Citizens’ Research Collective on SEZ

V. JAYANTH, January 21, 2008

Developments in Goa on the special economic zones (SEZs), especially the controversy over the denotification of zones, have brought the whole concept and scheme back into focus. In the light of these developments, and the controversies generated in West Bengal over Nandigram and Singur, it is perhaps time for the Centre to review the policy on SEZs. It may not be enough to just look at compensation and rehabilitation aspects alone.

Both political and trade union leaders suggest that the Centre must utilise this opportunity to take a fresh look at the policy.

According to the Union Commerce and Industry Ministry, about 172 SEZshave been cleared and notified in the country as on November 29, 2007. (The number has gone up to 193 as on December 24, 2007). But sources point out that two-thirds of them — about 115 SEZs — are for IT and ITeS segments alone.

What is more, five of the more developed States have stolen a march over the others in this scheme. Andhra Pradesh tops the list with 48 SEZs, followed by Tamil Nadu and Maharashtra with 24 each, Karnataka with 19 and Gujarat with 12 — sharing 127 zones among them. “This does not fit in with either the objective of bringing about a better geographical spread of industries and investments, or providing a fillip to the manufacturing sector,” reasons a senior government official.

It is not as though the more developed States should not benefit from the zones, but he argues that SEZs were mooted with the idea of encouraging the other States to “catch with these very States that have already achieved a certain degree of industrial development.”

As for the reasons for these States finding it easy to get over the land acquisition controversy that others have run into, officials say that they have built up a “land bank” over the years. State industrial development agencies have acquired land for either industrial estates or for new projects. Many of them have been converted into SEZs now. But for this advantage, they would have also found the going tough. In some States, the old industrial estates are being converted into IT parks or industry clusters.

Leaders in the trade union movement also describe the SEZs as they are taking shape as ‘skewed policy.’ They insist that it will further widen the regional imbalances in development and channelise more investments into the same States. They feel that the SEZs, as they understood it, were meant to encourage the manufacturing sector to catch up with the unprecedented growth of the services sector.

“Traditionally, it is the manufacturing sector that has spurred growth and generated employment. They are a labour intensive sector. Setting up SEZs with some fiscal concessions and infrastructure development would have helped them improve productivity and become more competitive. But we find most of the SEZs have gone the IT/ ITES way. They already have the IT parks and an STPI scheme to utilise,” explains a trade union official.
Nasscom’s views

But Nasscom (National Association of Software and Service Companies) sources say the argument of the manufacturing sector being labour intensive “falls flat.” Over the past few years, it has been the IT sector that has generated jobs by the thousands, so much so, that it has not provided jobs to about two million youth. Together with the BPOs and the call centres, this sector has virtually sucked in a majority of the graduates passing out of the colleges every year. “The expansion has been phenomenal, the competition is becoming more intense, the appreciation of the rupee has hurt our exports, and we are moving into Tier II and Tier III towns across the country. So the SEZs have come in handy for our progress,” an association official argues.

But union activists say that the IT sector is moving into the SEZs only because the Finance Ministry has announced a phase out of the STPI benefits. Their other grouse against the IT sector relates to the nature of the job — for the educated and skilled lot. They want more employment generation among the poor and rural youth and those going in for vocational education or the diploma holders.

Sources in the government feel that the Centre can still modify the SEZ scheme to revive the focus on geographical spread and an encouragement to the manufacturing sector. The Centre can itself offer to set up at least one SEZ in each State. Further, it should again take the initiative in investing in infrastructure. Besides tapping the Public Private Partnership (PPP) route, the government could create a fund to not only develop infrastructure, but also generate some venture capital. Only then can it address the problem of regional imbalances.

Source: The Hindu