What is true about SEZs is that the land where urban development makes sense tends to be located near ports, rivers or lakes, and has a pre-existing dense population. In India’s SEZ policy, the state has come into the picture by playing the role of forcibly acquiring land. This is done under the ‘eminent domain’ principle, but at non-transparent prices. The sharp hike in land prices that naturally follows consolidation and development often leaves the original owners of land feeling cheated.

Going beyond land, the SEZ effort is afflicted by many deeper questions. It was never clear that the policy was aimed at promoting exports or FDI, as is the case with Chinese SEZs. A variety of tax concessions were being given for the development of real estate. It is estimated that about Rs 1.7 lakh crore in tax revenue is to be forgone. Revenue forgone is no different from money spent by the government. Small enclaves of development were to be created instead of spreading public resources across all tax payers. Growth in exports is good if it reflects improvements in productivity in the country. Here the growth in exports, to whatever extent, was to come from a few artificially created pockets in the country. The bribes that would be earned by politicians and the profits that would be earned by developers were sources of discontent. The finance ministry said it did not have enough custom officials to man the boundaries and checkposts of SEZs which would be Free Trade Areas. RBI opposed giving convertibility within SEZs. Finally, Sonia Gandhi chipped in with her opposition to the use of arable land for SEZs.

... contd.