Believe it or not, Asia?s first export processing zone was set up in India back in 1965. But like with many Indian inventions throughout history, China was able to exploit the concept much better. In fact, it was the runaway success of China?s special economic zones (SEZs), the concept?s latest avatar, that made the then commerce & industry minister Murasoli Maran push for a replication of the model in India. The Indian government has, since, promoted SEZs as a sort of industrial paradise for businesses to get away from labour constraints, overpriced capital and infrastructure inadequacies. So strong were the attractions that SEZs were thought to have gained enough momentum to escape regime changes at the Centre as well. The UPA government did not jettison the idea. Instead, it approved two versions of SEZs?single tower blocks housing a particular type of industry, and multi-product zones sprawled across 1,000 hectares or more. The current SEZ debate is focused on the second type. ?
But two things have happened in the interregnum. Indian industry?s growth rate has picked up and there has been a series of farmer-versus-state agitations over land acquisition for industry. The former has made sections of the government less enthusiastic about creating these special enclaves, while the latter has dissuaded political parties with wafer thin majorities from acting tough over the issue. As an example of the former, the Union finance and commerce ministries are in a heated duel over the estimated revenue loss implied by the tax breaks granted to SEZs. At another level, despite the announcement of a generous rehabilitation & resettlement policy, the government is displaying reluctance on SEZ approvals. This week, an empowered group of ministers were supposed to take a call on these questions, but the meeting has been put off. Clearly, the government?s SEZ enthusiasm has been diminishing. The problem, however, is that SEZs are now a legislated reality, and based on that, investments worth at least Rs 40,000 crore are at stake, according to commerce ministry estimates. Delays, therefore, mean massive damage. Investors are quite irritated with the government, as they should be. But such commercial considerations are unlikely to count for much in an election year, even if the SEZ jinx shaves economic growth by a percentage point or two. This should not be happening.
