Staff Reporter | 12 May, 2008
B. Vijayan, Development Commissioner, Madras Export Processing Zone-SEZ has called for reservation of space in SEZs for small and medium enterprises (SMEs) as it would make development more inclusive.

Today, SMEs feel that the high rental costs in these SEZs prevent them from setting up their facilities and thereby availing of the tax benefits.

Small companies are forced to move to SEZs since the STPI concessions for IT parks are available till 2010. He wanted agencies such as SIPCOT and ELCOT to reserve space only for SMEs and said a policy to this effect should be framed. Unless the Government addresses this important issue, small and medium enterprises would be at a great disadvantage.

Investment in special economic zones (SEZs) across the country is likely to touch around Rs. 2.84 lakh crore by December 2009 and these new SEZs are likely to create around 21 lakh jobs. Exports are likely to touch around Rs. 1 lakh crore.

Though these figures look magical, they are what the Government predicted. Given the current economic crisis in the US, volatility in the currency and capital market and inflationary pressure on the prices and with most of these SEZs in pre-natal stage, the big question is will the government be able to achieve these targets?

Of course, during 2006-07 exports from SEZs had increased by 93 percent to Rs. 67,300 crore from Rs. 37,787 crore. Will this trend continue given the fact that maximum approvals (283 out of 453) of SEZs have gone to IT/ITeS/electronic hardware/semi conductor manufacturers?

Apart from this, there are 135 notified SEZs for the same sector and 12 are in-principle, waiting for approval.

Most of these SEZs were given approval since March 2006, they are yet to develop their infrastructure and start manufacturing. When the Centre is trying to draw a parallel with China for SEZ concept, one should not forget that in China the manufacturing sector occupies over 20 percent of the SEZs unlike in India. The growth in China was gradual unlike the mushroom growth here. It has so far set up only five to six SEZs which are maintained by the Government. The most important fact is that China had set up these SEZs closer to its ports, B. Vijayan said.

One of the main bottlenecks for development of SEZs in India is the acquisition and purchase of land coupled with Land Ceiling Act. There is no stamp duty exemption for the developer and resale of buildings is not permitted and there is a lack of development of external infrastructure. Generally, to develop any external infrastructure near an SEZ, the contributions from the Centre, State and corporates are equal. However, there seems to be less coordination among these agencies, he adds.

He said there was a need to put in place a governance structure for industrial townships. For example, there will be seven SEZs in Sriperumbudur, which will employ 1.5 lakh people in a 7-km radius. To avoid transportation hassles, there is a need for townships near the workplace.
Town planning

The former President of the National Association of Software and Service Companies (Nasscom), Kiran Karnik, has stated that city planners need to step up efforts to address this from a long-term perspective rather than a near-term solution. The solution does not lie in focussing attention on Tier-II or Tier-III cities but better town planning and expansion of the cities, he said.

In an interactive session conducted by Nasscom-ELCOT Chennai here recently, Vijayan wanted a single window clearance in all sense. "Is it single or multiple windows clearance," is the question often raised by the investors. The Government should provide the entire expertise to a single department and not create multiple windows under the single window system. There has to be resource building within the office of the development commissioner, he said.

He added, that of the total approved SEZs, southern region accounted for 44 percent, West 31 percent, North 19 percent and the East accounted for the balance six percent.

In the south 182 SEZs are formally approved of which 72 SEZs are in Andhra Pradesh, 59 in Tamil Nadu and 41 in Karnataka.