[Assam] Another View of Things/Who Pays the Price for India's "Corporate Welfare"?

Tue Jun 10 20:02:18 PDT 2008

Dilip-da,

Staying in Delhi area - esp Gurgaon is not much different from staying in any place which has a very vibrant civil society. I read such articles in Times of India etc when I was in Delhi 1990-1996 , but I recall they were about Delhi farmlands - where some wise enough farmers did not buy brand new Mercedes cars (which were as rare in India as are Rolls Royce cars in the USA now) and invested in something more useful.

Gurgaon is very much part of India's prime land and the landowners are not meek mice - ignorant and oppressed - but mostly Jats - the aggressive warrior/farmer clan who shake Delhi. New Gurgaon has been in around for over 15 years  now. 

http://www.gurgaonscoop.com/story/2007/12/18/23320/596 
you might find it useful though. The ones I read were before internet websites existed for these newpapers (TOI etc). TOI website came about I think in 1998.

Umesh

"Dilip&Dil Deka" <dilipdeka at yahoo.com> wrote: Umesh,
Do you know first hand that the land owners actually sold or were compensated for the land  by the real estate developers? The critics always say that the land owners get evicted and end up on the street. Is the truth somewhere in between?
Dilipda

----- Original Message ----
From: umesh sharma 
To: A Mailing list for people interested in Assam from around the world 
Sent: Tuesday, June 10, 2008 11:08:57 AM
Subject: Re: [Assam] Another View of Things/Who Pays the Price for India's "Corporate Welfare"?

It is similar to the question , "Who pays the price when all consumer goods in the US are MADE IN CHINA?"  Or "Who pays the price when all software work is outsourced?"

I have to assume that it is from the same group of people such a squestion has emerged. Somebody somewhere has to pay the price.  Since you do not seem to know much about how the new mini cities have come about -- let me refresh your memories that the farmers who sold their lands to these developers overnight became rich. Many bought new Mercedes cars etc. Many frittered away their wealth on trinkets .

Umesh

Chan Mahanta  wrote: This is a story related to the issues involved in the NY Times 
article about the Good Life in Gurgaon. And it touches on some of the 
points raised by Uttam, and how it impacts the PUBLIC GOOD.

http://www.evb.ch/en/p25010663.html

Note:

  A report by the McKinsey Global Institute came to the conclusion 
that the investment decision of corporations usually was not 
dependent upon these benefits. Especially in booming markets like 
India, corporations want to be present in any case, but are 
nonetheless happy to take advantage of the benefits that are offered 
to them. India's elites are not completely innocent: The success of 
having attracted a prestigious foreign corporation to one's own state 
is a great way to show off. It is India's poor who pay the price.

cm

***************************************************************************************************************

Who Pays the Price for India's "Corporate Welfare"?  (28.01.06)

Two reasons are given for India's economic attractiveness: 
well-educated, inexpensive high-tech workers and a booming internal 
market. But there is a third, more important motive that attracts 
investors: the abundance of incentives and sweetners offered by the 
Indian government to foreign corporations.

"Incredibly India: The Biggest Democracy for Global Investors": With 
this slogan, omnipresent in Davos, India takes a jab at China and at 
the same time makes clear: India is rolling out the red carpet for 
foreign investors. The enticements include tax breaks, tariff relief 
and inexpensive building sites already outfitted with the necessary 
infrastructure. Exemptions are also made to the applicable 
environmental and labor legislation. Since the individual Indian 
states are competing for investments, firms can combine individual 
and state benefits. And for large projects there are not only the 
standard incentives, but also tailor-made contracts and incentive 
packets, whose details remain secret.

The most extensive enticements are granted in the special economic 
zones, which are under the direct authority of the central 
government's Trade and Industry Ministry. Eleven such regions already 
exist, and a further 42 have been approved. The Trade Minister 
manages these zones himself; his colleagues in the Departments of 
Environment and Finance have no say. Former finance minister Jaswant 
Singh has complained, in vain, about the loss of tax authority over 
these zones.

Exemptions Without Rules
Labor laws find only a rudimentary application in the special 
economic zones. All firms are treated as public utilities, which 
means that workers may not strike. A toy factory has the same status 
as state-operated water and electricity utilities. Normal working 
hours and overtime as well as wages do not need to be made public, 
and there are no regular inspections for compliance with safety and 
health standards. In addition, no contributions need to be paid into 
the state's social insurance koffers during the first five years of 
operation.

There are also numerous exemptions regarding environment protection, 
the most important being that a corporation need not carry out public 
hearings as required by the 1986 Environment Protection Act. As a 
result, the results of an environmental impact assessment need not be 
made public. Corporations in the special economic zones are not 
encouraged to conserve; they can use unlimited water and energy, 
although these resources are chronically in short supply.

Last but not least, corporations in special economic zones profit 
from comprehensive tax breaks. All corporate taxes are waived for the 
first five years, and in the following five years a corporation must 
only pay 50 percent of the normal tax rate. This arrangement applies 
for a further five years for reinvested profits. In concrete terms, 
these tax breaks permit a firm in a special economic zone to double 
its profits in the first three years compared to a firm outside the 
zones.

The incentives for technology firms are even greater; these firms 
receive the benefits of a special economic zone, no matter where they 
are located. This applies not only for highly-skilled technology 
activities like software development, but also for simple call 
centers and data processors.

A Workplace for 420,000 Dollars
An example: Ford started a joint venture with the Indian firm 
Mahindra in 1999. The Indian states of Maharashtra and Tamil Nadu 
competed with each other to bring the factory to their state. The 
contract was eventually awarded to Tamil Nadu. The benefits for Ford 
included the exemption of sales tax on all locally-produced autos for 
the first 14 years. The state also offered land at no cost and 
subsidized electricity for four years. Then came a guaranteed water 
supply and the promise to build a purification plant. By an estimated 
production of 50,000 autos during the 14-year tax-free period, the 
additional profit for Ford (and the loss of tax revenues for the 
state) comes to a hefty US $378 million. The factory creates about 
900 workplaces, which means that each of these positions costs the 
the state of Tamil Nadu US $420,000.

This example shows that the combined measures from India's "Corporate 
Welfare" program create only a few jobs, at an absurd price. If, on 
the other hand, the state had higher tax revenues, it could itself 
create jobs, for example in the rural economy. Seventy percent of the 
Indian population earns its livelihood in agriculture, and eighty-one 
percent of those live in poverty (with less than US $2 per day). 
Instead of building streets and public utilities for the wealthiest 
transnational corporations, slums could be redeveloped and basic 
services could be assured for the poorest. A report by the McKinsey 
Global Institute came to the conclusion that the investment decision 
of corporations usually was not dependent upon these benefits. 
Especially in booming markets like India, corporations want to be 
present in any case, but are nonetheless happy to take advantage of 
the benefits that are offered to them. India's elites are not 
completely innocent: The success of having attracted a prestigious 
foreign corporation to one's own state is a great way to show off. It 
is India's poor who pay the price.

Koni Kuhn, Andreas Missbach +41 (0)79 478 91 94

Sources:

    * Indian Attraction, Profitable multinationals as subsidy junkies 
- A study of incentives for foreign investment in India, FinnWatch, 
November 2005. www.finnwatch.org

McKinsey Global Institute www.mckinsey.com/mgi/
_______________________________________________
assam mailing list
assam at assamnet.org
http://assamnet.org/mailman/listinfo/assam_assamnet.org

Umesh Sharma

Washington D.C. 

1-202-215-4328 [Cell]

Ed.M. - International Education Policy
Harvard Graduate School of Education,
Harvard University,
Class of 2005

http://www.uknow.gse.harvard.edu/index.html (Edu info)

http://hbswk.hbs.edu/ (Management Info)

www.gse.harvard.edu/iep  (where the above 2 are used )
http://harvardscience.harvard.edu/

http://jaipurschool.bihu.in/

---------------------------------
Sent from Yahoo! Mail.
A Smarter Email.
_______________________________________________
assam mailing list
assam at assamnet.org
http://assamnet.org/mailman/listinfo/assam_assamnet.org
_______________________________________________
assam mailing list
assam at assamnet.org
http://assamnet.org/mailman/listinfo/assam_assamnet.org

Umesh Sharma

Washington D.C. 

1-202-215-4328 [Cell]

Ed.M. - International Education Policy
Harvard Graduate School of Education,
Harvard University,
Class of 2005

http://www.uknow.gse.harvard.edu/index.html (Edu info)

http://hbswk.hbs.edu/ (Management Info)

www.gse.harvard.edu/iep  (where the above 2 are used )
http://harvardscience.harvard.edu/

http://jaipurschool.bihu.in/

---------------------------------
Sent from Yahoo! Mail.
A Smarter Email.