Coming under some incessant pressure from its crucial Left ally, the Congress-led UPA Government has decided to review the SEZ Act and Rules in January 2007.
This was communicated to the Left bloc at a Group of Ministers (GoM) meeting, attended by CPI(M)'s Sitaram Yechury, last week. In the stormy GoM meet, acute differences between the Government and the Left cropped up once again, with CPI(M) dismissing the former's arguments for not agreeing to amend the Act.
In a subsequent editorial in People's Democratic, CPI(M) not only argued for the need to set national guidelines on land acquisition for industrialisation, it also propagated that the Singur model in West Bengal was "one of the best and hence, needs to emulated elsewhere."
In November, the Government had handed a note to the Left, stoutly defending the existing SEZ policy. "The Department of Commerce would therefore recommend that no amendments to the SEZ Act be considered for at least 2 years," the Government had said after arguing for not amending the Act.
CPI(M) has now replied, saying that the position of the Government is untenable for several reasons, including the proliferation of SEZs, which "has been the basic flaw in the approach of the Government."
"It is the proliferation of SEZ proposals and their en masse approvals granted by the government within a matter of a few months which has quite naturally given rise to a big public debate," the editorial noted, adding that most approvals were concentrated in Andhra Pradesh, Maharashtra and Karnataka.
The Government initially put a cap on the total number of SEZ, but lifted it later saying that it had been flooded with proposals. The Left argued that the flood was triggered because remaining states did not want all the Zones be cornered by a few.
The Left further argued that the Act was "discredited" by the proliferation which could lead to "massive displacement, enormous loss of tax revenue and gross misuse (of land) for real estate purposes."
The Left further said the disproportionately large number of IT SEZs – 148 out of 237 – is an attempt by the companies to benefit from the 10-year tax rebate, provided in the SEZ Act. "Thus a situation has been created for the perpetuation of tax breaks for one of the most profitable sectors of the economy. Coming in a context where NCPM (national common minimum programmeprogramme) mandated welfare schemes are not being introduced citing resource constraints, such perpetuation of tax breaks is not justifiable," the editorial noted.