SEZ Act in Maharashtra faces stumbling block over fiscal incentives

Maharashtra Special Economic Zones and Designated Areas Act 2010, which provides a legal framework for dealing with issues pertaining to the establishment and administration of the SEZs, is facing a stumbling block over provisions of fiscal incentives and administrative autonomy.

The bill was introduced in the legislature in April this year, but despite being listed on the agenda during the recently concluded monsoon session, it could not be taken up for discussion.

The BJP has criticised the provisions and called for a detailed debate to which the government has agreed during the winter session to be held in Nagpur.

Principal secretary (Industries) AM Khan stressed the need for the Act as SEZs encompass long gestation projects.

"Fiscal incentives are meant to provide an enabling environment to generate significant economic development in the state and create employment," he said, adding that the act also puts in place a management structure to act as a single window clearing authority.

Contract labour laws and existing state labour laws are not applicable to SEZs because the aim is to generate employment through bigger markets, Khan said, adding that Maharashtra has 54 notified SEZs.

Referring to the provision of industrial townships, Khan said constitution of Industrial Township Authority for SEZs is in the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act 1965.

"The local bodies can declare industrial townships for the SEZs under the act to carry out the development, operation, management and maintenance of such townships. There is only an enabling provision in the SEZ act. It is upto the local bodies and not mandatory," Khan said.

In addition to the fiscal benefits mentioned under section 7 and chapter VI of the Central Act, the developer, co-developer and units operating in the SEZ will get tax waivers from VAT, Octroi, tax on entry of goods and sales tax based levies.

The waiver, will, however, not be applicable to exports made to educational institutions, hospitals, hotels, residential or commercial complexes, leisure and entertainment facilities.

Similarly, all transactions, excepting sales made to or by educational institutions, hospitals, residential and commercial complexes, leisure and entertainment facilities shall be exempted from sales tax, purchase tax, stamp duty, registration, land assessment tax and electricity duty.

The other special provisions include exemption from state labour laws, Maharashtra Zilla Parishads and Panchayat Samitis Act 1961, chapter six of Maharashtra Regional and Town Planning Act 1966.

BJP spokesman Madhav Bhandari said that the fiscal incentives provided in the proposed act will sound a death knell to the state's economy with far reaching and dangerous consequences on the state's industrial and agriculture development and regional balance.

Several industrial estates are in a dilapidated state, Bhandari said, adding that if the SEZs come up, those surviving industrial units will be finished. Similarly, electricity and water will be consumed in large quantity by the SEZs and they will be exempted from paying electricity duty.

However, the developer, co-developer is entitled to set, collect and retain user charges or fees for supply of power within the SEZs.

Terming the SEZ Act as a black act he said the entire coastal belt in the state will be given away to developers.

Bhandari questioned the need for a 25 year tax holiday when the state was reeling under a debt of Rs 1.85 lakh crore.

About administrative autonomy, the bill says the empowered committee will consist of chief secretary, secretary of industries, energy and labour, home, urban development, environment and development commissioners of any two of the SEZs in the state will be nominated by the state government.It will supervise operationalisation of SEZs. It will facilitate, if necessary, infrastructural support required from the state government, including the acquisition of land.

Decisions taken by the committee on the issues shall be final and bound for all agencies and authorities concerned.

The development commissioner will be appointed by the central government and will grant all local and state level clearances, approvals, licenses and registrations, the bill says.

BJP MLA Devendra Phadanvis said the SEZ Act cannot be passed in the present form. "We have asked for the bill to be sent to the Joint Select Committee for extensive discussion and amendments," he said.