Indian Economy: News and Discussion (Apr 1 2011)

Suraj · Post by **Suraj** » 23 Apr 2011 09:28

Gated residential communities are not the same thing as SEZs. An SEZ might have a residential community within, but a large gated community isn't in itself an SEZ.

The issue with gated communities has little to do with SEZs; their existence is largely an indictment of the inability to provide for effective urban quality of life. Everything from just basic road furniture to electricity/water supply to law and order is unreliable. But these are a different topic altogether. There's an entire thread dedicated to the topic here:
Indian Urban Development and Public Policy Discussion

somnath · Post by **somnath** » 23 Apr 2011 10:16

Ambar wrote:But it certain has negative implications. Apart from creating a 'green zone' for the rich, and the tax breaks they get by being branded as 'SEZ', they push the surrounding property prices outside their gates to astronomical levels. Sahara Housing's projects in Mysore and Lucknow are two prime examples how 'gated cities' triple the property prices in their surroundings making it impossible for the middleclass to own/rent anywhere close to these cities.SEZs , especially those on which high-end housing is built should attract a higher tax and not tax breaks.

Absolutely...All the so-called SEZs termed as "world cities" are nothing but real estate projects...The amount of land area used for "industrial units" is a miniscule % of the total land area in the "city"...And no, the residential real estate built is not just about catering to employees of the industrial units - the numbers are FAR in excess of those requirements..

now, there is nothing fundamentally wrong in gated communities being setup, even for a privileged audience...What is problematic is when such activities are given tax breaks under the garb of so-called SEZ - all that they need to do is to relocate a few existing units inside the complex, something like what BMW did with the Mahindra World City...

More blatantly, some dont even have that veneer - as the Sanhati report says, they simply classify an existing unit as SEZ! Prime example is RIL's Jamnagar refinery, but there are thousands of others..

Suraj wrote:Instead we just gave tax and duty benefits to help boost exports and foreign investment, along with employment and economic activity, which is obviously the case when exports rise from a mere $40B to $250B. Sure, the SEZ Act is a copout, but it's just a creation of essentially the ComMin+FinMin. Nothing more can be expected unless there's a much larger political consensus to create a broad policy framework where SEZs can create entire cities and physical infrastructure around them.

Well, if giving incentives to exports was the only objective, a better way would have been to simply give tax breask to export income, something that was alreayd there in various shapes and forms...But that wouldnt have been good enough, it wouldnt have resulted in the huge tax-free profits now being gouged out of real estate development!!

And yes, that is amply demonstrated by export performance...There is no marked improvement in growth in exports post 2005, when the policy went on stream..
http://rbidocs.rbi.org.in/rdocs/Publica ... 200910.pdf

The SEZ perf is only a reallocation phenomenon..

Theo_Fidel · Post by **Theo_Fidel** » 23 Apr 2011 10:30

Somanth,

Your chart doesn't say that at all. Your are being a little mendacious.
How can you call an export growth from 2005-2009 of $103 Billion to $178 Billion, a compound annual growth rate of 15% as 'no marked improvement'. In absolute terms that's is the entire export addition from 1991 to 2004 in just the last 4 years. The amount from SEZ's has been posted.

The SEZ's promote exports. I suspect this is the real source of your angst. That is their only purpose. If you don't like that policy , do attack it. Don't attack the preferential treatment given to them.

somnath · Post by **somnath** » 23 Apr 2011 10:47

Theo_Fidel wrote:Your chart doesn't say that at all. Your are being a little mendacious.
How can you call an export growth from 2005-2009 of $103 Billion to $178 Billion, a compound annual growth rate of 15% as 'no marked improvement'. In absolute terms that's is the entire export addition from 1991 to 2004 in just the last 4 years. The amount from SEZ's has been posted.

The SEZ's promote exports. I suspect this is the real source of your angst. That is their only purpose. If you don't like that policy , do attack it. Don't attack the preferential treatment given to them.
Somanth,

The growth rate from 2000-2005 was 20%+, from 36 billion to 103..So how is it "mendacious" (did you really mean that word, or understand it?) to suggest that there has been no marked improvement in growth post the SEZ policy?!! One can safely suggest that there has been a deceleration in growth, if anything...

My gripe is that SEZ are not for promotion of exports...thats a fig leaf to get tax breaks on real estate development..and that is daylight robbery....Since you are familiar with Mahindra World City - do some perfunctiory checks on the # of residential units populated by people working in units there and the # that are resided by "others"....You will get the answer...You dont even have to get into why/how BMW simply shifted its auto production into the Mahindra World City limits!

If you wanted an empirical basis, go throgh the Sanhati report posted earlier....

somnath · Post by **somnath** » 23 Apr 2011 18:06

there was a recent report of the PAC on SEZs...Scathing would be an understatement...

http://www.thehindubusinessline.com/ind ... 523129.ece

Katare · Post by **Katare** » 23 Apr 2011 22:15

Comparing that table is meaningless because the last year of that table shows drop in export due to financial crisis. So lets add one more year in that table since we have numbers for it -2010-11 - $245.9B

Now, what are the growth rates, six years before and after the policy change year (20004-05)

1998-99 Export -$33.2B
2004-05 Export - $83.5B

Growth in 6 years - 151% or 25.2% annually

Next six years under SEZ policy-
2004-05 Export - $83.5B
2010-11 Export - $245.9B

Growth in 6 years - 194% or 32.4%

This enhanced rate was achieved even after full impact of biggest financial crisis of last half a century in traditional exports markets of India.

Theo_Fidel · Post by **Theo_Fidel** » 23 Apr 2011 22:42

The PAC is always scathing about something or the other. Simply a witch hunting party, though they never actually catch any evil witches. So you are comparing a period comparing the worst recession the world has had with the earlier boom years. Also 2000-2005 is strictly $45 Billion to $103 Billion. If you take the next 5 years 2006 to 2010 it would be $103 Billion to $ 246 Billion. You were not comparing apples to apples and you knew it. And yes I meant that word.

WRT to Mahindra I don't need any Google link data since I've actually been there. Physically driving thru 90%+ is industrial/technological companies. Not sure how much is exported. There are a few small residential areas on the south side but most appeared unoccupied. There were signs for future bedroom communities but no work had started yet.

Take a look at this GOI statement
http://pibmumbai.gov.in/scripts/detail. ... 2010PR1356

In 2005 SEZ total exports were ~ 20,000 Crore.

While exports have doubled since then SEZ exports have gone up 10 times to ~ $50 Billion. From being 5% of exports in 2005 they have gone up to 25% in 2009-2010. WRT BMW I know a little bit about the process they went thru. The number one reason they located inside the SEZ was security. Esp. for their expats.

Suraj · Post by **Suraj** » 23 Apr 2011 22:54

somnath wrote:Absolutely...All the so-called SEZs termed as "world cities" are nothing but real estate projects...The amount of land area used for "industrial units" is a miniscule % of the total land area in the "city"...And no, the residential real estate built is not just about catering to employees of the industrial units - the numbers are FAR in excess of those requirements..

What exactly is wrong with an SEZ having excellent infrastructure and real estate within ? You, after all, were the one who complained about them *not* having quality infrastructure like Shenzhen - an urban real estate phenomenon more than anything else ? First you complain that our SEZs accomplish nothing like the Chinese SEZ cities do, and when we do have SEZs that look like a township at least, the complaint is that they're a glorified real estate project

This whole debate has become an exercise in cricitizing any aspect of the SEZs - they're bad when they are not like Chinese SEZs, they're bad when they are, they're bad when they're just grimy rebadged EOUs, they're bad when they're shiny townships with excess real estate...

Any exporter/EOU or related entity with enough sense would move into a place like the Mahindra World City. Why would they not ? Far better infrastructure and ability to transport their wares to the port/airport. It would be a no brainer if I were an MNC manufacturer or exporter.

Using the 2008-09 world financial crisis distortions in data to criticize the SEZ export data upto then, without even acknowledging the phenomenon doesn't help any critiques of the SEZs. Thanks Katare & Theo for pointing that out.

I appreciate that some will wish for enhanced revenues by taking away the preferential tax and duty to fund their chosen social programs. But things don't work that way - the export performance and enhanced economic activity from the SEZs exists because they provide the ease of conducting business with lower overheads than otherwise. Removing those incentives isn't the answer - the better choice is to expedite reforms so that outside the SEZ isn't such a bad place to do business, in effect turning the city, state or even the whole country into a SEZ.

Back in 2007 or so, someone - Surjit Bhalla ? - wrote essentially on these lines in Business Standard: SEZs exist because there's not sufficient political ability to implement broad reforms needed to make the whole country effectively an SEZ. Rather than completely undo what the SEZs have done, the better option is to allow their benefits to leech into the rest of the areas around them, whose residents and industries will progressively demand the same enhanced facilities of their own civic authorities, rather than put up with the hideous quality of urban infrastructure that still pervades the country.

To Mumbaikars - how's the road from Panvel/MPE to JNPT now ? I was there a few years ago and the main throughfare to the port was a terrible muddy 'road'. It was a testament to the efficiency with which GoI promotes exports. I used to think that it was a pity JNPT manages only about 5mTEUs containter throughput; after seeing the connectivity it was more a case of being in wonder that they manage so much. No comparison to HK, Singapore or Shanghai Yangshan port

Ambar · Post by **Ambar** » 24 Apr 2011 07:20

If a 'SEZ' has a housing project in it, strip it off SEZ status and add additional tax instead of tax breaks. The whole pro-SEZ argument is about encouraging export oriented services/manufacturing through better infra and lower taxes, so why plug real-estate project within it ? And no, these are not 'company quarters' unlike HAL/Jindal Nagars, these are high end real-estate projects specifically built for profit. Also, wouldn't a uniform tax code for all companies help those unfortunate ones outside these SEZs ? This would encourage legacy industrial areas that were/are not a part of SEZs and stop the step-motherly treatment towards them.

At what point do we pull the plug from the incubator ? Some of the most well known IT companies have profited massively by acquiring acres of prime real-estate in the 90s by paying nickles on dollar for the land. The real-estate alone is now worth hundreds of millions not counting the 'SEZ' benefits they continue to receive. Once a industry is mature enough, it should no longer qualify for a special status. Unless companies are willing to set up facilities in tier 3/rural areas with high unemployment and low development, i fail to see the benefits of SEZ-ization in urban areas.

Prem · Post by **Prem** » 24 Apr 2011 09:47

Courtsey Ram Narayan

http://www.business-standard.com/india/ ... ry/433200/
T N Ninan: The big story

Amidst the anguish about corruption – and, one might add, the dirty tricks unleashed against those campaigning on the issue – people have tended to forget that the big story in India, the truly exciting story, remains rapid economic growth. That was underlined by the Planning Commission formally adopting on Thursday a 9-9.5 per cent annual growth target for the five years beginning next April — building on the average of 7.8 per cent in the preceding 10 years. The size of the middle class has exploded, and the poverty numbers have declined (you can argue by how much, but there is no credible statistical pattern of growth that says incomes double in a decade, and literacy climbs from 65 per cent to 74 per cent, but the absolute poor remain where they were.)
Get beyond the big macro numbers, and one sees what rapid growth means at the level of businesses. Did you know that India is now the second largest market in the world for elevators (after China, and ahead of the US)? So there are more high-rise buildings coming up in India than in any other country, barring China. India also has more certified green buildings, ready or being built, than any other country barring the US. For that matter, did you know that Wal-Mart is growing its India business 60 per cent annually, that its stores often turn profitable in their first year, and that it may already be bigger than both Shoppers Stop and Trent? That Tata Consultancy Services is bigger today than the entire software sector was in 2002, and will hire almost as many people in one year as the total employed by Tata Steel across four continents? And that the Indian motorcycle market is now the second largest in the world, while the car market is the sixth or seventh largest? Also, that India is among the top five markets for air-conditioners?
The Indian markets have become more open and competitive, and acquired scale (we may be talking of a $2 trillion economy this year), companies have become demonstrably more efficient. One indication: prices of manufactured goods have been going up less than general inflation. Couple this with rising incomes, and you have halved the number of months’ salary that it takes the average executive to buy a basic car. Ergo, dramatic growth in sales as the consuming class burgeons in numbers. At the same time, companies have delivered greater surpluses; corporate savings have more than trebled in relation to GDP, from 2.7 per cent a decade ago to about 9 per cent (their share in total national savings has, therefore, doubled from 12 per cent to 25 per cent). This kicks into the macro story of more savings and investment, and therefore faster growth. Finally, in yet another indicator of improved competitiveness, Indian exports have grown at an annual rate of 19 per cent through the past decade — three times the global average of 6 per cent. The conclusion seems inescapable: Corporate India’s DNA has changed.
Looking ahead, the McKinsey Global Institute has forecast that India will be the fifth largest consumer market by 2025. That seems an understatement because, by the end of the next five-year Plan in 2017, India may already have become the fifth largest economy—overtaking the European trio of France, Britain and Italy. So, even as the country grapples with in-your-face corruption and complex challenges in economic management, bear in mind that rapid economic growth, dramatic changes in Corporate India and a transformed quality of life for many millions, has been and remains the most compelling story of our times

somnath · Post by **somnath** » 24 Apr 2011 11:22

Katare wrote:Comparing that table is meaningless because the last year of that table shows drop in export due to financial crisis. So lets add one more year in that table since we have numbers for it -2010-11 - $245.9B
---------------

This enhanced rate was achieved even after full impact of biggest financial crisis of last half a century in traditional exports markets of India.

For time series analysis, a year's blip usually shouldnt really matter...Trade growth globally registered all-time high numbers in 2010 (22% http://www.wto.org/english/news_e/news1 ... ar11_e.htm), and India benefited out of that along with others...If you are really fussed, extrapolate the trends from 2005 to 2008 to the next two years - you will get a 25% CAGR...therefore it is not at all incorrect to surmise that post-SEZ, there has been no "marked improvement" in growth rates...

Theo_Fidel wrote:You were not comparing apples to apples and you knew it. And yes I meant that word

Great, since you know the english dictionary meaning, maybe you should also take the effort of understanding the economic rationale/protocols

! Apples, oranges and everything else is quite tranparent in that data series...Whichever cutoff you take, 2000-2005, 2005-09 or 1999-2005, 2005-09 - all you need to do is to strip off the extraordinary year (GFC, 2009), and impute the trend growth...Simple econometric fundamentals...And the conclusion will remain the same - we have not seen any break-out in trend growth of the last decade...

Suraj wrote:What exactly is wrong with an SEZ having excellent infrastructure and real estate within ? You, after all, were the one who complained about them *not* having quality infrastructure like Shenzhen - an urban real estate phenomenon more than anything else ? First you complain that our SEZs accomplish nothing like the Chinese SEZ cities do, and when we do have SEZs that look like a township at least, the complaint is that they're a glorified real estate project This whole debate has become an exercise in cricitizing any aspect of the SEZs - they're bad when they are not like Chinese SEZs, they're bad when they are, they're bad when they're just grimy rebadged EOUs, they're bad when they're shiny townships with excess real estate

Thats a self serving rationale (of real estate developers!)...First, no one equates the success of Shenzhen with a few shiny buildings...SEZ is about an entire policy and infrastructure framework around a large "gated industrial community", and for good measure, also shiny buildings...In India, what we have is just the last, and nothing else...Two, the complaint isnt about gated communitie per se, but about tax breaks given to set them up...

Now there are primarily 2 types of SEZs in India:
1. Industrial units who have reclassified themselves as such to get tax breaks, a la RIL..
2. Mahindra World City type enclaves....

the former still have some economic rationale..The latter is nothing but tax breaks for real estate development...As the PAc (and the earlier CAG) reports show, the amount of "exports" from these enclaves is relatively small..Most of the "SEZ exports" reported are from #1 above...

Even more importantly, most of the SEZs of such sort are "IT SEZs" (I think about 60% according to the Sanhati report)...Is it a coincidence given that the STPI tax breaks are going away, with the decision being a matter of when and not if?

But as I said before, there is better rationale for the "tax breaks for exports" angle ...But there is absolutely no rationale for tax breaks for gated communities for the rich....No issues with gated communities per se, but the likes of Rahejas and Hiranandanis and DLFs (the primary SEZ-wallahs) do not need to be given tax breaks to build them...

BTW, I was in Mumbai 3 months back, the BPT road remains as bad as ever, thoguh there is an elevated road being built...

Suraj · Post by **Suraj** » 24 Apr 2011 12:02

somnath wrote:SEZ is about an entire policy and infrastructure framework around a large "gated industrial community", and for good measure, also shiny buildings...In India, what we have is just the last, and nothing else...Two, the complaint isnt about gated communitie per se, but about tax breaks given to set them up...

A special economic zone is just that - a region where special incentives are provided towards certain economic goals - encouraging exports or investments. What the promoter of the SEZ chooses to create within the zone is their business, as long as they're within the laws. Micromanaging what they should or should not do has been the bane of standard government policy interference, harkening back to 70s era witch hunts on businessmen.

There's nothing wrong with giving tax breaks under the circumstances. GoI could have done something else - something even better - they could have demonstrated their ability to take their revenues and execute projects properly. That includes provide, to list a few things:
* an efficient electricity and water system in all major cities
* effective labour laws without ridiculous socialist era strictures
* effective land procurement and zoning
* reform company laws so founding companies as well as liquidating them is straightforward
* law and order maintenance
I could add more.

GoI (and state govts for that matter) has been an abysmal failure at execution on most socio-economic counts. They cannot deliver their end of their mandate or social contract effectively. There's a fundamental lack of credibility about anything they say they will do, and particularly impose taxation to accomplish. Contrast that with China - you might hate their government and the vicious ways things get done there, but when they mandate something to be done, by and large, it does get done. Shanghai Yangshan deep water port was approved in 2001-02, built to a scale larger than JNPT by 2006-07, with a 30+km bridge to mainland. I'd like to see GoI being that effective. I'm not being sarcastic. I really would like it - they desperately need to be.

GoI does not have that credibility and the SEZs are a mature reflection of the fact that they know it too - what GoI has done with SEZs is 'here, take these tax and duty breaks, set up these regions, put your own money in, create the infrastructure and maintain it, and follow the requirement on net exports...' It is in effect a copout on their part, because they cannot accomplish it nationwide. Instead the way it's been done is to enable such zones to mushroom all over the place, until they form their own critical masses and enhance the development of the regions surrounding them as well. At some point, the distinction between within and outside SEZs will disappear, as it has in China, and with that, SEZs will die a natural death.

If you want to crib about SEZs to mendacious extents, how about proposing an alternative that doesn't sound like a pie in the sky ? Therein lies the problem - GoI has no lack of imagination at proposing solutions, but lacks the credibility when it comes to execution. SEZs amount to them abdicating that responsibility so some extent, in return for foregoing some taxes in the process. They've no divine 'right' to impose taxes for something they lack the ability to execute, and unlike those just criticizing the tax breaks, GoI (both NDA and UPA) has shown greater maturity and awareness of their own shortcomings, and done something that'll generate benefits despite what they lack in ability.

somnath · Post by **somnath** » 24 Apr 2011 17:36

Suraj wrote:Shanghai Yangshan deep water port was approved in 2001-02, built to a scale larger than JNPT by 2006-07, with a 30+km bridge to mainland. I'd like to see GoI being that effective. I'm not being sarcastic. I really would like it - they desperately need to be.

Well, if SEZs in India were executing that sort of projects, by all means give tax breaks...As I said, SEZs is about a bouquet of policy and infrastructure externalities...That includes things like highways, ports, connectivities in general..What we really have is nothing but oversized gated communities, consisting of nice apartments, mickey mouse railway stations and some nice roads within the complex...Thats it...

the simple point is this - there is absolutely no dearth of demand for, and hence investments in, pure real estate plays in India, residential or commercial...there is zero requirement therefore for any tax breaks for mega real estate developments...Gated communities for the rich, with nice buildings and supermarkets and a few office complexes have always been hugely profitable investments...the Sahara project in Lonavala or the much in news Lavasa or the Hiranandani complex in Powai did not require SEZ tax breaks...They were sold at high premiums, and the developers paid their taxes..What the SEZ policy has done is to convert these income streams into tax-free income streams...

As far as real infrastructure building is concerned, the fact is that there is no alertantive to public investment...One of MMS's not-so-bright legacies of the '90s was the sharp cut in public ivnestments...The assumption was that private investments would fill the gap once policy measures are in place...It did not happen, and the late '90s/early '00s again needed a public investment revival...the highway project took off only when solid public monies were committed..Nothing typical to India - it is the case in most places in Asia, and everywhere else...So this rhetoric of "ohh the govt cant execute infrastructrue projects, so SEZs are to create world-class infra" is all rubbish...There is no infrastructure (beyond oversized gated communities) that any SEZ has created...

What should the govt do? Its actually quite simple, and was suggested by many...If incentivisng exports through tax breaks is the objective, just do that - give an income tax break on export income (like the tax breaks on STPI companies)...We need not have anachronisms of "deemed exports", "DTAs" et al translating a bunch of taxable businesses into tax-free, and then some in terms of the same for real estate!

Real infrastructure will continue to need public investment support, and appropriate execution models....

tejas · Post by **tejas** » 24 Apr 2011 19:56

OMG! I can't believe some people are still arguing against SEZs. The GOI has a reverse Midas touch, that is there for everyone to see. The tax losses from SEZs are imaginary losses simply beacuse if these incentives were not given the private investment would not be forthcoming.

The labor laws promulgated under Indira Gandhi are a dagger pointed at the heart of Indian manufacturing. It amazing how far India has progressed DESPITE the unbelievable incompetence of the GOI. I could not agree more with Suraj, SEZs are a de facto acknowledgement by the GOI that they cannot provide the reasonable infrastructure that every non-turd world govt. on this planet has.

VinodTK · Post by **VinodTK** » 24 Apr 2011 20:24

India's double-digit growth ambitions fade

The ruling Congress party has long wanted to make history as the administration which ushered in growth of 10 percent -- touted by successive governments as vital to significantly reduce crushing poverty.

But India's main economic planning body looks set to row back on the goal of double-digit expansion when it fixes the country's five-year economic, social and other goals to 2017.

Setting a target of 10 percent average growth "for the next five years is not feasible", Planning Commission deputy chairman Montek Singh Ahluwalia admitted late last week, citing inflation, a need to jump-start reforms and an "international situation full of uncertainty".

Suraj · Post by **Suraj** » 24 Apr 2011 21:22

somnath wrote:As I said, SEZs is about a bouquet of policy and infrastructure externalities...

No it isn't. I'd like you to show me where the SEZ Act states that it's a broad omnibus urban/civic infrastructure and public policy regime with such broad outcome goals. That may have been the cases in China where the chosen cities also had SEZ status, but not in India. The SEZ India page says:

The main objectives of the SEZ Act are:
(a) generation of additional economic activity
(b) promotion of exports of goods and services;
(c) promotion of investment from domestic and foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities;

All it intends is whatever is the promoter deems necessary for achieving the goals of economic activity, greater exports and greater foreign investment - both of which have been accomplished. There are no outcome goals for infrastructure. Any externalities in terms of nature, quantity and quality of ancillary infrastructure is upto the promoter, and not you to determine. There's no point in blaming them for what you deem as shortcomings of the Act itself.

If they build residential real estate, that is upto them - it's their money and therefore their business; it's not your or my business to tell them what they 'need', should do or should not do to profit from their own investments, as long as they remain within the purview of the Act. More power to the likes of Mahindra and Sahara for having the smarts to make their rupee go the extra distance.

This tendency to imply we can tell what other people can do with their money has been a longtime GoI paternalistic tendency, and I'm glad that GoI (either NDA or UPA) have not interfered in that regard with SEZs.

As far as I'm concerned, I hope more and more SEZs continue to get approved and continue to enhance our economic activity, exports and quality of infrastructure; if GoI isn't good at execution on it's own, with this act it has demonstrated it is at least not too bad at stepping away and letting things work, rather than both suppressing economic activity through a myriad of legislation and taxation regimes and being incompetent at using those tax revenues effectively.

GoI has a credibility deficit; it's reflected in the fact that anytime they announce anything, there's no broad public belief that it'll get done on time or within budget. You focus on the fact that the SEZs result in imaginary or notional losses. I'm simply pointing out the paucity of outcomes, and that they themselves have been mature enough to indicate that they can't utilize those revenues well enough, and have instead chosen to forego those notional revenues in return for the enhanced real revenues they do accrue from the greater economic activity generated by the tax and duty waivers to SEZs.

somnath · Post by **somnath** » 25 Apr 2011 07:12

Suraj wrote:No it isn't. I'd like you to show me where the SEZ Act states that it's a broad omnibus urban/civic infrastructure and public policy regime with such broad outcome goals. That may have been the cases in China where the chosen cities also had SEZ status, but not in India. The SEZ India page says:

These are motherhood statements that can mean anything, everything and nothing at the same time...

the preamble of the SEZ Act says this:

An Act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto

http://india.gov.in/allimpfrms/allacts/3111.pdf
Promotion of luxury real estate isnt a stated objective...

Hence, the outcomes of SEZs would be (or should be) measured on two basis:
1. Changes in growth rate of exports
2. Changes in employment trends

On #1, we have seen that there is no material shift in the trend rate of growth in exports..On #2, given the stubbornly static employment elastcities of income across all sectors, there is no empirical evidence that SEZs have contributed in break-through growth in employment generation in industry...There is in fact enough anecdotal and empirical evidence to the contrary - of organised industry seeing static to negative growth in employment..

Suraj wrote:There's no point in blaming them for what you deem as shortcomings of the Act itself.

Well I am not blaming the companies, I am crtiquing the policy regime! Companies are free to do wht they can to max shreholder value, whether its 2G spectrum allocation or SEZs..Its the policy regime and the motivations thereof that are under scrutiny...

The CAG report on SEZ brings out the delicious ironies of "deemed exports", "DTAs" et al - so nokia's factory in the Sriperumbudur SEZ supplies most of its production to the domestic market, and why not? India is the fastest growing phone market in the world..But any reason why that should be classified as "exports" and given tax subsidies? RIL's Jamnagar refinery was planned and setup before the SEZ Act came into being - overnight reclassiifcation has given a company generating a few hundred crores in free cash flows every day near-total tax exemption! Mahindra World City's business model (this is from a PE fund ppt) hinges on sale of residential and commercial property...And what "infrastructure" have these guys created? Besides shiny gated communities? Nothing...In fact barring very very few, none of them have even a stated objective of creating meaningful "infrastruetcure" of any types besides these gated communities...So this bogey of "lack of govt outcomes" is a red herring...Like it or not, bulk of the heavy infrastructure is being, and will have to be publicly funded...SEZs are not solving that problem to justify tax breaks on residential/commercial real estate...

Which is the reason, btw there is broad bipartisan consensus on the policy...Real estate is the biggest funding source for all political parties...No reason they would not be keen to ensure that the golden egg-generating hen gets fatter!

Suraj · Post by **Suraj** » 25 Apr 2011 09:04

somnath wrote:Promotion of luxury real estate isnt a stated objective...

Maybe not, but it's not proscribed either. It's the promoters money to what they deem fit, as long as they accomplish the stated requirements for maintaining SEZ status.

If you're critiquing the policy, why the constant reference to various examples of SEZs ? Critique those responsible for the policy - the political class - not the examples themselves. Better yet, critique the inability of GoI to deliver basic goods and services that they impose taxation upon us for. Your constant references to Mahindra, Reliance etc just sound like the 'evil businessman' bashing days of yore from the glorious socialist era.

somnath · Post by **somnath** » 25 Apr 2011 09:35

Suraj wrote:If you're critiquing the policy, why the constant reference to various examples of SEZs ? Critique those responsible for the policy - the political class - not the examples themselves. Better yet, critique the inability of GoI to deliver basic goods and services that they impose taxation upon us for. Your constant references to Mahindra, Reliance etc just sound like the 'evil businessman' bashing days of yore from the glorious socialist era.

Suraj, thats quite disengenuous..How do you critique a policy without pointing out examples of its shortcomings?! How do you critique spectrum allocation policies without quoting the mostrosities of Unitech-Telenor?!

Its the "promoter's money" absolutely, but tax breaks on investing that money to build luxury housing isnt the promoter's discretion, its a public policy choice, and an extremely BAD one - which is the critique..

And yes, there is a lot to criticise GOI on execution of basic services - however these SEZs do absolutely NOTHING to mitigate those shortcomings - either in terms of policy, or objectives, or for that matter in actual execution...Hence, there is no merit in giving them wholesale tax breaks for essentially luxury housing/commercial development projects...

At a broader policy level, there are no grounds for giving distortionary tax-breaks for "DTAs" etc that are just regular domestic businesses who manage to relocate and rebrand themselves into SEZs...

Similarity between 2G and SEZ are jarringly obvious...In 2G, a purported policy objective (cheaper telephone connectivity) was abused in order to create a policy framework that gave away a natural resource cheap, and gave them away in a distortionary fashion to select players...In SEZ, a purported policy objective (export growth) was abused to create a policy framework that gives corporate tax breaks on luxury/commercial property, and then some more to convert domestic production into tax-free income (a la Nokia), and then some furthermore to continue with a tax-free regime when the earlier tax-break was coming to an end (RIL Jamnagar, S/W companies)...The only difference, if any, is the absence of a "face" to the scam, ie Raja in the case of SEZ...the reason for that is simple and I said that before - real estate is the oldest and most imporant funding source for ALL political parties....Hence, pretty much everyone is complicit, and there isnt one face to the issue, or even a political dividend to be earned by highlighting the same..

The "glorious socialist era" had enough and more of such policy distortions, irrespective of the rhetoric it was a cosy era for businessmen..Reforms was supposed to end all of that - obvioulsy it isnt in the interests of the political parties to "give away" everything, hence new opportunities are created

somnath · Post by **somnath** » 25 Apr 2011 10:23

Continuing on the theme of SEZs being simply "tax arbitrage havens", there was a MAT of 18.5% imposed on SEZs in the last budget..And brouhaha ensued...CBDT came up with this clarification thereafter..

http://articles.economictimes.indiatime ... e-enclaves

There is a huge shift of turnovers from non-SEZs to SEZs. There is diversion of current revenue to SEZs," Central Board of Direct Taxes (CBDT) Joint Secretary (Tax Policy and Legislation) Ashutosh Dikshit said

The senior official said in the last fiscal, exports from SEZs went up by 110 per cent even as the country's overall shipments abroad were stagnant.

This is a good start, but we have seen in the previouos avatar of MAT - there are far too mnay loopholes for it to be effective...

Suraj · Post by **Suraj** » 25 Apr 2011 12:20

somnath wrote:Suraj, thats quite disengenuous..How do you critique a policy without pointing out examples of its shortcomings?! How do you critique spectrum allocation policies without quoting the mostrosities of Unitech-Telenor?!

Your critiques are subjective, based on your idea of what the SEZ act should be, not what the Act specifies as requirements and goals today, regardless of how well intended they may be. I don't necessarily agree with either your critiques or your views on what the SEZ policy should be, and provided my own dissenting statement, whether you agree with them or not. I refuse to criticise the existing SEZs on the basis of what I think the goals of the SEZs should have been - that's nothing more than building a strawman and pummeling it.

I'm only concerned with whether they SEZs satisfy the letter of the law as it is. Do they meet the goals of increasing the country's exports and foreign investment figures ? They do, particularly in the years since the current Act came into effect, i.e. 2006-11, as opposed to the period before it. Therefore, they are a success.

To look further at whether the Act itself is effective or whether it needs to be improved, my contention is that it begins with the fundamental issue of GoI's lack of credibility. More revenues or less revenues doesn't change the fact that their effectiveness at execution is poor, so much so that when we do have success stories like DMRC, we celebrate it to extraordinary extents.

Further, public policy is always a matter of tradeoffs. There's no perfect policy framework that'll satisfy everyone. Your idealized SEZ of Shenzhen was built on the back of effectively no private land rights, labour rights or right to dispute resolution and restitution, among other things. As I've said before, GoI has no divine 'right' to tax revenues; no public policy discourse should make such a sweeping assumption that the governing authority is being denied a fundamental entitlement - not when the general public has no faith in their ability to use those revenues well, barring notable exceptions. The SEZ Act constitutes a case of them walking away from notional revenues they'd gain from taking away the tax and duty breaks involved, in exchange for earning what they do from the enhanced economic activity generated by the SEZs.

On the matter of the 2G auction: it's easy to look back with 800 million telephone users and think 'we should have sold the 2G spectrum for more - it would have made so much money! scam! scam!' Cheap access to telecommunications isn't a 'purported goal' of the 2G process to me - it's the foundational goal. Graft, nepotism and under the table deals involving the actual sale of licenses may be scams, but not the choice to sell 2G spectrum cheap. It's easy to say that in 2011, when everyone and his dog has a cellphone, and the current circumstances permit the 3G spectrum to be priced at far greater levels simply because everything - the population, economy and the telecom industry has evolved so much more than the situation in 2001 - when it was a fledgling industry with barely a million subscribers.

The fact is that in an economy there will always be distortionary policy actions in favour of certain ends. There's no eliminating them entirely. You could have such an imaginary framework - every single transaction is is priced at market value. Dying from malaria and can't afford the medicine ? Too bad. Can't innoculate children because the vaccine costs too much ? Too bad... Granted, these are just extreme examples. But every single subsidy or other social support move - NREGS included - is a scam, from some subjective view. There'll either be good distortions or bad distortions, but that is a matter of subjective opinion.

somnath wrote:The senior official said in the last fiscal, exports from SEZs went up by 110 per cent even as the country's overall shipments abroad were stagnant.

Exports increase in a decade from $40 billion to $250 billion (i.e. a $210B increase), and exports from SEZ from $5-10 billion to about $75 billion (~$65B increase). However, just because the latter increased by 110% in some one year period when aggregate exports were stagnant (most likely between 2009-10), it "proves" that exports are not rising and SEZs are just parasitical ? As they say, there are lies, damned lies and statistics

chola · Post by **chola** » 25 Apr 2011 12:25

Suraj wrote:
If you want to crib about SEZs to mendacious extents, how about proposing an alternative that doesn't sound like a pie in the sky ? Therein lies the problem - GoI has no lack of imagination at proposing solutions, but lacks the credibility when it comes to execution. SEZs amount to them abdicating that responsibility so some extent, in return for foregoing some taxes in the process. They've no divine 'right' to impose taxes for something they lack the ability to execute, and unlike those just criticizing the tax breaks, GoI (both NDA and UPA) has shown greater maturity and awareness of their own shortcomings, and done something that'll generate benefits despite what they lack in ability.

Actually the problem is far more basic. There is no real way to create SEZs in a nation that already follows the rule of law besides giving tax breaks unless you govern SEZ in ways that are antithetical to democracy (building roads over private land without compensation, providing consistent power to business at the expense of households, etc.)

The reason SEZs can work in a communist nation is because of the stark contrast between the special zone and the rest of the nation.

The idea of a special economic zone in India makes no sense.

somnath · Post by **somnath** » 25 Apr 2011 12:55

Suraj wrote:Your critiques are subjective

Not at all, I am subjecting the SEZ policy to its own stated aims, ie, export growth and employment growth! As a citizen and taxpayer, I absolutely dont believe that DLF an Hiranandani should be given tax breaks to build luxury apartments and commercial property..

Suraj wrote:I'm only concerned with whether they SEZs satisfy the letter of the law as it is. Do they meet the goals of increasing the country's exports and foreign investment figures ? They do, particularly in the years since the current Act came into effect, i.e. 2006-11, as opposed to the period before it. Therefore, they are a success

Wrong..There is no breakout from the decadal trend growth post 2005, even if adjusted for the blip in 2009. Further, none of the employment studies done show up any breakout in employment elasiticities of growth either...And the question here is not of "illegality" in terms of letter of the law, its of appropriateness of choices exercised in public policy...

Suraj wrote:On the matter of the 2G auction: it's easy to look back with 800 million telephone users and think 'we should have sold the 2G spectrum for more - it would have made so much money! scam! scam

Well absolutely, I agree with you...the issue with 2G was not about the question of selling the spectrum "cheap" per se, but the policy choices made in terms of the sale - and esp the ones done circa 2008, not 2001..Similarly, one can justify if SEZs are granted tax reliefs for promoting the stated objective of maxing exports, issue is when the tax exemptions go towards converting domestic income tax-free or worse, simply mking real estate profits tax-free..

So there is no quesiton of what SEZ "should have been", just an evaluation on the basis of the stated objective and achieved outcomes..

Public policy is always a question of choices, and therefore they need to be looked at from that perspective, ie of the quality of those choices...To argue that tax breaks to KP Singh on selling 1000 new luxury apartments is the same "subjective" as NREGS, is, well....

(BTW, this doesnt mean real estate isnt important - it is..But it surely does not need fiscal incentives to grow)

Suraj wrote:To look further at whether the Act itself is effective or whether it needs to be improved, my contention is that it begins with the fundamental issue of GoI's lack of credibility.

While there is a lot to critique on GOI's execution, using that to extend tax-breaks for real estate is disengenuous..Building fancy apartments and supermarkets isnt part of core public policy objectives...

Lastly,

Suraj wrote:Exports increase in a decade from $40 billion to $250 billion (i.e. a $210B increase), and exports from SEZ from $5-10 billion to about $75 billion (~$65B increase). However, just because the latter increased by 110% in some one year period when aggregate exports were stagnant (most likely between 2009-10), it "proves" that exports are not rising and SEZs are just parasitical ? As they say, there are lies, damned lies and statistics

He is magnifying the point, but the trend numbers show out the basic fact..the exaggerated growth in exports from SEZ are primarily a result of reclassification, as total trend numbers havent changed materially..It is "statistics, and a selective quote" at worst in this case

chola wrote:Actually the problem is far more basic. There is no real way to create SEZs in a nation that already follows the rule of law besides giving tax breaks unless you govern SEZ in ways that are antithetical to democracy (building roads over private land without compensation, providing consistent power to business at the expense of households, etc.)

Which is a point that a lot of people including Amartya Sen have made...But really, thats a larger philosophical question..There are plausible econoimic benefits of that aproach, as China has showed..Whether politically feasible is a different question..And frankly in its final avatar, the Indian SEZ doesnt really create any "island" of "differentied policy"..Labour laws, access to connectivity, municipal powers etc are pretty much similar, though not the same...

At the end, the Indian SEZ has morphed into a hotch-potch of the worst of all worlds - it hasnt created any meaningful infrastructure, and ended up extending tax breaks for real estate profits..And failed to meet its core objective of upping export and employment growth rates...

Sri · Post by **Sri** » 25 Apr 2011 15:41

Suraj wrote:The labour law issue came under fire from the commies during UPA-1, who were staunchly against explicitly relaxed labour laws in all SEZs. The compromise was to delegate the laws to state authority and let them figure out what they want to apply. Some states, IIRC, wrote/rewrote their own labour acts to make things easier for SEZs in their territory, and thereby make them more attractive to investors.

It isn't Shenzhen, but here's the SSC thread on the Mahindra World City in Chennai. Not bad, I say. There's another in Jaipur now.
Mahindra World City, New Chennai

One of our offices is in Mahindra world city and many of my coworkers live in the world city residential area. Beautiful I say. New project coming on who's layout is a replica of some pocsh suburb in baltimore. Idea being to enable Indian professional to return and work and live out of worldcity.

somnath · Post by **somnath** » 25 Apr 2011 17:47

Sri wrote:One of our offices is in Mahindra world city and many of my coworkers live in the world city residential area. Beautiful I say. New project coming on who's layout is a replica of some pocsh suburb in baltimore. Idea being to enable Indian professional to return and work and live out of worldcity

It would be great I am sure..But that precisely is the point - no need to give tax breaks to Mahindras to build a Baltimore suburb for returning Indians in Chennai!

Aditya_V · Post by **Aditya_V** » 25 Apr 2011 18:02

somnath wrote:
Sri wrote:One of our offices is in Mahindra world city and many of my coworkers live in the world city residential area. Beautiful I say. New project coming on who's layout is a replica of some pocsh suburb in baltimore. Idea being to enable Indian professional to return and work and live out of worldcity
It would be great I am sure..But that precisely is the point - no need to give tax breaks to Mahindras to build a Baltimore suburb for returning Indians in Chennai!

Well, atleast it better than Golf Clubs in Guragoan which only the Luytens, JNU crowd and Paki diplomats have access to.

RamaY · Post by **RamaY** » 25 Apr 2011 18:59

Suraj,

If we combine India's goods exports, services, and (permanent) remittances they balance the imports bill. Net net India should have a trade balance.

Suraj · Post by **Suraj** » 25 Apr 2011 20:00

somnath wrote:Not at all, I am subjecting the SEZ policy to its own stated aims, ie, export growth and employment growth!

There are no objective measures in the Act related to infrastructure, or real estate development, within SEZs, unlike the objective requirement of net exports. Any metric you apply in the context of either is subjective, regardless of your indignation as a taxpayer

As long as they continue to lead export growth and employment creation as they've done so far, they're meeting their objectives w.r.t. to the Act as it exists now.

somnath wrote:While there is a lot to critique on GOI's execution, using that to extend tax-breaks for real estate is disengenuous..Building fancy apartments and supermarkets isnt part of core public policy objectives...

Your subjective opinion of what constitutes good or bad public policy. Real estate and infrastructure are not topics the SEZ Act applies any objective outcome goal upon.

As it stands the SEZs in their current form have bipartisan political backing and will continue to develop on these lines, despite your disapproval

somnath wrote:And the question here is not of "illegality" in terms of letter of the law, its of appropriateness of choices exercised in public policy...

Exactly what I mean when I say your argument is subjective. The SEZ act itself and any broad public policy goals are two different matters - anything related to the latter is personal subjective opinion. By imputing those goals upon existing SEZs you're building a strawman. There's no point in debating your subjective opinion on what SEZs should be against mine - that would be pointless...

RamaY wrote:If we combine India's goods exports, services, and (permanent) remittances they balance the imports bill. Net net India should have a trade balance.

It would seem so. Merchandise trade in 2010-11 had a $90-$100 billion deficit, while services trade - if projecting from the 2009-10 data, would have a $55-60 billion surplus. Remittances were approximately $32-34 billion, which in themselves bridge the gap, not counting inflows in the form of FDI or net FII. That net plus shows up in our current foreign exchange reserves figure, which has risen to $308 billion.

SwamyG · Post by **SwamyG** » 25 Apr 2011 20:02

A relative of mine has a software business in India; he used to tell me that the big IT players did more of real-estate business than software business.

vera_k · Post by **vera_k** » 25 Apr 2011 20:16

somnath wrote:It would be great I am sure..But that precisely is the point - no need to give tax breaks to Mahindras to build a Baltimore suburb for returning Indians in Chennai!

I'm not so sure. I've seen similar approach in Nigeria of all places because that is the only way to get people to come and staff the business within, given that the government is unable to provide infrastructure (roads, water, security) outside the "bubble". And of course, the tax break is given to the business, not specifically for real estate development. Some level of residential development would be needed to bootstrap the business within until the local government catches up.

UBanerjee · Post by **UBanerjee** » 25 Apr 2011 21:16

Real-estate development within SEZs will continue so long as the state keeps failing to provide basic infrastructure for city residents. Reliable water, electricity, security, and general livability.

Sri · Post by **Sri** » 25 Apr 2011 21:25

What's wrong with Tax breaks? As long as the land being used is not arable (Like Chennai Mahindra World City) and all the earnings are in Dollars (100% export oriented).

Also, the land is just not given. Govt just recognizes a given area as a STPI unit od SEZ. The business men still has to buy the land and apply for all other permissions and permits. In case of mahindra World City it's the Chengalpet village Panchayat which sings of the building construction permits....

Theo_Fidel · Post by **Theo_Fidel** » 25 Apr 2011 21:53

I too am having a hard time understanding why a housing development inside is SEZ community is bad. As has been pointed out the land is paid for and acquired by the SEZ promoter itself. The SEZ areas are specific to the factories and not extended to the the entire zone. In fact at Mahindra all the facilities have special fences around them that control what comes in and what goes out. The main gate is completely unrestricted and anyone can drive in for instance. Does not mean you are inside a SEZ at that point. Just because you put up a 'Potti Kadai' shop inside the main gate does not make you a SEZ.

AFAIK All property taxes, income taxes, utility rates continue to be paid for real estate developments. There is a housing demand, people are willing to pay for it, so lets build to world standard in these areas as a beginning. Ideally long term all of India will start looking like a SEZ at which point they will be Irrelevant.

AFAIK if any developer plays fast and loose, the SEZ tag can be withdrawn at anytime by GOI.

For those interested here is the GOI act without the amendments/corrigenda.

http://india.gov.in/allimpfrms/allacts/3111.pdf

somnath · Post by **somnath** » 26 Apr 2011 06:27

There is too much rhetoric and too little analytical scrutiny on the SEZ issue...

1. Objective function - the SEZ Act in its preamble sets out the objective of SEZs as export promotion...We have gone through the data many times - there is NO evidence of any breakout in decadal trend growth in exports..

2. Subsidiary objective function - employment growth (quoted many times as a key objective by the votaries, incl Kamal Nath)..While large sample NSSO data for 2004-10 is only expected this year, none of the estimates (UNDP, Suresh Tendulkar, ICRIER - all posted here at various points in time in different contexts) show any breakout of employment elasticities/growth in organised manufacturing..If anything, they are stubbornly flat, and perhaps declining..

3. Given the above, the question is therefore - what is the SEZ policy achieving? We have rationale of "lack of govt credibility in executing projects" as one...Unfortunately, an overwhelming majority of SEZs are undertaking NO projects that would be usually funded through public investments...(Unless setting up Baltimore-type suburbs is a public investment objective!)..

4. We also have the argument of "what is wrong if SEZs build residential/commercial real estate"? Well, nothing at all...By all means...Such property has demand, and developers would/should build them...The point simply is, why should SEZs be given tax breaks on income from sale of luxury malls/apartments? Further, and this is a more defensible economic point admittedly, the point indeed is why should companies be allowed to "jump" from an expiring tax-concession regime (STPI, Backward area etc) to a new one (software companies, RIL Jamnagar etc)? To be sure, there are arguable merits of this, but there are no merits of the former...Unless as I said before, fancy property is a public policy objective..

Here's the "revenue foregone" statement of the Union Budget this year..http://indiabudget.nic.in/ub2011-12/sta ... nnex12.pdf
Ballpark, the total revenues foregone on account of SEZs (Direct and Indirect taxes) would be well over 15,000 crores, taking the peak numbers...Not including other "export oriented" revenue losses on account of STPI, EPCG, EOU et al...the key key question therefore is, what are the incremental impact of SEZs to India? Barring Baltimore-type suburbs?

5. Last, we have seen "bipartisan consensus" as a rationale..I said before, the reason is simple - real estate is the biggest cash cow for all parties! But more pertinently, post-2G, the govt is getting wiser to its pitfalls...Which is precisely why we have the MAT on SEZs now - its half-hearted, but the issues mentioned above are being acknowledged as such officially...

For a more analytical critique, the sanhati report posted before is as good as any..

somnath · Post by **somnath** » 26 Apr 2011 06:54

Suraj wrote:It would seem so. Merchandise trade in 2010-11 had a $90-$100 billion deficit, while services trade - if projecting from the 2009-10 data, would have a $55-60 billion surplus. Remittances were approximately $32-34 billion, which in themselves bridge the gap, not counting inflows in the form of FDI or net FII. That net plus shows up in our current foreign exchange reserves figure, which has risen to $308 billion

Numbers are a bit awry here.Trade deficit is expected to be 115-125 billion in the last fiscal...Net Invisibles, that uniquely Indian term which includes services trade and remittances, would be ~ 80 bill..That would leave ~40-45 billion dollars to be financed out of capital inflows (FDI, FII, Aid, ECB)...We should be ok, with a marginal net external acocunt surplus which gets added to the resrerves...

RamaY · Post by **RamaY** » 26 Apr 2011 07:00

^

I thought remittances are much more than that. Don't remember whether it is this thread or west-asia thread (cant distinguish nowadays), we discussed about ME remittances in the range of $50B.

OK found it.

India leading recipient of Middle East remittances

Dubai: India is the leading recipient of remittances from the Middle East, contributing to the $52 billion (Dh190.8 billion) the South Asian country received in 2008.

SwamyG · Post by **SwamyG** » 26 Apr 2011 07:05

Theo: If the society can support such a housing community, i.e. there are people who are willing to pay for such flats, houses and environment why do we need them inside an SEZ? Why can't the developers build it as residential development community?

RamaY · Post by **RamaY** » 26 Apr 2011 07:10

SwamyG garu,

As long as a given SEZ meets the minimum criteria - employment created, trade created, captive infra created etc isn't it alright to have some housing infra as well to meet the SEZ demands? What is wrong with allocating certain% (minority of course) of that land for housing? Doesn't it reduce that much burden on civic infrastructure? I am not talking about SEZs designed around RE business here.

somnath · Post by **somnath** » 26 Apr 2011 07:14

RamaY wrote:^

I thought remittances are much more than that. Don't remember whether it is this thread or west-asia thread (cant distinguish nowadays), we discussed about ME remittances in the range of $50B.

OK found it.

Issue with news articles is that they dont convey the full picture..Remittances are 50 bill, but that is a gross number input to Net Invisibles..what matters from a BoP perspective is the net invisibles number, net of outflows..And that number is ~80 bill for this year..

"Primary source" is always the best

..Here goes..

http://www.rbi.org.in/scripts/Publicati ... x?id=13043
Table III will give you the details on the latest "Net Invisibles" position...

somnath · Post by **somnath** » 26 Apr 2011 07:16

RamaY wrote:SwamyG garu,

As long as a given SEZ meets the minimum criteria - employment created, trade created, captive infra created etc isn't it alright to have some housing infra as well to meet the SEZ demands? What is wrong with allocating certain% (minority of course) of that land for housing? Doesn't it reduce that much burden on civic infrastructure? I am not talking about SEZs designed around RE business here.

Which is precisely the point...Let SEZs achieve what they were primarily set-up for, ie, a shift in export growth! Currently, all that they have done is shift existing units into SEZs for the tax break and then built a bunch of luxury property around them - double whammy! Mind you, there is no issue with doing this as an activity per se, but lets not extend tax breaks for them...