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