In the five fiscals of FY21-FY25, 466 special economic zones (SEZs) run by the Union government were shut down, constituting close to 10 per cent of the 5,281 SEZs operating in seven such zones across the country. <\/p>\n
This information was provided by the Commerce & Industry Ministry in the Lok Sabha on December 8 \u2014 without a word on why such a largescale shut downs occurred.<\/p>\n
Also Read: India\u2019s nuclear push comes with a catch: Absurdly low liability, unlimited public risk <\/a><\/p>\n The ministry may argue that the Member of Parliament who raised the query didn\u2019t specifically ask for the reasons, but that is only a technically correct answer. The ministry has done no assessment and would be unable to provide an answer if asked, as will be clear soon. <\/p>\n Limited outcomes<\/p>\n Meanwhile, here is what the ministry\u2019s answer revealed in the form of two graphs. <\/p>\n The first graph maps the total number of units in the seven centrally run SEZ zones and the zone-wise shutdowns in the past five fiscals.<\/p>\n It is easy to understand the stress caused by the untimely and unusually severe national lockdown in FY21, but that doesn\u2019t explain what happened in subsequent years when the Centre was liberal with its incentives and credit facilities.<\/p>\n The second graph shows their performance, but without a yardstick to measure whether their performance in investment, exports and employment is good, bad or indifferent.<\/p>\n India framed its SEZ Policy in 2000 and brought the SEZ Act in 2005. The idea was to boost exports, investment and employment for higher economic growth. It was inspired by the highly successful SEZs of China two decades earlier.<\/p>\n The SEZs enjoy a large-number of fiscal, administrative and other incentives. The key ones are: cheap or almost free land, duty-free import\/domestic procurement of goods for development, operation and maintenance of SEZ units; 100 per cent income tax exemption for the first 5 years, 50 per cent for the next 5 years and so on; exemption from Minimum Alternate Tax (MAT); zero GST tax; single-window clearances, etc. <\/p>\n SEZs or land grabbing? <\/p>\n Apart from the seven SEZ zones run by the Centre, states have their own 17 zones and many other SEZs are run by the private sector. <\/p>\n The Commerce Ministry\u2019s data shows, as on June 30, 2025, a total of 353 SEZs were notified across the country, but not how many are operational. It doesn\u2019t provide a consolidated data on the land acquired, purchased or allotted for these SEZs either. <\/p>\n In its reply to the Lok Sabha on July 25, 2018, the ministry said that 52 per cent of notified land for 373 SEZs (237.9 sq km) was vacant and 40.2 per cent of notified SEZs were non-operational. <\/p>\n The ministry, in its reply to the Lok Sabha on April 10, 2017, said that 61.2 per cent of notified land (270.3 sq km of 441.8 sq km) was vacant and 39.8 per cent was non-operational. Today, the numbers would be much higher.<\/p>\n Also Read: Wages slump and low inflation hint at a slowdown despite high GDP growth <\/a><\/p>\n For example, the FY25 annual report of Adani Ports and Logistics declares a land bank of \u201c18,250+ hectares\u201d (182.5 sq km). This includes 125+ sq km at Mundra (\u201cIndia\u2019s largest SEZ\u201d), 200+ sq km at Dhamra, 275+ sq km at Krishnapatnam and 100+ sq km at Gangavaram. But this is only part of the story. The other is the massive land grab in the name of SEZs.<\/p>\n Land misuse<\/p>\n A Comptroller and Auditor General of India (CAG) report for 2012 and 2013 \u2014 tabled in 2014 \u2014 said \u201cland appeared to be the most crucial and attractive component of the scheme\u201d and that \u201cland acquired was not servicing the objectives of the SEZ Act\u201d. That was the last known comprehensive study of SEZs.<\/p>\n SEZs became, in part, a flourishing real estate business more than actual manufacturing, investment, job creation or exports.<\/p>\n The CAG had then flagged that vast stretches of land were acquired (under the emergency provision of colonial 1894 land acquisition law for \u201cpublic purpose\u201d), allotted and purchased \u201cin the name of SEZ\u201d but \u201conly a fraction\u201d was \u201cnotified for SEZ\u201d, later de-notified and diverted for commercial purposes. <\/p>\n In short, SEZs became, in part, a flourishing real estate business more than actual manufacturing, investment, job creation or exports. <\/p>\n It also assessed the SEZs against their objective parameters (exports, investment, employment and economic growth) and found the data didn\u2019t show \u201cany significant impact\u201d. Rather, those impacts were \u201cmodest\u201d and largely contributed by a few regions from the infrastructurally developed states of Andhra Pradesh, Telangana, Maharashtra, Karnataka, Tamil Nadu, Haryana and Gujarat. <\/p>\n Inflated SEZ numbers<\/p>\n Many of those SEZ units were actually located in the EPZs (Export Processing Zones) between 1965 and 2005 and were shifted to the SEZs after 2005. As against manufacturing, it was the services sector IT\/ITes units that propped up SEZ performance \u2014 which, in turn, had been shifted from the Software Technology Parks of India (STPI) set up in the 1990s (45 per cent during the previous five years of 2012-13).<\/p>\n Other key findings were: <\/p>\n a) Shortfall in actual employment (against the projected) averaged 92.73 per cent, with Gujarat topping with 96.54 per cent.<\/p>\n b) Shortfall in investment (against the projected) averaged 58.8 per cent. Andhra Pradesh and Maharashtra topped the list; multi-product manufacturing investment had a 67 percent shortfall in investment; investment was primarily driven by the IT\/ITes sector. <\/p>\n c) Shortfall in exports (against the projected) averaged 74.6 per cent; the maximum was from multi-product manufacturing SEZs (23.9 per cent). <\/p>\n d) Shortfall in forex (against the projected) averaged 79.5 per cent; Uttar Pradesh topped the list at 108.8 per cent (net outgo of forex). <\/p>\n e) Excess claims of deductions, non-submission of audited reports, incorrect and non-payment of taxes, lack of monitoring etc., marred the performance.<\/p>\n A model that hasn\u2019t delivered<\/p>\n A CAG report of 2019 had looked into the Santacruz SEZ to discover many \u201cirregularities\u201d in awarding major works in a SEZ (\u201cweak administrative, financial and internal controls over\u201d). <\/p>\n A 2022 study by the Bengaluru-based Institute for Social and Economic Change said amendments in policies and compliances had \u201cfailed\u201d to address key challenges in doing business within SEZs, specifically new generation SEZs. All its data were from the CAG\u2019s 2014 report mentioned earlier.<\/p>\n