Ad Here  
June
July
August
September
October
November
 
 
Remembering Indira Sivasailam... GNS - 100: our first subscriber Gas is the way forward PC’s preference for professionals Towards speedy justice Tribute – Manikam Ramaswami Where is Rajaji? Road development slows down An informal presentation - analytical, forward locking... Welcome focus on core competence Poor quality of university VCs Mu Sigma – is no more Insurance companies bleeding, yet no decision on increasing FDI limit! Diamond jubilee of Egmore Samskrt School Why land prices zoom in TN? IPL - no surprise this scam L&T- the specialty of special purpose vehicles Tribute The ‘Jayanthi Tax.’ Not just in-laws (and outlaws); they’ve renowned academics at the helm! New IT products of Ramco in the pipeline… …and of a popular trade leader Why this malaise in medical education? Preserving for the future A welcome initiative by the judiciary Moily’s bold thrust Five star activism stalls development activity Recognition to role of NBFCs.... Whistle-Stop Tour of Raghuram Rajan A proud Madrasi Shanti and Sadhana through Music Online not in line with brick and mortar businesses... Which side are you, Montek? Shipping woes of Chennai companies CII projects higher growth… The Gulf aviation boom Secularism and anti-Hinduism More heat than light The few handicaps... Lesson from Chandrababu Naidu Come elections, come advertisements... Polls and promises Like Hinduism: many paths to reach God... Align crops to agro climate endowments… Russi Mody – a tribute Streamlining mandatory third party cover Lalu’s envy, India’s pride Valli, they are more marginalised Solar, solar everywhere … Convulsions in The Hindu Computation of GDP – conundrums continue Cement prices continue to rise… Sri Lanka votes for change Silver Years of Madras Musings Funding the un-funded Delhi Chalo... IPL type auction for VCs? The nuclear option No mega rail project for Tamil Nadu The Jan Dhan bonanza TN – agglomerate land holdings without alienating ownership No Maha Koottani in TN... Colour-Chem’s colourful KRVS Delhi is distant… More tributes to GR A professional at the helm of IRDA... Tihar, Puzhal not different from Parappana Agrahara This scant respect for Law Return to king coal for urea... A friendly business group Should we change the official year? No engine for this car WTO Meet: resolved to meet again Rahman at CIC Of course, Gujarat is vibrant GM Technology at last! Make standards certification mandatory... B H Kothari - a tribute A Grand Finale for SN’s MS centenary at the US… The brown list of Venkitaramanan Multi-faceted Venkat Boy, can you beat these? For whom the MIDS bell tolls? The ‘Ayyo-yes’ is no more Padma Bhushan for A Ramakrishna Sweet news for TN sugar mills The sea- saw battle continues... West Bengal: mindless malignancy The power-full Hindujas Engineering seats go abegging Bihar elections - the Rajaji formula worked ONGC at KG Basin Readers' Mail Adharma of opposition politics Liberal imports idling indigenous capacities There was flood of milk. Reason: no milk commissioner! Breaththrough in malaria control Build close rapport with business leaders Excel Generators provide the vital back-up Inflation: are we emulating Argentina and Brazil? Wanted: a second airport for Chennai A yen for wastage… Fuel for thought Chennai and Kolkata miss opportunity to grow as Delhi and Mumbai Revving up the manufacturing sector A C Muthiah – his munificent bequeaths to science Welcome changes that testify to Jayalalithaa’s return to health Delhi is distant Adapt Vajpayee dinner diplomacy Intellectual of rare qualities Odisha: spectacular win by Naveen Patnaik Demise of a media baron... Infrastructure funding – lessons learnt An enemy’s enemy is a friend Kudos to NDTV... When nations steal growth from one another… Shaming of Tamils by Tamil farmers at Delhi Welcome thrust on trade in Modi’s foreign visits... Medical costs hit the roof... Air Asia India will set new benchmarks for budget travel Parliament in paralysis... to the lack of interest on the part of these to focus on original research. This despite the much lower costs of such research in India. The industry which thrived on the protection of a closed economy and the advantage of a vast domestic market, has failed to organise its evolution on healthy lines Focus on quality of power - its only around 170-180V Tatas moving out of urea production... Shale gas and its shallow future Tribute – M V Murugappan Permanent secretariat for TN GIM London, London Narayan Eternal support for capitalisation of PS banks Noble nonagenarians... CSR and CMI: promise of another Srinivasan Ramanujan... All eyes on Sankara Nethralaya He saved millions from starvation... Contrarian cousins Fortune 500 review A Grand Finale for SN’s MS centenary at the US… Alexa – Talking Wikipedia Maximising the micro pricing … Poor representation for Kerala and TN in Cabinet TIAM turns a full cycle Tough task taking states together The rise and fall of Annamalai University The balancing act TN accounts for the largest recruits by the IT sector The rise and rise of KCP EVM is tamper-proof Naidu’s return augurs well for Seemandhra Varuna (rain) in 2015; Vaayu (air) in 2016. Chennai devastated Vibrant Gujarat Haul over the coal Fortune for Indian Airlines Discoms deserve better… Marketing expert Balagopal is no more More Shakthi to Das’ elbow Modi and the lady When Ratan Tata visited SRM A rich pool of talent not utilised…. Roaring Ro-Ro facility Strengthen the base... Welcome GST Editor's Says IAS invades NDDB... When online building permits work…. TELANGANA at last…BUT When TN politicians can emulate Kerala's Where a state respects its litterateurs… Pharma – overdose of copying A glass full of corruption Increasing non co-operation of state leaders When the President was rendered homeless… Quality education through the PPP mode Mersal magnified Bihar – Nitish Kumar adopts the Lalu model A more liberated TN… Editor's Notes When small is no larger beautiful.. Tribute – UCAL Selvan… Music happens Auto components surge… Limit foreign borrowings to hi-tech, export potential projects... SoA @ 80 The Ports’ Pasha expands into Tamil Nadu Put expensive assets created to use... Making ‘my Amaravati’... Paytm karo... L&T: focus on infrastructure and more infrastructure… Gay abandon in pricing Reliance’s TV – 18 ready to launch Tamil News Channel Modi storms Silicon Valley For whom the bell tolls? Godspeed, Chief Minister JJ Land reclamation from sea appears cheaper! Small units prefers to remain small... Scientists urged to take up farmer-oriented research Things happen by accident and not by design... CRS, a jewel among managers, is no more. The Swadeshi Trump Telangana in top gear… More Shakti to resource mobilisation... The star of Spencers is no more Tax agriculture Naidu will soon build a new Hyderabad China invests in India Muffled voices for merit… Delhi returns to BJP Nuclear power at the nucleus Protest masters... An inexplicable neglect The why of tax incentives Dr C Rangarajan returns to Chennai Revive development banks... Rs.1600 crore paper board plant of TNPL Solar thermal shines… MHC should not return to its old indisciplined ways Another Indian music maestro at the UN Tatas moving out of urea production... Waning interest in public discussions… Quality silica from Neyveli Cleaning Ganga – relocate tanneries and install electric crematoria PPP mode for upgrading Corporation Hospitals F C Kohli - his concerns all embracing Kinetic Karnataka Wise Presidents A think tank for Chennai Cutting the nose to spite the face He continues the focus on social amelioration R Sridhar steps down as CEO of Shriram Capital CIPET hqrs to stay at Guindy – for the present? Don’t seem to feel the pulse… Kulandai was a giant Sweeter prospects for sugar Fall in crude prices help in oil sector reform How Air-India loses customs... S V Raju – a ‘good’ true liberal Banning booze... Plummeting profits of PSBs TGS- The king storyteller Airlines in India: cost and space Robber barons everywhere TN-leverage strength of BHEL, NLC... Measuring roof tops in terms of KW/MW EEC at the National Media Centre S Ramanathan – a versatile musician, musicologist Building loyalty through the stomach
 
The why of tax incentives

At the height of the 2014 election campaign the Congress party as also the Aam Aadmi Party (AAP) levelled sharp criticism against the government of Gujarat extending huge tax concessions to industrial leaders like Gautam Adani. Like Dhirubhai Ambani, Adani built a huge empire, focusing on infrastructure. A major criticism of Chief Minister Modi was his offering land at very low prices. Gautam Adani responded through a few television interviews that it was nothing unusual. He pointed to several other state governments offering him even more attractive prices for land, to set up projects in their states.

Across the world states offer various incentives to attract investments. These range from low price for land and liberal tax incentives. In the US, for instance, several states including Houston, New Hampshire and Florida, do not levy sales tax. This is offered as an incentive for attracting industries to these states.

 

Ford Motor India Plant

This has been practised widely in several industrially developed states in India as well. In the 1990s, the AIADMK government headed by J Jayalalithaa attracted large investments by DuPont and Ford Motor Company to set up their factories in Tamil Nadu.

States also vied with each other in extending other concessions of various sorts. Tamil Nadu, for instance, offered Ford Motor Co. the funding of sales tax for 14 years at no interest. That meant all the sales tax revenues that were payable to the state for 14 years could be accumulated and used for capital and other expenditure. This meant, in several cases garnering, much larger funds than the monies invested on the plant and machinery at the starting point. Hyundai Motor Company and other later entrants also made full use of such practices.

Such large projects brought with them large employment not just in the main plant but also in dozens of component manufacturers’ in the services sector and in triggering more such investments in mega projects. Automobile companies that have set up shop this way have developed Tamil Nadu as a hub for production of specific brands of cars, especially in the smaller capacities, for export including to developed countries. Last year Hyundai is estimated to have exported 200,000 cars, Nissan accounted for a similar large volume of exports. Ford is estimated to target an export of around 100,000 cars and the list continues. Could these remarkable changes, especially the image of the state as a hub for production of automobiles of high quality and technology and the transfer of vital management practices have happened, but for the liberal incentives offered in the initial stage?

Of course, there is the valid criticism that states indulge in  fierce bottomless competition to attract investments  through a war of incentives. There is the criticism that the incentives offered do not match with the results. But this question can always be debated in any business and policy decisions as certain element of risk of failure is inherent in these. But overall, such incentives have worked well. Maharashtra in initial years built its vast industrial base on such active advocacy. Haryana followed suit soon and even Noida in UP offers such incentives in a big way. Tamil Nadu, Karnataka and Andhra Pradesh did this subsequently and today this has become a well-established trend.

As mentioned earlier, this is a global practice. Look, for instance, the shifting of automobile production from Detroit which held sway over this industry for several decades in the 20th century, making downtown Detroit a ghost town today.

Author :
Reported On :
Sector :
Shoulder :
RELATED NEWS
ABOUT IE
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
 
PRIVACY POLICY
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
TERMS AND CONDITIONS
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
 
CONTACT US
S-15, Industrial Estate,
Guindy,
Chennai - 600 032.
PHONE: +91 44 22501236
EMAIL: indecom1968@gmail.com