SEZs have failed to deliver, shows CAG report -Governance Now

SEZs have failed to deliver, shows CAG report

These zones availed tax breaks worth Rs 83,104.76 crore but did not generate enough jobs

Shreerupa Mitra-Jha | November 28, 2014

Special economic zones (SEZs), symbolising India’s drive for economic growth in the post-liberalisation era, have failed to perform their stated purpose of job creation, and have been reduced in many instances to fraudulent land deals, reveals a new report from the comptroller and auditor general (CAG).

“Though the objective of SEZ is employment generation, investment, exports and economic growth, however, the trends of the national databases on economic growth of the country, trade, infrastructure, investment, employment etc do not indicate any significant impact of the functioning of the SEZs on economic growth,” said the CAG report.

The report indicated that the sampled SEZs numbering 152 had non-performance in employment generation ranging from 65.95% to 96.58%, investment from 23.98% to 74.92% and export ranging from 46.16 to 93.81%.

The SEZs that contribute to job creation are located in a few developed states that were established prior to the enactment of the SEZ Act.

The audit observed that the ministry of commerce and industry has not prescribed any measurable performance indicators to gauge the real socio-economic benefits out of SEZs for the citizens and the state.

"Land appears to be the most crucial and attractive component of the scheme," noted the report. Out of the 45,635.63 hactares allotted for the SEZs, work commenced in only 28,488.49 ha. In some cases, fraction of the land acquired was notified for SEZ and was denotified later to benefit from price appreciation – out of 39,245.56 ha of land notified in the six states, 5,402.22 ha was denotified and diverted for commercial purposes.

SEZs in India had availed tax concessions to the tune of Rs 83,104.76 crore between 2006-07 and 2012-13. Tax exemptions also revealed that ineligible exemptions/deductions to the tune of Rs 1,150.06 crore and systemic weaknesses in tax administration to the tune of Rs 27,130.98 crore.

Commenting on the lack of a proper monitoring framework, the CAG said the lack of internal audit facilitated developers to misrepresent facts to the tune of Rs 1,150.06 crore.

India has 496 SEZs covering 61,000 ha of land involving Rs 3 lakh crore of investment.

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