SEZs: It's now time to move on

Special economic zones are now here to stay. Prime Minister Manmohan Singh has lent his weight behind the SEZs. Notwithstanding the many valid objections raised by Finance Minister P Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and several other experts, promoters and proponents of SEZs should heave a sigh of relief. The policy may see some tinkering here and some tweaking there, but the SEZ bandwagon should roll on.

So, perhaps it is time now to accept these zones as reality, and, instead of merely opposing them, work towards a scheme in which the least damage is done to the economy.

Note that the Left, which was once strident in its opposition to the SEZ scheme, has modified its stance and seems to be at peace with the policy. Not entirely unrelated to this change of heart is the fact that the two Left-ruled states of West Bengal and Kerala have 13 and 10 SEZs approved for themselves, respectively.

For the record, 181 zones have already been approved and 225 more are awaiting clearance. The total area to be covered by these zones will be approximately 1,000 square kilometres or equivalent to about two-thirds of Delhi's total land area.

Close to one-third of this area (350 square kilometres to be precise) will have to be used for processing activities, while 400 square kilometres will be used for maintaining a green belt and creating sewage and water treatment facilities, according to the government.

And the rest - about 250 square kilometers - will be used for real estate projects.

Clearly, the scale of these operations is going to be huge. There are implications for the real estate sector, social and economic infrastructure in and around these zones, and of course the millions of farmers whose land will have to be acquired before the zones are set up.

The government has argued so far that not an inch of agricultural land will have to be acquired to set up the first lot of 181 zones, approval for which has already been granted. But that argument will not hold water for the 225 new zones, whose approval is under consideration.

Yet, it is not enough for the government to focus only on the farmers and the need to protect their land rights. The issues thrown up by the SEZ scheme are far more complex and need a co-ordinated policy approach.

A good beginning for the government will be to agree on a set of conditions that will never be violated or diluted. If necessary, the government could even set up a group of ministers (this is one policy on which the Manmohan Singh government seems to have forgotten to set up such a body!) to decide on these conditions. Here is a list of what these conditions could be.

First, the government should make a solemn announcement that once the SEZ norms have been finalised, there will be no further change in them. For, far too many times has the government altered the norms for these zones.

Should the land use norms be changed to allow promoters to build more residential complexes? Or should more area be reserved for the processing activities? These are norms that should be sealed and signed once and for all.

The government should send out a clear signal to all that rules once framed are not going to be changed or diluted under any pressure.

Secondly, promoters of the zones should not be allowed to trade in them. Rules should be so framed as to disallow promoters to sit on the project after obtaining the government clearance and then sell that to some other party who is willing to pay a premium.

In fact, the government should insist on a time-bound roll-out plan from the promoters whose SEZ plans have been cleared. No modification in the roll-out plan should be permitted and stiff penalties imposed on those who fail to stick to the agreed schedule.

And finally, all clearances should be subject to a transparent land acquisition programme to be submitted by the promoter. The land acquisition programme should have specific clauses to ensure adequate compensation for the land owner at a market-determined price.

Additional incentives should be thrown in by ensuring that jobs or shares in the SEZ project are given to those who agree to sell their land. And these should be monitored and regulated not by the existing government machinery. It would be better if a special authority was set up to ensure that the new compensation package for farmers selling their land was implemented.

The government was responsible for having spawned a scheme that has many flaws. Now that the scheme is upon us, the government should frame transparent and inviolable rules and move out of the decision-making process.

Let an independent SEZ regulator take over the task of clearing the projects as also of enforcing the rules including those for land compensation packages.