India will only benefit by SEZs

Autocar Pro News DeskBy Autocar Pro News Desk calendar 25 Apr 2006 Views icon5400 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
India will only benefit by SEZs
India can benefit immensely if it were to set up special economic zones (SEZs) all over the country. In China, many years ago many investors rushed to set up units in these SEZs. Today, foreign investors are setting up units even outside the SEZs.

In China even the labour rules existing in the country did not apply to the units within the SEZ. In India, such conditions have been promised here too but have not come into force. We have, in fact, emulated the Chinese model since it was very successful. India's former Commerce Minister late Murasoli Maran had initiated the idea of setting up SEZs in India after his visit to China seven to eight years ago. He observed that Chinese SEZs were the real pushers of economic growth in that county. Initially it was decided to convert the export processing zones (EPZs) into SEZs, and then come up with green field ones. If India were to set up several SEZs, a lot of MNCs would come in.

By providing a base for MNCs, the country could benefit in a big way. Ten per cent of China's exports is to WalMart. There is a huge buying that the stores are doing. Take for example Ikea of Sweden; they are buying around Rs 800 crore worth of lighting alone from China. In contrast they buy may be around Rs 50 crore worth of lighting from India. Also, they could be buying Rs 10,000 crore worth of goods from China. Lighting is just five per cent of their turnover. Manufacturing outsourcing opportunities are really huge.

Ours was the first company to set up an auto parts unit in the special economic zone. In the last three - four years there have been no new auto parts units that have come up in the zone. There is only one zone in north India. There is a lot of hype that special economic zones will come up Rajasthan, MP and Haryana. They have not even started setting up one. There are SEZs in other parts of India.

##### We came to Noida when this area was NEPZ (Noida export processing zone). The rules are different for these two zones. Over a period of time it was converted into a SEZ. EPZs are like a country within a country. Anything that comes in from outside the zone (also called the domestic territory) is like an import for the zone. Anything that goes out is like export. So if we were to sell to the domestic area we would have to pay duty on the goods because this sale would construe as imports.

We can get 100 per cent foreign exchange for the exports, we can import anything without duty as long as it is coming to the zone, even items like air conditioners and furniture, excluding vehicles. The imported items have to be utilised within the plant. There is no sales tax here. The excise, customs and the development officer of this zone are very co-operative. We had a lot of apprehension when we came in.

A lot of people are coming in after it has been converted into an SEZ. Earlier they were sceptical whether this area would indeed be converted into an SEZ. Once it was converted two years, a lot of people are coming in and one can see a lot of construction taking place in the area.

The zone is only around 300 acres. The new zones that the government is promising in other parts of north India are around 2000 to 3000 acres in area. One, we can import anything that we want to for the plant. It gets customs cleared here only. We do not have to get it custom cleared in any port because this area is like a port. When we need to export, we get it customs cleared at the gate itself and it goes directly to the sea port.

If somebody wants to utilise his or her production unit for the domestic market then this is not the right place too. They should set up a unit outside and convert it is an export oriented unit. Then they can sell 25 to 50 per cent of their production in the domestic market. But then you have to pay sales tax for the purchases. The most important point is that there is an income tax holiday in the SEZ. There is none for EOU unit. In the SEZ there is a five-year 100 per cent income tax waiver and for another five years there is a 50 per cent waiver.

For SEZs to be successful, India's infrastructure too needs to improve. These include roads, ports and airports. Take, for example, the ports. Your ships first go to Colombo. It is a small ship that carries your goods to Colombo or Dubai or some other port. The mother vessel is parked there. Ninety per cent of these mother vessels do not come into India. A buyer in Brazil which is almost equidistant from India and China, is able to get his goods from China in 20 days while from India it takes around 45 days. That's the difference in transit time.

This is still okay. But a customer coming to India loses his confidence when he comes to India by merely looking at our airports and roads. The potential here is real good. The entrepreneurship here is good, the workers are hard working, so why miss the bus merely due to bad infrastructure?

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