With a view to overcome the shortcomings experienced on account of multiplicity of controls and red tapism in File clearances , absence of world-class infrastructures and top of all, the unstable and disingenuous political regimes at most state levels, the Special Economic Zones (SEZs) policy was promulgated in order to attract large Foreign investments in India.
The SEZ s which are hyped as future engines of growth for the Sates and India in general but if you closely scrutinize these project's profile it has swarming pitfalls in addition having negative effects of on Goan environment turning our green lands into polluted zones by disturbing the ecology. The Congress Government's move to allow a number of SEZs by acquiring or grabbing land through the State-owned Goa IDC and giving it to private investors at a throw away prices is prone to encourage corruption such as "land scam." which will benefit the politicians and Real Estate Developer mafia. It is not so easy to find barren wasteland that is well connected to airport or Seaport. But it is an option that the Diggu government is now seriously looking at as anti-SEZ voices get louder. The government may use the Land Acquisition Act to force farmers or land owners say goodbye to their land after compensating them in cash, after the Aam aadmi factor of Diggu prevailed in recent south Goa Elections where voters ignored the pleas by BJP to take this election as a referendum in favour or against setting up of SEZs in the state. No wonder Diggu and his political boss and Congress chief Sonia Gandhi are treading carefully on the SEZ bomb. She has earlier categorically declared that good agricultural land should not be acquired for SEZ's. Otherwise for Congress government it will like trying to set up islands of affluence over a sea of deprivation. These zones will be lavish exhibition pieces while underdeveloped environment surrounding these zones will be dragged down into these zones in time to come. I would like to highlight mainly how these SEZ units are going to rip off country's resources by tax evasions by obtaining blanket tax exemptions & huge revenue losses to the state exchequer by way of income tax waiver and other subsidies. 1) The SEZ units can shift tax base by indulging in over/under invoicing from DTA (Domestic Tariff Area) to SEZ unit. They can also do circular trading to walk away with advantages at the cost of the exchequer. 2) If Income Tax exemptions are deemed essential to boost exports then why they are withdrawn in respect of the DTA exporters. They have scores of disparities vis a vis SEZ units in this aspect. 3) It is illogical that all the Industries and Aam Aadmi in country should pay taxes for the benefit of select few ??? 4 ) Major IT companies get have benefited with more than 1,500 Crores in Corporate Tax exemption p.a. for over 10 years still they want to extend their IT holidays by moving to SEZ s. The tax holiday for software and BPO exporters is coming to an end in 2009. Moving into SEZs will enable them to extend their tax holiday for another decade. 5) The tax exemptions have made the owners of these SEZs filthy rich since there is absence of tax on dividends. The General reserves have been capitalized by issuance of liberal bonus shares serving their own rationale. 6) There is no physical exports in Software/BPO industry therefore it is best suited for laundering of ill gotten wealth; Circular trading by DTAs with SEZ is another loop-hole they employ to evade Taxes. The bureaucrats; politicians & industrialists will favour these sops as they all have a vested interest in these entities. 7) It is unfair to exempt SEZ income from tax When the best enabling environment to ensure profitability of the SEZ s is made available. Why the DTAs be fleeced through the high incidence of taxation & denied legitimate growth when they bear various disadvantages in the system. If the SEZs are meant to bring in all inclusive development then they should pay taxes & make a positive contribution to the growth of the economy. 8) You will observe in most of the cases the units getting into the SEZs have their EPZ (Export production zones) units or 100% EOU but still are coming to the SEZs just to extend the tax holiday by doing jugglery between the DTA & the SEZ unit. 9) The Income Tax act specifies that the SEZ unit should not be set up on the basis of relocation, re-organizing of business, splitting up of business etc. however, the SEZ Act does not spell this out. With the reduction in import duties & the basic Customs duty certain to reach 5%, the SEZ will wipe out the Small & medium enterprises. The frequency of exemptions will far exceed the duty recognition. 10) Independent Power Producers (IPPs) can be established in SEZs to sell power to SEZ by just paying duties on consumables The State Govt. under the Package Scheme of Incentives will exempt units set up in SEZs from payment of electricity duty for a period of 15 years. Therefore SEZ units can be a big threat to domestic power producing companies to because all these privileges are bestowed on them. 11) Who & how will it be ensured that the SEZ will give preference to local talents and not create distortions in hiring of human resources. The Hire & Fire policy needs to be regulated for benefit of employees and mutual relation with employer. How will this be ensured by the Development Commissioners of the Zones who are autonomous and do not come under purview of state Government The Development Commissioners of the zone are made omnipotent & superheroes - will they be able to deliver justice to all ? Vinay Natekar
