The Hindu Business Line : SEZ movement has stabilised: Commerce Secy

Fine-tuning of policy: Mr G.K. Pillai (left), Commerce Secretary, Ministry of Commerce, with Dr S. Narayan, former Economic Advisor to Prime Minister, at the one-day national seminar on ‘SEZs: Prospects and challenges’, in Chennai on Monday.

Our Bureau

Chennai, July 23 With the fine-tuning of the policy, the ‘land issue’ of the Special Economic Zone (SEZ) policy has more or less died down and the SEZ movement has stabilised, the Union Commerce Secretary, Mr G.K. Pillai, said on Monday.

So far, the 75-odd operational SEZs have received investments of Rs 43,125 crore and have created 35,000 jobs, Mr Pillai said, adding that he expected investments in SEZs to cross the Rs 1-lakh crore mark by the end of the year, leading to generation of 1 lakh jobs.

Speaking at a seminar on SEZs, organised by the Industrial Economist magazine, Mr Pillai said that after the policy was tweaked to the effect that State governments could not compel any land owner to sell land for SEZs, ‘land acquisition’ became a non-issue.

Later answering a question, Mr Pillai said that the Union Government could not take away the right of the State governments to acquire land. The policy only says that if a State Government acquires land by force, “I will not notify it as SEZ.”

He said the policy also had been fine-tuned by mandating that at least 50 per cent of the land should be for processing (of goods and services).

Mr Pillai observed that in the 15-odd months since the SEZ Act was notified, 133 SEZs had been notified. He took up some of the popular misgivings about SEZs. Firstly, land.

The Commerce Secretary pointed out that all the land with all the 362 formally approved SEZs amounted to 48,000 hectares. “By no stretch of imagination can this 48,000 hectares can be said to affect India’s food security,” he said. (The Ministry of Commerce Web site notes that the total land with the approved SEZs is 443 sq. km, against India’s total land mass of 2.9 million sq. km and India’s agricultural land of 1.6 m sq. km.)

Mr Pillai said that a large part of the land was already in the possession of the State governments, acquired years ago. For instance, Maharashtra had over 70,000 hectares in its possession, acquired in the 1980s. The SEZs are unlocking the value of the asset.

On the question of loss of revenue, he said that any revenue sacrifice was only a “notional loss”. Still, he said, according to the Ministry of Commerce’s calculations, there would be a net revenue gain of Rs 48,000 crore because of SEZs. The Ministry of Finance had commissioned ICRIER, New Delhi, to do a study of revenue sacrifice on account of SEZs. The study report is awaited.

Meanwhile, the Ministry of Commerce has also commissioned another study. “The jury is still out on the issue. We will have to wait for 4-5 years to see if there is any real revenue loss,” Mr Pillai said.

He also observed that although as many as 225 of the 362 approved SEZs were for IT, “because they require only 10 hectares”, the proposals that are coming up for approval were mostly non-IT.

Distortions

Dr S. Narayan, former Economic Advisor to the Prime Minister, stressed that the issue was not about numbers but the distortions that the SEZs created — units in the zone would enjoy an advantage over those outside it.

He said that units in IT SEZs would continue to enjoy tax-free status beyond 2009, when the other IT units elsewhere would have to start paying income tax. He wondered if there would be a migration of talent into the zones, to the detriment of the units outside.