NEW DELHI: Amid the controversy over land acquisition for Special Economic Zones, the Centre has mooted yet another politically unpalatable proposal: Setting up of National Manufacturing Zones . The commerce ministry has circulated a draft proposal, setting off acute discomfort in some corners of the ruling alliance.
The proposal comes in the wake of pervasive confusion about SEZs. Under the Special Economic Zones Act of 2005, a large number of projects have been approved, but most of them have failed to take off due to issues related to land acquisition and other obstacles.
There have also been allegations of widespread corruption over land acquisition in the name of SEZs. Land being acquired under the guise of SEZs has allegedly been diverted into other projects. Land acquisition for large industrial projects has also been a politically sensitive issue, with such efforts meeting violent protests in many places. Sources in Congress said the leadership was unlikely to be enthused by the new proposal.
The special economic zones — 579 of them have been approved as of last month, of which, only 122 are operational — were a product of India’s eagerness to become a manufacturing powerhouse and set right the somewhat lopsided economic development of the country in going directly from being independent on agriculture to being a services-centric economy. During 2009-10, the services sector accounted for 57% of India’s gross domestic product, while industry contributed 28% and agriculture, 15%.
SEZs were a concept taken straight out of China’s success as a manufacturing hub. In China, which boasts an economy nearly four times the size of India, there are less than twenty SEZs (They enjoy varying degrees of benefits and waivers). Industry is the largest contributor to China’s GDP, with a 46.8% share. The contribution of manufacturing to India’s GDP is about 17%. Activities such as mining and power generation are accounted as industry, but not as manufacturing. It is the government’s stated aim to increase the share of manufacturing to 25% of GDP by 2020.
Because SEZs offer attractive tax breaks and encouragement by the government, there has been a race to corner
SEZ licenses. But it remains to be seen how many of them can operate in a viable manner.
India is hopelessly out of date when it comes to clear laws and policies relating to land acquisition and subsequent resettlement and rehabilitation. A new bill introducing amendments to the Land Acquisition Act of 1894 has been stuck in Parliament and given the gridlock over the alleged scam over 2G spectrum, faces uncertainty.
What complicates matters is that the government is unable to gain the support of allies on land acquisition. Railway minister Mamata Banerjee has been vocal in her opposition to the bill. The Trinamool Congress leader has been the face of opposition to large projects in West Bengal, including the Tata Nano project.
Without an amended land acquisition policy in place in a fast-growing economy, the government is unlikely to be able to find the political acceptability to a new kind of SEZs.
Source : economictimes.indiatimes.com