In an audit report tabled in Goa assembly during the last week of March 2009, the supreme audit institution - Comptroller and Auditor General of India - has once again pronounced critical remarks on SEZs, this time around on massive irregularities in land allotments by Goa Industrial Development Corporation (GIDC) to SEZ promoters.

The main opposition party (BJP) as well as resistance movements against SEZs were quick to grasp the moment putting forward a demand for CBI probe and criminal inquiry. The CAG audit report had probed into land allotments to Dona Paula IT Park on the outskirts of Panaji (2,85,296 square metres), the Quintol Food Park (4,19,000 square metres) and seven SEZs (38,41,000 square metres) as part of the performance audit of government companies.

On closer examination what emerges is an even more worrisome problem. Land acquired in past for 'public purpose' remains unutilised and undeveloped for years, and despite this, repeat land acquisition quests were undertaken by the government. Worse, the current legal regime has no space for handing back such land to persons from whom it was acquired in the first place.

A huge chunk of SEZ land - 24.05 lakh square metre allotted to five SEZs at Verna - was carved out of 65.81 lakh square metres of land acquired for small and medium scale industries under centrally assisted Industrial Growth Centre scheme violating Government of India guidelines.


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The audit scrutiny revealed that GIDC has acquired 166.86 lakh square metres land for 22 industrial estates and 7 special projects from 1966 till March 2003. Furthermore, during the last five years alone, ending March 2008, it initiated land acquisition proceedings for another 164 lakh square metres, i.e. an amount as high as what it acquired in the previous 37 years. Logically, one would expect that if land acquisition proceedings over such a large area were initiated within such a short period, GIDC was acting with due diligence on the need and requirement of such a rapid growth in industrialisation.

However, over six years ago, CAG's performance audit report on GIDC for the year ending 31 March 2003 had remarked that, "Saleable land admeasuring 29.57 lakh square metre remained unutilised for period ranging upto 21 years since the said land was acquired". The report was tabled in the year 2004 and has not been discussed by Goa Assembly's Public Accounts Committee.

Even though GIDC was in possession of 36.57 lakh square metres of unutilised saleable land as on March 31, 1998, it further acquired 13.71 lakh square metre of land during 1998-2003, at a huge cost and without a proper market survey, found the CAG. Out of this 13.71 lakh square metres land, as much as 8.53 lakh square metre (96 per cent) remained unallotted as explained below.

The numbers show that on the one hand, GIDC was acquiring within five years, as much land as it acquired in 37 years, and on the other hand, it was not able allot 96 per cent of the saleable area of the land that it acquired during 1998-2003.

There is more.

Coming back to the more recent times, the audit scrutiny examined all allotment to SEZs and allotments of area more than 10,000 square metres individually in Verna, Kundaim, Pissurlem and Cuncolim. This amounted to 7.83 lakh square metres and the CAG noticed irregularities in 86 allotments measuring 46.24 lakh square metres, involving the loss of revenue of Rs.102.64 crore. In short, almost 91.32 percentage of all its land allotment during last five years smack of irregularities.

In the Quitol Food Park case, the CAG auditors were shocked to find out that in deviation of GIDC's established policy, it acquired and allotted 4.19 lakh square metre of land to Betul Hospitality Parks Private Limited in April 2007 in the name of 'auxiliary services to Food Park', even as it was aware that BHPL had applied for 'setting up residential resorts for upmarket tourists'.

In the Dona Paula IT Park case, the CAG auditors noticed that the state government transferred 2.85 lakh square metre of land in June 2000 to state run Goa Info Tech Corporation for setting up IT and ITES. GITC developed the land and allotted 18 plots admeasuring 2,03,757 square metres area between August 2006 and October 2007 at a premium of Rs.4600 per square metre to 14 parties. The CAG auditors scrutinised the data and observed that "incorrect assessment of market rate of land resulted in loss of Rs.9.84 crores by way of premium and thereby undue benefit to allottees of the land". Also calculating the ripple effect of the loss in term of lease rent, CAG auditors noted that the company would suffer a loss worth Rs.5.90 crores (2 per cent of Rs.9.84 crores for 30 years).

Audit of the applications and allotments in Dona Paula IT Park case revealed large scale irregularities, since out of 37 applications only 19 were from IT firms, while 18 were from Real Estate Developers. Allotments were eventually made to 5 IT firms and 9 Real Estate Developers, while rejecting 23 applications, indicating that prime land earmarked for IT and ITES was being palmed off to speculative real estate interests that too at rates arrived by incorrect assessment.

According to the CAG report, in one instance, a real estate developer - Venkatarao Infra Projects - was allotted plots without even a proper application or project report, and five developers were allotted plots by relaxing the prescribed eligibility criteria.

On the land allotments to 7 SEZs, CAG stated that GIDC allotted the land (during April-May 2006) even without publicising or following up a proper process such as invitation of expression of interest, etc., and even before the state had designed its SEZ policy. Even more shocking: a huge chunk of SEZ land - 24.05 lakh square metre allotted to five SEZs at Verna - was carved out of 65.81 lakh square metres of land acquired for small and medium scale industries under centrally assisted Industrial Growth Centre scheme violating Government of India guidelines.

CAG auditors further noticed that undue favour was extended to SEZ developers by dropping a clause that enabled revision of Annual Lease Rent (ALR) as and when premium rates are revised. Trying to argue that this was not by design, the GIDC management stated in its reply in August 2008, "revision of ALR annually was not applicable to SEZ as the entire infrastructure maintenance cost within SEZ would be borne by SEZ developers". CAG auditors stated that the reply was not appropriate as GIDC had included its rights to revise the ALR in lease deed with BHPL for land at Quitol Food Park.

The list goes on and on. A comprehensive narration of CAG's findings about GIDC will take several pages more.

In sum, the CAG reports show that Goa's fever for land acquisition appears completely misplaced. GIDC and the state government are accountable for the large tracts of land that have been lying unutilised, after allottment or acquisition. Such land could simpy be handed back to people from whom it was acquired in the name of 'public purpose', rather than it being allowed to remain in 'suspended industrialisation' mode for years and then swiftly being handed over to SEZ developers at cheaper rates.