SEZs fail, yet Centre keen on land bill

No more than 62 per cent of land – much of it acquired from farmers – for special economic zones (SEZs) has been used for its intended purpose: to boost manufacturing, exports and jobs. Against this backdrop, Modi government is pushing for new land acquisition bill

There is a strong evidence that past acquisitions of land for development have gone awry. That should serve as a warning, as the Prime Minister Narendra Modi's government enters the second year in office and proposes to continue its battle for a new, controversial land acquisition law. A 2012-13 report of the Comptroller and Audit General of India (CAG), the official auditor of the central government, revealed these key findings.

No more than 62 per cent of land – much of it acquired from farmers – for special economic zones (SEZs) has been used for its intended purpose: to boost manufacturing, exports and jobs. Most SEZs are populated with IT and IT-related companies, while manufacturing accounts for only 9 per cent of all SEZ projects. SEZs fell short of their job, investment and exports targets by wide margins. For instance, they generated less than 8 per cent of the jobs expected.

The new land acquisition bill piloted by the government of Prime Minister Modi has been sent to a parliamentary committee for re-consideration after facing opposition and accused of being against farm interests. The government’s argument is that India needs to fast-track the bill, so that land can be made available for industries-to generate employment and power economic growth. What about SEZs? They were created, with motives similar to those expressed by the government, under the Special Economic Zone Act, 2000.

This was enacted in 2005 to make SEZs growth-engines of the economy. An SEZ is a specifically delineated duty-free enclave, deemed foreign territory for the purpose of trade operations, duties and tariffs. The previous UPA government cleared 576 SEZs covering 60,375 hectares, of which 392 SEZs covering 45,636 hectares were notified (approved land) till March 2014. But on the use of land, of the 392 notified zones, only 152 are operational, accounting for 28,489 hectares.

The land allotted to the remaining 424 SEZs (31,886 hectares) has not been put to use (52.8% of total approved SEZs), although approvals and notifications in 54 cases date back to 2006. In composite AP, 48.3 per cent of the land allocated to SEZs was seen to be lying idle. This apart, jobs, investment and exports also fell short of targets by a wide margin, the audit report found. SEZs generated 0.2 million jobs instead of 3.9 million. They were to attract investments of Rs194,662.5 crore and no more than Rs 80,176.3 crore was invested. - Exports fell short by 74 percent at Rs 100,579.7 crore instead of the projected Rs 395,547.4 crore.

Manufacturing was supposed to be a key focus of SEZs, but that did not happen. Of the 625 approved projects, only 152 – or 24 per cent – of the approved projects were operational. “The large number of IT/ITES SEZs coincides with the expiry of the 10-year income-tax break period allowed to IT sector under Software Technology Park Scheme which gave a fillip to the sector. Several units closed and shifted to SEZs to avail of the benefits offered in SEZ area,” the report said.

SEZs are mainly located close to urban areas. For example, in undivided Andhra Pradesh, of 36 operational SEZs, 20 were close to the capital city, Hyderabad. The report, in conclusion, said: “The SEZ policy and procedures need to be integrated with the sectoral and state policies with the involvement of the unique advantageous points therein.”

By Prachi Salve