Ceiling on India

Capping SEZ size represents a peculiar politics of pessimism. Its costs are enormous

Clever politics by the empowered group of ministers on SEZs hides one piece of dreadfully wrong economics. The cleverness first. Eighty-odd whistle-clean SEZs have been cleared. Many CMs and many in industry will be happy. Public acquisition of land for private projects has been disallowed. This addresses agitationist politics — something that was worrying the Congress leadership. But it also finds favour with those instinctively and intellectually in favour of India’s rapid modernisation via the agency of entrepreneurship. This newspaper, for example, has been arguing that the official role is better defined as a market facilitator than as a land acquirer

for private projects. Mind you, in some exceptional cases the state may need to intervene, to acquire, say, a small plot that squares the circle. So a blanket ban may be an overcorrection. Plus, let’s not argue that the state acquiring land for private projects, however contentious the process, has no public good dimension. Numerous small plots put together and sold means better utilisation of land as a resource, increasing revenue and employment potentials. This isn’t invalidated by the state getting out of SEZ land.

But the state hasn’t withdrawn from SEZ land, that’s the dreadful bit. A magic figure — 5,000 hectares — has been found. SEZs now have a size cap and apparently that is what the country needed. Well, three questions. One, how will making acquisition a private transaction work with a ceiling on land size? Suppose landholders sitting on, say, 150 more hectares adjoining the 5,000 hectares are keen to sell, the developer is keen to buy. The transaction will spread nothing but cheer. In whose interest will it be stopped? And if it isn’t in one case, what happens in the next case? Second, why is the government questioning the ability of India’s industry to think and build big? The ceiling basically says no Indian entrepreneur should dare think of building a city? Why not? Why should privately built cities not exist? Considering especially the state of government-built cities (think Patna vs Jamshedpur). Third, what does the ceiling represent fundamentally? That old idea in ULCA of controlling land development by caps. ULCA still hasn’t been universally repealed; we already have another socialist tool.

The SEZ ceiling rule is consistent with a lot of stuff the UPA’s been expending its energy on. Control, as these columns observed recently, is terribly fashionable these days. So is thinking small. Farmers can’t assume they are free to sell their output as they want. And we are to be alarmed and even ashamed at the prospect of sustained 9 per cent growth. This kind of politics means putting a ceiling on India. So, of course, there’ll be ceilings on SEZs.