Mindlessly politicking special economic zones

The Special Economic Zone (SEZ) model has been the lapped up by governments all over the world because of its ability to harness the maximum economic growth potential of a region.

SEZs are pockets of development where the state makes the best use of the comparative advantage of a specific region. They are the nodal points in the country's development map. Individually, they might look isolated, but the larger picture takes shape when all the points are connected.

India adopted the model nearly seven years ago. The government introduced the SEZ policy (on April 1, 2000) aiming to provide a globally-competitive hassle-free environment for exports. According to the policy, units can be set up in the SEZs for manufacturing activities or for rendering of services. The units have to be a net foreign exchange earner but they shall not be subjected to any pre-determined value addition or minimum export performance requirements. Offshore banking units may also be set up in the SEZs.

New Act

The Government of India passed the Special Economic Zones Act early last year. And, ever since, hundreds of domestic and foreign companies have been hobnobbing in corridors of power to bag a SEZ licence.

The government has also been fast in its act. Apart from the already sanctioned 237 SEZs, the Board of Approval gave the 'in-principle' approval for another 166 SEZs. The SEZs are likely to generate 1.8 million jobs and attract $80 billion in investment.

So far, so good, until the SEZs received bitter opposition at their implementation stages. Like most Indian government policies this one is mired in controversies. The Left parties saw red first. They claimed unless the changes including protection of worker's rights, appropriate cap on different classes of SEZs, regulation of land use within the SEZs and tax concessions were reviewed, the policy would "degenerate into a free for all, which would have serious consequences".

They have been specifically critical about land use. In their joint note to the government, the parties said a major difference between the Indian SEZ policy and that of China, is on the question of land use. In China, the government acquired the land and developed the infrastructure, where private enterprises were invited to set up units. The land continued to be owned by the state. In India, private entities were being involved in developing the infrastructure and land was being acquired by the state and handed over to private developers. The parties suggested that there should be no land ownership to private developers, who should only be allowed to take land on lease or build the infrastructure on build-operate-transfer agreement.

If you overlook the Left's fascination to liken everything with its Chinese counterpart, it is true that there is a cause to exercise caution. The Congress party president Sonia Gandhi has expressed opposition saying, "Prime agricultural land should not normally be diverted to non-agricultural uses."

Opposition

M Venkaiah Naidu, president of Bharatiya Janata Party, has said the industry must directly negotiate with land owners and the government could acquire up to 10 per cent only if there was a need for contiguity of land.

It seems all political parties now have something to oppose against land acquisition for SEZs. But where were they during these seven years? Wasn't it their responsibility to shed narrow political interests and sort out the issue in these years? Wasn't it their duty to sit together to find a solution to the problem instead of going to town with it?

But that was not to happen because politics comes first for the parties, country later (if at all).

The commerce ministry's website describes the SEZs as "designated duty free enclaves to be treated as foreign territory for trade operations and duties and tariffs". And look how far we are now from achieving that goal because of mindless politicking.