Somesh Arora: SEZ: Incorrigible experimentation

It has been more than four decades since the first EPZ was formed in Kandla in 1965. China in comparison which was a late entrant in 1970s made these, as a much bigger success and has after benefitting from their existence, reversed the process of liberally sanctioning the same.

India, however, woke up late when most of the tariff barriers were already dismantled, but sanctioned these left, right and center after coming into force of SEZ Act, 2005.

Industrial houses grabbed these as if it was a never before opportunity, not realizing that even when the government had procured land for these SEZ at not so expensive acquisition price, was finding it difficult to sell out, seven official versions of these SEZs for almost four decades.

With much higher acquisition cost and with lesser comparable tax incentives vis-à-vis the domestic industry, where was the scope for these SEZs to be a big draw defied sense. But then, even the astute business people are fallible and make mistakes.

Though they never admit it in public. It became evident, when all the projections of Business Association bodies and Corporate, indicating a never before and huge space requirement by 2011 from IT industry and others, turned out to be a fiasco in 2008. MOC was left to take resort to the definition of `Exports’ under SEZ Act to claim that exports from SEZ were rising. That this definition, is like ever expanding

‘Small Scale Industry’ definition was known to every person   who has something to do with the government statistics. Like SSI became SME i.e Small and Medium Enterprise and then SMME i.e Small, Micro and Medium Enterprise just to justify that number of SSI were not on the decline post liberalization. Though it is different story that more than 9 lakh SME units have shut shop reportedly since 2000.

Tools available with the successive Governments in their armory are not only-  Statistics juggling, but also  the definition bungling.  Exports were `goods exported out of India’ in 1980`s, then it became exports of goods and services, then it became deemed exports to SEZ and EOU`s. With the coming into force of SEZ Act, it is export of goods and services from India, exports from DTA to EOU and SEZ and then whole lot of combinations like exports from EOU to SEZ, from SEZ to SEZ, from SEZ to EOU, from DTA to Developer, from SEZ and EOU to developer etc. A reality check of what all is being included and what all is being reported may be interesting. Long live the repetitive Indian Export growth story- where the year begins with every one asking for more incentives as the scenario is bad, and ends with claims of growth despite it.

The developers who were in the business had mainly set their eyes on the fact that one day the MOC will be able to yield to their original demand of allowing at least 75% of the area as non-processing, which it had resisted seeing the initial queue of the developers chasing it, but now may be more vulnerable to yield to it considering that all the big players are either getting their zones denotified or are  continuing to seek extensions for development. Perhaps, waiting for projections for huge demand to come true. Let the MOC, at least give, ad interim, permission to these Developers to do farming on these lands to save country some grain imports. Import substitution is as good as Exports was the EXIM policy line in 1980`s. But that may be possible if someone requests for it. The heavy cost of land acquisition for these developers in states like Haryana which have been termed to be having best acquisition packages and where at least 50-60 of these SEZ are supposed to be located puts  a question marks on the viability of these projects with only 50% area allowed for processing zone. Other option is to open these SEZs for hither to untapped areas like Gaming activities, Casinos’, medical tourism and educational institutions etc. against stipulation of earning foreign exchange.  The Casinos can no doubt reduce burden on our Cricket satta market and can provide some competition. In any case, where ever there is cricket fixing found and Indian fixer is never far behind.

The art to attract is there amongst out satta entrepreneurs and urge to gamble is there amongst all, whether Indians or outsiders. What difference is there between lottery tickets and Horse racing on one hand and Casino gaming  on the other, is difficult to comprehend. The suggestion will also make Cricket, little gambling proof. Otherwise the figures of stakes in betting, is indeed mind boggling. Let some people who are on the right side of the law also make some legitimate money. Tourism will also flourish. Opening of educational institutions in SEZ will not only save out flow of Foreign Exchange but will also ensure some earnings of the same from foreign students. The Indian students can be charged in new avatar of Rupee (which could have been better insignia for railways with a parallel rail track showing up in the sign). Medical tourism can ensure more supply of medicos who are well employable with in India and more medical colleges to support the demand for medicos.

However, the problems which are decades old, in relation to SEZ i.e. some jewellery units running away with the gold will always remain.  The quantity has only gone up many folds in the last two decades. Every surprise inspection of the unit used to make administrators more worried than the defaulting unit as there could be a big surprise for them. The units importing big machinery, by overvaluing the same  and then running away with all loans, foreign parked funds and even shareholder`s funds and with no exports,  will always be there. And so shall be the squabbles between the officials of MOC and MOF. The former, cribbing about the Exports, and latter about revenue. The SEZ Lab will continue to experiment even twenty years down the line, but the fruit of research may remain elusive.