NITI Aayog recently pitched for development of two Coastal Employment Zones (one each on the western and eastern coast) on the lines of a Chinese strategy to promote exports and create high productivity & good income jobs.

Features of Coastal Employment Zones (CEZs)

1. Each CEZ will be an agglomeration of multiple coastal districts, spread over a wide geographical area of 500 square kilometers or more.
2. Flexible land conversion rules would help accommodate numerous inter-related economic activities on large scale, thereby generating economies of scale.
3. It will provide the geographical boundary within which port led industrialization will be developed by having a uniform policy along the ports and coastal states.
4. CEZs are expected to have liberal labour laws and other tax incentives such as limited period tax holiday etc.
5. CEZs would facilitate ease of doing business, especially, ease of export and import, faster environmental clearances etc.
6. Each CEZ would create urban spaces as residential provision for those employed in the zone.

Challenges

• Non-availability of land parcels with the states along with huge acquisition and compensation costs can delay the execution of such projects.
• As per UNCTAD survey, such islands of excellence can create enormous political risk by excluding other regions from development.
• Envisaged CEZ's potential may not be realized due to sub-optimal transport modal mix, lack of scale, low penetration of coastal and inland shipping etc.
• Due to subdued global demand, the supply efficiency from CEZs will take time to grow into full- fledged manner.
• Inclusion of ineligible land for notification, allotment of land far in excess of need and protracted non- use of notified land, may result in the diversion of CEZ land for more lucrative commercial exploitation.

Prospects

• An export led coastal economy, based on labour intensive sectors such as apparel, footwear, electronic and electrical products etc would help create high productivity good jobs.
• Due to exit of many firms from China, India is well positioned in the international market to serve as export bases of the migrating firms.
• It would attract large firms which would bring with them technology, capital, good management and links to the world markets.
• By capturing agglomeration economies, it would generate an ecosystem around them in which productive cluster small and medium firms would emerge and flourish.
• CEZs will help tap synergies with the planned industrial corridors like Vizag Chennai Industrial Corridor and Delhi Mumbai Industrial Corridor.
• With the reduction of clearance time and normalization of duties, these zones would help in frictionless movement of imports and exports with the creation of bonded free-trade zones in the long term.

Learning lessons from SEZs, initially it would be practical to limit the number of zones to a few, rather than spreading the resources thinly across different geographies. This would help ensure that many sector- specific zones and clusters emerge within each CEZ to fully exploit economies of scale and agglomeration.