Track2Realty Exclusive: Social activist Medha Patkar has rather questioned the need of SEZs and acquisition of such huge tracts of land. Referring SEZs as “pervert corporate projects” Patkar points out that the Maharashtra Industrial Development Corporation (MIDC) had about 80,000 acres of unutilised land – information unearthed through the Right to Information Act.
“When there is so much land with the MIDC, what is the need to acquire more land?” says Bharat Patankar of Shramik Mukti Dal, an NGO.
Undoubtedly, land is a thorny issue for SEZs. The difficulty lies in getting land that is contiguous, vacant and not double-cropped. “It is impossible to get large tracts of land near cities. We gave up the Maval project as we, as a policy, do not go in for projects that the people do not want,” says Nanda.
This calls for the government to translate its intent into an overarching framework. Failing this, land acquisition will remain a contentious issue. Though the government asserts its seriousness to not just promote exports through SEZS but also manufacturing with the proposed National Investment and Manufacturing Zones (NIMZs), the seriousness is yet to be delivered on the ground level.
Commerce Minister Anand Sharma says he remains upbeat about NIMZs becoming a reality. According to the New Manufacturing Policy, each NIMZ is expected to come up in 5,000 hectares or more, and acquiring the land would be the state’s responsibility.
Then there are taxation issues that have put the seriousness and intent of SEZ developers on the back foot. The imposition of Minimum Alternate Tax (MAT) and Dividend Distribution Tax is believed to be among the key reasons for the cloud over SEZs.
According to an industry expert, the absence of tax exemptions for new SEZs has also led to decline in interest in tax-free enclaves. Investors are very apprehensive about the feasibility to set up SEZs after the new tax structure. The two taxes are a said to cast a shadow over the new SEZs in the pipeline.
“The decision to impose MAT has made SEZS an unattractive proposition. Also, with DTC likely to remove SEZ benefits, there is further scepticism,” says NCAER’s Aggarwal.
The government too has conceded that the imposition of these levies has led to a visible slowdown in export growth from SEZs. “Policy clarity is lacking,” says Ramadas Kamath, Senior Vice President (Infrastructure), Infosys.
The main aim of the SEZ Act of 2005 is to boost exports, create jobs, bring in new investment and improve net foreign reserves, he points out.
“But the focus is lost in the many ‘ifs and buts’ in the Act and the rules. Also, the Commerce Ministry and the Finance Ministry speak in different languages,” he says, citing the example of Instruction No. 70 issued by the Department of Commerce in November 2010 clarifying various policy and operational issues relating to IT SEZs. “It was rejected by the Finance Ministry. Investors don’t know which way to go,” says Kamath.
It is argued that uncertainty in tax laws and poor administration of SEZ laws will only drive away foreign investors in the year ahead. The Indian government is expected to come out with fresh guidelines soon to revive SEZs and it may be a timely intervention. The brand SEZ has nevertheless got hit, investors apprehensive, developers reluctant and the government exploring more options than answers.
