'You can't take away SEZ benefits'

It’s been an eventful week for Commerce & Industries Minister Kamal Nath. He got his way on the SEZ policy when the empowered Group of Ministers (e-GoM) supported him against Finance Minister P Chidambaram, and he got cement manufacturers to lower prices for government purchases and put a brake on prices for other buyers. To balance things, he then got mauled by the Left and the BJP on his single-brand retail FDI policy. And to top it all, party chief Sonia Gandhi appeared uneasy with his FTA policies. Excerpts from an interview with Sunil Jain and Monica Gupta

It’s been quite a week, you got your way against a formidable rival on the SEZ policy, the cement manufacturers dropped prices, you’ve got more impressive plans after single-brand retail … I don’t think it’s a matter of my side or their side, it was an issue that needed resolution, and it was always clear any unresolved issues on the SEZ rules which had a revenue impact would be referred to an eGOM. In any case, ‘my side’ is about the investment that will flow as a result of the SEZ policy, the amount and the type of investment. Investment cannot be demanded, it has to be attracted.

The finance ministry is now talking of removing various tax sops, and among the list are the 10A/10B ones under which SEZs fall. Is the ministry getting back at you? There’s an SEZ Act approved of by Parliament that mandates the tax concessions, so you can’t just take them away. It’s not for anyone to go beyond the Act.

But the country is losing out on its tax base, and if the policy works, all exporters will locate themselves only in SEZs since they’re getting taxed on their profits now. There’s this joke about a man who tells his wife he saved Rs 10 by running behind a bus instead of boarding it to come home — she said he should have run behind a taxi and saved Rs 30! If the increased investment and hence the profits are coming because of the SEZs, you didn’t have them in the first place, so where’s the tax lost? Maybe we should say that when companies lose money, that’s also a tax loss! As for all exporters locating in the SEZ, we’ve clearly said it is only for new units.

Everyone will expand in SEZs. The issue of tax loss is very real. You know how the Chinese create employment? By pricing their products very low, and this in turn is possible because the bank interest is very low and the loans are written off each year … they’re subsidising US customers to create employment at home. You do the numbers. Give tax concessions to industries like leather, textiles, gems & jewellery ... basically, the employment-intensive ones ... and you won’t need an employment guarantee scheme which costs Rs 15,000 crore this year!

Why did you go after cement units and not others, like steel? Haven’t prices gone up because of global demand, and other issues like the ban on overloading of trucks? I can look only at my charge, I presume the steel ministry’s looking at steel prices! By nature, I’m not an interventionist, but the price rise was exorbitant and not for the reasons you say. I saw their balance sheets, this quarter versus the previous, and this quarter last year, and the profits have ballooned. I also recognise that prices are finally controlled by retailers and not by companies, but I’ve put them on alert and they’re monitoring this. The export angle is overdone as they export 9 million tonnes out of a production of 130 million tonnes.

Isn’t domestic price rise the excuse for cutting off exports all the time? As the commerce minister, I’m aware of that and don’t want to cut off exports, but the rise was way too excessive.

Why did you get into the reservation debate? And in any case, Business Standard’s done several data-based stories showing there is no case for reservation in colleges or jobs. The NSSO ones? I must confess I don’t follow the NSSO numbers, but my point is very simple: you cannot have urban-centric growth, it has to be all-inclusive. I have not said I want reservations, but I’ve said that if industry goes to the interiors, what’s 50 per cent, they’ll have 75 per cent SC/ST/OBC workers, or even more since they are the only people available. Both the pro- and anti-reservationists have congratulated me on my stand!

You’ve got more plans after the single-brand retail ones … Best to keep that out after what happened in Parliament today! Seriously, the issue’s not so much of FDI versus Indian retailers as it is about big versus small. We cannot have FDI that replaces jobs.

In the auto sector, Suzuki’s entry killed Ambassador and Fiat, but the number of workers in the auto industry has increased many times over. That’s true, but understand that if a kirana gets hit by Wal-Mart, he can’t get hired by Wal-Mart. Maybe his son can, but not he. I’m still trying to work out the model.

Your party chief has sent a letter to the PM on FTAs, cautioning him on the impact on farmers. Doesn’t that put you in a spot?

Not at all. The letter advises caution and that is precisely what we’re doing. We haven’t signed the Asean FTA anyway. I’m from Madhya Pradesh, which is a significant soyabean producer. So, if I lower the barriers for palmoil, for instance, my soya will suffer since the oils are competing … so, no one is going to be more cautious than me.