SEZs are earmarked geographical zones which can be developed by a private sector or public sector developer. They come with direct and indirect tax holidays and is great for countries that want to attract foreign investments. The SEZ concept was a great success in China and brought heavy foreign direct investments into that country. However there is a difference between the Chinese and Indian model of SEZ, in China the government acts as the developer whereas in India it is either the private sector developers or public sector developers.
The Chinese objective behind setting up of SEZs was not profits but investment promotion and world class infrastructure. There is also a vital difference in tax incentives provided by the two countries. Chinese tax incentives are based on foreign direct investments unlike India wherein they are based on export revenues.
However there are some issues with regard to SEZs in the Indian arena:
Violent farmer agitations against acquisitions of land and their political backing
Cap on acres of land to be given to SEZs (5000 acres)
Rush by various developers to acquire land for creation of SEZs. State governments are confused over the quality of investment and activities.
IT industry wants the lions share in the SEZs. The industry already has had a decade of tax holiday and an IT SEZ will create power, water shortages and also traffic congestions.
SEZ is an avenue to receive kickbacks for politicians
It is of primary importance that the above issues are sorted out and SEZ achieves its full potential an enables India to get into the “Super Powers” list.
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