Mumbai:
The International Monetary Fund (IMF) has advised
India to review its plans for special economic zones,
saying that the tax-sops and other incentives could divert
industrial activity from the rest of the country.
"Overall,
it becomes yet another give-away which the government
cannot afford," IMF chief economist Raghuram Rajan
said, adding that it would be far better to make people
compete on the basis of the quality of the infrastructure
they create in such zones.
He
was speaking to reporters after the release of the IMF''s
World Economic Outlook.
As
of now, tax sops are the only reason for setting up smaller
SEZs of 10 hectares, he said, adding that economic zones
of such small size cannot offer benefits of infrastructure.
People should rather be made to compete on the basis of
SEZ rules and regulations to attract capital, he said.
Tax
sops and other incentives may also divert industrial activity
from the rest of the economy into these zones, creating
problems of inequitable development, he said. The Reserve
Bank''s annual report has also pointed out that SEZs could
aggravate an uneven pattern of development, he pointed
out.
The
finance ministry has estimated a revenue loss of the equivalent
of Rs175,000 crore in direct taxes, customs and excise
duties over the next five years while the commerce ministry
expects a Rs44,000 crore gain from the zones.
Meanwhile,
the Communist Party of India (M) feels that the SEZ Act
may allow acquisition of agricultural lands for real estate
development causing large-scale displacement of farmers
in the name of industry and other social ramifications.
CPI(M),
a partner in the ruling UPA, is seeking a change in the
Act to ensure use of a minimum of 50 per cent of the land
for industrial purposes against the existing SEZ Act allowing
the use of up to 75 per cent of land for non-industrial
or real estate purposes. The CPI (M) said it would consult
other political parties on the issue.
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