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Skewed Economic Zones?

Murasoli Maran, the then Minister of Commerce and Industry, was impressed with the concept of Special Economic Zones (SEZs) in China. He was keen to replicate the success of these in India. But over a decade later, SEZs are neither special, nor economically attractive.

The huge success of China in exports, especially of manufacturing products, was the result of the several privileges extended to units set up at SEZs. They were huge in size with some of them spread across  500 In comparison, an SEZ in India is small.

In July 2007, IE organised a seminar on SEZs, inaugurated by the then Commerce Secretary, G K Pillai. There were great expectations on hundreds of such SEZs getting established all over the country giving a big boost to exports. Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka, Haryana and Gujarat evinced great interest in applying for these.


Manufacturing sector failed to grab the offer

Initially the demand came from the IT sector, which was keen to avail of the multifarious concessions ex-tended. Several property developers and promoters of infrastructure were attracted. However, industry, as such, was lukewarm. The manufacturing sector, however, was slow in grabbing the opportunity.

Against great expectations, there were only a couple of successes.

Mahindra World City in Tamil Nadu and Sri City at Tada, Andhra Pradesh are two good examples.


Expectations from SEZs...

•    Massive investment flows – both foreign and domestic –  into infrastructure, industry and services.

•    Creation of  large employment .

•    Stepping up of exports.

•    Technology and skills upgradation.

    But these did not materialise.


Problem areas...

•    Substantial loss of revenue due to the concessions extended.

•    Fear of loss of arable lands.

•    Displacement of communities from their habitations.

•    Land acquisition problems;

•    Unrealistic  demands on  relief and rehabilitation packages.

Nearly a decade after the launch of the concept in India, the policy is not clear. With a huge rise in land prices, land acquisition has become a serious issue. Compulsory acquisitions made by the state earlier met with serious resistance from the opposition parties. There are also attempts by real estate promoters and politicians to corner land and demand hefty prices that are not considered viable by industry.

There are also the traditional pressure groups opposed to displacement of habitats.

As at the end of June 2012, only 143 SEZs are operational. These are concentrated in Andhra Pradesh (36), Tamil Nadu (28), Karnataka (20), Maharashtra (18) and Gujarat (13) accounting for over 80 per cent of the total. Even in these states, these are just around a fourth of the number of SEZs formally approved.

The conclusion, therefore, is that the concept is not found attractive.


Need for clear policy

Unlike in China, in India, there is a vast difference between the objectives enunciated by policy and their implementation. While the Communist country could order shifting of population, acquisition of land and quick erection of infrastructure, in India, none of these is possible within an acceptable time frame.

Even large projects that were cleared have been delayed. Finance Minister P Chidambaram mentioned that close to 215 cleared projects, involving an investment of around Rs 700,000 crore, are not progressing.

Most importantly, state governments are not much involved with the implementation of SEZs. There is a gap between the policies decided by the Centre and their implementation by States.

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