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Mainstream, Vol XLV No 19

SEZs : Modern Enclaves to Reward Capital by Exploiting Labour and Displacing Livelihoods in the Agrarian Economy

Friday 4 May 2007, by Byasdeb Dasgupta, Sunanda Sen


The Special Economic Zones (SEZs) have received a lot of attention in the neo-liberal agenda for industrialisation and development. In India the issue has currently been a matter of public concern and intense debates, primarily on the question of land acquisition and the displacement of the agrarian community as results therefrom. We would like to draw attention in this note to one more aspect of the current SEZ policy in India which affects the status of labour employed within these Zones. The arguments we provide are based on a recent field study we conducted in three major SEZs in India. The findings confirm a state of severe insecurity in terms of job contracts, income and other labour status for those employed in these highly subsidised and growth-oriented enclaves of SEZs. We would like to bring these aspects of labour exploitation in the public domain of debates and policy-making as aspects which are of no less concern.

As it is documented in several other studies and in official documents, the SEZs are devised as conclaves meant to attract capital-—both domestic as well as foreign—by providing benefits which are exclusive to those operating within these Zones. It needs to be mentioned here that SEZs are different and more extensive than the earlier patterns with Export Processing Zones (EPZs) in India. In a landmark legislation passed in April 2000 the Indian Government replaced the EPZs by the SEZ scheme. This was followed up by the enactment of the SEZ Act in 2005 that started functioning in 2006. Similar laws were also enacted by the State governments to take care of the State subjects as come under the purview of the SEZs. The policy provides for setting up of SEZs in the public, private, joint sector or by State governments.

Armed with the incentives offered to the multiple stake-holders in these projects, the scheme is expected to draw capital in these areas. Benefits to various partners in the implementation include the profits of the developers which also include the state, numerous tax concessions and flexible labour norms availed of by the occupant enterprises in these zones. The goal was to attract capital, both domestic and foreign, offering the most convenient terms over a long period, without any obligation as existed earlier in the EPZs in terms of export commitments. Units set up in SEZs can be for manufacture of goods and rendering of services. Even offshore banking units may be set up in the SEZs. All import/export
<> operations of the SEZ units are on self-certification basis, that is, not through the Customs Departments. While units in the Zone have to be net foreign exchange earners these are not subject to any pre-determined value addition or minimum export performance requirements. As an indirect incentive to exports as a more desirable form of activity, sales in the domestic tariff area by these SEZ units are subject to payment of full custom duty and other aspects of import policy as are in practice. The SEZs are thus deemed to be foreign territory for the purposes of land occupation, trade operations, duties and tariffs. These can be treated as equivalent to subsidising foreign exchange inflows with multiple channels of concessions, not only on export earnings but also on direct foreign investments from abroad. This replaces the earlier forms of export subsidies as had been tried in India, both direct and through the concessions to the EPZs. One does not, however, understand why India needs to still subsidise exchange earnings when the official reserves seem to be more than comfortable and managing the balance of payments is no more a major concern!

To speed up the process of establishing the SEZs in the country, the government has already converted seven EPZs into SEZs. As of 2007, more than 500 SEZs have been proposed, 237 of which have been cleared by the Central Government over the past year. The pace has been fast with the rush to acquire land in different parts of the country (including in Orissa, West Bengal and Goa among others). These have been met with resistance, both at the local and national levels which makes it all the more important to place these moves under public scrutiny.

resistance, both at the local and national levels which makes it all the more important to place these moves under public scrutiny.


IN India at the present juncture the creation and multiplication of SEZs can be criticised for the following two reasons:

First, on the ground that fertile agriculutural land is being converted into SEZ at subsidised rate. This involves the sale of fertile agricultural land to developers to create the SEZs (often around 2000 acres on an average) which use only a fraction of the land acquired for setting up industrial plants. The rest are used for property development for residential and other purposes. The land aquired is at a subsidised rate which is given as compensation to the landowner and is far less than the market price. Now, in the case of agricultural land, apart from the landowner there are several catergories of people whose livelihood centres around the same plots of land as are transferred. These include the tenant farmers or sharecroppers, agricultural labourers and many others who earn a living by providing services in different forms. Land-conversion in a massive scale also affects the livelihood of these people in the countryside. These are the aspects which at the moment have raised a lot of concern and public protests in the country.

Second, we also need to pay attention to the mode of labour deployment in these zons which have serious implications in terms of labour security. In the SEZ labour can be deployed with a far greater degree of exploitation since the labour laws of the land are not applicable within these Zones. This brings us to the claim that the creation of SEZs will create some five lakh jobs in the country. With 60 per cent of the approved SEZs in the IT sector, one cannot expect much rise in the job opportunities for the unskilled. Hence it is unlikely that the creation of these units would mean a lot of jobs for those agriculturists (including the people around as mentioned above) who part with their land, and which till today remains as the means of subsitence as well as a source of security and social status for them. As for the workers who are currently employed in these units, the conditions of work provide a rather dismal picture relating to their status as labourers.

We provide below some data which is based on a series of field surveys we conducted in three SEZ units of India which include Santacruz-Mumbai in Maharashtra, Noida in UP and Falta in West Bengal during 2004 and 2005. Following the method in a recent ILO study which is based on the data base for 100 countries for 1990 and 1999, along with 15 household surveys in these areas, we tried to use our field survey data to construct some indices of the labour security level for workers in the respective Special Economic Zones. In general the value of the index is based on the response of workers to specific questions in our questionnaire (as yes/no). A higher value of the index indicates a better status while the maximum value of the index is naturally at 1.

Spelling out the different components which determine labour security in the Indian context the following seven aspects seem to be relevant:

Employment security which ensures tenured employment with protection from unwarranted dismissals in terms of hire and fire strategies. The issue of employment security becomes particularly relevant in the context of the opening of domestic markets under globalisation which brings in changes in technology, labour laws as well as shifts in demand—all of which contribute to uncertainty. The latter often is shifted to labour in terms of job prospects within the country.

Income security ensuring minimum wages which is in conformity with the local cost of living index. It also entails payment of bonuses and other job related remunerations including medical benefits. Facilities of on-the-job skill-formation can also be counted under this head. All these contribute to secure the current status of labour.

Security at workplace to provide insurance against accidents, payments against illness and overtime and protection of women in night shifts. These also contribute to secure the present status of labour.

Job security ensures tenured employment with protection from unwarranted dismissals in terms of hire-and-fire strategies.

Security in terms of representative voice of workers with the right of trade unions to protest. This is concerned with both the present as well as the future status of labour.

Security in terms of support from family and community which often is negatively impacted by labour migration, income disparities and aspiration gaps and poverty in general.

Financial security, which provides an average worker, in terms of savings, possession of bank accounts and any other financial asset that is used in an emergency. This is especially in the absence of the social security net for workers.

In addition to above, labour security can also be affected by work security (hours of work, ESI benefits. PF etc.) which generally are either abent or scarce in the case of the SEZ workers a majority of whom are normally hired on a purely temporary basis as casual workers. We arrive, by combining all the indices, at a composite labour security index for each area, with the following score table:

0.75-1.00: very high
0.50-0.75: just above average
0.25-0.50: critical
0.00-0.25: worst.


WE provide, in the three tables in the following pages, the results of our survey relating to the Zone-specific profiles of workers we interviewed in the three SEZs. The findings are self-explanatory in terms of the precarious nature of their existence and survival strategies.

The decimals relate to the value of specific indices.

As revealed by the tables provided here, despite the opportunities offered by the SEZs in terms of job openings and better terms of work, the state of working conditions and the level of security availed of by the workers seem to be at a critically low level. Do the new Special Economic Zones envisaged in the current drive for industrialisation promise a better future for workers who would be fortunate to get jobs?

We do not, however, deny the virtues of rapid industrialisation and the need to provide sustainable jobs in a country like India where 70 per cent of people are still living on farming and related activities and about one-third or more of the population are without the means of bare subsistence. We can look into the experiments by China where the earliest of these SEZs was founded by the Government of the People’s Republic of China <> under Deng Xiaoping <> in the early 1980s. This was in Shenzhen <> , the most successful SEZ in China as a flourishing business centre. Following the Chinese example, Special Economic Zones have been established in several countries which now include India <> , Iran <> , Jordan <> , Poland <> , Kazakhstan <> , the Philippines <> ,Russia <> , and Ukraine <> . Currently, the Puno <> region in Peru <> has been slated to become a “Zona Ecomomica” by its President Alan Garcia <> . According to the World Bank estimates, as of 2007 there are more than 3000 projects taking place in SEZs in 120 countries worldwide.

The examples of SEZ models from China, a developing country similar in terms of population density, provides added incentives to policy-makers in India to launch a massive industrialisation policy by inviting FDI and domestic capital to areas set up as SEZ units. It is, however, important to keep in mind the problems China is facing in terms of regional disparities and other ills as have arisen in the process. Four of these aspects need to be pointed out in any comparison drawn between China and India in terms of the SEZ policy:

First, that the historical experiences of the two countries have been very different. These include the socialist experiments, especially with widespread access to education, health etc. in China in the past which contrasts with the vast illiteracy and mass impoverishment in India, both in the colonial past and at present. Second, that the Chinese state has more authority over its people, both in terms of ignoring/suppressing protests and their articulation via the media. This contrasts with what is found in India, thanks to the democratic form of government which at least creates the space for protests and dissidence. It is thus far more difficult for the Indian state (as compared to what it is in China) to go against the tide of public protests, as voiced by the concerned people. Third, the working class in urban as well as in rural China may still receive some benefits, not only as an implicit unemployment benefit from employers in State owned Enterprises (when workers are laid off) but also with reasonable access to food and shelter. One needs, however, detailed field work to arrive at any conclusive evidence on these aspects. It does not require similar research to find the contrast in India where poverty surfaces and overshadows the sparkles of the new found prosperity. Fourth, the success story of industries set up in the SEZs of China is explained not just by the incentive schemes or by cheap labour. A considerable part of the above is also due to the hidden subsidies offered to industry in terms of the cheap and easily available infrastructure facilities provided by the state. The Indian state is still far behind in offering these facilities.

India’s drive towards industrialisation by setting up a large number of SEZs in different parts of the country needs a rethinking. Unconditional benefits to capital as are offered to these privileged Zones along with the sanctions to expropriate labour on a legal basis while making space for these huge landscapes by displacing the agrarian community open up the need to revisit India’s current industrialization policy.


1. See among others, Aradhana Agarwal, “Special Economic Zones : Revisiting the Policy Debate”, Economic and Political Weekly, November 4, 2006.

2. See also for a recent assessment by the media, “Development vs Displacement”, Hindustan Times, New Delhi, March 26, 2007.

3. See for details the report titled “Political Economy of Labour under Globalisation: A Study of Organised Labour in India’s Manufacturing Industry” by Sunanda Sen and Byasdeb Dasgupta (mimeo 2006).

4. See for the method as well as for an application of the notion of labour security in a wider context, ILO, Economic Security for a Better World, 2004. See for the conceptual aspects, Guy Standing, Global Labour Security—Seeking Redistributive Justice, Macmillan Press, London, 1999, pp. 51-53.
The points made in this section are based both on published material and a recent field trip in China by one of the authors and discussions with participants in an international conference organised by the Chinese Academy of Social Sciences in Tianjin in 2006. While it is not the intention of the authors to provide this note as an exhaustive bibliography on China studies, the following may be looked at in support of the arguments in the text.
Sriram Natarajan, “Inter-Provincial Disparities in Rural Peoples’ Livelihood: An Empirical Assessment (1980-2004)”, China Report, 42: 3, 2006.
Huang Ping, “Uneven Development and Rural-Urban Migration in Recent Years”, CASS, 2005.
CASS (ed.), “China Model or Beijing Consensus for Development”, Social Science Academic Press, 2006 [in Chinese]. Articles by Samir Amin, Sunanda Sen,
“China Copes with Globalisation: A Mixed Review”, A Report by International Forum on Globalisation, 2006.
“UN, China in a Globalised World”, 2005.
Sunanda Sen, “China in the Bull Shop”, in Gary Dymski and Bagchi edited volume (forthcoming from Tulika in 2007). Also a Bangla version in Manab Mukhopaddhyay and Moinul Hasan (eds.), Chin, Punashcha, Kolkata, 2007.

Table 1: Profile of Workers in Mumbai Santacruz SEZ
Number of Labourers 22 25 47
Industries Code at 2 digit level as in
Annual Survey of Industries data
22, 25, 27, 28, 29, 31,32, 36 17, 22, 24, 25,27, 29, 31, 35, 36
Average Age (Years) 29.45 31.28 30.43
Wage (Rs. per month) 5395.45 4158.00 4737.23
Working hours per person 9.00 9.00 9.00
Union membership (%)*+ 36 0 17
Experience (Years) 4.18 3.16 3.64
Minimum wage level *(%) 45 24 34
Skill (%)* 0.82 0.80 0.81
Special training (%)* 0.55 0.36 0.45
Migration (%) * 0.45 0.36 0.40
Education (Years) 11.27 10.84 11.04
Average number of earning members
per household
1.55 2.40 2.00
Asset holding (%)* 18 12 15
Composite Security Index 0.53 0.37 0.45
Income security 0.50 0.23 0.35
Employment security 0.72 0.45 0.57
Job security 0.68 0.74 0.71
Work security 0.74 0.64 0.69
Skill security 0.58 0.40 0.48
Voice representation Security 0.15 0.00 0.07
Financial security 0.33 0.21 0.27
Family support security 0.55 0.30 0.41

*All percentages relate to persons interviewed in the specific zone.
+While unions are formally not permissible in these areas, workers seem to participate, in an informal capacity, in trade unions which have recently come up.

Table 2: NOIDA Special Economic Zone
Number of Labourers 8 9 17
Industries Code 18, 24, 31, 36 18, 25, 27, 28, 36
Age (Years) 30.50 25.33 27.76
Wage (Rs. per month) 2978.00 1900.00 2407.29
Working hours 9.00 9.00 9.00
Union membership (%)*+ 0 67 35
Experience (Years) 5.88 0.61 3.09
Minimum wage level (%) 25 0 12
Skill (%) 100 33 65
Special training (%) 0 0 0
Migration (%) 100 89 94
Education (Years) 10.13 8.22 9.12
Average number of earning members per household 1.63 1.67 1.65
Asset holding (%) 0.88 0.67 0.76
Composite Security Index 0.45 0.33 0.39
Income security 0.50 0.06 0.26
Employment security 0.50 0.50 0.50
Job security 0.31 0.50 0.41
Work security 0.50 0.30 0.39
Skill security 0.67 0.33 0.49
Voice representation Security 0.22 0.33 0.28
Financial security 0.63 0.37 0.49
Family support security 0.28 0.28 0.28

* All percentages relate to persons interviewed in the specific zone. . The decimals relate to the value of specific indices.
+While unions are formally not permissible in these areas, workers seem to participate, in an informal capacity, in trade unions which have recently come up.

Table 3 : Falta Special Economic Zone
Number of Labourers 17 26 43
Industries Code 19, 21, 25, 31 19, 21, 25
Age (Years) 31.47 30.88 31.12
Wage (Rs. per month) 3092.71 1919.04 2383.05
Working hours 9.18 10.04 9.70
Union membership (%)*+ 29 50 42
Experience (Years) 5.06 4.27 4.58
Minimum wage level (%) 41 12 23
Skill (%) 100 96 98
Special training (%) 24 0 9
Migration (%) 47 8 23
Education (Years) 10.06 7.77 8.67
Average number of earning members per household 1.24 1.08 1.14
Asset holding (%) 6 15 12
Composite Security Index 0.47 0.30 0.37
Income security 0.45 0.07 0.22
Employment security 0.71 0.48 0.57
Job security 0.32 0.13 0.21
Work security 0.59 0.39 0.47
Skill security 0.71 0.37 0.50
Voice representation Security 0.10 0.18 0.15
Financial security 0.27 0.13 0.19
Family support security 0.57 0.65 31.12

* All percentages relate to persons interviewed in the specific zone. The decimals relate to the value of specific indices.
+While unions are formally not permissible in these areas, workers seem to participate, in an informal capacity, in trade unions which have recently come up.

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