Looking past the SEZ furore

Updated: Jan 20 2007, 06:33am hrs
The controversy over land acquisitions has affected the approval process for special economic zones drastically. The Board of Approvals has had to repeatedly postpone its meetings so that a rehabilitation policy can be formulated first to help those displaced. But before controversy began to bark at its heels, it was a body with a mission that showed no signs of slowing down.

After the SEZ Act came into force in February last year,it handed out more than 230 formal approvals to set up SEZs. In addition, more than 160 approvals were given 'in principle'. Interesting trends seen in the approvals include a high number of multi-product SEZscompared to sector-specific ones and the presence of Orissa in the ranks of the states with the highest number of SEZ approvals.

Putting the controversy aside, a look at the proposals approved over the last year would also give a fair idea of what the mainstays of India's exports will be in the years to come.

Looking at the sectoral break-up of the approvals, both formal and in principle, IT and IT-enabled services dominate, with 167 approvals, forming 41% of the total. Of these, the largest SEZ proposed is the one promoted by Adarsh Prime Projects over 468 hectares at Hobli near Bangalore. After IT and ITES, the textile and apparel sector has the largest number of approvals with 28. Of these, the state with the largest number of proposals is Maharashtra with 8. The largest SEZ in this sector is one at Visakhapatnam that has also been formally approved. Called Brandix India Apparel city, it will have an area of around 400 hectares.

The sector with the third largest number of approvals for SEZs is the electronics sector with 19. Many of these SEZs would be involved not only in the manufacture of electronics hardware but will also be home to units in the IT/ITES sector. Here, West Bengal with 4, has the largest number of approvals with 4 followed by Tamil Nadu and Maharashtra with 3 each.

There are some unique sectors too among the SEZs approved. For example, the activities of one proposed SEZ at Chhatrapur in Orissa will revolve around the mining and processing of minerals from beach sand, to be used in sectors such as atomic power. Another SEZ in Noida will revolve around the manufacture of equipment that utilises non-conventional energy sources like solar power. It will be developed by Moser Baer, a company otherwise known for making digital storage media.

Other interesting SEZ proposals include one based on ceramic and glass products in Jhagadia in Gujarat, and another for handicraft items in Moradabad in Uttar Pradesh. Unfortunately, there is only one SEZ proposal that looks to build on India's agricultural potential, a 200 hectare agro-based SEZ in Latur, Maharashtra.

The size of the proposed SEZs ranges from 10 hectares to 10,000 hectares. Sector-specific SEZs have a minimum area requirement of 100 hectares, which is relaxed for globally competitive sectors like IT and biotechnology. They have a minimum area requirement of 10 hectares. Multi-product SEZs that serve several sectors, have a minimum requirement of 1000 hectares and to no surprise, the largest SEZs are multi-product based. The honours are shared by two 10,000 hectares multi-product SEZs backed by Reliance Industries, one the Maha Mumbai SEZ and the other based at Jhajjar in Haryana. The largest sector-specific SEZ approved was the controversial chemicals-based one at Nandigram in West Bengal with an area of 4000 hectares.

The usual suspects dominate the list of states with the largest number of proposals approved. Maharashtra leads with around 73, or 18% of all approvals, followed by Andhra Pradesh with 54 approvals and Karnataka and Haryana tied at 46 each. The proposed SEZs unsurprisingly tend to concentrate around the industrial centres of each state. While the fact that there were no SEZs approved from the North Eastern states, Jammu & Kashmir and Bihar isn't shocking, that there was only one approved from Jharkhand is. The only automobiles and auto-components-based SEZ at Adityapur in Jharkhand will be in a position to take advantage of the industrial base and easy access to raw material available in the state.