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Important issues relating to Agri-Export Zones (AEZs) in India
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Tuesday, 03 May, 2016, 08 : 00 AM [IST]
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Deepa B Hiremath
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fiogf49gjkf0d Background
Today the world is rightly called a global village. Various factors like global accessibility, telecommunication revolution, information metamorphosis, media transformation and redefined living standards have led to the integration of the world economy from the economic perspective. The economies which were once closed or inward looking have now transformed to become open and outward looking through the process of globalisation.
Today, goods and services are not just confined to geographical boundaries but are available across countries. India’s role in globalisation began with the economic reforms of 1991 centred on the three pillars of liberalisation, privatisation and globalisation; popularly known as the LPG of economic reforms. LPG sought to achieve domestic and global competitiveness, increased share in global trade, efficient and competitive domestic manufacturing base, higher growth driven by manufacturing sector and exports; finally bring about overall development of the economy.
India’s efforts at globalisation through the economic reforms of 1991 liberalised the inflow of goods and services and also capital inflows. Simultaneously, it made a distinct thrust and focussed on the promotion of exports and not just that of “surpluses” by catering to the global market in terms of demand, tastes and preferences. India being a large economy in terms of size, agrarian base, diversity, population pressure, wide scale poverty and unemployment, regional imbalances and structural rigidities, has adopted and blended export-led growth and growth-led exports, as a strategy in its efforts at globalisation. In this regard, India has been dedicating certain specific geographical areas within the domestic economy to cater exclusively for exports as a part of export-led growth strategy and the rest of its economy following the growth-led export strategy.
This strategy of export-oriented growth has led to the growth in trade in high value products rather than homogenous bulk products. Much of the growth in high value-added goods is mainly due to increasing product differentiation as producers and retailers attempt to convince consumers of the merits of geographical locations, recipes and brand names. Considering all these in view, besides promoting enterprises and making manufacturers to be competitive globally, the Government of India announced the introduction of Special Economic Zones (SEZ) policy on April 2000, through a revision in the Export and Import Policy (EXIM) 1997-2002.
What is an SEZ?
An SEZ is a geographical area clearly demarcated with boundary, within the domestic economy but insulated. The SEZs are only physically located within the country but for all practical purposes they are deemed foreign areas. With this concept, two other concepts evolve - one Domestic Tariff Area (DTA), which is the rest of the domestic economy, and the other, Rest of the World (RoW). The SEZs have world- class infrastructure and facilities for manufacture of goods and services entirely for exports. No duties (excise or customs duties) or taxes are payable in the SEZs. Even import duties are not levied on any imports into SEZs. Private and foreign companies can easily set up industries with very few restrictions from the government. Manufacturers in these zones would enjoy tax holidays for five years on profits earned and 50 per cent would be payable for the next five years. Labour laws are flexible and contractual employment permitted. SEZs operate with the following main objectives: To generate additional economic activity; To promote exports of goods and services; To promote domestic and foreign investment; Creation of employment opportunities; and Development of infrastructure facilities.
History of SEZs
? SEZ was first established in Puerto Rico in 1947.
?In Ireland, SEZ was established in 1960.
?The concept of SEZ came into existence in India with the aim to make “Island of Excellence” by providing world-class infrastructure facilities.
?In China, experiment of SEZ has become successful and it has developed world-class infrastructure.
?In India, first SEZ was established in 1965 in Gujarat state at Kandla as Export Processing Zone (EPZ).
?Later 8 EPZs were proposed and converted to SEZ later on.
? In China, SEZs were started 14 years after the establishment in India.
?In 2000, SEZs were proposed for private as well as public sectors.
?12 other SEZs also started functioning thereafter.
?Today, 589 SEZs are approved formally.
?Number of notified SEZs (as on 17 July, 2012) is 389.
?India has enacted the SEZ Act 2005 keeping in view the success story of China.
?The SEZ Act in India came into force from February, 2006.
Agri Export/ Agri Economic Zones (AEZ): The concept
India is basically an agrarian economy and has a vast potential of producing exportable produce. This helps the farmer in getting better price for his produce besides eliminating the complex chain of middlemen. It also leads to modernisation, technology diffusion and promoting intensive research and development. Although, India is amongst the largest producers of various kinds of agricultural produce, however, its share in total exports of the country or in the world exports of agricultural produce is disproportionate. Thus, the concept of having zones similar to SEZs for agriculture-related products was mooted.
The concept of AEZs was first introduced in India under the EXIM policy 2001. They were developed to play the role of key facilitator in boosting agricultural exports of the country and augmenting farmers’ income as well. These zones take a holistic view at a specific product located in a contiguous area and work in sourcing and developing the raw materials, production, processing, packaging of the product and so on with the ultimate objective of exporting the product. The AEZs are based on cluster approach in identifying the product, the geographical areas in which the produce is cultivated and adopting end-to-end approach by integrating all activities from the stage of production to final marketing of produce. Since agriculture is a state subject, the development of AEZs, is chiefly the responsibility of the respective state governments.
At present, the AEZs in India are product-specific covering a number of clusters in different states as under: Fruits export zones; Flowers export zones; Dry fruits export zones; Spices export zones; Onion export zones; Potato export zones; and Cereal export zones.
Present scenario of AEZs in India
APEDA has set up 60 AEZs spread over 230 districts in 20 states. The crops covered include fruits, vegetables, spices, cashew, tea, basmati rice, medicinal plants, and pulses. In all, 35 crops were identified for promotion in these zones. The total investment committed under the AEZ programme by all agencies stands at Rs 1, 724 crore, including private investments of Rs 970 crore.
Benefits of AEZ
Strengthening of backward linkages with a market-oriented approach; Product acceptability and its competitiveness abroad as well as in the domestic market; Value addition to basic agricultural produce; Bring down cost of production through economy of scale; Better price for agricultural produce; Improvement in product quality and packaging; Promote trade related research and development; and Generating employment opportunities.
Mode of operation
The entire approach of promoting the Agri Export Zone has been taken on a project mode. State governments identify potential export products which could be selected for development with a cluster approach. State governments evolve projects which are feasible and are possible to be implemented immediately. They have also to conform to the indicative guidelines. The states forward such project proposals to APEDA which will conduct the initial scrutiny of the proposals. If found feasible, APEDA may provide necessary guidance in preparing the detailed project report. This report, after preliminary scrutiny, will be placed before the steering committee which has been constituted under the chairmanship of commerce secretary with the following members: Director General of Foreign Trade, Member; Joint Secretary (EP Agri Division, DOC) Member; Joint Secretary (Deptt of F.P.I.,MOA) Member; Joint Secretary [Infrastructure Division, DOC] Member; Executive Director, NHB Member; Representative of DG, ICAR Member; Director (Finance, Deptt of Commerce) Member; and Chairman, APEDA Convenor.
Once the project proposal of a state has been approved by the committee, an MoU would be signed between APEDA (on behalf of the Central government) and the state government for providing possible assistance at each stage of the project. The responsibilities of the state government would also be defined in the MoU, a draft of which is under preparation. (http://agritech.tnau.ac.in/)
Problems of AEZs
A number of problems related to AEZs have been identified such as increase in exploitation of farmers and farmers becoming landless. There has been decrease in agricultural production thereby an increase in the cost of food items. An increase in economic imbalance and disparity regarding the ownership rights has been observed. There has been an increase in exploitation of workers and in the number of untrained workers. A number of negative externalities like increase in pollution, endangerment to wildlife due to pollution and related diseases observed.
References
Gavhane, S (2012). Special Economic Zones and Indian Agriculture, Grip – The Standard Research, International Referred Online Research Journal, ISSN 2278-8123
Verma, S (2011). The Indian Economy, “Export orientation: export led growth strategy-SEZ”,
p102-109
www.agritech.tnau.ac.in/horticulture/Agriexportzone.pdf
www.sezindia.nic.in/about-introduction.asp
(The author is assistant professor, college of agriculture, Navsari Agricultural University. She can be contacted at deepahiremath1301@gmail.com)
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