Punjab Passes New SEZ Bill (2009)

15 July 2009

With the SAD-BJP government clearing the much-awaited Punjab Special Economic Zones Bill, 2009, on Saturday, the decks have been cleared for developers to give a major boost to the development of the SEZ’s in the state.

As per the norms laid down in the policy, the requirement of areas for setting up SEZs in case of a multi product SEZ is 1,000 hectare, product-specific 100 hectare, IT-specific 10 hectare and warehousing 40 hectare. Speaking about the policy, state industries & commerce minister Manoranjan Kalia said due to paucity of land and high cost in the state, the government has asked the Centre for relaxation in the aforementioned norms and has also sought permission for development of SEZs as per viability of the project, to be determined by the developer.

Although the new industrial policy is yet to get the Cabinet’s approval, Punjab has now become the 6th state in the country after Haryana, Gujarat,West Bengal, Maharashtra and Madhya Pradesh to enact the SEZ Act.

The Punjab Act is little different from the SEZ Acts in other states, as it provides exemption from payment of any tax, duty, fee, cess or any other levy, whereas the Acts of Gujarat and Maharashtra specify exemption from sales tax, VAT, motor spirit tax, luxury tax, entertainment tax, purchase tax and other state taxes. These exemptions under Punjab Act will be on export or import of goods in SEZ, inter-unit transaction in SEZ, movement of goods in SEZ for value addition and on any service to SEZ developer or unit. All SEZ units will also be given public utility status. Moreover, the Punjab Act will provide exemption from stamp duty, registration fee and social security cess on purchase of land for SEZ and on first transfer or lease of immovable property within SEZ for industrial, commercial or residential purposes. The allocation and transfer of land within the SEZ can be done only by way of sale or lease as per the Punjab Act.

While referring to the over all SEZ scenario, Mr Kalia told ET that the Centre has given formal approvals to 578 projects in the country, out of which seven are from Punjab. Among the 322 notified SEZs, two are in Mohali — QuarkCity India for IT industry and Ranbaxy Laboratories SEZ in the pharma sector.

The total investment envisaged in the SEZs projects on all India basis comes to Rs 1,08,903 crore while the 18 projects to come up in Punjab would entail an investment of Rs 10,182 crore. “QuarkCity would cover an area of 13.75 hectare with a proposed investment of Rs 500 crore and give employment to some 27,500 people, whereas the Ranbaxy Labs SEZ would cover 32 hectare with an investment of Rs 265 crore,” said Mr Kalia.

In order to make the clearance of projects more convenient and hassle free, the state government has made a single-tier approval system instead of two-tier process. A project approval committee headed by the chief secretary, along with administrative secretaries concerned will look after all the SEZ proposals in Punjab. The committee will give in-principle approval, if land is not in possession of the developer and will grant final approval after land possession. After approval by the committee, the proposal will be sent to the Centre. The SEZ Act also provides permission for generation of electricity in or outside SEZ for consumption of units in SEZ, whereas in other states, generation of electricity is allowed only within SEZ. There will be no electricity duty on generation, transmission, distribution and consumption of electricity within SEZ. The state government will also notify the SEZ after approval by the Centre. The SEZ developer will prepare the development plan of SEZ in accordance with the development plan or master plan of the area, where SEZ is to be located.

Mr Kalia further said that the Act enables the SEZ developer to demarcate the sites for industrial, commercial, residential and other purposes in SEZ and also let them free to fix the rates for transfer of land/building within the SEZ to the units. The Act allows the developer to maintain the SEZ and also empowers them to levy charges for maintenance. However, the developer will have to pay the charges to local authority in case its services are utilised. SS Channy, industries & commerce secretary, said that with the implementation of Punjab SEZ Act, the road is clear for proposed 18 SEZs to set up their ventures in the state. This will give boost to rapid industrialisation and will also attract more SEZs in Punjab. He pointed out that Punjab Industrial Facilitation Act, 2005, providing single-window clearance in a time bound manner with the provision of deemed clearance if approval is not granted in the notified time schedule, will also be applicable in the SEZs.

Large SEZs unviable

The Punjab government’s decision to not acquire land for SEZs has sealed the fate of multi-product SEZs in the state which require at least 1,000 hectares, reports Parshant Krar from Chandigarh. The mega size multi product SEZs would remain elusive in Punjab due to the lack of compulsory acquisition of land even though the state government has offered unmatchable list of concessions in the SEZ Act. The policy and high cost of land have affected the land acquisition for proposed product-specific SEZs that are allowed only on 100 hectares. The multi product SEZs mooted by DLF Universals at Amritsar and Ludhiana were stalled by company after the Amarinder Singh government decided against acquiring 1,218 acres of land for the SEZ in Amritsar due to stiff competition by farmers. Ruffled by the hurdles, DLF Universals dropped the plans in Amristar even though the company is believed to be still interested in setting up SEZ in Ludhiana. “There isn’t much land available in Punjab and the land requirement under the SEZ policy is not viable in Punjab,” industries and commerce minister Manoranjan Kalia said while detailing features of the newly formed Act. “Under the Act, the state government has no role to play in acquisition of land for SEZ projects,” the minister said.

Courtesy:- ET dt:- 13-07-09

Stalin Proposes Solution for Nationality Question

No, not that Stalin -- M.K. Stalin, Deputy Chief Minister of Tamil Nadu and likely successor to the current Chief Minister, Mr Karunanidhi. And the 'Nationality Question' in this case is not what to do with the Ukranians and others, but how to accommodate the specialized infrastructure and other needs of investors from a range of nations. The idea is to build country-specific SEZs for firms from particular nationalities.

Orders have been issued for the development of country-specific industrial parks for Japan, Korea, Finland, Germany and France. Each industrial park will be spread over 100 acres and will be developed by the State Industries Promotion Corp of Tamil Nadu (Sipcot)

This would allow the SEZs to cater to not only the sectoral focus of each country's investors, but also, presumably the requirements for social amenities (schools, shops, etc) tailored to each country's cultural background.

Whether such an approach will be perceived as parcelling out Indian territory to foreign entities, or whether it will meet with less resistance (because the new policy approach is also combined with an effort to ensure that the new SEZs are spread more widely across the state), remains to be seen.

Can Pressure from State Governments Bring About Changes to SEZ Policy Norms?

Which forms and sources of pressure are most effective in bringing about changes to existing rules framed pursuant to the Government of India's SEZ Act 2005? This is a question of considerable significance, but not one to which the answer is by any means obvious.

One view is that drivers of policy reform come from within the central bureaucracy -- where turf battles and competing policy priorities between agencies, departments, and other actors combine to produce (or not produce, as the case may be) changes to existing rules. Such claims can be couched in terms of the need for consistency across policy domains, or in order to close enforcement vacuums. For instance, whereas there are rules on sales to the Domestic Tariff Area (DTA), stock tranfers to the DTA are not covered, apparently -- and this, according to some analyses, is the kind of issue that must be subject to constant review. Revenue department officials in the Finance Ministry are a classic source of demands for reviewing the financial implications of various SEZ rules, particularly those that concern the interpretation of tax concessions granted in the Act. Moreover, in some cases gaps in the legislation become evident only once particular scenarios manifest themselves. For instance, the call by the Goa government to denotify SEZs that had earlier been notified met with the response from the Commerce Ministry in Delhi that there was no provision for denotification -- a policy vacuum that surely deserves filling.

A second view is that industry complaints -- about the unworkability in practice of existing rules -- are the key source of effective revision. Here there is a distinction between those reforms that are pushed by a particular firm, and those that are advanced through the lobbying efforts of a sectoral association or even one of the apex business chambers, which of course tend to have their own histories, policy orientations, and indeed sectoral biases. There is also the Export Promotion Council for EOUs and SEZs (EPC-EOU/SEZ), a body constitute by the GoI to resolve issues arising in both types of export-promotion entity. All of these channels can combine to press issues of especially widespread concern, and there are clear cases where the EPC-EOU/SEZ has been successful. The matters arising are often of seemingly minor importance, and mainly of technical interest, but the effects can be significant in terms of bottom-line impacts and the clarity and predictability of the policy regime.

Finally, state governments represent an key channel of influence. State governments play a major promotional and implementation role in the SEZ policy. They are not only in the front lines of dealing with popular resistance to the SEZ policy, but also an important avenue through which firms and business associations can make their voices heard, making the distinction between this level of influence and that exerted by industry (above) difficult to dis entangle.

What is clear thus far is that some states have particular kinds of policy concerns. A recent example comes from Punjab, where the high price of land is (according to the state government) a major constraint on the ability of the state to live up to its implementation potential with respect to SEZs. Eighteen SEZ projects are curently in the works in Punjab, but only two have been notified by the GoI thus far. The Punjab government has highlighted the scarcity and price of land as a key constraint, arguing that the rules on minimum size should be amended so that the business feasibility of a given project -- not its bureaucratic categorization (whether for warehousing, or sector-specific activity, or a multiproduct SEZ) -- should determine how large an area is considered sufficient.

Politics matters in this kind of lobbying, of course. Whether the chief minister of Punjab's voice will carry much weight in Delhi, given the current party-political configuration is an interesting point. If joined by other state governments from regions where the Congress or its allies are in power, it may be that the volume of this particular appeal will be amplified. In this connection, it will be interesting to see whether Railway Minister Mamata Baneree's campaign demand that the SEZ rules be reviewed and revised (especially, not surprisingly, with respect to land-acquisition issues) are acted on now that the Trinamool Congress is part of the ruling coalition.

A Blog for People Resisting the SEZ planned for Polepally, Andhra Pradesh

The case of the SEZ planned for Polepally in Andhra Pradesh is the subject of a blog, which includes (irregular) postings on recent events, reports from visiting civil society commissions, photos and videos about people's resistance. It is an interesting experiment to try to create a space where a local movement can keep supporters and the wider world informed and (potentially) engaged. It would be interesting to know if other SEZ resistance movements have similar blogs.

Reviving Two Lapsed Bills: Will the Left's Reduced Influence Affect the Quality of Land Acquisition and Resettlement & Rehabilitation Bills?

Priya Parker and Sarita Vanka, of the PRS Legislative Research initiative, produced a very good brief on the Land Acquisition Act Amendment Bill 2007. The article goes into issues such as the setting up of a disputes authority, the recommendations of the Parliamentary Committee established to examine the question of SEZs and Land, and contains a matrix showing how 'public purpose' (with respect to eminent domain/forced acquisition) has been defined in other countries.

This Bill lapsed with the dissolving of the last (2004-09) Lok Sabha, but is to be pursued by the current government. The Left parties that supported the 2004-09 UPA government claimed to have influenced this Bill for the better, stating that Congress and other centrist parties working on their own would not have created any nearly as progressive (not that the Bill itself is a model piece of legislation in any case). It will therefore be interesting to see whether the current (non-Left-reliant) UPA government, post May 2009, will promote an improved, or possibly inferior, Bill.

Either way, the Bill will need to be seen in the context of whatever legislation is introduced to substitute for the similarly stalled/lapsed Resettlement and Rehabilitation Bill which was also the the subject of analysis. The Left parties (the CPI-M in particular) also claimed to have had a positive influence on successive drafts of that legislation -- just as it claimed also to have played a major role in getting the National Rural Employment Guarantee Act 200 passed (an inflated claim, at best). Again, time will tell whether the new dispensation, in which the UPA government is no longer reliant on Left party support for its parliamentary majoriy, leads to better or worse (or just the same) legislation.

Indeed, lapsed legislation that is subsequently revived provides a potentially revealing window on the effect of party/parliamentary reconfiguration on the substance of policy change.

India's SEZ a Focus of International Campaign Against Forced Displacement

A special meeting of the International League of Peoples' Struggle (ILPS) was held in Hong Kong in June 2008 to launch the International Campaign against Forced Displacement and Special Economic Zones. While allegedly 'international,', India-based events and organizations -- mainly related to SEZs -- seem to be the primary (if not exclusive) focus of this campaign. The campaign's website outlines the purposes and structure of this initiative. The overall purpose of ILPS support is 'to build up organised resistance to imperialism and reaction on an international scale.' Fact-finding reports and background papers from Visthpan Virodhi Jan Vikas Andolan can be found on the India section of the site. Reports cover Nandigram, Jharkhand, and the POSCO project in Orissa, among others.