The Ministry of Commerce and Industry has requested the states to jointly work with the developers of Special Economic Zones (SEZ) to ensure optimal utilisation of vacant land in notified SEZs within next two years. This request has come at a time when the Supreme Court is hearing a plea for returning the vacant land in SEZs to farmers from whom it has been acquired.
On January 9 last year, the Supreme Court had issued a notice to the Ministry of Commerce and Industry and seven state governments, based on a public interest litigation (PIL), which petitioned that unused land acquired for Special Economic Zones (SEZ) should be returned to farmers and a court-monitored CBI probe should be conducted into the alleged flouting of rules by beneficiary companies. The Supreme Court is yet to pronounce its judgment on this issue.
The seven states who had received notices are Telangana, Andhra Pradesh, Maharashtra, Karnataka, Tamil Nadu, West Bengal and Punjab. According to a senior government official, a few of the states are yet to submit their replies to the apex court. Minister of State for Commerce and Industry C R Chaudhary told the Rajya Sabha on February 7, 2018, that “52 per cent of the notified SEZ land is presently vacant”. As on September 7, 2017, there are 372 notified SEZs in India with a total area of 44,625 hectares.
On December 22, 2017, the officials of Ministry of Commerce met the officials of various state governments in New Delhi to discuss the formulation of export strategy. At this meeting, Sunil Kumar, additional secretary, Ministry of Commerce, gave a presentation on the issue of SEZs. His presentation stated that the way forward is to “work jointly with SEZ developers to ensure optimal utilisation of vacant land in notified SEZs within next two years”. He added that total 23,779 hectares of land is lying vacant at seven major SEZs.
The issue of vacant land in SEZs was also discussed in the internal meetings of Union commerce ministry in the past. On October 7, the SEZ division of the ministry gave a presentation to Chaudhary and Suresh Prabhu, Minister of Commerce and Industry. This presentation listed the challenges faced by the SEZs and the possible solutions for them. The first challenge mentioned in the presentation is: “Unutilised land (more than 25,000 hectares) in SEZs. Lack of flexibility to utilise land in SEZs for different sectors.” The solution to this challenge, according to the presentation, is: “Optimal utilisation of vacant land in SEZ. Allowing flexibility of land use and removing sector-specific constraints.”
Last year, a question was asked to Nirmala Sitharaman, the then Union commerce minister, in Rajya Sabha on whether “it is a fact that misuse of SEZ lands is rampant in the country” and whether “any estimation has been made up to what extent the (land of) SEZs are being misused”. Sitharaman have a written reply to Rajya Sabha on April 12, 2017: “Land is a state subject. The Board of Approval approves a proposal for establishment of a SEZ subject to the terms and conditions prescribed in the SEZ Act and Rules. The approval is granted only after the concerned state government recommends the setting up of the SEZ. The implementation of SEZ projects by developers is monitored by the development commissioners as per SEZ Act and Rules on a regular basis. No rampant misuse of SEZ lands has been reported.”
Prabhu was present at the December 22 meeting with state government officials. At this meeting, Kumar stated in his presentation that “due diligence” must be exercised before recommending cases for de-notification of SEZs. He added that states must ensure that “de-notified lands are used for the same purpose for which they were acquired”. As on September 7, 2017, total 53 SEZs, which have a total area of 5079 hectares, have been de-notified in India. Kumar mentioned in his presentation some of the states – including Gujarat, Haryana, Andhra Pradesh, Maharashtra and Odisha — which have allowed large scale de-notification of SEZs.
“Setting up of SEZs is a long term process and delay in commencement of commercial operations of the SEZs may be due to various reasons which include time taken in getting approvals from statutory/state government bodies, adverse business climate due to changed global economic situation, changes in fiscal incentives, etc,” Chaudhary stated in his written reply to the Rajya Sabha on February 7.
Kumar, in his December 22 presentation, stated that the state governments should set up an effective single window mechanism for speedy clearances. He stated that currently, the following clearances are required from the state government agencies: “building plan or layout plan of SEZs; environmental clearance certificate; approval from irrigation department for digging or setting up a bore well; no-objection certificate from fire department; registration under Factory Act, Small Scale Industries, Shops and Commercial Establishment Act in case of service units etc; registration under Employees’ State Insurance Act; registration under Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; Power Connection and Water Connection; provision of road connectivity of SEZ to state highway or national highway.”
Kumar stated that only six states have enacted state SEZ Act and just five have framed their SEZ policy. He added that while there is no uniform practice for various clearances by states for establishing SEZ units, Karnataka and Gujarat have a relatively effective single window clearance system.
Initially, the SEZs were established in states with coastal areas due to ease of access to ports from where the goods can be easily exported. “However, presently SEZs, which are exporting services, are being established in hinterland also. SEZs for more services can also be set up in hinterland. SEZ units for services could also benefit the states in terms of providing ‘quality’ employment to skilled work force,” Kumar stated in his presentation.
SEZ is an enclave area that is deemed to be a territory outside the customs territory of India for its authorised operations. The Centre’s Foreign Trade Policy 2004-2009 stated: “SEZs are growth engines that can boost manufacturing, augment exports and generate employment. The private sector has been actively associated with the development of SEZs. The SEZs require special fiscal and regulatory regime in order to impart a hassle-free operational regime encompassing the state-of-the-art infrastructure and support services.”