96.6 pc SEZ land lying idle in Odisha: CAG

Bhubaneswar: Even as the Modi government preparing to take its battle for a new land acquisition law to next phase, a report of the Comptroller and Audit-General of India (CAG) reveals that a staggering 96.6 per cent of the total land allotted for setting up of various ‘special economic zones’ (SEZs) across the State has not yet been put to use.

The official auditor of the Central government analysed a representative sample of 187 developers and 574 SEZ units spread across 13 States – Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal – and the Union territory of Chandigarh for the period 2012-13.

The CAG report shows that there is strong evidence that past acquisitions of land for development have gone awry. That should serve as a warning for prime minister Narendra Modi against going all out to get the controversial Bill passed. The government argues that India needs to fast-track the Bill so that land can be made available for industries to generate employment and power economic growth.

But look at the SEZs telling a different story. They were created, with motives similar to those expressed by the government, under the Special Economic Zone Act-2000. This was enacted in 2005 to make SEZs growth-engines of the economy. An SEZ is a specifically delineated duty-free enclave, deemed foreign territory for the purpose of trade operations, duties and tariffs.

The key findings the CAG report reveals are:

No more than 62 per cent of land – much of it acquired from farmers – for SEZs has been used for its intended purpose: to boost manufacturing, exports and jobs.
Most SEZs are populated with information technology (IT) and IT-related companies while manufacturing accounts for only 9 per cent of all SEZ projects.
SEZs fell short of their job, investment and exports targets by wide margins. For instance, they generated less than 8 percent of the jobs expected.

The previous Congress-led UPA government cleared 576 SEZs covering 60,375 hectare of land, of which 392 SEZs covering 45,636 hectare were notified (approved land) till March 2014. But on the use of land, of the 392 notified zones, only 152 are operational, accounting for 28,489 hectare.

The land allotted to the remaining 424 SEZs (31,886 hectare) has not been put to use (52.8% of total approved SEZs), although approvals and notifications in 54 cases date back to 2006. A look at some States and the percentage of idle land, based on the audit report: Odisha 96.6 per cent, West Bengal 96.3, Maharashtra 70.1, Karnataka 56.7, Tamil Nadu 49, Andhra Pradesh 48.3 and Gujarat 47.5 per cent.

In 30 SEZs (1,858 hectare) in Andhra Pradesh, Maharashtra, Odisha and Gujarat, developers made no investments; the land is idle and has been in their custody for between two and seven years.

This apart, jobs, investment and exports also fell short of targets by a wide margin, the audit report found.

Employment fell short by 93 per cent: SEZs generated 0.2 million jobs instead of 3.9 million
Investments fell short by 59 per cent: SEZs were to attract investments of Rs 1,94,662.5 crore and no more than Rs 80,176.3 crore was invested
Exports fell short by 74 per cent SEZs exported goods valued at Rs 1,00,579.7 crore instead of the projected Rs 3,95,547.4 crore

Manufacturing was supposed to be a key focus of SEZs, but that too did not happen. Of the 625 approved projects, only 152 (24 per cent) were operational. In IT/ITES, out of 354 notified projects, 91 were operational, in multi-product zones, out of 60 approved, 13 per cent operations. It was 31 and a mere one for biotech, 26 and nine for pharma and 153 and 38 for others.

Almost 56 per cent of the approved projects are from the IT sector, while only 9 per cent are in the multi-sector, manufacturing business. While 59 per cent of the operational SEZs are in the IT sector, only 8.5 per cent are from the manufacturing sector.

“The large number of IT/ITES SEZs coincides with the expiry of the 10-year income-tax break period allowed to IT sector under Software Technology Park Scheme which gave a fillip to the sector. Several units closed and shifted to SEZs to avail of the benefits offered in SEZ area,” the report said.

Of the 392 notified SEZs in India, 301 (77 per cent) are located in the States regarded to be developed. Andhra Pradesh (now bifurcated) has 78 units, followed by Maharashtra (65), Tamil Nadu (53), Karnataka (40), Haryana (35) and Gujarat (30).

A key reason for the uneven spread of the SEZs across the States, according to the audit report, was the absence of single-window clearance in many States. This led to approval delays. Moreover, the SEZs are mainly located close to urban areas. For example, of 36 operational SEZs in undivided Andhra Pradesh, 20 were close to Hyderabad.

The report, in conclusion, said: “The SEZ policy and procedures need to be integrated with the sectoral and State policies with the involvement of the unique advantageous points therein.”

(In arrangement with IndiaSpend.org, with which author Prachi Salve is a policy analyst. The views expressed are her personal.)