Mukesh Ambani's Lobbyist Niira Radia tells a journalist that the reason that Reliance has halted work on the Jhajjar SEZ is because of the price of land. It expect the government to do 'something' to help.
Saturday, December 11, 2010
Tuesday, May 11, 2010
Another State Passes SEZ Legislation (maybe)
The Times of India reports that Maharashtra is (soon) to join the group of states that has passed specific SEZ legislation to complement the central Act (the SEZ Act 20015). Many states have got by just fine without having a state-level Act. Why it is that Maharashtra is passing an Act -- and why it is doing so now -- is difficult to say? One indication is the range of exemptions built into the Act. In one sweep, the bill will remove units in an SEZ from a huge raft of state-level legislation -- everything from industrial relations regulations to tax laws to rules governing the responsibilities of elected local councils. It is likely that the business community would have welcomed this kind of legislation earlier in Maharashtra; but building the requisite political support and moving the Bill through the complex legislative process has not been easy. It's not over yet, either, regardless of what commentators have to say.
Tuesday, March 30, 2010
Friday, February 19, 2010
Indirect Effects of SEZs
Among the effects of various policy changes in India, as elsewhere, is the indirect effect they have on interest groups who feel 'left behind'. So, for instance, tariff increases in one sector often lead to demands for similar reductions in allied sectors. Demands for 'parity' -- in rates of taxation, forms of regulation, levels of subsidy, or other public-sector decisions that affect competitiveness -- are a familiar feature of policymaking processes.
It should therefore be no surprise that this process can be found in the domain of SEZ policy as well. Indeed, in tallying up the impacts of the SEZ policy, one would need to examine the indirect policy effects as well as the direct economic effects. A classic example can be found in the discussions leading up to this year's Budget. Som Mittal, president of National Association of Software and Services Cos (NASSCOM), put it this way: “One of our demands is that STPI units get the same benefits as SEZ units ....'.
It is worth distinguishing two versions of the 'policy parity' demand. One version -- of the type represented by the NASSCOM statement -- is articulated in terms of the need to provide a level playing field for direct competitors. The idea here is to restore balanced conditions favourable to market operation. The other version of a parity demand is more overtly political in nature -- no organized demands made on public decision-makiers can be divorced completely from politics -- and involves a moral claim. So when sugar farmers in Maharashtra demand that their subsidies be increased in line with those 'enjoyed' by rice farmers in Andhra Pradesh, their claim is made on grounds of fairness, not in terms of adverse market impacts likely to be suffered as a result of rice subsidies. The two are not substitutable goods
Whether NASSCOM gets its way will have more to do with the political clout of its membership -- and the inclinations and calculations of those who make decisions -- than with the merits of their case. Either way, SEZ policy must be seen to have effects beyond the specific issues (or firms) falling within its purview.
It should therefore be no surprise that this process can be found in the domain of SEZ policy as well. Indeed, in tallying up the impacts of the SEZ policy, one would need to examine the indirect policy effects as well as the direct economic effects. A classic example can be found in the discussions leading up to this year's Budget. Som Mittal, president of National Association of Software and Services Cos (NASSCOM), put it this way: “One of our demands is that STPI units get the same benefits as SEZ units ....'.
It is worth distinguishing two versions of the 'policy parity' demand. One version -- of the type represented by the NASSCOM statement -- is articulated in terms of the need to provide a level playing field for direct competitors. The idea here is to restore balanced conditions favourable to market operation. The other version of a parity demand is more overtly political in nature -- no organized demands made on public decision-makiers can be divorced completely from politics -- and involves a moral claim. So when sugar farmers in Maharashtra demand that their subsidies be increased in line with those 'enjoyed' by rice farmers in Andhra Pradesh, their claim is made on grounds of fairness, not in terms of adverse market impacts likely to be suffered as a result of rice subsidies. The two are not substitutable goods
Whether NASSCOM gets its way will have more to do with the political clout of its membership -- and the inclinations and calculations of those who make decisions -- than with the merits of their case. Either way, SEZ policy must be seen to have effects beyond the specific issues (or firms) falling within its purview.
Monday, December 28, 2009
Expansion Strategies
The following item underlined that strategies for assembling SEZs -- and modifying SEZ rules to allow for this -- take a huge range of forms:
ADANI GROUP INTENDS TO INCREASE AREA OF ITS SEZ IN MUNDRA [GUJARAT]
Business Standard, 21 Dec 09
Ahmedabad-based Adani Group is looking at increasing the area of its multi-product SEZ at Mundra in Kutch.
ADANI GROUP INTENDS TO INCREASE AREA OF ITS SEZ IN MUNDRA [GUJARAT]
Business Standard, 21 Dec 09
Ahmedabad-based Adani Group is looking at increasing the area of its multi-product SEZ at Mundra in Kutch.
Mundra Port and Special Economic Zone Ltd (MPSEZ), the developer of the SEZ, has already approached the Board of Approval for SEZs seeking its permission for addition of land to its SEZ.
Adani Group's multi-product SEZ in Kutch is notified over 6,472.86 hectares.
The developer has requested for addition of 2008.41 hectares of land to the already notified SEZ. If the government approves the request, the area of this SEZ would be 8,481.27 hectares.
"Out of the 2,008.41 hectares the company proposes to add, it is in possession of 1,840 hectares and is also in the process of obtaining possession of balance 168.41 hectares of land shortly from the government of Gujarat," the company has communicated to the Board of Approvals. The additional area applied for notification is contiguous to the notified SEZ.
The SEZ is positioned on the west coast of India and it is ideally situated for exports to African, Middle Eastern and western countries.
Mundra Port and Special Economic Zone Ltd also manages the largest private port at Mundra in terms of cargo handling with total 36 million tonnes of cargo handled in 2008-09. It is expected to handle 44 million tonnes in the current fiscal.
The company is further developing world’s largest and fully mechanized coal import terminal at Mundra with a capacity of 50 million tonnes to cater to various power projects including the power projects being set up by Tata and Adani Group.
Friday, December 4, 2009
Peeling Back the Veil on SEZs
Since the passage of the SEZ Act, 2005, critics of the new policy have complained that the implementation modalities lend themselves to abuse. Among the concerns has been the role of the Development Commissioners (DCs), appointed to oversee the enforcement of rules pertaining to the operation of SEZs. DCs are vested with a variety of powers -- some central subjects, others state subjects. Not only did critics of the SEZ policy fear that the DCs would implement rulings detrimental to the interests of labour and the environment, but also that the concentration of state power in the hands of a single official (working with a small group of subordinates) would lead to corruption. There would also be strong incentives for private sector actors to abuse the provisions of the Act -- by, for instance, smuggling tax-free goods to the Domestic Tarrif Area or using SEZs primarily as a way of evading zoning restrictions on housing development.
It did not help matters that the Union Ministry of Commerce and Industry did not take urgent steps to reassure these critics. The nature of the DCs' powers were left vague, allowing fevered speculation as to the scope of their authority. Transparency in the operation of the zones, moreover, has been uneven at best, and usually much worse than that -- leaving civil society watchdog groups little option but to bark from the sidelines when they were denied access to pertinent information. To top it all off, efforts to ensure that the state's own oversight institutions could effectively keep tabs on the functioning of the zones -- and the performance of the DCs -- had been thwarted since last summer by the infamous Instruction No. 34, issued by the Ministry. This required DCs to authorize investigative action by various auditing and enforcement agencies. Anecdotal evidence indicates that permissions were often denied, further fueling speculation about what it is that the SEZ developers and their bureaucratic accomplices might be hiding.
The latest Ministry-issued instruction has reversed this precedent, however -- allowing audit and enforcement agencies to investigate activities with and pertaining to SEZs without obtaining prior permission from the DC or Zonal Development Commissioner. This is an important, but still limited, boon to the cause of transparency and accountability. Why ''limited"? Mainly because it opens up SEZs only to state agencies with a mandate to investigate issues that fall within their organization's core mandate; there are many non-governmental groups who could contribute substantially to such inquiries, as the People's Audits of SEZs held in many states have shown. Even more important, many issues (such as land alientation in the process of establishing an SEZ) are not adequately covered by the new Instruction (No. 43).
The Ministry of Commerce has in one respect gone 'beyond transparency': when revoking the legal force of Rule No. 34, it also wiped the relevant provision off of its website entirely, rather than simply ensuring that a subsequent Instruction superseded it.
Another interesting feature of this climbdown is that it was prompted, apparently, by India's desire to demonstrate to the international community that it was serious about combating terrorist financing, which in turn required bold action that indicated that no entity was beyond the reach of India's investigative agencies. India hopes to join the Financial Action Task Force before long, and without unleashing its significantly hemmed in enforcement agencies, it stands little chance of being accepted into the club. International norms may be less meaningless than is often thought.
It did not help matters that the Union Ministry of Commerce and Industry did not take urgent steps to reassure these critics. The nature of the DCs' powers were left vague, allowing fevered speculation as to the scope of their authority. Transparency in the operation of the zones, moreover, has been uneven at best, and usually much worse than that -- leaving civil society watchdog groups little option but to bark from the sidelines when they were denied access to pertinent information. To top it all off, efforts to ensure that the state's own oversight institutions could effectively keep tabs on the functioning of the zones -- and the performance of the DCs -- had been thwarted since last summer by the infamous Instruction No. 34, issued by the Ministry. This required DCs to authorize investigative action by various auditing and enforcement agencies. Anecdotal evidence indicates that permissions were often denied, further fueling speculation about what it is that the SEZ developers and their bureaucratic accomplices might be hiding.
The latest Ministry-issued instruction has reversed this precedent, however -- allowing audit and enforcement agencies to investigate activities with and pertaining to SEZs without obtaining prior permission from the DC or Zonal Development Commissioner. This is an important, but still limited, boon to the cause of transparency and accountability. Why ''limited"? Mainly because it opens up SEZs only to state agencies with a mandate to investigate issues that fall within their organization's core mandate; there are many non-governmental groups who could contribute substantially to such inquiries, as the People's Audits of SEZs held in many states have shown. Even more important, many issues (such as land alientation in the process of establishing an SEZ) are not adequately covered by the new Instruction (No. 43).
The Ministry of Commerce has in one respect gone 'beyond transparency': when revoking the legal force of Rule No. 34, it also wiped the relevant provision off of its website entirely, rather than simply ensuring that a subsequent Instruction superseded it.
Another interesting feature of this climbdown is that it was prompted, apparently, by India's desire to demonstrate to the international community that it was serious about combating terrorist financing, which in turn required bold action that indicated that no entity was beyond the reach of India's investigative agencies. India hopes to join the Financial Action Task Force before long, and without unleashing its significantly hemmed in enforcement agencies, it stands little chance of being accepted into the club. International norms may be less meaningless than is often thought.
Wednesday, December 2, 2009
An Indication of Continued Confusion?
According to two developers who recently attended a (small!) conference on investment opportunities in India, the lack of clarity about the way in which rules related to SEZ are to be interpreted is one of the factors that is slowing down the completion of SEZs under construction as well as the establishment of business units within SEZs. (Obviously the global economic downturn and the reduced availability of credit are the most important variables.)
The policy ambiguities most cited concern taxation matters -- sales tax, duration of various concessions, categories of expenditure that attract tax breaks, etc. But there are other unresolved issues as well, most notably those related to land acquisition and the nature of the regulatory regime -- particularly the applicability of labour laws and the functioning of special tribunals stipulated in the SEZ Act. The lawyers for American firms in the auto-parts and energy sectors are especially worried about how such tribunals will deal with questions relating to collective bargaining (should trade unions make a big push for representation in a given SEZ).
Apparently, Development Commissioners who are responsible for overseeing much of the administrative infrastructure of SEZs have been seeking clarification on the rules governing these and other questions at an increasing rate. It is therefore no surprise that Ministry of Commerce and Industry in Delhi has felt obliged to notify these and other officials of a procedure for dealing with such queries. Below is the text of the Instruction (No. 43, F.No.C.8/6/2009-SEZ) was issued by the Additional Secretary in the Commerce Dept in late November. Since the text is a little vague on the precise modalities for operating this decentralized system for addressing policy questions, it will not be surprising if further clarification is sought on how to go about seeking clarification pursuant to this Instruction.
Procedure for seeking clarification on policy issues relating to SEZ Act and Rules from Department of Commerce
Instruction No. 43
F.No.C.8/6/2009-SEZ
Government of India
Ministry of Commerce & Industry
Department of Commerce
Udyog Bhawan, New Delhi
Dated the 23rd November, 2009
To: All Development Commissioners
Sub: Procedure for seeking clarification on policy issues relating to SEZ Act and Rules from Department of Commerce
Sir/Madam,
I am directed to say that references are received from Development Commissioners in this department seeking clarification on various provisions of SEZ Act and Rules. It has been decided that such clarifications may first be considered for a decision in the meetings held by Zonal DC.
2. Meetings of all Zonal Development Commissioners under the chairmanship of AS (SEZ) would be held after BOA meeting in the Department of Commerce to discuss and clarify policy matters which required further discussion. Therefore, if Zonal DCs need any clarifications on SEZ Policy issues, they may bring up such matters along with full details of the case in these meetings.
3. This issues with the approval of AS (SEZ).
The policy ambiguities most cited concern taxation matters -- sales tax, duration of various concessions, categories of expenditure that attract tax breaks, etc. But there are other unresolved issues as well, most notably those related to land acquisition and the nature of the regulatory regime -- particularly the applicability of labour laws and the functioning of special tribunals stipulated in the SEZ Act. The lawyers for American firms in the auto-parts and energy sectors are especially worried about how such tribunals will deal with questions relating to collective bargaining (should trade unions make a big push for representation in a given SEZ).
Apparently, Development Commissioners who are responsible for overseeing much of the administrative infrastructure of SEZs have been seeking clarification on the rules governing these and other questions at an increasing rate. It is therefore no surprise that Ministry of Commerce and Industry in Delhi has felt obliged to notify these and other officials of a procedure for dealing with such queries. Below is the text of the Instruction (No. 43, F.No.C.8/6/2009-SEZ) was issued by the Additional Secretary in the Commerce Dept in late November. Since the text is a little vague on the precise modalities for operating this decentralized system for addressing policy questions, it will not be surprising if further clarification is sought on how to go about seeking clarification pursuant to this Instruction.
Procedure for seeking clarification on policy issues relating to SEZ Act and Rules from Department of Commerce
Instruction No. 43
F.No.C.8/6/2009-SEZ
Government of India
Ministry of Commerce & Industry
Department of Commerce
Udyog Bhawan, New Delhi
Dated the 23rd November, 2009
To: All Development Commissioners
Sub: Procedure for seeking clarification on policy issues relating to SEZ Act and Rules from Department of Commerce
Sir/Madam,
I am directed to say that references are received from Development Commissioners in this department seeking clarification on various provisions of SEZ Act and Rules. It has been decided that such clarifications may first be considered for a decision in the meetings held by Zonal DC.
2. Meetings of all Zonal Development Commissioners under the chairmanship of AS (SEZ) would be held after BOA meeting in the Department of Commerce to discuss and clarify policy matters which required further discussion. Therefore, if Zonal DCs need any clarifications on SEZ Policy issues, they may bring up such matters along with full details of the case in these meetings.
3. This issues with the approval of AS (SEZ).
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