SEZs - a Miserable failure?
THE CAG recently conducted a performance audit on the Special Economic Zones (SEZ) and their social and economic benefits to the country.
CAG notes,
A Special Economic Zone is a geographical region within a Nation State in which a distinct legal framework provides for more liberal economic policies and governance arrangements than prevail in the country at large. The geographical areas thus notified under the SEZ Act, were declared to be outside the normal customs territory of India.
52 per cent of the land allotted remained idle even though the approval dated back to 2006. There was a decline in the activity in the manufacturing sector in the SEZs. Land acquired for public purposes were subsequently diverted (up to 100% in some cases) after de-notification. Developers and unit holders were almost left un-monitored, in the absence of an internal audit set-up. This posed a huge risk for the revenue administration.
Though the objective of the SEZ is employment generation, investment, exports and economic growth, however, the trends of the national databases on economic growth of the country, trade, infrastructure, investment, employment etc., do not indicate any significant impact of the functioning of the SEZs on the economic growth.
Among all the States of India, Andhra Pradesh boasted of operating maximum number (36) of SEZs in the country followed by Tamil Nadu, Karnataka, and Maharashtra. Over a period of time, the growth curve of SEZs had indicated preference for urban agglomeration by industry, undermining the objective of promoting balanced regional development. Another significant trend in the SEZ growth has been the preponderance of IT /ITES industry. 56.64 per cent of the country's SEZs cater to IT/ITES sector and only 9.6 per cent were catering to the multi product manufacturing sector.
Land allotment and utilization Land appeared to be the most crucial and attractive component of the scheme. Developers approached the government for allotment/purchase of vast areas of land in the name of SEZ. However, only a fraction of the land so acquired was notified for SEZ and later de-notification was also resorted to within a few years to benefit from price appreciation.
DDT will bring you more on SEZs in the coming days.