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April 6, 2000

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'Free special economic zones from labour laws'

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EXIM
POLICY

The special economic zones, or SEZs, as announced by the Union Commerce Ministry in the new Exim Policy, must be freed from the existing labour laws in order to make these zones globally competitive, said a software expert from the Santacruz Export Processing Zone, or SEEPZ, in Bombay.

Welcoming the objectives of setting up such zones for promotion of exports, Electronics and Computer Software Export Promotion Council chairman, western chapter, Lalit Kanodia, said that besides rationalisation of duty structure at a uniform 5 per cent, the SEZs must do away with the Industrial Disputes Act to attract foreign investors.

As per the Exim guidelines, these zones come under the Labour Act and banking and foreign exchange laws.

To get rid of the Labour Act and promote the interest of workers, Kanodia suggested that companies setting up units in SEZs could be allowed to pay their workers salaries in dollars.

Since these zones would be treated as foreign lands in respect of movement of goods and products from here, this should be permitted.

There will be no hindrance vis--vis the movement of goods between ports and the SEZs. Additionally, they can now undertake job work from the domestic tariff area, or DTA, and get their goods processed in the DTA as well.

The no-wastage, input-output norms have been done away with under the new Exim Policy.

On information technology, he said that customs bonding has been done away with entirely for the it industry as this used to affect timely delivery of projects, adversely affecting software technology park units.

Kanodia, who is also the chairman of Datamatics Limited, felt that if the SEZs are treated as foreign lands, as the minister mentioned in his speech, India could boost its exports substantially in the coming years.

Exports might touch a figure of $ 40 billion in the near future. In China, such zones contributed about 22 per cent of China's total exports annually.

In India, however, the contribution of export processing zones to exports is minimal because of several bureaucratic hurdles.

Although the Commerce Minister has looked eastwards to China in creating SEZs, he did not take a lead from the communist rulers in adopting stringent labour regulations including the hire and fire policies, Kanodia said.

"We have a long way to go to match our policies with China's export zones," he said.

S B S Reddy, joint director general of foreign trade, western region, said that the success of the SEZs in India would largely depend on their promotion by the state governments and the response from the industry.

"In fact, our experiences from the existing export processing zones were not encouraging because of certain hurdles, which have been largely removed in the recent policy, he said.

In many cases, units in the export processing zones gradually shifted their operations in the mainland in order to get certain tax benefits, he said.

UNI

Exim Policy 2000-2001 on rediff.com

The Exim Policy Document

Exim Policy 1999-2000 on rediff.com

Web site of the Ministry of Commerce and Industry

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