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A Sezpool Of Factors

Once leading the SEZ revolution, now Maharashtra is backing out or going slow

A Sezpool Of Factors
Atul Loke
A Sezpool Of Factors
outlookindia.com
-0001-11-30T00:00:00+0553

Roadblocks Ahead

  • The MIDC has been winding up its plans to set up SEZs
  • As many as 28 SEZ proposals, in the government and private sector, were withdrawn or projects denotified in the last six months
  • Farmer protests, land acquisition problems, economic downturn and non-feasible tax regimes are cited as reasons for developers backing out. CM Prithviraj Chavan too exercises great caution.

***

Mandated to create industrial opportunities in the state, the MIDC or Maharashtra Industrial Development Corporation has been doing quite the opposite of late—winding up its own plans to set up Special Economic Zones (SEZs) that promised thousands of jobs and crores of export earnings. In May, it applied to withdraw proposals for SEZs in the textile sector in Yavatmal and Solapur, as well as an SEZ in the leather sector in Osmanabad. Earlier, it had approached the central Board of Approvals to drop proposals for information technology-based SEZs in Thane, Jalna, Akola districts, and power SEZs in Raigad and Chandrapur districts.

Do not fault the MIDC though. Private developers too have sought permission to denotify their approved SEZ projects, mostly in the IT and power sectors. Half-a-dozen had sent in withdrawal applications late last year while a few other sought extensions to kick off their approved SEZs, triggering anxiety that more withdrawal proposals could be in the offing. In the last six months alone, as many as 28 SEZ proposals have been withdrawn or projects denotified, making it the largest ever setback in SEZ-led industrial development in the state. It has set alarm bells ringing in the state headquarters.

Maharashtra led the SEZ party a decade ago. At the last count, it had the highest number for any state—148 of the 500-odd proposals approved all over the country. “This is certainly not good news,” remarks Sachin Ahir, minister of state for industries. “Most of these SEZs were dependent on exports, and promoters were sceptical after the economic slowdown.” This is a convenient half-truth; Ahir left out the inconvenient, and often unacknowledged, reason—unsuccessful land acquisition fuelled by fierce local agitations.

The SEZ withdrawals couldn’t have been more ill-timed for chief minister Prithviraj Chavan. Since he took over the reins of the state last November, he has displayed extreme caution—perhaps wary after the Adarsh Housing scam—while dealing with the business of approving industry, investment and real estate proposals. It earned him, and the state government, the reputation of being investor-unfriendly. Chavan’s deliberation and delay in clearing files reached a point where a few senior ministers of his cabinet, though mainly from alliance partner Nationalist Congress Party, submitted a list of uncleared files after the weekly cabinet meeting. Those associated with industry and commerce wondered how this would impact Maharashtra’s reputation as a destination for industry and FDI inflow. “It looked like the CM was scared of taking decisions,” says a senior minister.

An official from the CM’s office contradicts this, saying, “Records show that the CM received some 5,000-5,500 files in the six months he has been in command; of these 4,500 have been cleared, most of them on the same day or within a couple of days.” And while he may have been cautious on files pertaining to SEZs, studying issues before putting his signature, he has not hesitated in taking decisions on files relating to other policy matters.

Among the decisions taken was one that would impact SEZ proposals across the state. In mid-February, the government denotified the land acquisition process for the mother of all SEZs—the 10,000-hectare MahaMumbai SEZ promoted by RIL chairman Mukesh Ambani and associate Anand Jain across 83 villages south of Mumbai-Navi Mumbai. Barely 10 per cent of the required land had been acquired in the last five years; the government resolution meant no more land would be acquired by the government, though private developers could continue if they wished, and also land already acquired the old way would be returned to farmers. This was prompted, in no small measure, by the country’s first-ever local referendum on an SEZ in September 2008. The referendum results were not made public, but government sources disclose that over 90 per cent villagers had voted against the SEZ.

Says activist Ulka Mahajan, one of those who led the resistance movement, “The SEZ idea was imposed from the top. It didn’t take into account what farmers wanted, how it would impact their livelihoods once they were deprived of land and so on. Besides, SEZ became a synonym for pure land grab. Wouldn’t it spark off agitations?” All eyes are on Ambani and Jain now to see how they pull off the project under these circumstances.

The resistance in Konkan and Pune against SEZs also spread to far-flung interior areas in Vidarbha and Marathwada regions. Farmers in Chandrapur district reportedly refused to sell land for an MIDC-proposed SEZ; MIDC withdrew it. In Raigad, IndiaBulls could acquire only 10 per cent of the 5,000 ha required for its multi-product SEZ and sought an extension recently. Videocon Realty faced stiff farmer resistance in Adgaon, Aurangabad, and was denied further extension for its IT-based SEZ near Pune when it failed to acquire land. Bharat Forge has had problems acquiring land for a multi-product SEZ spread over 1,400 ha. Mahindra’s multi-product SEZ ran into similar land acquisition delays for its 1,000-ha SEZ in Karla due to agitating farmers.

“The government can’t risk being seen as anti-farmer by forcibly acquiring land for industry or SEZs,” a state cabinet minister says. “The Jaitapur agitation is already a hot potato. We have political considerations too.” While unsuccessful land acquisition is an important factor in the decline in enthusiasm for SEZs, promoters applying for withdrawals and extensions also cite the economic downturn and non-feasible tax regimes as reasons.

Maharashtra, like a few other states, had offered highly attractive incentives to SEZ developers in its 2005 policy; many of these were to be formalised as the state SEZ Act last year. The draft bill too had proposed that an SEZ would be treated as a township, outside the purview of most laws and with near-complete control for developer. The bill could not be passed by the state legislature.

Faced by the alarming rate of SEZ project withdrawals, the government now hopes to make good some loss by formulating a new industrial policy which will address some of the concerns of the SEZs. It may be too early to write off SEZs; after all, there are worthy examples of functioning SEZs too, but there is no doubt that, for now, the forward march has been halted.

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