Special Economic Zones (SEZ’s)

Despite all the controversies, India has rightfully embarked on building new “Urban Centres” in areas earmarked as SEZs. These Urban Centres will provide much needed relief to India’s Mega Cities. They will provide opportunities for urbanites as well as the uneducated, unemployed, unskilled (U3s) from Rural India (Bharat). Situating these SEZ’s on the periphery of existing cities and in Bharat, is inarguably the right solution for the entire country. 

These SEZs will provide opportunities for people:

• Currently living in India’s congested cities, 
• Living in Bharat, 
• Migrating from Bharat to India in search of a better life. 

The challenge is to build them fast, build them well and build till supply catches up with demand. An SEZ in Bharat i.e Rural India, will be a mixture of an Urban Economy, surrounded by a Rural Economy.

The requirement of export orientation only for an SEZ is an unnecessary constraint. The Economic Engine of the SEZ could be anything. Exports and Manufacturing are important, but jobs, any job and affordable housing are MORE IMPORTANT. Any estimate of the number of jobs are spread sheet guesstimates at best. The person who gets a job doesn't care if it is Manufacturing or Export Oriented.

The SEZ's main purpose should be to provide a magnet that will attract the “core” residents, namely the Middle Class (Urban and/or Rural) to move there and in the process provide employment for the Uneducated, Unskilled, Unemployed. It could be a “jobs” oriented SEZ, or a “housing” oriented SEZ, a la Vashi. Vashi was originally not intended to be the bedroom community of Mumbai, however, it flourished only after the extension of the harbour line to Panvel. Now one can hop on a train at Vashi and 55 minutes later arrive at CST (formerly VT). Although industrial employment was a goal at Vashi, for the most part it is bursting (literally) as a satellite to Mumbai for commuters. And while that maybe so, it provides plenty of service-oriented jobs in Vashi as well.

Regardless of its orientation, an SEZ has to provide ancillary amenities like schools, entertainment, retail outlets, medical facilities etc. for the "core" residents, to be motivated to move there; be it skilled people for jobs or commuters.

Figure 2

The whole focus of a "jobs" SEZ ought to be simplified. Attract big companies or a group of industries to establish operations in a zone demarcated as an SEZ and promote the formation of all the things around it that makes for a High Quality of Life for the individuals who reside there. Give companies that wish to establish an operation a Tax Break (like a pre-tax write off) rather than a tax holiday. Tax revenue could be realized from the income of the builders and providers of ancillary services needed to make the SEZ viable.

An outstanding example of an Industrial township in what was once Bharat is the steel city - Jamshedpur. When Tata's set out to establish a Steel Plant, they didn’t set out to build just a steel plant. They set out to build a city and they did. Their Steel Plant was the Economic Engine. And we have Vashi as a "commuter SEZ' example. There maybe some failures, and that is par for the course. Let the market decide where to invest their "construction" money. Let the government focus on facilitating the movement of capital, facilitating equitable land acquisition policies, assist in infrastructure and establish guidelines that protect the environment, safety and hygiene etc. Water and Electricity would be utilized even if the SEZ is a failure. SEZs should be thrown open for any sector.

Land Reform and Infrastructure:

Land for SEZ and Infrastructure to the site are the two big hurdles that Industrialists and Developers face. Acquisition of owned (malki) land has been contentious as experienced in Singur, Nadigram and other places. Current land laws inhibit parties from entering directly into agreement with landowner’s without government intervention. However, there is non-arable, non-forested land owned by the government that is available. This land could be leased or sold to SEZ developers. Land for SEZs and resentment amongst the rural population due to a number of reasons is a major hurdle that is stifling India’s economic progress. Addressing these issues is a must for a achieving the economic goals that will benefit those who have not benefited by liberalization.