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Volume XLIV, No.51

Special Economic Zones - Neo-Zamindari zones?

by S.G.Vombatkere

Tuesday 24 April 2007

Special Economic Zones (SEZs) are not a new concept, but the scale and speed and the socio-economic ambience in which these are being created are entirely new. Economic Processing Zones (EPZ) existed in India and SEZs are reportedly a tremendous success in China , starting 1979. But in present-day India, there are growing sections of the population across the country that are protesting, the position is rapidly hardening, and the “E” in SEZ is being seen to stand for “exploitation” or “exclusion”. Of 267 SEZs approved, 41 are in Maharashtra from where, predictably, the maximum resistance is coming.

The Commerce and Industry Ministry’s proposal of SEZs aims to generate economic activity and promote export of goods and services, promote domestic and foreign direct investment (Rs 1000 crores expected within end-2007) and create employment (500,000 jobs). All this, through development of suitable infrastructure for the SEZs, without prejudice to the sovereignty, integrity and security of the Union of India. Exemptions from 21 Central Acts concerning cesses, taxes and duties for products such as rubber, oil, tobacco, sugar, tea, salt, mica, coffee, etc., modifications to the Income-Tax Act and amendments to the Insurance, Banking Regulation and Stamp Acts provide the fiscal concessions and simplify procedures expected to enhance competitiveness. World-class infrastructure within SEZs will provide the necessary “climate” for profits.


The sections that are opposing SEZs are invariably the poorer sections, mostly from the farming community since the land required for SEZs is almost entirely from agricultural land, with the reason of loss of livelihood and certain destitution. The Finance Ministry has also opposed SEZs but only for the reason that the tax holidays proposed for entrepreneurs and developers will result in revenue loss of Rs 1,75,487 crores in a four-year period for an investment of Rs 3,60,000 crores, in an economy that is already suffering from reduced revenues due to globalisation pressures. This does not include revenue losses by States. Given the corrupt tax enforcement structure, it is doubtful whether the government will be able to or care to distinguish new investments that are eligible for tax breaks from transfer (or flight) of old investments to these tax havens to illegally avail tax breaks. The experience of Chinese SEZs is that corporations that had operated successfully and made huge profits, wound up and left when the tax holiday ended. There is every chance that this will happen in India, leaving India and Indians to bear the losses. Sadly, all these objections are after Parliament passed the Special Economic Zones Act in 2005, with hardly any debate.


The main reasons for opposition to SEZs are: First, the fact that SEZs will be at the cost of the agricultural community. Only about 20 per cent who own land are entitled to compensation, while 80 per cent are landless labour who lose out from day one and will be condemned to live out the rest of their lives in city slums. It does not call for the skills of a rocket scientist to calculate that the compensation money for a two-acre farmer, even if entirely invested in bank, will provide him an income less than the BPL level of “$ 1 per day”, and can never compensate for loss of livelihood. The jobs that SEZs may provide will be for construction labour for the duration of infrastructure construction and thereafter, jobs for people who have qualifications and work experience in the particular business of the corporation; these cannot be offered to farmers who know nothing other than farming. Thus, lives of the agricultural community are sacrificed for the benefit of shareholders in corporations—this is transfer of wealth from the poor to the wealthy by bleeding the poor. The second reason is that SEZs are enclaves within which the ordinary laws of the land do not apply. The SEZ Act is a law that exempts itself from or supervenes over older laws listed in the First Schedule. Even environment protection provided for will be over-ridden. Thus, an SEZ is “another India ” walled from the real India from where resources will be sucked and waste disposed, where the employer will always get his way whether with labour or environmental pollution. With only 25 per cent of the land required to be used for “economic activity”, the rest can be developed for residential and commercial purposes, and developers and entrepreneurs can live an exclusive, luxurious life in a widening ocean of poverty and deprivation.

A votary of SEZs ( S. Srinivas in “Social Engineering through SEZs”) in a recent (October 2006) issue of Vijay Times says: “Apart from providing land for entrepreneurs, the government should form settlements for the landless poor … in SEZs” and “… drastic socio-economic changes can be effected by forming settlements for the depressed classes in the SEZ”. With none of the laws that protect labour in India (recently made more toothless, thanks to globalisation) being applicable in SEZs, these settlements will amount to nothing less than slave labour colonies in a neo-zamindari system.

When the government pleads lack of funds for necessities that affect ordinary people such as drinking water (60 per cent of Indians have no assured source), sanitation (70 per cent have no toilet facility), education (schools without blackboards, single-teacher schools, single-room schools, schools without roofs, teachers without schools and schools without teachers, etc.) or primary health care (inadequate and failing government hospitals and expensive multi-speciality hospitals), it is small wonder that ordinary people, and especially losers of land, resent loss of revenue that should provide these necessities, so that wealthy corporations may benefit. The compensation given to farmers for land (again noting that only around 20 per cent own land) will be made up manifold by developers by re-sale to entrepreneurs and others with dollar bank balances for constructing luxury residences and shopping malls. SEZs are therefore being branded as corporate land grabs with government connivance. No prizes are offered for guessing which lobby initiated and saw the SEZ Act through Parliament.

Creation of SEZs can only lead to speeding up the growing socio-economic polarisation and increasing existing political and social unrest. It appears to be beyond the understanding of the corporate class that they cannot progress in the long run by leaving behind a vast majority—such is blindness of greed. Attempts of the state to acquire land have met with resistance, and protestors have been ruthlessly subjected to corporate-sponsored police action, especially in Maharashtra. This has only served to increase the frustration, anger and suspicion about the state machinery being the agent of the corporates, and has shaken the faith of affected people in the state apparatus. This can lead to militancy and worse.

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