SEZ, how special?

Despite having burned its fingers with export processing zones, which mainly involved a number of substantial fiscal benefits, the government has gone into overdrive to push its new policy on special economic zones. The difference, this time around, is the gargantuan scale on which the project is being pitched.

Setting up these special zones entails land acquisition on a massive scale -- and, therefore, displacement on an equally massive scale. Much of the land involved is fertile, agricultural land, though the government has now said it will only acquire wasteland. This is a somewhat disingenuous policy shift, given the fact that it is extremely difficult to identify whether a piece of land is indeed waste.

Wasteland, moreover, is, par excellence, the resource on which the poorest and most marginalised depend -- and, clearly, the government is gearing up to take over large swathes of common property resource land by designating them 'wasteland'.

The scale of the special projects has united farmers who risk losing their land. And protests, some violent, have already started breaking out. The outlook for the future is grim. In their struggle against the state, the farmers have the support of sections of the political class and intelligentsia, and civil society organisations. But their most powerful ally, strange though it may sound, is the Union ministry of finance and the associated fiscal establishment, including a number of think tanks.

The finance ministry raised objections to the ambitious programme on the ground that it would lead to the loss of an unconscionably large chunk of the government's revenues. Independent observers have also pointed out that special zones may not bring in new, big-ticket investments, as hoped, but only encourage the flight of old capital to these enclaves. Moreover, they say, the special zones are in effect piggy-backing on public resources -- the taxpayer's money. But despite opposition, the special zones programme is steaming ahead.

There are other major concerns the constriction of labour rights, the disregard for established environmental procedures, and, not least, the deeply anti-democratic systems that have been devised to run these enclaves. padmaparna ghosh explores the downside of the new strategy

Published: Wednesday 15 November 2006

SEZ, how special?

-- (Credit: Rustam Vania)Roughshod riding
SEZs will trample on farmers' rights

A farmer in Cheete Kalan village in Amritsar, Harjeet Singh Hundal, has big plans. For the past year, he has been using organic manure on his fertile and irrigated agricultural land and he can't stop talking about it.

dlf Universal, the big hitter in real estate, also has big plans. It wants to build an approximately 500-hectare (ha) special economic zone (sez). Unfortunately, Hundal's land is organic to their plans. It's right in the middle of the land the company wants for its new venture.

The sez will comprise textile and garments industry units (spread over 162 ha), engineering units (142 ha), food-processing units (101 ha), a free trade and warehousing zone (40 ha) and an inland container depot and an air cargo handling space. It will also include commercial centres, residential areas and institutional facilities like schools and hospitals. dlf will invest Rs 800 crore in the sez to build an island of industrial growth where Hundal wants to make vermicompost the buzzword. The state has promised dlf it will acquire Hundal's 12 ha and the rest of the fertile land in the public interest.

Hundal is not alone. Massive tracts of land are being acquired in the name of public interest and being sold off to private developers for sezs. The Union ministry for commerce and industries sees these zones as a big boom, boosting the economy through exports, building infrastructure and generating hundreds of thousands of jobs. In June 2005, the government passed the sez Act and in February 2006, framed rules. Till now, the Board of Approval (boa), which approves sez proposals, has granted formal clearances to 212 proposals and in-principle approval to 152, despite stiff opposition from the Union ministry of finance, the Left parties and the Reserve Bank of India.

Down to Earth "I can't watch the fields I have tilled with my hands for so long get bulldozed"


Act I, Scene II
The sez Act was notified last year. It provides for enclaves that will be given major fiscal concessions. Units in sezs will not have to pay import duties, state taxes on raw material, or cesses/duties on electricity. State governments have to assure sezs water. They will also get single-window clearances.

The requirements on minimum area, processing area, social infrastructure and investment have been contested. After finance ministry warnings on revenue losses, the commerce ministry tweaked requirements for minimum processing area and investment to pre-empt real estate deals, but revenue concerns were not addressed (see table Mostly carrots).

But sezs have an unfortunate genealogy. Earlier experiments with export processing zones (epzs) and free trade zones have not worked.

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