Thursday, February 15, 2007


The Government’s initiative to develop Special Economic Zones (SEZs) in various parts of the country providing them special fiscal and other concessions, no doubt is a step in the right direction. Riding on the boom of real estate, a large number of SEZ developers have taken initiative and the Government has issued a number of approvals and final approvals. Some of the SEZs are in the process of acquiring land, whereas others are still in the waiting. Whole of this concept of SEZs has also aggravated the insatiable desire of land sharks and mafias to grab large chunks of land mass perceiving its accelerated demand in the near term future. There are serious economic, fiscal and socio-cultural fallouts in the implementation of laudable scheme, which if not taken care of in comprehensive manner, may bring in aberrations within the society. And surely, India as a country cannot afford this at this juncture. The Government of late is also shying to process further applications in view of political implications and election in several states round the corner.

There are several issues, which are required to be dealt with at the policy level by the Government to ensure a regulated development of SEZs for the benefit of the citizens of this country:

  • The location of SEZs has to fall in line with national development plan and state-wise development plan to ensure balance spread of SEZs across the country.
  • Environmental issues, ecological balancing and geographical planning are necessary keeping a long-term vision.
  • The existing social system including wildlife, forest spread, residential clusters and agricultural backbone of the country is not only to be protected but also needs to be empowered together with the industrial development.
  • Though too late but still the Government has rightly decided not to permit fertile land to be acquired for SEZs. Even barren land could have a future potential of agricultural uses with the help of latest technology being promised by Israel and other countries. Before earmarking the land to be acquired, its potential alternate usage must be fully evaluated. Cost benefit analysis, economic as well as social, must also be undertaken objectively. 
  • The best option could be to use the land clusters, which are non-productive from agriculture and forest viewpoint.
  • The increase in population of the country and growing requirement of food necessitates protection and growth of agriculture sector. Largest part of our populace is agro-dependent. The industrial growth cannot be at the cost of agriculture sector.
  • Various incentives, benefits and concessions provided to Special Economic Zones may have an adverse impact on existing industries, which may also be export oriented.
  • Labour policies and regulations are to be implemented in these SEZs in such fashion that distortions in the labour market does not creep in. SEZs and DTAs should have similar labour regulations.
  • The permission to Special Economic Zones to sell their products locally (Domestic Tariff Area) is to be taxed in a manner that domestic industry does not suffer.
  • The Indian customs, Indian culture and Indian ethos are to be preserved and nurtured to the benefit of generations to come. 
  • The land is a scarce resource in India and while planning Special Economic Zone development it is necessary to ensure that –
  • The Special Economic Zones provide a very high level of infrastructure and development, similar to Chinese SEZs. This may not completely be left to the SEZ Developer; and public private partnership (PPP model) would be required. The Government investment in infrastructure around SEZs is a must. 
  • The land availability in SEZ for industrial uses should be at reasonable regulated prices. In view of the fact that in most of the cases SEZ Developers are able to acquire land at reasonable prices, because of Government policy, incentives and compulsory acquisitions etc., it is important for the Central Government as well as State Governments to ensure regulations of prices and uses of land clusters by SEZ Developers.
  • SEZ Developer need to adhere to the time frame accorded in the approval. If the Developer fails to complete the project, heavy pecuniary penalties must be imposed. In case of undue delay in execution or completion of project open auction of the project en-block may be invoked. At all Government need to ensure that there is no undue land holdings for speculative purposes.
  • The agriculturists and local population may be considered for owning upto 26% of the SEZ Development Company in terms of a scheme whereby land sellers automatically become entitled to a Sweat Equity or Stock Option Plan. Similarly at reasonable price Stock Option could be offered to local population. 
  • A revenue share may be granted to the local panchyaats of the village(s) in the same district. Panchyaats should use the wealth so granted to it for the have-nots by promoting community development projects in literacy, health care and skill up gradation of the masses. The bounty of development must reach the grass root.
  •  In a certain portion of real estate development around SEZ including flats, shops, markets and entertainment zones, some kind of priority or reservations could be made for local inhabitants.
The Government should come out with a detailed white paper and comprehensive policy in respect of Special Economic Zones rather than stopping the work under fear of nearing election. The comprehensive policy need balancing and solution of the aforesaid issues in a manner which provide a win win solution for SEZ Developers, the agriculture sector, the land owners, the local public and above all the nation. It must also provide a boost to infrastructure development including inland container depots, railways, roads, power, telecom and all other necessary facilities to ensure all-round development of Special Economic Zones as well as growth of industry culminating into rapid economic uprising in India. Unregulated growth not in line with regional development plan, ignoring the local ecological needs and disregarding the social fabric will lead to irreparable damage to our own countrymen.


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