'The issue of SEZs not benefiting local population is merely academic'

Q&A: Ajay Nijhawan

With nearly 500 SEZs lined up for development, developers of the zones have formed a panel under the aegis of the Export Promotion Council for EoUs and SEZs.

Currently, the panel has 50 SEZ developers, including Reliance Industries Ltd and DLF, as its members. Panel convenrr Ajay Nijhawan, who works for Reliance, spoke to Rituparna Bhuyan regarding the issues that the zones face. Excerpts:

What is the most significant issue affecting SEZ developers and the units coming up in the zones?

In terms of policy, the major issue is single-window clearance. From a conceptual point of view, it is an ideal method of making things simple for developers and units. But to translate it into reality is what needs to be looked into. I may have a certain piece of land available for a unit and thus will need to get many legal clearances done.

In addition, I need to interact with certain government agencies for things like power or water connection and getting development plan clearances.

All these interfaces that are here at the state government level need to come under a single window system, as was envisaged in the SEZ policy. This is necessary for benefits of the policy to permeate down to the state level.

How do you see these zones and units inside them functioning in the future?

Each SEZ developer has prepared his own project report. They have made their own projections on the units that would be attracted to these zones. If we sum them up, investments in the future are going to touch Rs 3 lakh crore or $ 75 billion.

In addition, 4 million jobs will be created in these zones. But the pace of translation of the these projections into reality will depend on how quick the government facilitates the policy related matters.

This is because a person who is going to invest in these zones or units needs to have a certain amount of confidence. He needs to know that in the next five years, he is going to get returns and carry out upgradation of activities. To ensure this, a lot needs to be done.

Many critics maintain that the SEZ policy per se is fine but it is the huge number of zones that is a cause of concern. What do you have to say?

We cannot isolate ourselves and adopt the China model, where the state acquires vast tracts of land and sets up the zones. We need to look at the Indian context. Today, the service industry has been leading the way in terms of exports. That needs to be motivated and incentivised.

This sector does not require big spaces. Maybe for a short term, say 5 to 10 years, the government is looking at promoting exports and development through smaller SEZs. But, as many smaller zones come up, it would lead to proliferation.

The second issue is the availability of land pockets. Without the support of the government you cannot acquire large tracts. Thus smaller tracts are available for developers. This is the key factor that is leading to the multiplicity of SEZs.

How do you think developers should respond to controversies arising out of land acquisition?

Land acquisition was a political hot potato about four months ago, after which the empowered Group of Ministers came forward and put a cap of 5,000 hectares on the land size of the zone.

From a developer's perspective, there are two ways to look at it. None of the developers want non-inclusive growth. We have spoken to all and everybody says if they have to develop a zone and attract units into that area, they cannot be importing manpower from other parts. The developers will be selecting a place on the basis of the availability of manpower in that place.

Second, manpower available in the vicinity of an SEZ will be available for the developer to train and provide employment. This is happening with many zones which are coming up in Tamil Nadu, Andhra Pradesh and Haryana.

What is significant is that this is happening without any government support. There is a dearth of manpower looking at the way the industrial sector is going to be developed through SEZs. The issue of developers going to an area and not benefiting the local population is merely academic in nature.

There is this issue of revenue foregone due to the tax breaks given to SEZs. As an SEZ developer, how would you respond to it?

If there is an export activity that is to happen or is happening, it results in industrial activity.

As per current foreign trade policy, whatever is getting exported, is getting incentivised. The SEZ policy is no different from that. Exporters are not getting any additional benefits from SEZs, from what otherwise they would have got.

Now, if there is an investment that is coming in "" land is purchased, money is brought in, employment is generated, salaries are paid, it has a multiplier effect and the economy gets benefited. Every rupee that gets invested turns around a number of times, and in each cycle, the government will earn its revenue. So, why is it being said that SEZs will lead to a revenue loss?