Tuesday, February 27, 2007

What's So Special About SEZs?

The Indian government is facing political heat from the farmers, opposition, and even from its own allies on setting up of special economic zones. The policy that aims to emulate China's success with SEZ by establishing a tax & customs free zones to encourage exports is now under fire on land acquisition. The controversy has prompted the Prime Minister to put on hold further approvals of SEZs.

The SEZs have always been marred by controversies — earlier by the Finance Ministry's fear on tax exemptions offered to these zones and now by the land acquisition.

There is not much doubt, that the SEZ concept will definitely help India succeed in a big way. The domestic manufacturers will be able to compete in the global markets. The SEZs will bring technology and manufacturing skills to India, create lakh of employment opportunities, attract Foreign Direct Investment (FDI), increase exports etc.

To achieve 10 percent GDP and make India a global manufacturing hub, we have to move towards industrialization but not at the expense of forcing farmers to give their arable land.

The government should come up with proper land acquiring policy, make financial reforms rather than making cosmetic changes to a globally successful model.

For industrialization, land is needed, but those who are losing their land must be adequately compensated. They must be paid market value of the land, offer jobs, regular income, home etc.

In a year, the government approved 237 SEZs, gave "in principle approval" to another 162 and received proposals from state governments for 304 more. All but 63 of those projects have been put on hold since protests erupted. Too many SEZ's with not serve the purpose, we should develop sound infrastructure and offer better facilities for foreign investors.If we look at China, it has few SEZ's but large ones.

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