What is an SEZ?
A Special Economic Zone (SEZ) is a specially demarcated area of land, owned and operated by a private company, which is deemed to be foreign territory for the purpose of trade, duties and tariffs. SEZs will enjoy exemptions from customs duties, income tax, sales tax, service tax. After the passing of the SEZ Act by Parliament in June 2005, the law came into effect in February 2006, though some states like Gujarat had passed provincial SEZ legislation in 2004.
Why SEZs?
The stated purpose of creating SEZs across India is "the promotion of exports". Commerce and Industries Minister Kamal Nath claims that exports will ultimately grow five times, GDP will increase by 2%, and 30 lakh jobs will be generated by SEZs across India. The government also claims that SEZs will attract global manufacturing through Foreign Direct Investment (FDI), enable the transfer of modern technology and create incentives for infrastructure.
How many SEZs will there be?
- The central government has approves 237 SEZs in 19 states (occupying 86,107 hectares).
- 63 of these SEZs have already been notified.
- 23 SEZs are operational, 18 in the IT sector.
- Ultimately there will be 500 SEZs.
- Total amount of land to be acquired across India:150,000 hectares (the area of the national capital region). This land -– predominantly agricultural and typically multi-cropped -- is capable of producing close to 1 million tonnes of foodgrain. If SEZs are seen to be successful in the future and more cultivated land is acquired, they will endanger the country's food security.
What has the experience with SEZs been so far?
There are less than 400 SEZs around the world at the moment. In India, the government is planning that many in one country alone. ]
Number: China - 7
India - Ultimately 400-500
When started: China - 1980
India - Mostly after 1991
Democratic decision? China - A lot of discussion and debate preceded the setting up of
SEZs
India - No discussion. Parliament passed the law easily.
Size: China - Very large (Shenzhen: 32,700 hectares)
India - Small (3,000-14,000 hectares)
Ownership: China - State
India - Private Corporations
On what kind of land: China - Mostly coastal wasteland
India - Mostly fertile cultivated land
Exports: China - Very good (Shenzhen: Net exports in 2006, $ 35 Billion)
India - Poor so far (in 1998 a waiver of $1.67 billion on customs
duties was given to earn $ 1.04 billion in
foreign exchange)
Employment: China - ubstantial number of low-paid jobs
India - Very limited so far: 100,650 in all SEZs, till March 2005
Tax revenue collections: China -Only selective tax incentives provided
India - Across-the-board tax holiday given to companies
Overall economic success: China -Shenzhen very successful, but at least two SEZs have
failed
India - Largely unsuccessful so far
Ease of land acquisition: China - Land battles in some areas
India - Bloody, bitter resistance
Will there be displacement and loss of livelihoods?
Estimates show that close to 114,000 farming households (each household on an average comprising five members) and an additional 82,000 farm worker families that are dependent on these farms for their livelihoods will be displaced. In other words, at least 10 lakh (1,000,000) people who primarily depend on agriculture for their survival will face eviction. Experts calculate that the total loss of income to farming and farm worker families is at least Rs 212 crore a year. This does not include other income lost (for instance, of artisans) due to the demise of local rural economies.
The government promises "humane" displacement followed by relief and rehabilitation. However, historical records do not offer much hope on this count: an estimated 40 million people (of whom nearly 40% are adivasis and 25% dalits) have lost their land since 1950 on account of displacement due to large development projects. At least 75% of them still await rehabilitation.
Almost 80% of the agricultural population owns only about 17% of the total agricultural land, making them near landless farmers. Far more families and communities depend on a piece of land (for work, grazing) than those who simply own it. However, compensation is being discussed only for those who hold titles to land. No compensation has been planned for those who don't.
Will SEZs create jobs?
The growth of employment in the entire organised sector since the inception of the reforms in 1991 has been negligible. Total employment in the organised sector is still less than 3 crore. Even in IT and ITES, boom areas of the economy, employment is less than 0.15 crore (60% of SEZs are for IT). The Indian labour force is estimated to be 45-55 crore. Thanks to growing automation, modern manufacturing grows joblessly around the world (in India, automobile production has grown rapidly, while employing less labour than before). With more automation, organised services also require limited supplies of labour. SEZs will attract modern industry and services in order to succeed. To that extent they are unlikely to generate too many jobs. Moreover, the few jobs that will be generated will be for highly skilled labour, usually not available in the countryside -- from where working people are being displaced to make room for SEZs. Kamal Nath's claim that SEZs will create 30 lakh jobs within a few years is a fantasy: those many jobs have not been created in total since the inception of the reforms in 1991! The government does not provide information on jobs lost, only on jobs created.
Further, if the experience of existing SEZs in places like Noida (or Shenzhen, China) is anything to go by, the working conditions -- poor wages, non-existent benefits, long working hours, occupational hazards, discrimination, etc -- under which people will be employed will inevitably violate human rights, apart from keeping the benefits of growth away from the poor.
Are we moving towards new corporate city-states?
Many SEZs, like the Mahamumbai SEZ (to be built by Reliance Industries), will be like mid-sized cities, over 100 sq km in area (the size of Chandigarh). There will be no elected local government. A government-appointed development commissioner will govern the SEZ with the main aim of facilitating economic growth. SEZs have been declared "public utilities" under the Industrial Disputes Act, making collective bargaining and strikes illegal. Infrastructure like power, roads and water supply is guaranteed to investors and developers, not to the people of the region. Several lakh people may be living/working inside the SEZ. In some cases, the developer may have the right to tax the population in order to provide essential services. The constitutional tenability of private monopolies running local governments (for a sizeable cluster of the urban population) without being elected is questionable. All the non-economic laws of the land under the IPC and the CrPC would be applicable to SEZs. However, internal security will be the responsibility of the developer. Will SEZs turn ultimately into sovereign states -- treasure islands of prosperity in a sea of poverty and misery -- unaccountable to the vast majority of citizens in the neighbourhood?
Will there be loss of public revenue?
Thanks to exemptions from customs duties, income tax, sales tax, excise duties and service tax (even on luxury hotel facilities, shopping malls, health clubs and recreation centres) given to SEZs, the finance ministry estimates a loss of Rs 160,000 crore in revenue till 2010 (the ministry has also asked for capping the number of SEZs at 100. Finance Minister P Chidambaram wrote to Cabinet colleagues saying: "SEZs per se will distort land, capital and labour costs, which will encourage relocation or shifting of industries in clever ways that can't be stopped. This will be further aggravated by the proliferation of a large number of SEZs in and around metros."). The foregone tax revenue every year is five times the annual allocation for the National Rural Employment Guarantee Scheme and is enough to feed 55 million people each year who go to bed hungry every day.
Furthermore, given the concessions on import duties (not merely for the investors who will produce exportable items, but also for the developer who will not), there are likely to be foreign exchange losses (rather than gains). For the five-year period ending 1996-97 the foreign exchange outgo on imports made by units in SEZs and the customs duty forgone amounted to Rs 16, 461.58 crore against which exports of only Rs 13,563.87 crore were reported.
Moreover, these zones are exempt from sales tax, octroi, mandi tax etc on the supply of goods from the domestic tariff area (rest of India).
SEZs or REZs (Real Estate Zones)?
What are SEZs likely to become in a few years' time? According to a clause in the SEZ Act (Section 5(2)), as much as 75% of the area under large SEZs (above 1,000 hectares) can be used for non-industrial purposes.
This lacuna in the law is likely to become a loophole for the accumulation of land banks by private developers and property dealers for the purpose of real estate speculation (this explains why so many of them have been buying areas for SEZs). In fact, it may well be the case that the rationale for the above clause in the SEZ Act is the uncertainty surrounding the economic attractiveness (and ultimate viability) of SEZs. If adequate productive investment is not forthcoming, the SEZ developer can at least cash in on the land value. Conglomerates like Reliance already own upwards of 100,000 acres of land in the countryside.
Furthermore, the government has enabled Foreign Direct Investment (FDI) in real estate as of January 2007, leaving the door wide open for massive amounts of international speculative investment in property. Far from giving "land to the tiller," as the original idea of land reform had promised, the present tendency of the Indian government is to remove all ceilings on the ownership and use of land, thereby serving the interests of big business. It is noteworthy that there is no legal upper limit on the size of land area under an SEZ.
Are there legal violations involved?
The following are the main legal violations arising out of the SEZ Act, 2005:
- Violates the letter and spirit of the Indian Constitution.
- Infringes on the fundamental rights of citizens guaranteed in Part III of the Constitution.
- Relaxation/inapplicability of a number of labour laws (including those under the Industrial Disputes Act, Contract Labour Act, Factories Act, Minimum Wages Act, Trade Union Act).
- Environment (Protection) Act is inapplicable to SEZs. No environmental clearance needed.
- Violates Panchayati Raj Act (1996) for local self-government.
- Violates laws granting rights and control to adivasi communities over their land.
- Violates many international conventions on human rights.
Are there resistance movements in defence of rural lives and livelihoods?
The political landscape of India in the last 20 years presents 'a million mutinies'. In every region and state, small and large people's movements have emerged to fight the appropriation of natural resources, livelihood and survival by government and large national and international corporations. Brief snapshots of these rebellions follow:
In the south
- Struggle against Coca-Cola in Plachimada, Kerala. Coca-Cola is held accountable for water shortages and pollution in the area. The community forced the Coca-Cola bottling plant to shut down in March 2004. Spearheaded by the Coca-Cola Virudha Samara Samiti.
- Muthanga forest land struggle, Wayanad, Kerala, led by the Adivasi Gothra Sabha(AGS) and its leader C K Janu for tribal land rights.
- Farmers protest against land acquisition for the Bangalore-Mysore highway in Karnataka.
- People's struggle against mining of the Krishna river by the Reliance Group.
In central and western India
- Dalit struggle for gairan (grazing) land in the Marathwada region of Maharashtra, under the Jameen Adhikar Andolan.
- Struggle against Reliance gas lines in Sindhudurg district, Maharashtra.
- Farmers protest against SEZ in Raigad, against land acquisition by Reliance in Greater Mumbai.
- Farmers (26 gaon bachao sangharsh samitis) protest against SEZ in Raigad, against land acquisition by Indiabulls.
- Fishermen's struggle against the proposed gigantic port at Umbergaon.
- Anti-Coca-Cola agitation in Kaladera, Rajasthan, by the Jan Sangharsh Samiti.
- For over 20 years, the Narmada Bachao Andolan(NBA)has opposed big dams and displacement of people and has brought the issue of rehabilitation, justice and the ills of mega projects into the mainstream.
- Against privatisation of the Sheonath river in Chhattisgarh, the National Alliance of People's Movements, the All-India Youth Federation, the Nadi Ghati Sangharsha Samiti and the Chhattisgarh Mukti Morcha have been uniting people living along the river to oppose the move. Around 23.6 km of the Sheonath river had been sold to the Radius Water Company.
In the east
- Protests in Kashipur, Gopalpur, Kalinganagar (Orissa) against displacement.
- Protests in Singur and Nandigram (West Bengal) against SEZs
agricultural land acquisition for private industrial use and forceful displacement for corporate interest.
- Adivasi struggle in Jadugoda against uranium mining and displacement.
- People's movement against the construction of the Koel-Karo Hydro Power Project (80 km from Ranchi) under the Koel-Karo Jan Sanghathana that has stalled implementation of the project for over three decades.
In the northeast
- Struggle against the Pahladia dam in Assam and privatisation of water resources.
- People's movement in Doyang and Tongani, Assam, against forced evictions from forests.
- Struggle against the Tipiamukh Multipurpose Hydel Project in Manipur.
In the north
- Anti-Coca–Cola struggle in Mehdiganj, near Varanasi, in Uttar Pradesh.
- Struggle against privatisation of water, Delhi.
- Farmers protest against Reliance SEZ in Jhajjar, Haryana.
- Farmers' struggle against land acquisition for Trident SEZ in Barnala, Punjab.
