Friday, January 04, 2008

Opposing editorial analyses of the scrapping of SEZs in Goa

As we await further developments on the Goa Government’s decision to scrap SEZs in the state, two prominent dailies have issued contrasting editorials. Yesterday, the Hindu’s editorial team weighed in, speaking out in favour of the Goa government’s stance. The Hindu editorial views the decision as responding to the public protests in the state against SEZs, and advises the Central Government to “respect this democratic outcome and help the State government speedily resolve all remaining issues, especially the question of how land already allotted to private parties in the three notified SEZs will be recovered.”

In making its case, the Hindu editorial focuses on the following points:

A coastal State with an area of 3,700 square kilometres and a population of about 1.4 million, Goa has always been extremely sensitive to the impact of unrestrained economic development. The upsurge of public activism against the setting up of Special Economic Zones, which eventually forced the State government to announce the scrapping of all 15 such projects, is an impressive case in point. Early last year, a similar agitation coerced the government into calling for a re vision of the Goa Regional Plan 2011, a controversial document that opened up large swathes of land, including green belts and coastal stretches, for construction. The broad-based agitation against SEZs has demonstrated the power of popular protest in the State. Those opposed to the projects had questioned the propriety of the government acquiring large tracts of land and then selling them to promoters at low prices. There were also suspicions that some of the SEZs were real estate speculative plays, fronts for the entry of big construction companies.

The Express editorial, which is featured in today's issue, draws attention to the overall policy implications for SEZs in general, and urges the Central government to “stand firm in rejecting the decision” of the Goa Government. Here are the details it relies upon:

Of the 15 proposed SEZs three have already been notified by the Centre after the state government earlier recommended them. The other 12 SEZs too have been recommended by the state government but remain to be notified. However, the land has been formally allotted in the case of all the SEZs. In the case of SEZs already notified construction is under way and investments worth Rs 500 crore are in the pipeline. Equipment has already been imported at zero duty by one of the SEZs being set up by a well-known pharmaceutical company. The company also has other non-SEZ operations in Goa where the bulk of the people employed are locals. The Centre will have to decide whether it wants to generate more employment or let rent seekers have their way.

Addressing the legal issues involved, the Express editorial avers:

Legally, the state government just cannot cancel SEZs which have already been notified and where work has started. The courts may not allow that. However, since land use is a state subject, the Goa government will try to cancel the SEZs which have not been notified. Technically they can do so. It is here that the Centre must stand firm. Technical arguments will not help restore the credibility of the UPA if it gives in to pressure from the Goa Chief Minister Digambar Kamat.

The Express editorial ends by making a pitch for the “integrity of the process” of national policy-making:

The country has gone through a fairly robust debate on the feasibility of SEZs. Several modifications to policy have been made in the area of land acquisition. Even within the UPA it is now accepted by all that SEZs are indeed desirable to drive development. It is of paramount importance that India moves large sections of its population from low-yielding agriculture to industry within a democratic framework. That is precisely what the SEZ policy seeks to do. The UPA must do everything to maintain the integrity of this process.

In my view, these contrasting editorials do a decent job of representing the diverse policy issues involved. One can, however, quibble with particular arguments made by each editorial. The Hindu may be emphasizing ‘people power’ to the detriment of other factors, such as the problems involved when governments go back on policy decisions, thereby adversely affecting investors who have acted on such undertakings. The Hindu also ignores the messy political calculations involved, and its act of commending the current leaders, who were party to all the overruled decisions, seems a bit much. The Express editorial, on the other hand, makes the mistake of overemphasizing the “integrity” of the policy debate over SEZs. In particular, its claim that “the country has gone through a fairly robust debate” over SEZs seems particularly misplaced. When exactly did such a debate take place? Were all stakeholders party to such a debate, and how do we know that all the legal and policy implications were discussed?

These problems aside, the editorials do set up the policy dilemmas involved in debating SEZs reasonably well. Together, they point to the many challenges involved in crafting a balanced policy towards SEZs.

Update, 2 pm: In the comments section, Dilip provides links to two papers by Aradhna Aggarwal which provide very useful background context, facts and statistics, and analysis. I am providing links to those documents in the text of this post: those interested getting a deeper understanding of this issue will benefit from reading these two pieces. This is a shorter EPW piece, while this is a longer working paper under the institutional aegis of ICRIER.

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