Govt may tweak but won't trash under-fire SEZ scheme

The Special Economic Zone (SEZ) scheme has been a poor draw for investments and must be scrapped, says the Centre for Monitoring Indian Economy. However, Commerce and Industry Minister Anand Sharma says he is willing to tweak the scheme, not trash it. CNBC-TV18's Economic Policy Editor Vivian Fernandes reports.

Also read: SC to hear petitions challenging the SEZ Act: An analysis

Special economic zones have raised interest from industry leaders like Mukesh Ambani and also a lot of dust over land acquisition.

The pain inflicted on farmers and the deprivation of revenue because of tax exemptions was sought to be justified by the greater good to the nation that would result from the creation of improved industrial parks, enhanced manufacturing activity, increased exports, higher economic growth and more jobs.

However, Mahesh Vyas of the Centre for Monitoring Indian Economy wrote in the Business Standard that high interest in SEZs has not been matched by actual investment. Till June this year, of Rs 49,000 crore invested in 42 commissioned SEZs, half is accounted for by Reliance's Jamnagar Refinery which wants to change status and sell in the domestic market.  Outstanding investments of Rs 630,000 crore as of March, are just 7% of the country's total, and not more than a third might materialise. But his suggestion that the scheme be scapped has not found favour in Udyog Bhavan.

Anand Sharma, Commerce and Industry Minister, said, "We will keep on evaluating. What can be done to further improve? In government, we do not allow policies to be frozen with a time cap."

Sharma cites exports and employment numbers to justify the scheme, but if the revenue foregone and the cost incurred were ploughed into improving infrastructure in general, there might be a better payback.

SEZs have attracted more controversy than investment. Even if they are not scrapped, the scheme might lose much of its charm if the government stops acquiring land.