news details |
|
|
| SEZs as ‘gated cities’ | | The model is divisive and counter-productive | |
Special Economic Zones (SEZs) are in the midst of a raging national debate. The Union Ministry of Commerce, in their policy paper, describes SEZs thus: “A designated duty free enclave to be treated as foreign territory for trade operations and duties and tariffs”. As per this description SEZs are alien territory located within the geographical limits of India with all the perks and privileges befitting a princely state! At the last count 181 of them have been approved and hundreds more are waiting in line.
For the Confederation of Indian Industry (CII), the voice of large industries and MNCs, SEZs as conceived by the government will be a “powerful instrument” to achieve rapid growth in manufacturing, employment and exports and offer “the only way forward” in bridging the gap between India and South-East Asia, including China, in terms of manufacturing and employment.
The National Alliance of People’s Movements speaking up for farmers have a diametrically opposite perception: “SEZ is a system of apartheid, the return of the old system of zamindari. There will be a preferred group of people/industrialists in these enclaves just because they happened to grab a piece of land approved as an SEZ, as opposed to those who are outside the SEZ. These ‘zamindari enclaves’ will sound the death knell of all industry outside the SEZs and have enormous implications for other industry, government revenue, environment and labour.”
Let us look at SEZs as they are emerging. The range of perks and privileges fiscal as well as physical, are vast and varied. Fiscal incentives include 100% income tax exemption and ploughing back of profits; exemption from customs duty and central excise on import / procurement of capital goods, raw materials, consumables, spares etc; treatment of supplies from Domestic Tariff Area to SEZ as deemed exports; reimbursement of Central Sales Tax paid on domestic purchases; carry forward of losses; facility to retain 100 per cent foreign exchange receipts; commodity hedging; exemption from industrial licensing requirements; free repatriation of profits without any dividend balancing requirement; duty free goods to be utilized in 5 years; in house customs clearance and many more.
Physical privileges include permission to develop Independent Townships within the SEZ with commercial/residential areas, hotels, hospitals, markets, clubs, golf courses, casinos and recreation centers with authority to provide services like water, electricity, security etc. Developers have full freedom in allocation of developed plots to approved SEZ units on purely commercial basis. Barring a few sectors 100 per cent Foreign Direct Investment in manufacturing is allowed through automatic route. SEZ units could be for manufacturing, trading or service activity and no license is required for imports.
For enjoying such mind-boggling array of privileges and incentives, developers have to use just 25 per cent of the SEZ area for manufacturing or other core activities. The balance could be utilized for ‘city building’ purposes to make huge profits.
This is reflected in the statement of the Reliance Group representative while responding to the ‘satyagraha’ launched against the 35,000 acre SEZ project near Mumbai: “We are planning the Mumbai SEZ in such a way that it will be a world class city, which will ease the pressure on Mumbai.”
Two more ‘world class SEZ cities’ are coming up in the small state of Haryana, one on 25, 000 acres of land near Delhi and another on 11, 000 acres near Chandigarh. Besides incurring farmers’ wrath these ‘private, gated cities’ are fraught with grave socio-economic consequences.
Little wonder that the Reserve Bank of India has stepped in and declared SEZs as real estate development, advising banks and financial institutions to adopt stringent norms while funding these projects. The Commerce Ministry is upset and has sought the intervention of the Prime Minister to rein in the RBI.
What has been the track record of SEZs and similar land based development models? Have they been able to “achieve rapid growth in manufacturing, employment and exports” as perceived by CII? The fact of the matter is that neither the international nor the Indian experience with SEZs has been particularly happy. Globally, only a handful of SEZs of the hundreds that exist, have generated substantial exports, along with significant domestic spin-offs in demand or technology upgradation.
For each successful Shannon (Ireland) or Shenzhen (China), there are 10 failures - in the Philippines, Malaysia, Brazil, Mexico, Colombia, Sri Lanka, Bangladesh and even India. A 1998 report by the Comptroller and Auditor General on export processing zones (EPZ) says: “Customs duty amounting to Rs. 7,500 crores was forgone for achieving net foreign exchange earning of Rs.4, 700 crores” What is the guarantee that a similar fate does not await the new avatar – SEZs?
Studies on the EPZs show extremely high rates of labour exploitation and job insecurity, especially of female workers, poor technology absorption, and dubious long-term benefits. Going by past experience, the promises of millions of new jobs in SEZs sounds like empty rhetoric.
Are SEZs the appropriate growth model for India? The answer is a categorical no, considering the country’s geography, economy and the composition of its workforce. India has a large population and there is tremendous pressure on its land mass. Any development model should be based on the most economic usage of land keeping food security in view.
Despite the 8-9 per cent GDP growth, India’s economy largely remains poor and low-income earning. The vast majority of India’s workforce is low, semi and unskilled and they have no place in the SEZs.
A few hundred ‘exclusive luxury enclaves’ mostly catering to high-tech, low-employment foreign investments are not going to change this. What is required is broad-based, value-added, employment intensive and inclusive development models wherein the common man can feel he can take part.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
|
|
 |
|
|
