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A Socio- developmental perspective

“At the stroke of the midnight hour, when the world sleeps, India will awake to life and
freedom...The service of India means the service of the millions who suffer. It means
ending poverty and ignorance and disease and the inequality of opportunity...so
long as there are tears and suffering, so long our work will not be”

This was the promise made to the millions of afflicted

masses in India on the eve of Indian independence, a
promise to end tears and suffering and a promise to end
inequality of opportunity. The famed speech delivered by
Shri. Nehru allows us a peep into the mind of the man
who later charted the way of development, a path for
others to follow. When faced with the option of choosing
between promoting agriculture and the industrialization,
influenced by the western model of development that was
by then seemed booming, industrialization was opted for.

What many of us are not aware of is his remarks in reflection at a later stage in the
parliament where in he says, “I’m afraid to develop this country we should go back to the
old man” (He was referring to Mahatma
who declared a development mantra for
India i.e. development of India is in its
villages). Though, his successor Shri. Lal
Bahadur Shastri succeeded to some extent
in understanding the importance of striking
a balance between agriculture& allied
sectors and industrial development, those who followed him lacked the vision to carry it
forward.
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c u-tr a c k Over all these years, we are often made to believe that best models of development are .d o
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those that emerge in the west. We simply followed what ever that was told successful in
the west and tried to replicate it here (refers to our policy documents/acts that are
replication of acts else where in the world) or just became a ground for experiment for the
international agencies. It seems even today there isn’t much change in the way the
policies are planned and implemented by our policy planners in India with few
exceptions in some quarters of the country.

One such example of unsighted replication is promotion of Special Economic Zones. It is

said it was late commerce minister Murasoli Maran who was instrumental in chalking out
plans for the new-look SEZs in India. During his visit to China in 2000, Maran was so
impressed by the modern, hassle-free economic zones in China that he told his officials:
"Let us also make them."

What is all the fuss about SEZ?

What is an SEZ? An SEZ, or a Special Economic Zone, is like a foreign territory within a country.
An SEZ is governed by a special set of rules to facilitate foreign direct investment for export-oriented
production. SEZs are free trade zones and customs authorities do not supervise them. Minimum
bureaucracy, best infrastructure, generous tax holidays, unlimited duty free imports of raw,
intermediate and final goods as well as capital goods, typically mark these zones. Basically,
governments look to SEZs to overcome difficulties in bureaucracy and fiscal measures.

Are SEZs a new phenomenon in India? No. In fact, the first such zone in the country was set up way
back in 1965 at Kandla. But it was known then as the Economic Processing Zone. Thereafter, in 1972,
the Santa Cruz Electronic Export Processing Zone (SEEPZ) was launched in Mumbai.

Later, six more EPZs were set up at Noida (Uttar Pradesh), Falta (West Bengal), Cochin (Kerala),
Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), and Surat (Gujarat).

Have SEZs helped China to attract foreign investment? Yes. Analysts say China attracts nearly
$45 billion per year in foreign direct investment compared to India's figures of $2 billion annually, all
because of the sprawling SEZs they have set up across that country.
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government either wholly or partly with private sector participation. Generally, the government provides
land to private companies that develop the SEZs, according to rules and regulations.

How many SEZs has the government given sanction to? The Union government has cleared nearly 150
SEZs, including those of Reliance Group, Biocon, Bajaj Auto, Bharat Forge, DLF, the Adani Group and
Satyam Computer. All these companies have to complete a set of formalities, such as land acquisition.

How much land would it require to set up an SEZ? The government rule says minimum 10 hectares of
land is required to set up an SEZ. An SEZ should have a minimum built-up area of 1 lakh square metres.
More specifically, the government notification says SEZs for gems and jewellery would require a
minimum land area of 10 hectares and 50,000 square metres of built-up area, while biotech and non-
conventional energy SEZs would need 10 hectares and 40,000 square metres, respectively. Multi-product
SEZs must have an area of 1,000 hectares, while multi-services and sector-specific SEZs should have a
minimum area of 100 hectares. The processing area in SEZs would be 35 per cent.

Which all states are racing ahead to set up the SEZs? Maharashtra, Karnataka, Tamil Nadu, Andhra
Pradesh, Haryana, Gujarat, Uttar Pradesh and West Bengal are racing ahead in setting up SEZs.

Here's what's in it for everyone

Advantage to units located in a SEZ
• 100 per cent FDI allowed through automatic approval
• Sales to hinterland of India permitted with incentives on achieving positive net foreign exchange
• Sub-contracting allowed to units in domestic tariff zone
• "Public utility" status to in-zone units preventing flash strikes by workers
• 15-year income-tax exemption on export profits
• Imports exempted from customs duty and local taxes

• Freedom to retain foreign exchange earnings

Incentives to developers and co-developers
• Generation, transmission and distribution of power in SEZ allowed
• Full freedom to allocate developed plots in SEZ on commercial basis

• Income-tax exemption for a block of any 10 years in 15 years at the option of the developer
• Exemption from service tax
• Developer can import without payment of duty for the development, operation and maintenance of
SEZ
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The responsibility of every citizen in a democratic country like India is to see that his/her
Govt. policies are in tune with its commitment for sustainable and holistic development
of its masses. It is this responsibility, which allows us to critically review the whole
process of SEZs with an objective to help the governments to heed to the voices of the
voiceless that are stakeholders in the process. This section of the report critically looks at
our approach and where we actually are going wrong.

Mistake No. 1: Treatment for the causes not for roots:

The counter-argument is basically with regard to the applicability of the model in India.
China introduced such zones a quarter century ago, when it was breaking free from a
communist production system and therefore needed capitalist enclaves. Investors in
today's India do not have to seek escape from poor infrastructure and irrational labor
laws, in special zones; rather, the underlying problems should be tackled in the country as
a whole to make it investment friendly and development friendly. The government
decided that this was beyond its capacity, and plumped for the zones.

Mistakes No. 2 and 3: nullify existing systems/policies

The new law on such zones has been drafted, and the finance minister protested that
providing generous tax breaks would divert existing (or already planned) investment into
these zones. The resulting tax loss calculated is at a staggering Rs 100,000 crore (Rs
1,000 billion). Also, the new law does not give investors freedom from rigid labor laws;
that was left for each state government to decide. However, the state Govts who are in the
cat race to attract investments have obviously laid little emphasis on the labor laws.

Mistake No. 4: The cat race

The state governments, sensing big investment or because they were competing among
themselves or for other reasons, began signing up business partners for dozens of zones -
sometimes allocating prime farmland. Farmers resisted, but there is none to listen.

Off late, farmers’protests in Gujarat against the Reliance’s efforts to acquire 10,120
hectares, out of which 5720 ha. is irrigated from Hetavane dam, and large tracts belong to
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sustainability of this area, made the government to sit-up and take stock of the situation.
Then the government framed rules on how much of these zones could be devoted to
production (very little), how much to residential development (much more), and so on.
Overnight, what had begun as zones that might help exports began to look like an idea for
company towns with tax benefits, which (given the difference between the prices of
farmland and urban housing lots) would yield mega-profits to developers.

SEZ

Social & Development issues

Land issues: land grab by rich

The SEZs are under fire on many fronts. Politically, the most sensitive charge, and the
one that will probably lead to some change in policy, is that farmers are being forced to
sell their land and lose their occupations, and that state governments and developers are
profiteering. Sonia Gandhi, Congress's leader, says that agricultural land normally should
not be used for SEZs. But under India's constitution land is an issue for state
governments, not the centre.

Many of the SEZs mooted may simply be property deals. Developers hope to acquire
cheap land, put in a minimum of infrastructure and sell it. Only 35% of the land area of a
SEZ must be used for production. Even the central bank, the Reserve Bank, seems to
have suspicions, classifying loans to SEZs as “real-estate” lending, which makes them
relatively expensive.

These SEZs would be privatized and autonomous townships. Instead of mere SEZs, they
are Special Real Estate Zones. These SEZs can be used for anything from trading,
entertainment, hotels, and housing projects. The SEZs will have their own security,
operation and maintenance rules and all environmental and labor clearances vested with
the Development Commissioner of that SEZ (even a CEO of an IT company can be the
DC in case of an IT SEZ). It is nothing but creating autonomous private regions; the local
self-governments will have no authority over them. These zones would become "islands
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regional imbalances.

Land and livelihoods: Multi crore business and meager compensation

Two important issues in acquisition of land are 1. Nature of lands acquired 2. Suitable
compensations for the landowners and the communities those are dependent on them for
their livelihood. Though, after Maharashtra people’s resistance, the center has asked
states not to allot farmlands, states under intense competition to woo investors are daring
to allot them, paying a meager amount as compensation for the farmers, leaving them to
re-create their lives and livelihoods in an unknown land. Reformers may argue that they
have to forgo land for the sake of development. But do the poor land owners or farmers
get any benefit in the long run as stakeholders in such developments? What the land
owners get as compensation is just a pittance of the amount involved in the projects and
many a times lower than the actual price on the day.

The acquisition of large-scale agricultural land is a tricky game. First, it robs the right of
the landowners and second, so much of land, which was used for growing food, is
diverted and this may lead to another problem - food shortage and imbalance in growth.
Above all, allocating farm and environmentally sensitive land for SEZs is going to have
its impact on the livelihoods of all those who are dependent on it. This is more so in case
of fishing communities whose livelihood is based on ecological balance along the coast.

The economy: Duty free development of the ‘Haves’through un-limited autonomy

The fear of many economists— including some in the Ministry of Finance— is that rather
than promoting new business, the SEZs will merely attract investment that would have
been made anyway. Instead of finding fresh sources of money for its infrastructure, India
would thereby have made things worse by depriving itself of tax revenue. According to
an internal assessment of the Union Finance Ministry in 2005, the government had to
forgo about Rs. 90,000 crores in direct and indirect taxes over the next four years on
account of the SEZs.
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environment' for such operations, that is, exemption from all sorts of taxes viz: stamp
duty and registration fees, cess or levies including import-export duties, customs duties,
sales tax, excise, octroi, service tax, mandi and turnover taxes. They can import or
procure from domestic sources duty free all their requirements from capital good to raw
materials, spares, packing materials, office equipments, without any license or specific
approval. They can procure/ import goods duty free to set up the units.

In case of Maharashatra which is leading the race, most important concession is the
income tax benefit under 80 1A to developers for any block of 10 years in 15 years,
exemption for income on investment in infrastructure capital fund and the from electricity
duty for 15 years in C, D, D+ areas and no-industry districts in Maharashtra and for 10
years in other areas. They are allowed re-investment of ploughed back profits and carry
forward of losses. The units are allowed establish Independent Power Plants (IPPs), to
produce, transfer and distribute the power, fix tariffs in their own zones without any
license. The SEZ authority, the state government appointee is to 'ensure continuous and
good quality' power supply and 'adequate water supply' to the SEZs.

These units can have 100% foreign direct investment (FDI) in the manufacturing. Off
shore banking units are allowed in these areas and they are allowed 100% Income Tax
exemption on profit for 3 years and 50% for next two years. Individual investment in
SEZ too is exempt from the Income tax. External commercial borrowing up to $ 500 m.
per year is allowed without any maturity restrictions. The SEZ units enjoy freedom to
bring in export proceeds without any time limit and have freedom to keep 100% of export
proceeds in the EEFC account and to make overseas investment from it. All this is being
done at the cost of farmers for whom neither the Government nor the developers are
willing to give a decent share in the development.
Employment: Foreign land for locals as well
The SEZs have no responsibility to provide employment to the people in and around the
area. The reliance in Gujarat has earlier clarified that there would be no scope for the
employment for the local people, as most of the jobs will be skilled ones. On the other
hand, any of the labor laws and regulations will not be applicable to SEZs. All the powers
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particular SEZ and a single point mechanism in SEZs will be provided to give all
clearances and permissions pertaining to industrial safety and other regulations. The
practice of 'hire and fire' will be made easier and nobody will be allowed to conduct
inspections without prior permission of the Development Commissioner of that SEZ. For
example the Maharashtra policy aims to further exclude many services from the ambit of
the Contract Labor (regulation and Abolition) Act. And "All industrial units and other
establishments will be declared as 'Public Utility Services' under the provisions of
Industrial Disputes Act” to put an end to flash strikes by workers. In gist, SEZ
envisages to promote an environment for workers where in they would have to say
“Our’s is not to ask why, but to do or retire”.
Environment: Un-bound and not answerable
The SEZs are made free from the environmental and labor laws and they are exempted
from public hearing under Environment Impact Assessment notification. On the contrary,
SEZs are permitted to have "non-polluting industries like golf courses, desalinization
plants, hotels and non-polluting services in the coastal regulation zone (CRZ). All the
environmental clearance powers, particularly the clearances required by the state
Pollution Control Board, are vested in the hands of the Development Commissioner,
appointed for the administrative supervision and solve the problem for the SEZs. The
coastal areas and the environmentally sensitive areas are going to fall prey to land
acquisition drives of the SEZs. One such example is rich patches of mangroves which
are going to be destroyed by a Reliance project in Maharashtra.
Cultural influx: The other side of development
History of development in India stands witness to the fact that every effort made to
‘mainstream’the ‘indigenous communities’that live in the forests or along the coast have
in fact proved to be disastrous to the existence of these communities. Blue revolution is
one best example. The revolution which was intended to provide enhanced livelihood
opportunities for the coastal poor communities has proved to be otherwise. The capital
rich land lords and corporate houses flooded the remote coastal communities because of
which the communities have started exhibiting departure from its long held traditions and
cultural ethos. As a result these communities have become sources for child trafficking
and experience wide spread prevalence of HIV/AIDS.
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SEZs proposed in such areas for reasons of getting inexpensive labor for initial setting up
of the project and because of vast hectares of un-cultivated fertile land, are not going to
be different from the earlier experiences. The damage this time is expected to be much
deeper as the zones would be under exclusive control of the organized private players for
whom welfare is not an agenda.

Displacement:

Historians like Sumit Sarkar describe the SEZ policy as the "biggest land grab movement
in the history of modern India". But where earlier movements were led by the poor to
acquire land, this time round it is the rich that want to "grab" land belonging to poor
farmers. This situation is going to further exacerbate poverty of the masses and while rich
become richer, the have nots remain to be poor. Displacement, whether voluntary or
involuntary, is going to have its impact on the individuals and communities, leading to
many more social problems like forced migration.

On the other hand, economists argue that instead of new investments pouring in, the
already existing companies will simply relocate to SEZs to take advantage of the tax
concessions being offered. This would not create new jobs, they say, but merely displace
people. Displacement of these large companies leaving behind auxiliary industries will
cause un rest and un employment in the area and infrastructural facilities provided by
respective companies and governments lay waste causing additional budget for its
maintenance. On the other hand, development will be restricted to few SEZs which are
able to woo investors with best package of incentives, killing the basic policy of setting
up industries across the nation for equal development and to ensure equality in
opportunities.

Conclusion: What needs to be done?

Several organizations, agencies and political parties from both ends of the spectrum are
coming together in opposition to the Special Economic Zone program started by the
central government. And people’s resistance to SEZs has already started at Pen in
Maharashtra, where local police had to fire on the demonstrations of farmers who came
on to streets apposing acquiring farm land for setting up SEZs. The Govt. has made plans
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stake is not only the lands and rights of the affected farmers and other villagers, but the
larger canvas of the way the political economy of the nation is being usurped by the
corporate interests with the connivance of the political and bureaucratic elite. Above all
the issue is about the need to protect natural resources of the communities – land, water,
forest, sea-coast.

If Plachimada is the beginning of people’s

fierce resistance to multinational companies
for encroachment on the rights and resources
of the people, the collective resistance of
marginalized coastal poor communities in the
east coast would have to go down in the
history of people’s movements in resisting any
measures that deprive communities of their
rights and resources in promoting SEZs.

Source: SASY

As Gandhiji says, “I do not want mass production but want production by masses”, SEZs
shall have to be promoted not by corporate but by cooperatives of people. It should
necessarily be a people’s centered approach and essentially support traditional
occupations of the communities.

If we continue to pay deaf ears to the voices of the masses in rural India and refuse to see
the reality and continue to support the development models of west, then we are actually
supporting the historical mistake, a mistake that neglected a large chunk of its rural
population for which history will never forgive us. Inevitably, it is the ‘gram swaraj’
which would enable us realize our national dream that Shri. Nehru spoke of in his tryst
with destiny. It is time that we should listen to the ‘old man’to give power to the
powerless, assets to the asset less and make poverty history.