Maran rules out change in labour laws for SEZs

By Sushma Ramachandran

NEW DELHI, APRIL 1. The new Special Economic Zones (SEZs) to be set up in Gujarat and Tamil Nadu may allow 100 per cent foreign equity in all industries. A proposal for a special dispensation on these lines for the SEZs would shortly be considered by the group of Ministers on foreign direct investment.

This was disclosed here today by the Minister for Commerce and Industry, Mr. Murasoli Maran, in an interview to The Hindu. He said currently the existing equity caps for various sectors would apply to the new economic zones. But since the local manufacturing units here would entirely be marked for export, he felt there should be special provisions to allow 100 per cent foreign equity for these firms. Only then would it prove attractive for them to invest in these centres.

On the question of flexibility in labour laws, however, Mr. Maran was categorical that the existing system could not be altered for the special zones. The only modification in the labour laws being sought was to consider units in the SEZs with over 50 per cent export obligation as public utility services. This would enable them to prevent ``wildcat strikes'' and other unforeseen labour problems. ``This is in the national interest as these units will be fulfilling international obligations in the exports sector.''

Mr Maran said he would soon write to the Chief Ministers of various States to request them to give this special facility in the SEZs.

Regarding reservation of products in the small-scale sector, he said a request had already been made for de- reservation of electronic toys, leather goods and ready made garments especially for the SEZs. ``We have allowed China to have a monopoly in the world in toys'', he pointed out. The SEZs were meant to provide greater flexibility for companies to produce goods such as toys and leather goods on a mass scale to avail economies of scale. There was a huge demand for Indian products in areas such as leather but small scale units were not able to meet these requirements. In any case, studies by the FICCI had shown that as many as 233 items reserved for the small sector were not being produced of the total list of 812 which continue to be reserved.

Mr. Maran strongly refuted the suggestions that lifting of quantitative restrictions would lead to a flood of consumer goods being imported. Firstly, he pointed to the latest trade data for the period from April to February (1999-2000) which showed an increase of only 1.02 per cent in non-oil imports. This was despite the fact that QRs were lifted on 894 goods in 1998-99, 532 in 1997-98 and 488 in 1996-97. This had not yet led to any significant rise in imports, he noted.

``The impression is being created that people will now sip Colombian coffee, wear U.S. tracksuits and buy Mikimoto pearls'', he said. But this was far from the truth as the total duties levied on these products would ultimately be around 50 to 60 per cent, he said, and these would be luxury products meant for those who already buy them in foreign countries. At least now these imports would attract duties and revenue would flow into the exchequer, he said.

Besides, he pointed out, there were a whole range of provisions in the World Trade Organisation rules that allow countries to protect themselves from cheap imports. For instance, Article 6 provides for anti-dumping action due to predator pricing, dumping or cartel formation, while Article 12 provides safeguards, article is for industry protection, Article 20 is for protection of natural resources and Article 21 is on grounds of national security. ``So we have all these weapons which WTO has given us,'' he said.

Regarding steps to improve the country's share in international trade, he said an exercise was on to examine ways in which greater market access could be achieved. One of the potential markets waiting to be tapped was the former Soviet Union - Russia and the Central Asian republics.

Even for existing markets such as the U.S., Mr. Maran said studies had shown the potential was much longer and India can significantly improve its presence. ``Exports also have to diversify into higher value added products and products with higher technology,'' he added.

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