“Wealth, like
knowledge, grows in spots and spreads out,” so postulated William James, the
philosopher. And Deng Xiaoping—the Chinese statesman for whom “It does not
matter what color is the cat, so long as it catches the mouse” —proved William
James right by establishing SEZs at Shenzhen, Xiamen, Zhuhai, and Shantou that
have today become economic powerhouses, besides acquiring a place among the
largest manufacturing bases in the world and turning China into a global
economic power next only to the US and Japan.
Enthused by the
success of the Chinese experiment with SEZs, we deliberated upon them, debated
on their pros and cons for a couple of years, and finally decided to put in
place an appropriate law for establishing SEZs 15 years after we started the
liberalization process—which is, of course, in stark contrast with China, which
started its liberalization with the establishment of SEZs. And, thus began all our woes. As a race, being highly possessive of the
‘sovereignty of reason’, we—‘pregnant’ with ‘thoughts’ that are ‘disjoint and
out of prime’—took to the fancy of ‘reasoning out’ the good and bad of
SEZs—whose capability to develop agglomeration economies, to make
socio-political control of foreign involvement easier, and create better
infrastructure and links with the external world, has been proved beyond doubt
in China and elsewhere —and have become
perplexed by the problems it has created. The net result is pandemonium across
the country.
Reacting to the
violence and police firings, the empowered group of ministers has come up with
revised policy guidelines: one, the size of multi-product SEZs is caped at
5,000 hectares; two, state governments will not acquire land for SEZs; three,
at least, half the area of the SEZ should be earmarked for processing unit; and
four, SEZs cannot merely be net foreign exchange earners but their exports must
equal their purchases from the domestic tariff areas.
Now, what does
all this mean? It means: on the one
hand, the government wants to create industrial cities of world-class standard
with their own ports, airports, power stations, offshore banking, water supply,
and other essential social infrastructure, so that they could become ‘global
centers’ of growth; and on the other hand, it wants them to confine to a
miniscule size of 5,000 hectares. India cannot have SEZs of the size anywhere
nearer to that of Shenzhen which is spread over an area of 20,000 hectares with
all the supporting infrastructure of world-class, and hence, it is feared that
they would not be able to generate the ‘driving force’ that is required to
really transform the economy as envisioned. Some have, therefore, dubbed it as
an act of government’s continued lack of a long-term vision.
Secondly, it is
palpable that the government has resorted to such capping of SEZs across the
board only to placate the political forces that are opposing the acquisition of
agricultural land for establishing SEZs. But what is enigmatic here is why the
government should prescribe the size for SEZs when acquisition of land is no
longer by the state governments but only by the respective promoters of SEZs.
The revised policy prescription of land acquisition through ‘voluntarism’
between the acquirer and the seller raises a question: why should government
cap it? Such half-hearted attempts at promoting SEZs would only result in the
mushroom growth of small-sized SEZs which, instead of creating world-class
infrastructure, are sure to become a drag on the existing infrastructure in and
around them. Further, as the laws permit establishment of sector-specific SEZs
with as low as 10 hectares, many such may sprout all around cities causing
further strain on the already fragile urban infrastructure, and gain exorbitant
tax benefits for breaking down the existing infrastructure. Unfair, isn’t it?
That is not the
end of the story, for it raises another important question: How would the
withdrawal of state governments from land acquisition help farmers? Whether
land is acquired by the government or by the SEZ promoter, the sufferings of
the farmer will not change. In either case, he needs to rehabilitate himself.
That being the reality, withdrawal of the government from the scenario with a
modification of policy guidelines is nothing short of abdication of its
responsibility towards the welfare of citizens. That aside, what would happen,
if, say, a small group of ‘no-saying’ farmers hold the rest to ransom? Such predicaments will only hasten the
process of small SEZs mushrooming around cities. In that context, wouldn’t they
do more harm than good to the nation?
Amidst these
unanswered questions, there emerges a ray of hope: Commerce Minister has
announced that the government is open to lift the land ceiling on SEZs. “In
future, should a proposal come that looks at an area that may be larger, we are
willing to look at it”, said Kamal Nath. That must have cheered many, but this
dilly-dallying is what is ailing the country for decades, which could, perhaps
be more due to our “tendency to give ourselves the fullest benefit of every
possible doubt…”
“To be or not to
be”: but how long?
(May, 2007)
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