The Industry and Commerce Ministry has rightfully taken credit for the creation of the Special Economic Zones (SEZ) Act 2005 but the policy lacks transparency and seems ad hoc in implementation.

The ostensible goal of the SEZ policy is to generate additional economic activity, development of infrastructure facilities, generate employment, promote investment from domestic and foreign sources, and facilitate easier exports of goods and services. So far, it has approved 237 SEZs and 51 have commenced operations. The industry ministry has showcased Nokia’s SEZ in Tamil Nadu, Apache (Adidas Group) in Andhra Pradesh, Flextronics in Tamil Nadu, Quart City in Chandigarh, Motorola and Foxconn in Tamil Nadu as examples were thousands of people were employed and hundreds of millions were invested.

While SEZs are very necessary to scale the economy, the Indian form has not been well thought out where there is an arbitrary allotment of land for industrial purposes. Thus fertile farm land has been siphoned for industrial activity while the government continues to anguish about loss of agricultural productivity. Moreover, the compensation handed out to farmers affected by this policy has been paltry and well below market value. Even so, payments are delayed and political middlemen and corrupt bureaucrats get a cut of such payments. The government claims that the SEZ scheme is a tremendous success among investors both in India and abroad. This should not really be surprising as industry does like tax cuts and exclusivity. The point is not whether the industry loves this concept or not but whether the nation has a comprehensive policy on SEZ, an optimal use of land and resources, and loopholes benefiting a few have been plugged. A Lehman study in Honk Kong said that some of the SEZ projects approved by the government are in multi-story buildings and benefits accrued from such schemes born out political expediency and obvious nepotism hurt the nation financially than provide benefits.