A study
commissioned by the Department of Commerce to
assess the potential costs and benefits of
Special Economic Zones has dismissed the
entire debate over revenue losses due to the
fiscal sops extended to SEZs by the
Departments of Revenue and Commerce.
“Many of
these tax exemptions are already offered to
Export Oriented Units and Software Technology
Parks till 2009,” the study notes. In fact,
impressed by the transformation in areas where
new generation SEZs have been set up such as
Bangalore, Hassan and Sriperumbudur, the
study’s authors have stressed that these SEZs
“have created a tremendous local area impact
in terms of direct employment, emergence of
new (formal and informal) activities, changes
in consumption pattern and social life, human
development facilities such as for education
and healthcare,” adding that “overall, the
expected benefits of SEZs outweigh expected
costs.”
Firstly,
the study points out that the revenue loss on
account of SEZs in 2005-06 was just 2.84 per
cent (Rs 1,070 crore) of the revenue lost by
the Government on all export promotion schemes
and 3.99 per cent (or Rs 2,146 crore) in
2006-07 (see chart). More importantly, on the
Department of Revenue’s estimates that SEZs
will cause a revenue loss of Rs 175,847 crore
between 2005 -10, the study conducted by
independent think-tank, Cuts International,
notes: “It must be understood that this
revenue loss is notional as there would be no
revenue if these SEZs are not put in place.
The estimation of revenue loss has been made
by assuming that the same amount of investment
and additional economic activities would have
been generated if the units are located
outside SEZs and do not avail any benefits
from other export promotion schemes - a heroic
assumption, indeed!”
An
interesting finding on the employment pattern
of the SEZ units surveyed is that nearly forty
per cent of workers are women and 76 per cent
of those hired are local people. In fact, new
generation SEZs (formed after the SEZ Act came
into being) employ far more women at 55 per
cent of the workforce as compared to the old
Export Promotion Zones like Kandla that have
been converted to SEZs, where women constitute
30 per cent of the workforce. The new SEZs are
also creating more jobs for semi-skilled
workers as compared to the EPZs.
Interestingly, the study, based on interviews
with different stakeholders and visits to 14
of the 27 SEZs operational by the first half
of this year, found that though the SEZ Act
vests the powers of the Labour Commissioner
onto the SEZ Development Commissioners, in
many SEZs in Cochin and Jaipur, inspectors
from the State Labour Department are also
visiting SEZ units.
Another
contentious issue the report has dwelled on is
the size of SEZs. The idea behind specifying
only minimum size for SEZs with no upper cap
in the SEZ Act, 2005, was to allow SEZs to
develop world class infrastructure.
However,
the study argues that the two subsequent
decisions by the empowered Group of Ministers
on SEZs headed by External Affairs Minister
Pranab Mukherjee to cap the maximum size of
SEZs at 5,000 hectares and leave the issue of
land acquisition to the private sector
developers “are contradictory.”
“The
government cannot reduce SEZ-related land
acquisition to a contract between a landowner
and a developer, and yet put a ceiling on the
land so acquired,” the report stresses.
On the
criticism that SEZs could aggravate regional
disparities in economic development, the
report concedes that of the 234 formal
approvals (at the time), 70 per cent are in
six states - Andhra Pradesh, Gujarat, Haryana,
Karnataka, Tamil Nadu and Maharashtra.
Except
Tamil Nadu, the other states are already
significantly industrialised - and the report
has suggested that the government should
encourage SEZs in places “hitherto
underdeveloped” since it “may not be possible
to limit the number of SEZs” in the current
political economy.
The author is Principal Researcher, Point
Pedro Institute of Development, Point Pedro.
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