Windfall loss

  • 14/11/2006

Windfall loss But the farmers are not the only ones who have been protesting against these special zones. An unlikely but forceful voice has been that of the ministry of finance. Though the commerce and finance ministries had drawn swords over the issue of whether sezs will result in a revenue loss or increase in investment, they have now agreed to disagree. The finance ministry claims that the country will lose Rs 1,60,000 crore by 2010 in revenues, while the commerce ministry claims that sezs will rake in investments worth Rs 1,00,000 crore by 2007. "The question of whether we will gain or lose is impossible to know,' says Debroy.

The National Institute of Public Finance and Policy (nipfp), New Delhi, has very pointedly discouraged the kind of tax incentives being offered to sezs.It says perpetuating tax incentives for exports under the sez Act is questionable because the arguments that originally provided the rationale for setting up epzs and allowing tax concessions for export-oriented units have lost their force after liberalisation. Secondly, there is no evidence that tax benefits to special zones have helped promote exports. "The epz era was different. We needed them because we could not liberalise everywhere then,' says Debroy. The nipfp report explains that special consideration towards exports was necessary when India's economy was heavily controlled and protected and epzs were conceived as

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