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