Last week, the farmers of Raigad in Maharashtra, voted in a referendum on whether they want a SEZ on their farmlands or not. Reliance Industries rubbished the referendum. The commerce ministry said it will not give approvals for SEZ, if the land is acquired compulsorily by the state government.
The Kerala government decided to come out with a SEZ policy, but failed to decide what the policy would be. The Supreme Court declined to entertain a petition asking for directions to restrain state governments from acquiring land for SEZs. The Samajwadi Party spokesman called for scrapping the SEZ policy. Meanwhile, the Board of Approvals went ahead and approved 27 more SEZs.
The SEZ policy is a response to complaints of Indian businessmen about poor infrastructure, high interest rates, inspector raj, multiplicity of taxation, rigid labour laws and eroding competitiveness. The government-run Free Trade Zones (also called Export Processing Zones) failed to deliver the desired results. So, the idea of a policy change was mooted in 1998 and existing legislations were amended to accommodate the development of SEZs by the private sector.
Even so, very few SEZs came up. Meanwhile, China was attracting massive investments in its coastal SEZs. India was losing out on investments and opportunities to generate large employment through export-led strategy. After enough deliberations, the SEZ Act, 2005 and SEZ Rules, 2005 were put in place.
The new regulatory framework gave enough safeguards against frequent policy changes and attracted massive interest of the private sector. Unlike China, the government stayed away from creating infrastructure and gave incentives to SEZ developers that attracted the interest of speculators in real estate and builders.
The policy allowed captive SEZ of industrial houses that create no infrastructure but only enjoy tax breaks. The policy permitted different minimum land requirements for different sectors and created a discriminatory tax regime that would encourage migration of domestic units to the SEZs, especially in the information technology sector.
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The competition among states to attract investment led to accusations of complicity between politicians and businessmen and charges of forceful acquisition of farmlands under the guise of public interest and so, in April 2007, the Central government came out with guidelines regarding acquisition of land for industrial purposes and rehabilitation of the displaced persons. Even so, the controversies continue, with all kinds of vested interests trying to whip up sentiments and cash in on them.
| LANDED TROUBLE | |
| 250 notified SEZs: | 29,398 hectare |
| 513 formal approvals (including notified SEZs): | 62,590 hectare |
| 138 valid In-principle approvals: | 115,642 hectare |
| Total area for proposed SEZs: | 207,620 hectare |
| * SEZ exports during 2007-08: | Rs 66,638 crore |
| * SEZ exports projected for 2008-09: | Rs 1,25,950 crore |
| Source: www.sezindia.gov.in | |
Land acquisition is not a SEZ-specific issue as the controversy over the Nano plant at Singur in West Bengal shows. Nor is the acquisition of land an industry-specific issue because land has to be acquired even for residential purposes. What is now New Delhi, was indeed, very fertile farmland some decades back.
The point is that any policy can have positive and negative aspects. These must be debated threadbare. Once these are debated and decisions taken, uncertainty should end. The way Goa allowed large investments to come up in SEZs and then decided to scrap these can not work in the long run. Businesses have a choice.
They will move to areas where there is greater certainty of legal framework and friendly business environment. It is the recognition of such business behaviour that brought about the SEZ policy. Now, it should be allowed a reasonable run.