Nath sore over finmin report on SEZs

INDRONIL ROYCHOWDHURY
Posted online: Sunday, November 26, 2006 at 0022 hours IST

KOLKATA, NOV 25: The rift between the commerce and finance ministries
over the issue of special economic zones continues to widen and be a
cause of serious concern.
Commerce and industry minsiter Kamal Nath on Saturday rubbished the
finance ministry’s report to Parliament that the tax holidays extended
to SEZs entailed great revenue loss.

. Minister of state for finance SS Palanimanickam had informed
Parliament on Friday that the tax holidays to SEZs will cause revenue
loss of Rs 102,621 crore during 2006-07 to 2009-10.

Of the estimated revenue loss, direct tax loss would be around Rs 53,740
crore and indirect loss would touch Rs 48,881 crore.

However, speaking on the sidelines of the 33rd annual award presentation
ceremony of the Gems and Jwellery Export Promotion Council, Nath told
reporters that there are concerns from various organisations and forums
about the revenue implication of the special economic zones. But all
these are merely a “point of view.

While revenue is the main concern of the finance ministry, employment
generation is the priority of the commerce & industry ministry.

“We have shifted our focus to employment generation. SEZs and
export-oriented units are now being considered important, due to their
potential in generating employment, over revenue or foreign exchange
earning,” Nath said.

But not all seem to be sharing Nath's enthusiasmon SEZs. For, the
Reserve Bank of India and the International Monetary Fund have expressed
concern that SEZs could aggravate the uneveness of development by
diverting resources from less developed areas. The RBI has also
increased the risk weightage on SEZs by 150%,thereby bringing it on a
par with real estates and commercial complexes.

Nath, however, told FE that the government is trying to justify the
revenue loss by putting in place a mechanism that would ensure that the
“SEZs establish forward and backward linkages.”

http://www.financialexpress.com/fe_full_story.php?content_id=147356