The big SEZ debate has become lively once again, following new policy initiatives
by the government and a study on the policy''s effect on government revenues by
a leading economy think-tank.
>Despite all the opposition and controversies
and its own denails, the government is once again readying itself to help the
SEZ developers acquire land. To pacify those whose land is sought to be acquired,
a comprehensive resettlement policy has been promised for those displaced by the
>And if you were wondering, like most others, whether
the government will end up making more money once all these SEZs come up or lose
a good part of what it could have earned, the debate continues. A study by Indian
Council for Research on International Economic Relations (ICRIER) says the government
would be better off, but the think-tank has used some interesting assumptions
to prop up this conclusion.
In all this noise, the core issues remain
mostly ignored. Do we need large industrial zones in this country? If we need
them, should the government shower them with such lavish tax breaks? Finally,
can we set up these zones without displacing so many people?
all these issues, starting with whether we really need large industrial zones.
The answer is an emphatic ''yes''. The only way this country can ever hope to provide
alternative employment to agricultural employment to lift millions in rural India
out of poverty is by enabling rapid growth in manufacturing.
>As we have
realised, the biggest obstacle to manufacturing growth is poor infrastructure.
Should we wait for infrastructure to improve across the country before manufacturing
is allowed to expand, a few more generations of Indians will waste their lives
in penury and frustration.
Despair and frustration among citizens can
be dangerous to a nation. The growing Naxal menace, the biggest challenge this
country is facing today, is mostly an upshot of many decades of economic underdevelopment
in the affected regions. The only long-term solution to this problem is to provide
a better economic future to the people in those areas.
generation for less-skilled workers is possible only in manufacturing. And the
quickest way to boost manufacturing growth is to set up separate manufacturing
zones with the required infrastructure.
Tax breaks to promote industry
are always controversial. There is no doubt that tax breaks can be an effective
tool to attract investors to a new initiative. But at the same time the government
must ensure that tax breaks to new ventures do not put existing units at a major
disadvantage. It must also be ensured that existing businesses do not exploit
the tax breaks to enhance or perpetuate benefits already available to them.
The majority of the SEZ proposals approved by the government so far are small
projects by IT services companies. These companies have only one motive - to continue
enjoying tax breaks for a longer period by shifting operations to SEZ''s, in case
the government withdraws their current tax benefits.
industrial zones are not vital for the operations for IT firms, though some campuses
of the bigger IT companies are quite large. Some of the proposed SEZ projects
by these IT majors will have no more than a couple of office buildings with some
landscaping around them. To call such facilities as special zones would be absurd
as they would never create non-IT, semi-skilled jobs.
>Some IT industry
veterans have held that there is nothing wrong in allowing tiny SEZ units as they
would help their industry grow and will lead to more jobs, the biggest goal of
the whole SEZ policy. True, their industry will be able to retain part of the
price advantages arising from tax breaks and that may help their growth. Even
if most of the jobs in the new IT SEZs will be those transferred from other locations,
they will end up creating some new jobs as well. But that is not the issue here.
Why muddle a major initiative like the SEZ policy to support the IT industry when
it can be done through other policy initiatives? Why allow the not-so-genuine
promoters to build small developments close to urban centres and add to the strain
Many of the larger SEZ projects approved are promoted
by the big real estate developers. This triggered the initial criticism that the
SEZ projects are nothing but commercial real estate development with a little
bit of manufacturing promotion thrown in. The developers may argue that industrial
zones are a natural extension of commercial and residential property development.
But, none of them have started work on these projects even after getting approval.
This makes one wonder if these developers are only keen to expand the ''land bank''
under their control and then wait for some policy softening to increase the residential
and commercial development area in these zones.
>There can be little argument
that the large self-contained industrial zones are what we need if the SEZ initiative
is to have a positive rub-off on manufacturing growth. Even with more residential
and commercial development, the large zones proposed by the property development
companies are more desirable than the tiny zones sanctioned to IT service providers.
Large self-contained zones will divert new industrial units from already crowded
areas and ease the pressure on existing infrastructure. They will allow people
to move from the cities to less-crowded and less-polluted environs. The positives
>Unfortunately, it is the few really big projects like the Reliance
SEZ project near Mumbai that are facing the resurgent heat from the opponents
of the SEZ policy. Some of these projects are facing stiff resistance on the issue
of land acquisition and there is already some talk that these might be scaled
down to smaller zones. That will be a disappointment.
>But why is it that
the promoters of these large projects never think of locating their cherished
projects in less-populated and less-fertile parts of the country, if the development
is what they genuinely wish to bring about?
is it that these projects are often proposed on highly fertile land and involves
relocation of a large number of people, thereby multiplying the opposition? By
their very nature, all these self-contained zones need good transport links to
the outside world. If such links are provided, they can be located anywhere. Then
why do these promoters insist on creating their own ''mini-cities'' close to our
mega cities, knowing that there will be trouble? Is that a conundrum or is there
something more to it?
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