Impending SEZ fiasco

The cancellation of the Kalinanagar SEZ and shifting of the Nandigram SEZ were just the first signs of the problems in the SEZ Policy. Soon we had a new policy restricting the SEZ size. And there is more to come.

India’s SEZ policy is another example of us trying to copy someone else’s (read China’s) model without considering the ground realities. SEZs require large contiguous tracts of land. In India this will include some agricultural land as well. There is yet no clear consensus on whether this should happen.

While in China it is easy for the government to acquire land for whatever purpose, the same is not the case in India. There will always be people unwilling to surrender their land, no matter what the price, and enough politicians eager to fuel protests. To top it all the compensation offered in not adequate in most cases.

No doubt SEZs will be beneficial for the economy but the policy needs to be fine-tuned.

Firstly the tax losses due to potential shifting of industries should be plugged. A proper mechanism is needed so that exports and sales to domestic territory are properly measured. And the area in each SEZ that can be developed for residential and commercial purposes should be restricted otherwise SEZs will turn into real estate ventures.

It is imperative that the SEZ policy must have clear guidelines on who will acquire the land – the government or the developer, how a fair price is to be determined, how those unwilling to sell are to be dealt with and how those affected can be made stakeholders. Given the situation I feel the government will have to play a role in land acquisition and also in rehabilitation. What can a private developer do if even one person refuses to sell his land? Only the govt. has the power to displace him. And it must ensure the compensation offered is fair. The policy should also contain provisions on employment to be offered to the displaced people. And all processes must be transparent enough to stand legal scrutiny.

Unless these points are taken care of the SEZs will face many hurdles