The Centre has decided upon developing 12 industrial smart cities across six industrial corridors in 10 States, by investing about ₹28,600 crore. The novelty of this plan, compared to policies of the past to develop enclaves for manufacturing and IT, appears to be its emphasis on ‘sustainability’. The utilities in these 12 cities are expected to be IT-driven, which is likely to spur efficiency of use and a ‘circular economy’.
Industry and households may have to use green technologies. The exercise could be part of a larger effort to come to grips with emerging green trade barriers such as the EU’s Carbon Border Adjustment Mechanism. However, there is per se nothing new about industrial townships acting as a growth model. Its vintage is at least 50 years in India’s case. The Centre’s latest policy offering comes two decades after Special Economic Zones came into being. For the latest plan to truly make a difference to India’s manufacturing and exports and generate returns that are commensurate with the resources invested, the errors of the past, especially with respect to SEZs, must be avoided. The institutional arrangements and market linkages must be worked out beforehand. The biggest hurdle pertains to land acquisition. The implementing agency, National Industrial Corridor Development Programme, is expected to provide “developed land parcels” for industries to operate in ‘plug and play’ mode. But this is easier said than done.
The CAG report on SEZs (2014) observes, “only a fraction of the land so acquired was notified for SEZ and later denotification was also resorted to within a few years to benefit from price appreciation”. The new laws and rules should steer clear of related flaws in the SEZ Act, 2005. The States and the Centre must work in tandem to ensure smooth land acquisition by arriving at a political consensus. The 2018 Baba Kalyani report on SEZs points out that it was a mistake to curb access of SEZ units to the domestic market. While the latest move looks at the ‘cities’ as “catalysts” to achieve $2 trillion exports by 2030 ($778 billion in FY24), they should not be confined to being export enclaves. The industrial zones are expected to create a million direct jobs and three million indirect ones. To place this in perspective, over 260 operational SEZs in India with about 5,500 units have generated around 2.5 million jobs (largely in IT), but over two decades.
The CAG report observes that exports and employment performance over a decade (in 2014) was well below targets, raising questions on whether the revenues forgone through tax breaks were excessive. In the present case, the regulation and incentives need to be simple, and yet effective. There is also the question of how these enclaves can promote balanced regional development. The location of the 12 cities in 10 States, along the Gati Shakti corridor, could enhance viability. But if select States are investment magnets, it is perhaps due to factors that go beyond physical infrastructure.