The Indian commerce ministry has averted yet another confrontation between civil society and the State over Special Economic Zones (SEZs), and a face-off with the Goa government, by reversing its stand on the latter's decision to rid the state of SEZs

India's Commerce Minister Kamal Nath assured the government of Goa, on January 3, that the central government would not impose any Special Economic Zone (SEZ) on the state and is willing to review even those projects that have been notified, reversing the hardline stance taken by his commerce secretary a day earlier.

Sticking to his guns on the issue of scrapping all SEZs in Goa, even notified ones, the state's Chief Minister Digambar Kamat lobbied several union ministers, including Nath, and senior party leaders to press for endorsement of his government's decision.

A day after India's Commerce Secretary Gopal K Pillai virtually rejected the Goa government's decision saying that notified SEZs could not be scrapped, Nath said the Indian government could review all zones. He added: "The central government does not want to thrust upon any state SEZs which are not conducive."

When asked about the fate of the three SEZs already notified, Nath said: "There is absolute provision in the (SEZ) Act for everything."

Kamat later told reporters in New Delhi: "Goan people do not want SEZs. SEZs will not come to Goa. The Congress government will not go against the people."

He added that the state government would send formal communication to the Centre within two or three days recommending the revocation of all 15 SEZs in Goa.

A day earlier, Commerce Secretary Pillai had said that SEZ projects that were already underway could not be de-notified or scrapped based on the whims of the state government, paving the way for a full-blown confrontation between the central and state government on the issue. According to the quasi-federal nature of the Indian union, land is a state subject.

"Once an SEZ is notified after getting formal approval from the Board of Approval (BoA), it becomes a legal entity. There is no provision in law to de-notify a notified SEZ," Pillai, who is also the Board's chairperson, told the media after a BoA meeting in New Delhi.

Reacting to the Goa government's announcement that it would scrap all 15 upcoming SEZs in the wake of widespread protests in the state, Pillai said that it was legally untenable and that the government had no locus standi on the issue.

He however clarified that it was up to the state government to deal with formally approved zones that had not been notified, and said that the Centre could honour the sentiments of the state government in the case of SEZs that had been approved but not notified.

Pillai said developers of notified SEZs could even approach the court against the Goa government's decision. He said developers had already made huge investments in the SEZs. "How will the state government compensate the developers," asked Pillai.

The BoA recently notified three SEZs out of the 15 in Goa -- a 123.2 hectare biotech SEZ by pharma major Cipla's Meditab Specialties, a 107.17 hectare SEZ by K Raheja Corp Pvt Ltd, and a 20.36 hectare biotech SEZ by Peninsula Pharma Research Centre Pvt Ltd. Ten others have either been granted formal or in-principle approval. The developers of notified SEZs have not only acquired land but also started construction and imported machinery for their projects. "The Goa government has already transferred land to formally approved zones," Pillai said.

Amar Lulla, Managing Director of Cipla, which has one of the notified SEZs, said that the company had already invested Rs 200 crore in its SEZ. "Though, at present, work has been stopped, we have already completed a fairly large amount of work on the SEZ," he said. He added that the company had not received any communication from the state government about scrapping the SEZ.

On December 31, the Goa government decided that it would scrap 12 SEZs in the state and recommend the de-notification of others, following widespread protests by civil society and political parties, including the ruling Congress Party. It said the benefits of industrialisation could be reaped without SEZs, by extending incentives to incoming industry.

The decision was taken after a panel set up to study the viability of the SEZs observed that they were not suitable for Goa's development. The panel said that the proposed SEZs would not match the talent skills in Goa, would further burden the existing infrastructure, and would not create employment. Any financial benefits that accrued would benefit only outsiders, added the report by the Goa taskforce that included eminent persons such as architect Charles Correa and townplanner Edgar Rebeiro, adviser to the Goa government on land utilisation. However, no request for de-notification has been sent to the Ministry of Commerce, which is the anchor for the SEZ policy.

Though there have been violent protests against SEZs in many Indian states, Goa is the first state to abandon all plans to build SEZs. After Mayawati became chief minister of Uttar Pradesh in mid-2007, the Uttar Pradesh government too asked the SEZ Board of Approval not to consider cases from the state until it got the go-ahead.

A tiny, coastal state with an area of 3,700 square kilometres and a population of around 1.4 million, Goa has always been extremely sensitive to the impact of unrestrained economic development. In this latest development, Chief Minister Kamat admitted that politics had scored over economics and cited his government's belief in democratic principles as the reason behind the decision to scrap SEZs.

Source: The Hindu, January 3, 2008
             The Asian Age, January 3, 2008
              www.ndtv.com, January 3, 2008 
              PTI, January 3, 2008 
             Business Standard, January 1, 2008
            The Hindu, January 1, 2008
            The Hindustan Times, January 1, 2008