The Hindu Business Line : Not yet in clear zone

No economic policy of this Government generated as much controversy and heat as that on the Special Economic Zones (SEZs). Since January the policy that had got so many investors and developers interested has been put on hold, causing embarrassment to the Centre that had seized the concept and legislated the Special Economic Zones Act of 2005 with enthusiasm, as also the State governments that saw in the SEZs a quick avenue to development, especially of the hinterland. Developers saw in them vistas of enterprise, free of the usual red tape, poor infrastructure and communications. Quite literally, the SEZs were viewed as projects on which the developers could bring to bear all the efficiencies and enjoy duty-free imports. With the Empowered Group of Ministers now giving the SEZs the green signal, albeit with some qualifications, that dream of creating islands of excellence may still come true.

The Empowered Group, headed by the External Affairs Minister, Mr Pranab Mukherjee, has tried to meet some of the objections to the SEZs as they had been publicised by the Commerce Ministry. For instance, it has capped the size of the zones to 5,000 hectares, from double that figure, in a bid to clear the objection that the SEZs would start to encroach farmland. Second, it has increased the area meant for processing to 50 per cent from the existing 35 per cent. There were apprehensions that given the minimum size of SEZs, 10,000 hectares, and the fact that only a third need be put to processing or manufacturing for exports, the principal focus might well be on the real-estate development rather than be seen as incidental to industrial activity. With adjustments in the permissible size and extent of usage for manufacturing, enterprises and developers will have to return to the drawing boards and rejig their plans for the SEZs already sanctioned. The country has not seen the end of controversy for the issue of land acquisition has been tiptoed around. Some weeks ago, it was reported that the Government would stay off land acquisition but that is just the beginning. New Delhi must still evolve policies such that the weakest party to land transfers, the farmer, will not feel shortchanged.

The Empowered Group has cleared the air somewhat but ambiguity still shrouds the SEZs. For instance, the original idea of SEZs was export-oriented. Such zones were meant primarily as foreign exchange-earning hubs. Earlier this year, the Finance Ministry's view on an export obligation clause was stoutly opposed by other Ministries. In the absence of a clear objective for SEZs, controversy may still dog the zones much after they are developed.

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