Wednesday, December 20, 2006

Kamal Nath defends SEZs

`They are engines of growth that lead to job creation'

"The initial response to the SEZ policy was tremendous with the State
Governments showing a lot of zeal for the scheme"

New Delhi , Dec. 19

The criticism against special economic zones (SEZs) was entirely
"misplaced and the propaganda against SEZs is not based on facts," the
Union Commerce & Industry Minister, Mr Kamal Nath, said here.

Presiding over the Parliamentary Consultative Committee attached to his
Ministry, Mr Nath emphasised that SEZs were engines of growth, which
would lead to creation of employment on a large scale through the
generation of additional economic activity, development of
infrastructure, promotion of investment and exports of goods and services.

SEZ Policy

He said that the SEZ policy as embedded in the SEZ Act 2005 bolstered by
the SEZ Rules 2006 were purported mainly to provide a "One Stop Shop"
doing away with numerous controls and clearances, along with fiscal
concessions and simplified procedures.

Mr Nath pointed out that the initial response to the SEZ policy was
tremendous with the State Governments showing a lot of zeal for the
scheme. Over 650 proposals were received from 21 States and three Union
Territories (UTs) till now that entail investors from both within the
country and abroad.

Of these, 237 approvals have been granted, spread over 17 States and two
UTs and 51 SEZs were notified.

He said a large number of these SEZs cover textiles and apparels,
leather footwear, auto components, engineering and other sector specific
SEZs that would involve labour intensive manufacturing. The employment
projected in these 51 notified SEZs would be over five lakhs, he added.

Responding to queries concerning land issues, Mr Nath made it clear that
the Central Government had not acquired any land for SEZs. "It is the
States which acquire land for various purposes, viz, roads, hospitals,
industrial areas and ports and have their own relief and rehabilitation

In this regard, the Minister deplored the tendency to link all land
issues with SEZs and cited the case of Singur in West Bengal, which had
nothing to do with SEZ, being a standalone industrial project of the
State Government.

He also clarified that any investment in SEZs must be new investment
with new machinery and other new facilities.

On the issue of revenue loss, Mr Nath explained that for infrastructure
developers tax benefits already exist even outside the SEZs.

"Unless suitable tax concessions are given, no developer will come
forward to invest over Rs 2,500 crore in multi-product SEZs without any
assured timeframe for returns. In case of SEZ units, the corporate tax
concessions are available only on export income. For sale in domestic
tariff area (DTA), 100 per cent duty and taxes as per import tariff have
to be paid by the SEZ units. There are no tax exemptions for such DTA
sales under the SEZ regime," he said.

In response to a member's query about allowing foreign direct investment
in SEZs for the manufacture of cigarettes, Mr Nath said that 100 per
cent FDI was allowed for manufacturing provided the manufacture was for
exports. This would also benefit the tobacco farmers in the country, he


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