SEZs have become the most talked about in the Indian economic circles, its lack of clear policy has provoked strong opposition from leftist political parties, activists, farmers groups, economists and urban planners. However the government of India is moving ahead with the programme to set up special economic zones (SEZs) to trigger a manufacturing wave in the country. Amid evidence of an undercurrent of rural hostility to giant industrial zones coming up on agricultural land, Posco, a South Korean steel company, was last week permitted to set up a 1,600ha SEZ in mineral-rich Orissa state.

Posco plans to invest 530 billion rupees (S$18 billion) in the zone. Some 30 other SEZ applications have now won the backing of the Board of Approvals, taking the total number of SEZ proposals cleared to 181. The government sees boosting manufacturing as crucial to balancing the country’s economic growth. Untypical for a developing country, India’s services sector contributes about 54 per cent of GDP. Economists say a China-style push to manufacturing is needed to provide jobs for the unemployed and those migrating from farm work.

But SEZs also have raised some controversy in India. Finance Minister P. Chidambaram has warned of massive revenue losses because of the tax breaks accorded to companies in the zones. With SEZ being under the charge of the Commerce Ministry, there has been a turf war of sorts between him and Commerce Minister Kamal Nath. As well, several political leaders are uncomfortable about pushing farmers off land in a nation where six in 10 people depend on agriculture for a living. Mrs. Gandhi, who chairs the ruling coalition, said: ‘Prime agricultural land should not be diverted to non- agricultural uses and, even if this is resorted to for unavoidable reasons, this should not jeopardize agricultural prospects.’

Capping months of debate on the pros and cons of developing Special Economic Zones (SEZs), the commerce ministry has issued a caveat that prime agricultural land should not be used for business purposes India’s commerce ministry has asked the chief ministers of all Indian states to ensure that prime agricultural land was not allotted to business houses for development as Special Economic Zones (SEZ), and that in any event agricultural land must not exceed 10% of the land allotted.

The commerce ministry’s clarification, which also underlines that farmers be adequately compensated for their land and rehabilitated fairly, comes in the face of mounting concern that diverting agricultural land for the development of business interests, that too at government rates, was riding roughshod over the interests of India’s farmers. This has come as a reality check for state governments that have been aggressively pushing their SEZ proposals for clearance from the Centre. So far, the Indian government has handed out over 150 licenses to set up SEZs; another 200 applicants are on the waiting list. However, the chief minister of Andhra Pradesh — the biggest beneficiary of SEZs so far has categorically ruled out any review of SEZs already cleared for the state.

It said that SEZs should serve as a bridge between rural and urban economies. The concept of PURA (Provision of Urban Facilities in Rural Areas), which is how developed countries have holistically conceptualized their rural habitations, needs to be remembered at a time when India is entering an era of SEZs. The explosion in the economy envisaged through SEZs will have to be linked to integrated infrastructure in rural and urban areas. India should focus on comprehensive and integrated spatial planning within and beyond SEZs. This however is a dream come true here.