News

20th June, 2006

MoF not in favour of relaxed SEZ labour norms

The finance ministry has advised the government against relaxing employment criteria in special economic zones (SEZs) as suggested by the commerce ministry.

It has said that any relaxation to the employment criteria would defeat the idea of granting fiscal incentives to such zones that would act as engines of growth and mass employment, sources said.

This comes close on the heels of the recent move by Maharashtra to introduce hire and fire norms in the SEZs in the state.

Dropping the employment criteria will amount to diluting the objective of creating SEZs at a huge cost to the government, a source told ET. The government is providing huge tax concessions to the SEZs only on the condition that these institutions would boost massive employment growth.

However, the commerce ministry in a note to the empowered group of ministers (GoM) had expressed reservation against having an employment criterion for setting up a SEZ. It had suggested that the GoM review the employment criteria imposed for developing SEZs.

The ministry has been pitching for introducing labour flexibility in SEZs against the wishes of the Left allies of the UPA government. The finance ministry feels that the criteria could be exempted only in specific cases. It can be relaxed for the electronic hardware and software, biotechnology, unconventional energy and gems and jewellery SEZs, only if the minimum size is increased to about 25 hectares.

The finance ministrys objections may stall the commerce ministrys move to amend rules of SEZs to make it more lucrative for developers. Earlier, the SEZ bill gave states the flexibility to relax labour norms in these special zones. However, under pressure from the Left, even this proposal was finally withdrawn.