Saturday, January 20, 2007

SEZ plan turning into bad dream

Friday January 19 2007 00:00 IST
NEW DELHI: Converting a beautiful dream into a horrible nightmare within
a blink of an eye is perhaps no big task for Indian policy makers. And
that’s what has happened repeatedly with India Inc. in 2006 considering
the SEZ (special economic zones) saga for the year. For both big
corporate houses and India as a whole, what was looking like a race to
gain, now looks like a hoard to bear pain.

SEZ’s were supposed to give to the country areas, which would be
blossoming ground for exports and investments. But, with recent moves,
it seems all they could manage to do was adding fire to the political
and economic dual that is living within the country.

The one who is to be blamed fully for the failure is none other than
Kamal Nath, the minister for commerce. From the very first day that SEZ
Act, 2000 came into force, Kamal Nath has been an ardent supporter of
setting up SEZ’s in India. He overlooked all the logics and calculations
that were put in front of him.

But the mistake was, while it took China (whom Kamal Nath followed
blindly) 27 years to setup five SEZ’s, the government of Maharastra
alone approved more than two dozens SEZs, forget about the number across
the whole country. On top of it while the number is growing rapidly the
present setup has failed to support them. Lack of power and other
infrastructural loopholes, in more ways than one have made it difficult
for new SEZ’s to sustain.

It’s not only the system that is showing signs of failure, even the
bigger benefit that SEZ’s are supposed to give are also loosing track.
If one were to follow the calculations done by the finance ministry,
then India would loose Rs 100,000 crore till 2009-10 as tax losses
alone. This surely is big enough to have taken some of commerce
ministries time and attention, but sadly nothing happened.

A report by RBI suggested that the revenue loss for the government in
providing incentives may be justified only if SEZ units ensure forward
and backward linkages with the domestic economy; else these new zones
would increase nothing but regional imbalance. Even this could not
change Mr. Nath’s mind.

And now after around 237 SEZs are approved and there are 600 more in the
pipeline, the ministry has decided to come up with a proper
rehabilitation policy and study of land acquisition, which bound to put
on hold the fates of many entrepreneurs.

Commerce minister showing an act of fairness now stresses, "States must
have a fair and transparent policy in land acquisitions, as well as some
sense of equity". In such a chaotic situation everyone seems to be a
sufferer and the policy makers have once again been able to change many
a dreams from bad to worse.


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