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Since tax revenues are already at low levels of 10% of GDP, it is felt that it could be difficult for the government to meet necessary financing for social sector. Further, since most of the Export Processing Zones (EPZ's) would be subject to elimination of tax exemption after 2009, SEZ's will provide them with good viable options by 2009.
This can contribute to further revenue loss for the government.

4) Other Issues Relating to SEZ's: Other important issues relating to SEZ's pertain to land acquisition and financial soundness of the promoters and developers of SEZ's. Land holdings in India are fragmented and it is difficult to acquire large tracts of land. A case in point is the experience of Mahindra World City near Chennai, the country's first private SEZ. It was first conceived in the year 1996, but the 560-hectare project could only acquire land by 2000 and get the infrastructure in place by 2003. SEZ's are projects with long gestation period, and hence, it is of paramount importance that promoters and developers of these SEZ's have the requisite financial clout and deep pockets to finance these projects over a long term.

A welcome change in this aspect has been the government guidelines in respect of minimum investment and the net worth criteria for the promoters and developers of the SEZ's. A minimum investment of Rs. 250 crores and net worth of Rs. 50 crores for industry specific zones has been approved. Also, a minimum investment of Rs. 1000 crores and net worth of Rs. 250 crores for multi-product zones has been specified.

The Positive Side to SEZ's

While SEZ's have their own disqualifications yet they are engines of economic growth. SEZ's can bring enormous benefits like forex earnings, FDI, global exposure and transfer of technology. There are today some 3000 SEZ's operating in 120 countries which account for over $600 billion in exports and give direct employment to around 50 million people. The example of China's economic growth as a leading 'manufacturing' hub has been due to its SEZ policy.

In India, SEZ's are expected to get investments of the order of Rs. 1,00,000 crores over the next 3 years and generate 5,00,000 new jobs apart from the indirect jobs created during the construction period. India's export from SEZ's have increased by 52.35% over the last 3 years and stood at Rs. 18,309 crores which still is only 5% of India's total exports. Thus, there is a considerable scope for expansion.

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Gaurav Aggarwal,
Master of Business Economics (MBE),
University of Delhi, South Campus,
Delhi.