A key meeting of senior United Progressive Alliance government ministers and political parties, including the Congress and its Left allies, failed to secure a political consensus on the showpiece Special Economic Zones initiative.
At a meeting of the empowered Group of Ministers on Wednesday, the ruling Congress and the Left parties rejected the government's arguments in favour of the zones.
The Left parties cried foul over the non-implementation of labour laws in these zones. The political parties will now come back to the eGoM with their views by the month end. A separate meeting of the inter-ministerial Board of Approval is also scheduled for January 10.
Talking to Business Standard after the meeting, CPI (M) leader Sitaram Yechury said, "We are not satisfied with the government's reply and have submitted our concerns in a written form to it."
While enumerating the Left's objections, he said that financial services have also been given approval in the SEZ policy. "We are concerned that this will lead to speculation," he said.
Along with Yechury, the Left parties were represented by Sudhakar Reddy of the CPI and Abani Roy of the RSP. Congress leaders like AICC general secretaries Digvijay Singh and Ashok Gehlot attended the meeting.
The government was represented by senior ministers including External Affairs Minister Pranab Mukherjee, Commerce Minister Kamal Nath, Finance Minister P Chidambaram, Science and Technology Minister Kapil Sibal, and Communications Minister Dayanidhi Maran.
Commerce Minister Kamal Nath's attempt to achieve a consensus on labour laws for the SEZs by stating that there is a plan to declare the zones as public utility services and exempting them from strikes, evoked sharp protests from the Left, party sources said.
The Left leaders reiterated their demands including a cap on the number of SEZs, review of tax exemptions, allotment of land on lease, at least 75 per cent of land to be used for industrial and related infrastructure facilities and only 25 per cent for real estate and removal of regional imbalances among others.
On their part, the Congress general secretaries highlighted what party president Sonia Gandhi had said at the Congress chief ministers' conclave in Nainital last September that fertile land should not be acquired as far as possible.
The commerce ministry has already instructed state governments to this effect and imposed a 10 per cent limit on use of double-cropped agricultural land for an SEZ. "Who will decide what is mono-crop and what is multi-crop? Some land use map is required," demanded Abani Roy.
The government interlocutors, however, sought to allay the political parties' apprehension, and to impress upon them the potential of fresh investments through SEZs. "If it were not for the SEZ policy, Nokia among other foreign companies like Flextronics would not have come to India," they said.
As of now, the Board of Approvals has formally approved 237 SEZs, out of which, 51 have been notified. As many as 22 SEZs are functional within the 2005-06 fiscal. The commerce ministry expects $700 million in SEZs by this month end and Rs 1,00,000 crore (including Rs 25,000 crore in FDI) by December 2007.
Later, Nath said there has not been any fresh land acquisition in the present 237 approvals, which comprise a total land area of 34,510 hectares.
Addressing the issue of tax concessions raised by the Left, a commerce ministry presentation maintained that on a projected turnover of Rs 8,00,000 crore (Rs 8000 billion) by SEZs, the direct and indirect tax income accruing to the Central and state governments would be far higher than the estimated tax loss.
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