SEZ-driven growth proves to be a chimera

NEW DELHI: The Union government’s plan to promote special economic zones (SEZs) as an engine for medium-term growth in exports has failed to make any significant progress.
Not even one of the dozen greenfield SEZ projects cleared by the government are near the implementation stage. None of them has succeeded in achieving even financial closure.
While two-and-a-half years have passed since the scheme was launched, the only SEZs in operation are export processing zones (EPZs) converted into SEZs and the Indore SEZ which is an Export Promotion Industrial Park (EPIP) upgraded into an SEZ.
Two of the most promising greenfield SEZs, at Positra (Gujarat) and Nangunery (Tamil Nadu), find themselves stuck while others are nowhere on the horizon.
The Nangunery SEZ project, planned at an investment of around $2bn, has suffered due to political reasons. While the project was launched when the DMK government headed by M Karunanidhi was ruling Tamil Nadu, the subsequent regime change in the state is seen to have gone against the hi-tech SEZ.
While the Nangunery project has failed to move on, the Tuticorin port has floated a plan for its own SEZ. Nangunery lies quite close to Tuticorin and the port was to be used by the SEZ for the movement of its export-import cargo.
In case the Tuticorin port goes ahead with its plan for an SEZ, then it would be curtains for the Nangunery project.
The case of Positra, promoted by Nikhil Gandhi, is far more serious. The Gujarat government is said to be going slow on allotment of land for the project which was planned at an investment of more than $1bn.
Land already allocated for the SEZ is also being demanded back, industry sources said. Last year’s earthquake and the communal killings after Godhra have also queered the pitch for the project, forcing the promoters to look for an alternate site in Maharashtra.
It is not going to be easy for Mr Gandhi to set up the project in Maharashtra, the sources added, citing that the state government was already in the process of establishing an SEZ at Navi Mumbai.
The City & Industrial Development Corporation of Maharashtra is already working on the project and Mr Gandhi would have to face competition from the Navi Mumbai SEZ.Optimism is missing in the case of the three SEZs sought to be promoted by the UP government.
The Badhoi, Kanpur and Greater Noida SEZ projects remain on the drawing board. Similar is the case with projects sought to be promoted by the Orissa government at Gopalpur and Paradeep.
The only saving grace so far has been the Indore SEZ, commerce department sources said. While the big fish have floundered, the EPIP-turned-SEZ has been launched by the Madhya Pradesh government on a compact scale, with marketing starting for the first phase. Considering the current scenario, the Indore model sounds quite practical.
The government has also sanctioned two SEZs for West Bengal, one at Kulpi and another at Salt Lake, along with Hassan in Karnataka and Visakhapatnam in Andhra Pradesh.
However, none of them show any signs of materialising in the near future.
No greenfield SEZ in the country is likely to be operational for at least three years. This means a lapse of five years since the SEZ concept was announced officially in ’00.
If it takes five years to start a medium-term machinery, how is it possible to expect results in the form of incremental exports in the near future, ask pessimists.
The only SEZs that are functional now are the erstwhile EPZs at Kandla, Santa Cruz, Surat and Calcutta. The EPZs located at Noida, Chennai, Falta and Vizag are yet to be converted into SEZs.
Moreover, several policy issues pertaining to taxation and government regulations remain to be sorted out. With the investment climate deteriorating, it seems the wait for real SEZs is going to be long, ultimately having an impact on export performance.