SEZ – A SLOW RACING HORSE IN INDUSTRIAL SECTOR

The scheme of Special Economic Zone was controversial since its inception itself. However, after the declaration of the scheme in the year 2006, many companies were interested to establish their units under the scheme in the years 2007 & 2008. But, their interest has been slowed down during the previous year and many of them either wish to leave their projects or ask for the extension of period in completing it. Therefore, there is a necessity to analyse their change of minds in this direction. According to the official statement, so far 597 projects have been cleared in principle out of which 335 units are notified. Out of 335 units, some units are working and some units are under uncertainty.

Reasons for attraction towards SEZ.

After declaration of SEZ scheme, many companies were eager to establish their units under it and there were two three reasons for the same. The main attractions were the following :-

i. The zones established under the scheme shall get the benefit of 100% tax benefits including income-tax, and thereafter, for the next five years, there shall be tax concession of 50% and thereafter, 50% tax concession on the profit made from the zones for its reinvestment.

ii. The other point of attraction was that out of the land allotted
for establishing the industrial zone, only 35% should have to be utilized for manufacturing activities and the remaining can be utilized for Administrative Buildings and also for other activities.

iii. Further, the State Governments were ready to acquire the
land for SEZ directly from farmers.

In view of many concessions granted under SEZ, many observers called it as the new advent of Feudalism, however, the Government was committed to go forward with the scheme and many companies shown their interest to establish their units under the scheme till 2008.

The impact of Recession

In view of the global recession which started by the middle of the year 2008, the situation was changed all over the world which affected our country too. Prior to the recession, there were huge demands for commercial complexes and offices and thus the value for real estate property was at higher level. After the recession, there was a downward trend of valuation in property market which affected the rush for the purchase of offices in commercial complexes. Further, the Companies exclusively functioning in the real estate area found it difficult to get the finance, as there was a disinterest amongst the investors in shares in view of lesser value of the real estate properties.

The availability of land

There was a trend to obstruct the possession of land in establishing SEZ units. In the beginning, the Government started to acquire land for public interest by using its legal right and provided to such units for setting up units by private industrialists/business men. However, there was a hue and cry for acquiring the land by the Government for public interest and at the same time handing over to the private parties for making profits. And due to this issue, it was difficult for the Government to acquire the land for SEZ units by using its authority and power. Gradually it became the custom for the private parties to acquire the land directly from farmers for setting up their units, however, such practice also did not sustain for long in view of the opposition from small land holders to sell their land for the project although a large portion of the land was acquired for the zone unit.
There is an opinion that such cases should be resolved by the intervention of the State Government and one another opinion is that the Government should keep away from such disputes. And thus, there is an uncertainty still exists for setting up the SEZ.

Increasing Uncertainties

Now a situation has arisen wherein many companies are not interested to set up their units in an atmosphere of uncertainties. Therefore, the companies which are working in the real estate are started de-notifying their own schemes and also slowed down its activities. The companies working in other fields also are closely watching the chaining scenario, as we can understand the trend from their decisions to extend the implementation of setting up of the projects for a further period. According to the official statement, it is claimed that 101 projects are working at present under SEZ and about Rs. 1.70 lacs are invested by different parties till date. However, the opinion of the observers differ from the official stand, as according to them this is not an extra ordinary achievement and they site that under the normal conditions also there is an increase in investment in our country. And perhaps, without SEZ scheme also, there could have been investment of this order. According to observes, many times, SEZ schemes are compared with the Chinese industrial policy. But the fact is that the Chinese Government on its own sets up Special Economic Zones and there the ownership of the land rests with the Government. As such SEZ is now obstructed from all angles.