The Hindu Business Line : CII comes out in support of establishing SEZs

Rooting for growth
Lack of infrastructure adds to cost and delay
Govt intervention in creating infrastructure is needed
Centre, States must address issues of misuse

Chennai , Sept. 29

The CII is all for the concept of special economic zone (SEZ), which it believes is an instrument for export-led growth and employment growth, according to Mr R. Seshasayee, President.

In CII's first formal reaction on the issue, Mr Seshasayee, who is also Managing Director of Ashok Leyland, said: "SEZs bridge a gap between the models of growth in India and China."

In India, growth has been from domestic demand and the service sector rather than from manufacturing and export-led growth.

"The portfolio of growth should have domestic-led, service-led growth. But there is also need for a component of export-led growth, so SEZs are needed."

Also, manufacturing in India suffers as compared to other countries because of the "burden of embedded taxation" which makes it less competitive.

Lack of infrastructure also adds to cost and delay and affects quality.

Procedural issues reduce efficiency of manufacturing, he added.

SEZs as a concept address "bang-on" what should be done. The CII "strongly welcomes" the move, Mr Seshasayee said.

Industrial infrastructure does not get created on its own, he added.

Government intervention - through incentives - in creating infrastructure is the correct answer.

A lure is also needed for industries within the area and not just the developers because the investor needs critical demand for infrastructure utilisation.

Conceptually, the SEZ guidelines on 10-15 per cent area for industry and 35-40 per cent for residences reasonably reflect the need for space within townships for various uses.

Existing cities cannot bear the burden. There is a need to increase urbanisation.

CII is talking of 500 mini-industrial areas with support for industries, human settlement and integrated facilities, Mr Seshasayee said.

A caveat in this regard is that if the objective is to be export-led growth, then the space in SEZ should be predominantly for manufacturing and exports rather than just IT companies.

Without manufacturing there is not going to be incremental growth in revenue or jobs, Mr Seshasayee said.

State Governments can correct distortions in this regard.

He added that there could be problems in implementation.

SEZ in implementation can be an infrastructure project or a land grab. The potential for misuse needs to be addressed through vigilance by the Centre and the State Government.

That character should be the key to bank support for the project, he said.

In the long term, an autonomous authority for SEZs may also be considered, he said.

CII also supports a model where 10-15 per cent of land acquired is set aside for increase in value due to development, which can be shared with the owners.

Land acquisition should also take place close to market price, Mr Seshasayee said.

It must be recognised that land value increases only with development, he added.

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