Another Bhatta Parsaul…and SEZs will remain a mirage :Giri Devanur, serial technology entrepreneur, promoted Gandhi City, the country’s only approved R&D SEZ

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Bangalore, Karnataka, India, Republic of (Free-Press-Release.com) May 26, 2011 -- When the Indian Semiconductor Policy was announced in 2007, investors were keen on setting up manufacturing projects. Moser Baer signed a MoU with Andhra Pradesh government to set up $500 million SEZ for manufacturing. Four years down the line, the project is shockingly shelved! Tata’s ambitious automotive plant in Singur was no different. The ambitious Maha Mumbai SEZ project, led by the industrial giant Reliance Industries, too was scrapped recently…

These SEZs were heralded as the arrival of India at the global manufacturing arena, also termed as a serious attempt to take on the world’s biggest manufacturer – China. But what went horribly so wrong that top firms and investors are backing out of SEZ projects. Hardly any SEZ worth the mention has become operational in the last 5 years. Their problems are the same; an unclear SEZ policy; age-old land acquisition process and the unnecessary politicization of the issue; how many more incidents such as those at Singur and Bhatta-Parsaul do we need before it is too late for the SEZs to wind up?

Do we want the nation to become a hub of manufacturing or sacrifice manufacturing SEZs for the sake of politics? Now, is the time for the people concerned to make a hard choice? For, several years have already been wasted in realizing the dream of SEZs while the competing nations have moved far ahead.

The term Special Economic Zone (SEZ) created a buzz in the industry, promising thousands of job opportunities, and investments worth crores of rupees. The government saw SEZ as a tool to bridge the rural-urban divide by fostering industrial manufacturing ecosystem in the hinterland, as the country had already leapfrogged to the services economy from a predominantly agrarian economy.

However, these visionary targets now appear like mirage with one after the other SEZ projects failing miserably, with government alone taking the bulk of the blame.

The SEZ promotion, which started in an earnest way, meandered in different directions owing to a complexity of problems, including policy matters, lack of clarity among implementing agencies, and confusion among bankers and capital markets to fund them.

SEZs related to manufacturing have hardly taken off while 95 per cent of those approved are IT projects, specifically companies and real estate firms that wanted to take advantage of the tax benefits and incentives. Several firms have pumped in crores of rupees into manufacturing SEZ projects without any returns for the last few years. In essence, SEZs specific to industrial manufacturing have suffered, and there is an immediate need for course correction.

Land Acquisition & SEZ policy
The foremost challenge before an SEZ promoter is hassle-free land acquisition for the project. With the land acquisition process now taking political overtones in various states, the challenge has become even more difficult. That the country still pursues a nearly 150-year-old legislation to acquire lands is further aggravating the process.

The SEZ policy stipulates that the promoter directly acquires 70 per cent of the required land (predominantly agricultural as residential, commercial or forest land cannot be part of a SEZ) for the project while the government acquires the remaining 30 per cent. However, in a majority of the cases, problems with respect to the 30 per cent are plenty. While SEZs have taken possession of the 70 per cent of the land, the remaining 30 per cent is marred due to delays, compensation issues, and political interferences.

While the Centre cannot insist the State to expedite the process of land acquisition, the State is not bound by any law to acquire land within a stipulated time. This had led to cost overruns dramatically coupled with the rising real estate prices, making most of the projects financially unviable. Though the government intends to amend the Land Acquisition Act are in the next Parliament session, it is not clear whether the problems relating to SEZs are addressed.

I, Giri Devanur, as a serial technology entrepreneur, promoted Gandhi City, the country’s only approved R&D SEZ near Bangalore meant for pharmaceutical and life sciences; automotive and aviation; technology and communications, and agricultural sciences, in association with educational institutions. We have been trying very hard to overcome various challenges to realize the project. Our aim is to create an ecosystem to foster the right collaboration between the industry, institutions and research organizations. But like other SEZs, several hurdles are delaying what will be a premier SEZ.

The experience of Gandhi City SEZ is not an isolated case. Recently, 53 firms sought more time from the government to implement their projects. Their problems are common, as faced by Gandhi City SEZ.

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