The logic: while the government needs $150 billion over the next five years to upgrade the country’s crumbling infrastructure, the reality is it didn’t even manage to get $2 billion last year. Hence, it may be smarter to focus on creating world-class infrastructure first in areas where the country can reap high returns on investment.

The idea stems from similar regions in China (Pudong), Netherlands (Rotterdam) and the US (Houston). These regions, that could be 200-250 square km in size, would have a special Master Plan for hard infrastructure like roads, utilities and education.

While the Centre would fund upgradation of national highways within these areas, states would pitch in for state utilities and state highways. Such SERs could include several SEZs and industrial parks within them.

While private developers will build infrastructure inside the SEZs, the Centre and states would build the infrastructure linking the SEZs and other industries. The idea to select these regions on the basis of their economic growth potential to avoid politicisation of the concept, where electoral constituencies could influence the selection of regions.

The idea, revealed today at the Indo-German Infrastructure Dialogue, under the Indo-German Economic Co-operation Agreement, by Ajay Dua, Secretary (Department of Industrial Policy and Promotion), was heard with rapt attention by top German infrastructure companies.

There would be no new law required for creating these regions, neither would there be any need for fiscal incentives. The concept was first recommended by a Committe of NRIs, headed by Citibank’s Victor Menezes, who had submitted a detailed report to the Prime Minister recently.

Already, a task force headed by T K A Nair, Principal Secretary to the PM, is considering seven applications from state governments for setting up such regions revolving around Petrochemical and Petroleum industries, in their respective states.

Consultations have also been held with public sector companies such as ONGC and GAIL. The states in the fray are Maharashtra (South of Mumbai and Ratnagiri), Orissa (near the Paradeep port), Andhra Pradesh (Vizag), West Bengal (Haldia), Gujarat (Dahej), Haryana (Kundli to Panipat) and Karnataka (Mangalore).

An interesting feature of these regions would be the ability of states to offer flexible labour laws within them. “This would lead to competition among the states to attract investors by offering more flexible labour laws than the others,” Dua told The Indian Express.

A Cabinet note to create a policy framework for such regions will be prepared in due course by Nair, after consultations with other ministries.

Seven states already waiting in line

• Each SER (Special Economic Region) will have special Master Plan for roads, utilities and education.

• Centre would fund upgradation of national highways in these areas, states would pitch in for state utilities and state highways.

• Task force led by T K A Nair considering 7 applications from states: Maharashtra (South of Mumbai & Ratnagiri), Orissa (near Paradeep), AP (Vizag), Bengal (Haldia), Gujarat (Dahej), Haryana (Kundli to Panipat), Karnataka (Mangalore).

• Ability of states to offer flexible labour laws in SERs.