October 11, 2022
Good morning. In today’s either/view, we discuss whether the Development of Enterprise and Services Hub (DESH) Bill is the right way forward. We also look at the approval to run businesses 24×7 in Delhi, among other news.
📰 FEATURE STORY
The DESH Bill: A Step Forward?
Since 2006, the Special Economic Zone (SEZ) Act has pushed exports to boost the economy. The recent Budget speech announcement, however, proposed that this Act will be replaced with new legislation, the Development of Enterprise and Services Hub (DESH) Bill. This bill aims to revamp the existing framework and right all the wrongs of the SEZ Act.
The new draft Bill, however, emerges with its own loopholes, begging the question of its effectiveness. Is the DESH Bill a step forward or merely a change in name?
Context
The SEZ Act first came into effect in February 2006. Special Economic Zones are demarcated geographic regions where economic laws are more relaxed than those in the rest of the country, allowing them to act as export hubs. These zones not only promote exports but also generate employment and boost the economy. As of March 2021, there were 262 operational SEZs. This regime faces its share of issues, including being export-centric, complex compliance mechanisms, waning tax concessions, and sectoral restrictions.
With the intention of improving the investment attractiveness of SEZs, the government of India constituted the Baba Kalyani Committee to suggest changes to the SEZ policy of the country, obtaining inputs from various stakeholders. To carry out the endeavour of enabling India to become an attractive global destination for manufacturing and services, the DESH Bill came to fruition. It is expected to be tabled in the monsoon session of the Parliament.
The DESH bill has sparked hopes of change as it adopts a continuity-based approach with two important changes; firstly, there will be a removal of the positive net foreign exchange requirement, and secondly, there will be access to domestic markets. These changes are not only WTO-compliant but also address the long-pending demands of the industry.
The bill aims to shift the focus from exports to domestic investments, eliminating compliance and procedural challenges. Unlike in the SEZ ecosystem, the bill proposes the creation of developmental hubs, which will be of two types – enterprise and services hubs. The former will have land-based area requirements and will be utilized for manufacturing as well as service activities. The latter will have built-up area requirements and will be used only for service-related activities.
Finance Minister Nirmala Sitharaman outlined some objectives for the new bill. It is to cover all large existing and new industrial enclaves to utilize available infrastructure effectively, enable the states to become partners in the hub development and enhance export competitiveness.
VIEW: DESH Bill is a step forward
The DESH Bill has come at a particularly crucial time. With the hegemonic war flaring up between the US and China, foreign investors are expected to move away from China. Many Asian countries are planning to grasp this opportunity by strengthening their SEZs. The hubs proposed by the new bill will pose strong competition with those in other countries.
India’s goal of becoming a $5 trillion economy by FY 2026 requires accelerated investments in the services and manufacturing sectors. Although the SEZ Act was brought about to facilitate making India a manufacturing powerhouse in the world, it had a limited impact. The new bill, however, is expected to ensure tax rebates/financial subsidies to developers in the hub without any export compulsion. Existing ports, airports, land stations, etc., will be transformed into development hubs, thereby boosting the economy.
The DESH Bill also proposes various tax breaks. Since the provisions also facilitate coordination of the Centre, state governments, investors, stakeholders and industry associations, the bill could be a game-changer for the country and go a long way in achieving the $5 trillion economy goal.
COUNTERVIEW: DESH Bill is merely a name change
While the proposed bill seems to get some things right, will it eventually end up like the SEZ Act? Certain important questions need to be addressed regarding the provisions of the draft Bill. The objectives of the ‘hubs’ are generic and have not been clearly defined. There is a myriad of industrial zones developed by different ministries of the central and state governments. The bill fails to position these hubs in the established zones.
The bill boasts the involvement of state governments. However, the draft does not clearly outline how the states’ role has been expanded other than the Integrated Board having an officer from the concerned state. The existing draft is still unclear on many aspects, including pure-play trading activities and the availability of concessional customs duty rates.
India isn’t considered the easiest place to do business. The Ministry of Corporate Affairs data revealed that the number of foreign companies reduced from 3361 in 2017 to 3311 in December 2021. According to the US state department, this is due to India’s inability to simplify its regulatory regime, bureaucratic intervention and widespread corruption. Although the SEZ Act offered a single window mechanism to combat these institutional challenges, it failed to do so. While the DESH Bill has changed the name of the Board of Approval to Integrated Development Hub Board and Unit Approval Committees to State Boards, among others, the names may be different, but the gameplay remains the same.
Reference Links:
- DESH Bill: A change only in name? – Financial Express
- What is the SEZ Bill? – Business Standard
- Will the newly proposed DESH bill change the SEZ landscape of India – Financial Express
- What is the DESH Bill? – Business Standard
- DESH Bill Explained: Three key things you should know – Money Control
- DESH Bill – Awaiting a revised draft – Financial Express
What is your opinion on this?
(Only subscribers can participate in polls)
a) The DESH Bill is a step in the right direction.
b) The DESH Bill is a step in the wrong direction.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
B.B. Lal And The Making Of Hindutva Archaeology
For the Left:
India’s Hour At The UNGA: Modi’s 5-S Approach Is The New Panchsheel On The Global Stage
🇮🇳 STATE OF THE STATES
Businesses can run 24×7 (Delhi) – More than 300 businesses, including restaurants, hotels, and food delivery services, will now be able to operate 24×7 in the national capital. Lieutenant Governor V K Saxena approved the proposal by exempting 314 applications, some of which have been pending since 2016. These were pending for no reason, even as only a few were processed and sent previously. The move provides the exemptions under Sections 14, 15 & 16 of the Delhi Shops & Establishment Act, 1954.
Why it matters: The decision is expected to boost employment generation and promote a positive business environment needed for economic growth. It could help in promoting the nightlife of Delhi. Traders and business owners welcomed the decision. This was a demand from many for a long time as the pandemic hit businesses hard. However, they did have concerns about infrastructure and security.
EB cold war costs staff promotions (Kerala) – A rift between Power Minister K Krishnankutty and Kerala State Electricity Board Limited (KSEBL) chairman Rajan Khobragade has affected the promotion of 343 staff officer-level employees. The promotions had been halted by former chairman and managing director B Ashok. His successor held talks with various KSEBL trade unions, and he took the decision to initiate the promotion process. However, that has now stopped since Krishnankutty believes the KSEBL is a company and the government can’t intervene in the board’s decisions.
Why it matters: Some employees currently working as senior assistants and assistant engineers are awaiting promotions. Due to a lack of sufficient vacancies in the KSEBL, there have been delays. Despite this, they have got grade promotions which get them a higher salary. The financial impact is minimal since the KSEBL is bearing the impact.
Fishermen return from Bangladesh (West Bengal) – 135 fishermen returned to West Bengal a year after spending time in a Bangladeshi jail. After they were taken into custody for entering foreign waters, they were released on October 3 thanks to efforts by the Union Home Ministry and other government agencies. The Bangladeshi authorities cooperated with India to facilitate their release. The fishermen are residents of villages in Kakdwip and Namkhana.
Why it matters: Last year in June, due to strong currents in the Bay of Bengal, eight trawlers entered Bangladeshi waters. They were intercepted by their coast guard and taken into custody by the local police in Khulna. There are two other trawlers with 30 fishermen who are still in Bangladesh, and efforts are on to bring them back home.
Bulldozer politics not working (Madhya Pradesh) – In the poll-bound state, the BJP’s bulldozer politics isn’t working. A section of the party’s state leadership has informed the national leadership of the state government’s move. The party leaders said bulldozer politics wouldn’t be successful since Hindu-Muslim politics has not been an issue in the state. The more important issue is caste politics.
Why it matters: The BJP needs to consolidate tribal and Dalit votes in the state to be successful. These two groups have helped the party keep its 15-year uninterrupted rule in the state. Despite the Yogi Adityanath-led BJP government’s move in Uttar Pradesh winning some praise for maintaining law and order, the BJP hoped a repeat of this in Madhya Pradesh would be a success, but it seems that is not meant to be.
NZPO letter on WSYF ultimatum (Nagaland) – The Nagaland Zeliang People’s Organization (NZPO) wants the chief secretary to intervene concerning the ultimatum by the Western Sumi Youth Front (WSYF). The NZPO said the WSYF had no right to issue ultimatums concerning Lamhainamdi village since it comprises all tribes of the state. They want the state to ask the WSYF not to interfere.
Why it matters: In May, the NZPO said it informed the home commissioner that the government was aware that the land on which the village was established is traditional Zeliang land. It also pointed out that the government prohibited the people from cultivating on their own land, which led many to starve, but encroachers were allowed to undertake development work by illegally occupying the land.
🔢 KEY NUMBER
$2.5 billion – The amount Reliance Jio is looking to raise through overseas loans for its 5G rollout. The money will fund network gear buys from Sweden’s Ericsson and Finland’s Nokia.