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Monday, 25 March 2013 00:21
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NIMZs could be industry’s make or break

 

Given the experience of SEZs and the large number that have been denotified, it is natural to be sceptical of the National Investment and Manufacturing Zones (NIMZs) policy, the guidelines for which were notified last week. After all, if SEZs had a problem with the acquisition of land, imagine the problems for NIMZs which are much larger in size. The first set of problems, then, will be to acquire the land for the NIMZs and then the environmental clearances. What is clear, however, is that if industry is to take off, the NIMZs are its best chance. For a variety of reasons that are well known, no government has found it possible to do away with the plethora of regulations that continue to strangulate industry. There are around 70 laws that include maintaining a ‘record of lime washing and painting’ which have to be complied with and this requires filing as many as 100 returns a year. Most returns need to be filed on a monthly, quarterly or annual basis, taking the total to around 100 a year. Then there are the inspections. For smaller firms, all of this can take up around a fifth or more of management time.

This is what the NIMZ policy hopes to fix. Routine clearances—the 100 returns and 70 laws—will be dealt with by the CEO of the NIMZ, a government official who will be empowered enough to take all decisions; the NIMZs will be run as a self-governing and autonomous body and will be declared to be an industrial township under Article 243Q(c) of the Constitution. As per the manufacturing policy, once these issues are fixed, this will help raise the share of the manufacturing sector from around 16% of GDP right now to around 25% by 2025, and help provide employment for over 100 million persons. Labour laws, for instance, won’t bother units in NIMZs since the CEO will take care of issues like redeploying labour from units which close down; there will a higher payout for units who wish to close down (from 15 days for each year of completed service right now to 20 days); and even the creation of a sinking fund from where unemployment insurance can be bought. To put the 25% figure in perspective, this requires manufacturing to start growing at around 14% a year for the next decade—it grew by 9.2% per year over the last five years, 8.1% over the last 10 years and 1% over the last 10 months.

That’s the plan. How it works out has to be seen since, apart from the issues involved in acquiring land, environment clearances for units in the NIMZs will be a big issue—India has around R8 lakh crore of projects stuck for mostly land and environment clearances. Though the NIMZ rules notified last week try to fix this by allowing for 3rd party environment inspections, they say this “shall be considered to supplement the inspection by the Government agencies for compliance monitoring”. On the issue of labour laws—only the central ones though, not the state ones—there is more clarity but even here, the delegation of powers to the NIMZ CEO is “subject to the setting up of a suitable mechanism” in concurrence with the labour ministry. In other words, there’s still some way to go.

 
 

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