Blight on the land

In view of the stormy debate in Parliament on the issue of land acquisition and widespread apprehensions thereof, the decade-long experience of Special Economic Zones (SEZs), for which vast tracts of lands were acquired from farmers and handed over to industries, needs to be taken into account.

The SEZ Act was enacted in 2005. Huge parcels of lands were handed over to SEZs. As the SEZs were purported to increase export revenue, myriad concessions were given to industries located in these zones. The undivided Andhra Pradesh topped in granting SEZ permissions. However, the much-trumpeted concept of SEZs seems to be wearing out with the defined objectives not being met.

Despite causing a huge drain on the exchequer in the form of concessions and subsidies, the SEZ policy failed to promote all-round industrialisation. About 60% of the units in SEZs are essentially IT and IT-enabled services (ITES) and only less than 10 per cent are in the multi-product category. It is distressing to note only 39% of the SEZs have become operational even after notification.

Though, the SEZs are to usher in balanced economic growth, they are primarily concentrated in developed States and urban agglomerations – nearly 75 per cent are located in just six States. These inadequacies are clearly pointed out by the CAG report of 2014. The CAG brought to light that in a majority of cases, targets for employment, investment and even exports were never met. This makes the very scheme a mockery. Even the net foreign exchange earnings from the SEZs are also far from satisfactory.

Land allocations to SEZs often roused passions and evoked political controversies and protests, with the result that half of the land allotted to SEZs remained unutilised. As per norms, only 50% of the allotted land is to be used as processing area. This is stipulated to prevent misuse of land for purposes other than defined. But, the CAG found that in some cases, the land for processing area was as low as 16 %.

This indicates that land acquired in the name of public purpose and given at a throwaway price was used by developers for commercial gains. The developers in some States, including united Andhra Pradesh, even mortgaged the SEZ land to raise loans. The massive tax concessions to SEZs resulted in a huge revenue loss for the government.

The CAG report noted that SEZs were given Rs 83,104 crore worth tax concessions, including Rs 55,158 crore income tax sops between 2006-07 and 2012-13. The Union Ministry of Finance estimated the loss at Rs 1,75,487 crore from tax holidays granted to SEZs till 2010 only. Besides, the SEZs enjoyed many other concessions, exemptions etc., from the Central and the State governments. These pitfalls need to figure in a healthy debate on land acquisition in the larger interests of the nation.