NEW DELHI: Commerce secretary Rahul Khullar warned of a difficult patch ahead in the next three years for the Indian economy, due to lack of adequate land for the industry, mounting wage bills and poor infrastructure, all of which could blunt the competitive edge.
“Large parcels of land are not available in and around major cities. Labour is not going to be easily available as wage bills mount,” he said at a Special Economic Zone Convention here on Wednesday.
Besides, the infrastructure sector is going to face 20-25 per cent shortage of power. The water problem will get worse. Exporters will continue to face poor road connectivity and congestion at ports, said Khullar.
The Commerce Secretary also hinted a re-look at the SEZ land ceiling of 5 000 hectare for the SEZs. “Land issues are critical. I think the minimum size is something that needs to be looked at again definitely. You are not going to find 5 000 hectares of land area. It is a pipe dream. It’s not going to happen,” he said.
The ministry is likely to put up for review the issue before a Group of Ministers headed by Finance Minister Pranab Mukherjee soon.
A number of developers are grappling with the problems of land acquisition. Several of them have also dropped their projects because of the problem.
Khullar, however, expressed hope on the ability of SEZ across the country to continue to regenerate and attract investments due to good infrastructure.
Exports out of SEZs in 2010-11 moved up over 43 per cent over previous year to `3.16 lakh crore. Nearly 6.77 lakh workers are directly employed in these zones that have attracted investments worth `2.03 lakh crore.
To sustain this momentum, the Commerce Secretary suggested that developers explore other states besides Kerala, Tamil Nadu, Maharashtra, Karnataka, Gujarat and Andhra Pradesh for setting up tax free enclaves. These six states contribute about 92 per cent to the country s total exports from SEZs.
“Concentration of SEZs around metro cities has to end. Industries must go to hinterland where land and labour are available,” urged Khullar.
That is easier said than done, said many developers, for whom the Government’s move to do away with the exemption from Minimum Alternate Tax enjoyed by SEZ developers and units under the previous tax regime has led to a sense of policy uncertainty. This means imposition of MAT of 18.5 per cent on the book profits of SEZ developers and units.
Moreover, the draft Direct Tax Code has proposed withdrawal of exemptions for new units that come up after the tax code is implemented and replacement of tax exemption on profits for developers with sops on investments. The DTC is expected to be implemented from the next fiscal. Khullar, however, advised the SEZ players not to worry too much about DTC as the standing committee would give all a chance to express their views.