M. Veerappa Moily

SEZs have to be integrated with the world of our peasants and artisans. They should serve as a bridge between rural and urban economies.

THE DEBATE over special economic zones (SEZs) has once again brought into focus the issue of food security. Congress president Sonia Gandhi, championing the cause of the `aam admi,' has warned that the poor should not be deserted in the flood of emerging SEZs and that the farmers' interests should always be kept at the heart of the process while setting them up.

The Seventh Congress Chief Ministers' conclave heralded a reality check. Kamal Nath, Union Commerce Minister, was quite prompt in responding that SEZs would not be allowed on prime agricultural land. He wrote to all Chief Ministers saying that SEZs would be permitted only on barren wasteland and, if necessary, single crop agriculture land should alone be acquired for SEZs. If, perforce, any double crop agriculture land has to be acquired to meet the minimum area requirement, it should not exceed 10 per cent of the total land required for the SEZ. Sharad Pawar, Union Agriculture Minister, projected a compensation policy to ensure adequate returns to the farmers giving up landholding rights for SEZ projects.

It is a matter of great concern that 50 per cent of India's cultivable land has disappeared since Independence. Since 650 million people contribute 23 per cent of the GDP from the agriculture sector, there is a need for a holistic approach to a land-use policy. Besides, there is an apprehension of a negative impact of the new ethos of SEZs on the culture of our rural communities. This could lead to socio-economic and political conflicts.

The United Progressive Alliance Government provided concrete shape to SEZs through the SEZs Act, 2005. SEZs are crucial for generating employment, boosting manufacturing, and allowing India to compete with countries such as China. There has been an unprecedented flood of SEZs. While the entire world has only 400 SEZs, and China only six, India has already crossed 200 approvals within a year, 48 of them in Maharashtra alone.

Investment so far in SEZs in India is around $700 million; within five years, this is expected to grow to $30 billion. Over five lakh additional jobs would be created within the SEZs and 15 lakh jobs outside, while the additional employment in the construction stage is expected to be 2.56 million mandays.

The success story of SEZs in China is tremendous. The first SEZ in the Asian region was set up in Shenzhen in 1979. At that time, Shenzhen was a small town with a population of about 20,000, with only 26 small factories with a total industrial output of less than $10,000. In 20 years, Shenzhen has evolved into a modern city of 3.5 million people with a per capita GDP of approximately $4,000. Over this period, the annual rate of GDP growth reached 32 per cent. It has become a centre for high technology industries, indeed a "new technology tiger."

We should learn from the success and failures or weaknesses that may exist of Chinese SEZs. India need not pursue the Chinese model but should evolve its own strategies. Indian SEZs have to be adapted to local conditions and integrated with the world of our peasants and artisans.

The SEZs should serve as a bridge between rural and urban economies. The concept of PURA (Provision of Urban Facilities in Rural Areas), which is how developed countries have holistically conceptualised their rural habitations, needs to be remembered at a time when India is entering an era of SEZs. The explosion in the economy envisaged through SEZs will have to be linked to integrated infrastructure in rural and urban areas. We should focus on comprehensive and integrated spatial planning within and beyond SEZs.

The Reserve Bank of India endorses the view that SEZs will be engines of growth but has unexpectedly classified them into the category of real estate development. A number of SEZs are like huge integrated townships. But smaller SEZs, largely in the IT sector, cannot be treated as commercial real estate. This classification would result in increasing the cost of borrowing and the RBI policy may serve as a great disincentive for SEZ start-ups.

Since 1991, with the forward-looking policy of the then Finance Minister and present Prime Minister, Manmohan Singh, the country has been poised to face new challenges and opportunities in the 21st century. According to the latest report of the World Economic Forum 2006-07, India has moved up from 45 last year to 43 now in a survey that covers 125 countries. But weakness in the social infrastructure of educational opportunities and poor quality physical infrastructure reduce the scope of a more equitable distribution of the benefits of India's 8 per cent plus growth rate.

Ultimately, peasants must be taken as stakeholders in the creation of SEZs. Organisations such as the Confederation of Indian Industry (CII) should think of a partnership between farmers, Government, and industry in a consortium approach. Innovative ideas must be encouraged, like offering of 15 per cent share to the peasants whose lands are taken over, immediately paying market value for acquired land and reserving a portion of the land to enable peasants to enjoy the fruits of appreciation of land price. We cannot forget the fact that farmers are a vulnerable section of society and should not become victims of the development process.

Indeed, in this process, agriculture and food security must get topmost priority. And yet, the hysteria over accusations of land grabbing must come to a halt. The message of Ms. Sonia Gandhi from Nainital requires that we conceptualise an ideal SEZ while not pressing the panic button.

Ms. Gandhi has motivated the entire nation to revisit the issue; the debate should ultimately result not only in high growth but also in upholding the interests of farmers and farm labour.

(The writer is Chairman, Administrative Reforms Commission, New Delhi.)