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IN MEDIA – SEPTEMBER 2007
In
Media Archive...
SEZs and rational
expectations
Financial Express, September 11, 2007
By Pradeep S Mehta
The debate on the losses or gains in revenue
due to the special economic zone (SEZ) policy
is tantamount to missing the wood for the
trees. In any event, the debate on numbers is
by itself subject to assumption-based opinions
across a spectrum of economists, who may not
always agree. Besides, it is too early to
generate data to enable anyone to speak with
conviction. Let us not fall into the trap of
numbers, but look at the larger picture. The
fact remains that nobody has ever questioned
the merits of SEZs or its economic potential.
And there is a broad political consensus in
the country that the SEZ policy is here to
stay for good.
CUTS, too, has done a study recently for the
ministry of commerce, but we did not toe their
line blindly. We undertook an extensive field
survey to see what is happening on the ground.
Fourteen SEZs across the country were visited
to look into the larger impact (both upstream
and downstream) of the functioning of SEZs. We
found that SEZs, in addition to export and
investment growth, have had a very profound
impact on the surroundings, signalling a
positive trend, and a significant change in
the mindset of the local people.
The new generation SEZs, such as at Chennai,
Sriperumbudur, Hassan, Bangalore, Manikanchan
etcetera, have created a tremendous local area
impact in terms of direct employment, formal
and informal activities, consumption pattern
and social life in and around SEZs. They are
creating jobs for a large number of
semi-skilled workers. Wage rates are rising
and are higher in SEZs than those outside.
The HSL SEZ at Hassan, Karnataka, has
recruited mostly women who have graduated from
one of the 80 odd schools in the district. It
has, so far, employed approximately 1,700
women from nearby villages. Prior to the
establishment of the gems & jewellery SEZ in
Manikanchan, artisans used to migrate to
Gujarat and its neighbouring states in search
of employment, but now with the establishment
of the Manikanchan SEZ, they are going back to
West Bengal. One has to visit these SEZs to
see the energy and vibrancy in the productive
environment.
Turning to the question of land acquisition,
which has, alas, been skewed by the debate on
the Nandigram and Singur episodes, one can
strongly argue that land has to be acquired
for setting up industries, and land-use change
does happen. Recently, in an interview to The
Telegraph, Kolkata, the Nobel Laureate Amartya
Sen emphatically said, “Prohibiting the use of
agricultural land for industries is ultimately
self-defeating”.
Land acquisition is a state subject in India.
Unfortunately, the liberalisation process in
the country has not been matched by reform in
the rent-seeking patwari system of the states.
Girish Sanghi, MP and industrialist, argued at
a CUTS’ parliamentarians meeting at New Delhi
on May 3, 2007, that once the SEZ application
is approved by the Board of Approval, on the
basis of a State Government recommendation,
there should be no need for any
administrative/legal requirements for land
conversion.
According to the commerce department, only
0.000012% of India’s cultivable land will be
used for establishing SEZs. Following the
land-acquisition related controversies, an
eGoM has decided that state governments would
not buy land for private entrepreneurs and
that only barren/wastelands or single
croplands would be acquired for SEZs by them
directly. There is now a consensus across
political parties and CSO/NGOs, against the
acquisition of agricultural land by private
SEZ developers even at market prices. On the
crucial issue of rehabilitation of landowners,
another government policy is in the making to
ensure that the dispossessed are suitably
compensated.
Demolishing the romantic argument of farmers
in love with their land, Sharad Joshi, MP,
observed at a May 2007 meeting that in today’s
changed circumstances, they are ready to sell
it for their own betterment. If given the
option to sell their land (obviously at ruling
market prices), which amounts to voluntary
retirement from farming, and gain employment
in industrial activities, they will opt for
it. This has been corroborated by many,
including CUTS staff via personal interviews
with farmers.
One innovative model to deal with
rehabilitation came up in the case of the JSW
Steel plant in Salboni, West Bengal, where
farmers were compensated with cash, shares in
the company taking over the land and also an
assured job to each family. Even if the
land-owning company fails, the landowner gets
the market price for his land.
In
conclusion, the imperatives of SEZs in the
present context are clear, but some caveats
should be recognised. There may be a potential
threat of land being diverted to the real
estate business, as opined by Rahul Bajaj, MP
and business tycoon. At the same meeting, he
said that the larger non-processing area will
attract developers for the development of
shopping malls, recreational facilities and
even golf courses. These are some of the
concerns which need to be tackled head on
before the country can realise the benefits of
the SEZ policy.
The author is Secretary General, CUTS
International, a leading research, advocacy
and networking group and can be reached at
psm@cuts.org.
This article can also be viewed at:
http://www.financialexpress.com/
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