The Empowered Group of Ministers (EGoM) for Special Economic Zones (SEZs) ended its review meeting “inconclusively” but said that it is considering ways of infusing “export obligations” in order to differentiate between proposals. Chaired by External Affairs Minister Pranab Mukherjee, the meeting was attended by Finance Minister P. Chidambaram, and Commerce and Industry Minister Kamal Nath and officials were unwilling to reveal details only to say that those 63 SEZs already notified are not affected by any new rules and they recognized the complexities of introducing restrictions.
The Board of Approvals for SEZs has already approved 237 SEZs and given a go-ahead notification for 165 of them. Moreover, another 300 applications are yet to be considered. Per Indian law, the federal government cannot procure the land but has to depend on the State to make that decision. Given the level of corruption and unbridled nepotism and opportunism at lower levels of the economy, often decisions are made to benefit politicians at the cost of the poor.
The EGoM would do well to clearly define constraints to proposals of SEZs. Nath revealed that the EGoM talked a bit on "land issues, rehabilitation policy and possible misuse of tax concessions by SEZs” but that clearly is only the tip of the iceberg. Land Issues should include determining fair market value, history of ownership, and location within city limits. Determining the fair market value may be hard because most Indian real estate transactions happen with cash and only a notional value is registered. History of ownership should include the entire area and should perhaps include a moratorium on purchases so corrupt politicians do not buy up an area and propose an SEZ near it to aggrandize profit. The EGoM should also deny proposals to locate SEZ with city limits as urban boundaries grows and creates intense industrial activity within city limits and cause environmental and social concerns.
Apart from constraints, it must also consider economic benefit considerations. While “export obligation” may be a start, the EGoM need to consider other parameters such as Revenue impact, job creation, productivity increase, environmental impact, cost advantages, and global competitiveness.