The SEZ

Political Economy of the Special Economic Zone (SEZ) in India

Ish Mishra

Introduction
Capitalism with the innate attribute of mad rush to unceasing accumulation, is a bastard system in the sense that it mans at opposite to what it says. It appropriated political power and established it self with the slogans of, Liberty, Equality and Fraternity and its theoreticians – Adam Smith &Co. – explained the historical progress as an “inadvertent consequence” of “profit seeking activities” by individuals, organized and harmonized by the “invisible” hands of the market . But the very existence and the growth of capitalism depends upon the principles contrary to its declared ones as it is the matter of common historical sense that profit can not be sought and maximized by democratic principles of equality, liberty and fraternity but just opposite to that -- by maximum exploitation, manipulation and repression. It began its journey with the declared mission of civilizing the world and disposed the peasantry in its own land; plundered the riches and the resources of the rest of the world; conducted programs of the people; grabbed their land and resources; exterminated or enslaved them. It invades and devastates Afghanistan in the name of the “war on terrorism” – an abstract enemy – while it seeks to control and regulate the extraction and passage of the Natural oil and gas resources of Central Asia. It invades and occupies Iraq in the name of the destruction of non-existent WMD – Weapons of Mass destructions – as is open secret, to control and monopolize the Oil resources of the gulf but declares to be on the mission of democratizing it. Similarly when the local agents of global Capital declare to establish Special Economic Zone (SEZ), it means Special Exploitation/Expropriation Zones, regulated by, probably, the invisible hands of the market. Adam Smith’s invisible hands, which he advertently or inadvertently tried to hide, were clearly visible to Karl Marx and Frederic Engels, the activist intellectuals, who did not seek just to “interpret” the world” but also to “change” it. The SEZ kind of developments can be better understood in the context of innate character of Capital to increasingly and unceasingly accumulate and expand and the proposed SEZs are the latest, easiest and cheapest instrument of accumulation and expansion. Over 160 years ago, Marx and Engels wrote in their celebrated pamphlet, the communist Manifesto: “The need of constantly expanding market for its products chases the bourgeoisie over the whole surface of the glob. It must nestle everywhere, settle every where, and establish connections everywhere.”

The issue of the Special Economic Zone (SEZ) in India, as the new mantra of India’s future rise as a potential economic power along with China has become the focal concern and the focus of discussions in political and intellectual circles, particularly after the incidents of forced eviction of peasants and subsequent peasant movements against the expropriation of agricultural land, which have been generally under reported in the media. The Nandigram, that has become the hall-mark and the reference point for such anti-land grab movements, which has witnessed a mayhem since the West Bengal Government’s forcible acquisition of agricultural land. Death of 14 protesters and injury to hundreds in police firing aided and abetted by CPI (M)’s lumpen brigade on the14th March 2007 on the orders of the Marxist Chief Minister, Buddha Deb Bhattacharya, committed to the “development of West Bengal”, has deepened the debate. The violence unleashed by the state power and the armed lumpen brigade of CPI (M) – comparable to private armies in the neighboring state in Bihar

In 1965 the first Export Processing Zone (EPZ) was started at Kandla, Gujarat. So far there are only 14 EPZs in India. Very little is heard about their contributions to promoting Indian economy so far, except for the wage slavery for workers there and the riches made by a few out of them. Now with WTO calling for opening up trade in all its forms and extending liberalization in all fields including the land, a policy was introduced on the” fool’s day” (April 1) in 2000 by the Bhartiya Janta Party (BJP) led NDA government of for setting up of Special Economic Zones – SEZs – as foreign territories, in the country with a view “to provide an internationally competitive and hassle free environment for exports. Units may be set up in SEZ for manufacture of goods and rendering of services. All the import/export operations of the SEZ units will be on self-certification basis. The units in the Zone have to be a net foreign exchange earner but they shall not be subjected to any pre-determined value addition or minimum export performance requirements. Sales in the Domestic Tariff Area by SEZ units shall be subject to payment of full Custom Duty and import policy in force. Further Offshore banking units may be set up in the SEZs. The policy provides for setting up of SEZs in the public, private, joint sector or by the State Governments. It was also envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones. Accordingly, the Government has converted Export Processing Zones located at Kandla and Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special Economic Zones approved for establishment at Indore (Madhya Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur have since commenced operations .

In 2005 general elections parties and faces in the government changed but not the policies. Montek Singh Ahluwalia has been a common agent of influencing India’s Political Economy in favor of imperialist globalization during the regimes of various hues since 1991. The Commerce Minister Kamalnath announced to start almost 650 Special Economic Zones (SEZs) by 2007 with a target to touch a record 1,000 in few years and a bill for SEZs -- Special Economic Zone (SEZ) Act, 2005 -- was moved in the Parliament in early 2005. It was passed unanimously in both houses of parliament within two days and got signed by the president in a few days. It was expected that such a bill which is going to affect the future of agriculture and of those dependant upon it for their livelihood, the whole rural sector, land use, employment generation, urbanization and the pace of its expansion and other aspects of the social fabric, would be properly deliberated and debated. However, the fact that both houses passed it within two days of its presentation shows the “convergence” of interests among all the parliamentary parties on the issue and has compelled democracy-loving, sensitive Indians to introspect upon this perturbing matter..


Imperialism is not a policy matter of or aberration in capitalist development but innate in it, only the form changes. Capitalism that began with primitive accumulation by expropriation of agricultural land, proletarinization of peasantry and colonial plunder, traces its theoretical roots of liberalism in European Renaissance. With neo-liberalism, the history has taken a full turn and capitalist development has resorted to expropriation of agricultural land for industrial/commercial/real estate/SEZ purposes with the help of the governments that follow the dictates of displaces the peasants from their land who swell the ranks of surplus labor power. In the present neo-liberal phase of capitalism, SEZs are the cheapest and surest tool of imperialism.

European Renaissance was not the “rebirth” of classical antiquity. “Rebirth” is a myth. It was not the rebirth but the reconstruction of the society with the nostalgic memory of the classical antiquity, according to the needs of the new social forces that had matured in the womb of decaying feudalism. It announced the emergence of a new era which witnessed the emergence of a new species of hero – the hero of finance struggling to get money making included in the circle of virtues, even if on the periphery. This new hero proved to be very smart. In less than 150 years time it became the hero and moved from periphery to centre. The 17th century ideologue of this hero, John Locke declared in unambiguous and categorical terms, “governance is a serious matter; it can be entrusted with only those who have already proved their worth by amassing sufficient wealth.” Their demand for freedom and equality was interpreted as universal equality and liberty and which eventually led to universal franchise and territorial-national universal citizenship and establishment of representative democracies, dictatorship of proletariat and their reversal into capitalism. This paper seeks to look into the political economy of SEZ as a technique of the latest stage of the imperialist capitalism and the erosions of citizenship rights of people working in and outside these “foreign territories”. The details of fiscal & revenue implications due to various tax and tariff exemptions, subsidies and other incentives to SEZs constitute the subject matter of separate discussions. The country-wide intensification and radicalization of the popular resistance against the land grab by the state for SEZ estate is also the subject matter of separate discussion.



The Context:
The villagers apprehend the death toll in Police firing to be much higher than the official claim. It continues to be in news with unearthing of many charred bodies from the area, reports of many missing persons, rapes and tortures and its pervasive countrywide opposition that forced the West Bengal government to withdraw the notification of acquisitions of agricultural land there for the notorious Indonesian MNC, Salim Group and seek for the alternative site for the proposed chemical hub and the Central Government to hastily constitute an empowered Group of Ministers (eGoM) to suggest revisions in the SEZ provisions. The recommendation of the eGoM have suggested some superficial changes notable among them being reduction in the minimum and maximum area for a SEZ and removal of the role of states in land acquisition, which has been opposed by the CPI(M) ideologues. Reports of many fact finding teams and the reactions of CPI (M) leaders have been well publicized and are matters of separate debates. But the claim of CPI (M) leaders that the opposition to land acquisition is “handiwork of reactionary forces aided and abetted by TNC, BJP, Congress and the Naxals reflects the political bankruptcy of a party in power for three decades. According to Sumit Chakrabarty, the editor of The Mainstream, who was a member of the fact finding team, BJP, YNC or Congress had negligible support base in the area and the Naxal groups were almost absent. For a long time the area has been a strong hold of CPI and the CPI (M). Majority of activists in the movement are former CPI (M) and CPI cadres and supporters . The Communist Party of India (Marxist) [CPI (M)] led left front government despite opposition by some of the constituents of the front, has expressed its determination to go ahead with the plan of creating the SEZs at any cost. As is clear from the on-going protests, their radicalization and wide ranging support from various sections, like the peasants’ of Kalinganagar the peasants of Nandigram also are determined to hold on to their stand of “no-displacement” any cost. In fact there have been stiff resistances against the land acquisition all over the country that remain under reported in the media . The gravity of the seriousness and the genuineness of the issues involved at Nandigram generated tremendous and pervasive support cutting across various social cross-sections, political parties, civil society organizations, democratic rights groups and intellectuals all over the country in general and in West Bengal in particular. There are reports of dissentions and confusion among the rank and file of the party. Many eminent leftist intellectuals including the prominent economist Ashok Mitra came out openly in support of Nandigram peasants. Uproars were witnessed in the West Bengal Assembly as well as in the Parliament on the issue. And the CPI (M) leaders had to take a hundred and eighty degree turn and were compelled to announce the withdrawal of the land acquisition notification, though reluctantly . Now the leaders of CPI(M) are pointing out many lacunas and inadequacies in the SEZ Act, one fails to understand the hurry to begin the land acquisition for Salim Group without redressal of its objections? Dumping the opponents to its anti people policies by the CPI (M) leadership as reactionaries and Maoists reminds of Indira Gandhi’s authoritarian regime to brand all the political opposition as CIA conspiracy or a Naxal plot, against which the CPI(M) had joined hands with the RSS.

Who is Salim?
Salim is God-son of the Indonesian dictator General Suharto who usurped power in 1965 from the elected President Sukarno and put him under house arrest and massacred over a million communist activists in one of the most gruesome carnages besides thousands been left to die in unpopulated islands of the archipelago turned into prisons and their bodies thrown into the sea. In his three decades of rule he opened the country for imperialist loot and in collaboration with MNCs himself looted the country’s wealth and turned his son Salim into a mafia king and his company into an MNC. When the Indonesian people eventually overthrew Suharto regime Salim, who had important role in killing thousands of communists along with his criminal gangs, fled the country. The army with elements loyal to Suharto protected his wealth and companies. When Sukarnoputri became President he was caught and was in jail for some time. But with the appropriation of political powers by military Generals through a farcical election, he was releaser and his company flourished with investments in many countries and an office in Kolkata enjoying the most favored MNC status accorded by the CPI (M) leadership. The reasons for out-of-way favor by a “communist” chief minister to a murder of communists needs to be investigated.



The CPI (M) ideologues aided an abetted by its propaganda brigade are justifying the governmental decision in the name of he law and order, using Marxist and Leninist jargons, creating the confusion of the contexts by juxtaposing of 19th century England and early 20th century Russia over 21st century India. Probably for such Marxists of his time Marx had pejoratively said that “thank God! I am not a Marxist”. The ongoing debate in Marxism since the time of Marx himself on the peasants’ question has been documented by Himanshu Roy in his book Peasant in Marxism . History never repeats itself. As a philosopher of the Greek antiquity had rightly said that every thing in the world is in continuous state of change and flux and that the only constant is the change itself. History does not repeat itself, it only echoes. The creation of “foreign territories” within the country under the SEZ Act 2005 echoes the creation of fortified enclaves in the costal regions by various – French, Dutch and English East India Companies – in the costal regions of the country. It appears that history has taken a full circle. But much water has flown down the Bay of Bengal. Capitalism and innately linked imperialism has made multiple advances since then. Then under the leadership of English ruling classes the imperialism was on the “civilizing mission” in the “savage world”. Now the savages have probably been civilized and the “savage world” has become the “third world”. Now Imperialism under the leadership of American ruling classes is on “developing” the “undeveloped” and “developing worlds” and in its latest avatar of globalization has become so powerful that now there is no need of any Lord Clive, all the Sujauddaulas have turned into Mir Zafars.

Facts and Figures

The first SEZ was set up in Ireland around 1940

More than 130 countries now have SEZs/FTZ (Free Trade Zones)s or similar bodies

There are approximately 400 SEZs in the world presently

Today’ concept of SEZ is derived from 1980s Chinese models. Chinese SEZs have the largest area, volume of transaction and employment.

China has a total of 6 SEZs

India has already approved 265 with many more in the offing with an eventual target of over 1000






What is happening under this project is the biggest land grab since 1947. The draconian Land Acquisition Act, 1894 is utilized for this land grab. At present for the already sanctioned SEZs a total of 125,000 hectares of prime agricultural land are being acquired. The next phase involves almost same area. In Punjab where almost entire area is irrigated and under d even violating the SEZ Act double crop or more, land is being acquired despite the growing resistance against the displacement even violating the SEZ Act. Against this already farmers are agitating in Barnala and Amritsar. In Himachal Pradesh about 35,000 hectares in Kangra Valley is planned for an SEZ. In Jhajjar in Haryana near Delhi, 10,000 hectares of double cropped land, larger than Gurgaon, is taken over for SEZ. In Mangalore, Karnataka, 2200 hectares of double and triple cropped land is being taken over for setting up SEZ. In Orissa at Gopalpur land was originally acquired by state government for a paltry sum and handed over to Tata for a steel plant. But the plant did not come up and farmers wanted the land back. There Tata is building SEZ. 1600 hectares handed over to POSCO to build a steel plant is also converted into SEZ. The pattern of land acquisition for the SEZ boom is almost similar all over the country .
The Chinese Experience:
Though Kamalnath repeats about China’s SEZs, he is resorting to Goebelian methods. So far in China only six SEZs are set up—Shenzhen, Shantou, Xiamen, Zhuhai, Hainan and Pudong. These are all built in public sector and mostly in waste lands. Though under reported, yet that too did not go unopposed. These export centered Special Economic Zones were established by brutally suppressing the peasants’ protracted massive resistance with more intensity than the suppression of students’ movement for socialist freedom in 1989. Chinese students’ movement, which coincided with the bi-centenary of the French Revolution in chronological terms, though subject matter of a separate discussion, was essentially a resurgence of the “hundred flowers” principle of the Cultural Revolution . Major protests and opposition against the working conditions in these SEZs are still taking place.
China's phenomenal growth has been attributed to its single minded (or mindless) pursuit of export driven SEZ policies and the success story has driven Indian think tank towards this mad rush. It is true that export-driven policy for economic growth has helped China touch record growth figures creating the bourgeois illusion of Wealth of Nation [Adam Smith]. But the fall out is more alarming as along with increasing unemployment, the income gap is widening and rapidly approaching the levels of some Latin American countries. As per the recent report by the Chinese Academy of Social Sciences, China's Gini coefficient – a measure of income distribution where zero means perfect equality and 1 is maximum inequality – touched 0.496 in the year 2006 where figure for India is 0.33, for US is 0.41 and for Brazil is 0.54. And even the rural-urban income divide is staggering .The annual income of city dwellers in China is around US $1,000, which is more than three times that of their rural counterparts . The massive unemployment, widespread corruption and crime in China’s ruling establishments have been intimate companions and part and parcel of China’s rise as Economic Giant through liberalization and privatization. To compete with the capitalist countries in the world market on their terms, Chinese leadership began to dismantle the systems of state ownership and socialist values immediately after the Mao’s death beginning with the campaign against The Guilty Four. Post Mao CPC leadership’s choice for capitalist path anticipated the demands of corporate led globalization and also anticipated the advocacy of capitalist growth by veteran CPI (M) leader Jyoti Basu who was the Chief Minister of West Bengal for over two and a half decades and incidentally is a father of a capitalist son. In the Chinese Path of Development, even the CPI (M) General Secretary, Prakash Karat can seek justifications for his comical utterances terming the left intellectuals opposed to Nandigram kind of development as Norodniks. A conversation with a scholar of Chinese Studies who visited China during the period of Cultural Revolution and again in last decade of the last century, summed up the changes in following words: “Earlier there were no sky- scrappers and no slums, now there are both”. The slums are the logical corollary of sky-scrappers. The revolutionary achievements of socialist reconstruction of society through socialistic reconstruction and Cultural Revolution of Mao era, instead of being consolidated, were frittered away for the vested interest and lack of vision of the post-Mao CPC leadership.
China began the process of attracting foreign capital in the 1980s by implementing a series of measures and policies with the sole purpose of achieving rapid economic growth at any cost and consequently paid heavy price in terms of interest of the Chinese people in general and the cause of socialism for human emancipation. The mindless pursuit of growth has lowered the efficiency and effectiveness of economic policies, besides the irreparable ideological losses, huge resource wastage and devastating environmental and ecological implications.
The Chinese experience offers a valuable lesson for India. Chinese path to land grab exercise has not been smooth and “voluntary”. It has pauperized the millions of its rural population. China has to feed 22 percent of the world's population on only 7 percent of land. it can not afford to embark on such an aggressive pursuit of land garb. In July 2005, according to Chinese Minister Li Xuju quoted in the People’s Daily, China's countryside had over 26.1 million people living in absolute poverty . During 1996-2005, "development" caused diversion of more than 21 percent of arable land to non-agricultural uses, chiefly highways, industries and SEZs. Per capita land holding now stands at a meager 0.094 hectares. In short span of time from 1992 to 2005, twenty million farmers were laid off agriculture due to land acquisition. The rampant protests against land acquisition were brutally crushed, especially in the provinces of Guangdong (south), Sichuan, Hebei (north), and Henan. Guangdong has been worst affected. In 2004, the government admitted to 74,000 riots in the countryside . Environmental devastations are irreparable. Shenzhen, Chinese dream model of economic growth, after growing at a phenomenal rate of around 28 percent for the last 25 years, is now paying a huge cost in terms of environment destruction, soaring crime rate and exploitation of its working class, mainly migrants. Foreign investors were lured to Shenzhen by cheap land, compliant labor laws and lax or ineffective environmental rules. In 2006, the United Nations Environment Program designated Shenzhen as a 'global environmental hotspot', meaning a region that had suffered rapid environmental destruction. According to a report, China consumed 4.3 times as much coal and electricity as the United States and 11.5 times as much as Japan to generate each US$1 worth of GNP. More than 50,000 disputes over environmental pollution occurred in 2005, and 97.1 percent of all environmental mishaps involved the release of pollution. Water contamination made up 50.6 percent of the total accidents. Almost 40 percent of environmental accidents involved air pollution. The accidents collectively caused up to 105 million Yuan (about 13.1 million U.S. dollars) in direct economic losses. "This environmental problem has become one of the main factors that affect national safety and social stability," according to Pan Yue, deputy director of the State Environmental Protection Administration (SEPA). Around 20 per cent of the population lives in severely polluted areas and 70 percent of the rivers and lakes are in a grim situation. Around 60 per cent of companies that have set up industries in the country violate emission rules


Some Features of SEZs in India
• SEZ for gems & jewelry, IT-ITES-BPOs and bio-technology would require a minimum 10 hectare of built-up area. (Later notifications said that the land-area may be reduced to 40,000 square meter or 4 hectare in special cases). Multi-product SEZs must have an area of 1,000 hectare, while multi-services and sector specific SEZs should have a minimum area of 100 hectare. (1 hectare = 2.5 acres, approximately).
• Only in India, the task of developing SEZs is totally transferred to private hands. In other countries these tasks, in most of the cases, were performed by the government itself.
• The processing area in SEZs would be mere 35%`! In the remaining 65% housing projects, hotels, restaurants, hospitals, amusement centers, multiplexes, malls, playgrounds, golf courses can be built!
• SEZ will be a duty-free enclave and considered foreign territory within the state. If you buy goods from an SEZ, you have to pay import duties. Example: Reliance industries set up a new refinery in Jamnagar (Gujarat) that “could end up ‘exporting’ bulk of its output in India” .
• Generally, the government will provide land to private companies that develop SEZs. Thus, SEZ developers will have access to precious land at throwaway prices (with the help of government muscle), cleansed of all title and litigation issues.
• There will be no elected local government/civic authorities. A development commissioner will govern it.
• So lucrative are the tax-holidays & other concessions offers in these SEZs that there are strong possibilities of older units to relocate in the SEZs to avail the bonanza. Even Rahul Bajaj one of the leading industrialists has publicly expressed such apprehensions.
• There are 6,500 companies located in 47 Software Technology Parks (STPs) all over India enjoying fabulous tax-breaks and are making super-profits from export-earnings. Now Nasscom, the national association of the software companies want SEZ status for these STPs! The craze may be explained from the following facts: “So much so, that of the 237 proposals given final clearance so far, 148 (i.e., 62%) are for setting up IT SEZs. Further, of the 160-odd proposals given in-principle nod, about half are from this sector.”
• In these SEZs all the units/enterprises will be declared as ‘public utilities’ where existing labor laws do not act. Among other drawbacks, SEZs will not be subject to any town planning or supervision by the municipality, thus negating the 75th Amendment of the Constitution which ensures people’s participation in local government.
• What is most worrying in the SEZ Act is Section 49, which empowers the government to exempt any or all SEZs from the operation of any central law through a notification. It puts SEZs, theoretically at least, outside the pale of the Constitution.
• After all, the world over, SEZs are set up precisely so that they can avoid the rigidity of domestic laws and rely on smoother functioning without bureaucratic hassles. The rub here is that the SEZs are being developed by the private sector. India is, perhaps, the only country to have promoted private SEZs — or at least in such numbers. Fuelling the popular distrust is the speed at which the zones are being approved by the Ministry of Commerce. Around 20-40 on an average are being cleared every other week, bringing the tally so far to 263, plus another 169 that have got in-principle approval .
• And, there is also the Godzilla factor — the sheer size of some SEZs. Although these are small by global standards, some have the making of a mega enterprise. Reliance Industries’ twin block in Mumbai is scheduled to cover 14,000 hectares or 140 sq. km. This may be just a third of China’s Shenzhen economic zone (326 sq. km), but large enough to throw up some discomfiting questions in the Indian context. For reference, Jamshedpur, the steel city run by the Tatas, is just 64 sq. km and Chandigarh’s real estate, including its rural periphery, adds up to just 112 sq. km. More to the point, Reliance expects to house one million residents and play host to two million others who would commute daily to their SEZs.
• The question, therefore, is what happens when large SEZs eventually become townships whose population could run into millions. There is, to start with, the constitutional tenability of private monopolies running local government for sizable cluster of the urban population without being elected. Would the SEZs thus, turn into sovereign states like the British East India Company in 18th-19th centuries, accountable to none? Or, would there be some checks and balances?
• What the law lays down is an SEZ Development Authority (SDA) headed by the developer’s representative and run by a development commissioner (DC) appointed by the state government — a super bureaucrat vested with enormous powers. Since SEZs are being designated industrial townships by the status, the DC would work independently with no municipality or the third rung of governance to oversee his functioning.
• All functions undertaken by the civic authorities and some of those provided by the state government (water supply, tax collection, law and order) would devolve on the SDA. Several states have laid down detailed norms for the SDA. From providing birth and death certificates, maintaining cremation/burial grounds (all municipal functions listed in 12th Schedule of the Constitution) to laying out public streets, building bridges and culverts, and fighting epidemics, everything lies in SDA’s jurisdiction. The Act does not spell out provisions of penalties for dereliction of duties. Unlike Municipalities
• Unlike municipality, the developer is not obliged to provide services to all the inhabitants in “his territory” and there is no mechanism for the redressal of their rights to basic amenities. In fact given the profit centered development, it is doubtful whether the corporate developers would be able to or interested in providing such services?
• There are other pertinent and disturbing issues regarding governance and citizenship rights such as law and order and judicial process. For external security, as is being done in various states, irrespective of the color of the ruling party/coalition, the respective states shall provide the Police protection but the internal security shall be absolutely the prerogative of the developer. The SEZs shall also be provided with a separate fast track judicial system to save the foreign investors from any inconvenience. The government of India shall decide the location of designated courts – inside or outside SEZs.
Concessions and Incentives for the SEZ Enterprises
I am not a student of economics or financial management, so do not understand the jargons and intricacies of budgetary provisions, fiscal/non-fiscal revenue system but a glance through the provisions of Subsidies/Incentives to SEZ Enterprises is astonishing.
Non-fiscal Incentives/Concessions
• Exemption from industrial licensing for manufacture of items reserved for Small Scale Industries (SSI).
• 100 per cent FDI investment through automatic route to manufacturing SEZ units. Facility to realize and repatriate export proceeds within 12 months and no cap on foreign investment for SSI reserved items.
• “Write-off” of unrealized export bills up to 5%.
• No License is required for imports, including second hand machineries.
• Profits allowed to be repatriated freely without any dividend balancing requirement.
• Full freedom for subcontracting, including subcontracting abroad.
• The area incorporated in the proposed SEZ is free from environmental restrictions.
• Water, electricity and other services would be provided as required and the units would be given full exemption in electricity duty and tax on sale of electricity for self generated and purchased power. They shall also be allowed to allow generation, transmission and distribution of power within the Special Economic Zones.
• Single point clearance system and minimum inspections requirement under State Laws/Rules would be provided. For units inside the Zone, the powers under the Industrial Dispute Act and other related Labor Acts would be delegated to the Development Commissioner and that the units will be declared as a Public Utility Service under Industrial Dispute Act.
Fiscal Incentives
• 100 per cent income tax exemption for a block of five years, 50 per cent tax exemption for two years and up to 50 per cent of the profits ploughed back for next 3 years. Supplies from Domestic Trade Area to SEZ to be treated as export.
• 100 per cent Income-tax exemption for 3 years & 50 per cent for 2 years for off-shore banking units.
• Exemption from Central Excise duty on procurement of capital goods, raw materials, and consumable spares, etc., from the domestic market.
• Reimbursement of Central Sales Tax paid on domestic purchases.
• SEZ units may import duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment etc. for implementation of their project in the Zone without any license or specific approval.
• Exemption from service Tax to SEZ units.
• Exemption from State sales tax, octroi, mandi tax, turnover tax and any other duty/cess or levies on the supply of goods from Domestic Tariff Area to SEZ units.
• Enhanced limit of Rs 2.4 crores per annum allowed for managerial remuneration.
Subsidies/Incentives Given to SEZ Developers
• Developer of an SEZ may import or procure goods without payment of duty for development, operation and maintenance of the SEZ.
• Income-tax exemption for a block of 10 years in 15 years at the option of the Developer.
• Exemption from Service Tax.
• Investment made by individuals etc. in SEZ developing companies eligible for exemption under Section 88 of the Income Tax.
• 100% FDI allowed for (a) townships with residential, educational and recreational facilities on a case to case basis, (b) franchise for basic telephone service in SEZ.
• Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs.
• Developer may transfer infrastructure facilities for operation and maintenance.
• Generation, transmission and distribution of power in SEZs allowed.
• Full freedom in allocation of space and built up area to approved SEZ units on commercial basis.
• Authorized to provide and maintain services like water, electricity, security, restaurants and recreation centers on commercial lines.
• The area incorporated in the proposed SEZ is free from environmental restrictions.
• The water, electricity and other services would be provided by the government as required.
There are more dramatic examples of SEZs being granted most favored nation status. Environmental clearance is one. State governments are promising developers and their clients a quick, trouble-free process by exempting industries from the environmental impact assessment (EIA). This is normally a cumbersome exercise, but essential for understanding how to minimize the adverse impact of development on the environment. Now, some states have decreed that environmental approval will be given by the development commissioner of the SEZs in consultation with an officer of the state pollution control board posted in the zone .
Land Grab under SEZs
The Act says that the Central Govt., the State Govt. or any individual can singly or jointly establish a SEZ. The minimum area for various types of SEZ is provided for in the ‘SEZ’ rules. But there are no rules governing the maximum area. There is no ceiling on the maximum size or area of an ‘SEZ’, nor any indication of the maximum number of SEZs in the country. The Act provides that an SEZ can be established for export oriented production: export oriented production of services: free trade & warehousing. The SEZ rules clearly prescribe the minimum amount of land to be provided for, for various types of SEZs. However, under the Act, the developer is not required to specify which of the above purposes that particular SEZ is for, while making the proposal. Another joke is that when the Central or State Government forwards the proposal of any person, as a “developer” to the Approval Committee the Act does not require that the land upon which the SEZ is to be constructed be in the possession of the developer. The Act only requires the developer to identify the area. The present provisions also provide that if the developer does not have enough land in his possession to reach the minimum limit for the SEZ then the Central Government can still grant approval to more than one developer for the same SEZ. This means that at one level the mere “identification” of the land suffices, whereas at another place it is required that the land is actually in possession. Further, the law does not specify in the rules prescribed for SEZs what is the minimum area of land required to be with the developer (either in the form of ‘identification’ or in the form of actual possession) at the time of making his proposal. The law is also silent about what exactly has been done by the developer or is required to be done by him when he makes the ‘identification’ of the land. In fact, the Act ought to have imposed a condition that the necessary land (or at least some minimum area) must be in the possession of the developer when he makes the proposal for an ‘SEZ’ since the “identification” of the land is a vague and hazy concept or category. . Under the Land Acquisition Act 1894, the Government is at liberty to compulsorily acquire land from the land-owner for any ‘public purpose’ but whether the establishment a SEZ can be called a ‘public purpose’? The developer who puts forward the proposal for an SEZ is only the acquirer of the land and the provider of basic services and utilities to industrialist on this acquired land. Further, there is no assurance that even these services or utilities will be provided by the developer since the Act allows him to take any other person or corporation as a ‘co-developer’ for this purpose.
Manipulation of Acquired Land
The developer will only give land to the industrialists on hire for the above purposes in the SEZ that he proposes. The benefits of the basic services and utilities to be provided in the SEZ area will only be available to the industries and businesses operating there. The vast masses will receive no benefits at all since an ID card is required to even enter an SEZ. When the state governments are acquiring land for SEZs on the basis of their being for a ‘public purpose’ the relationship between an SEZ and ‘public purpose’ is not direct but remote. Hence, issuing notices under the Land Acquisition Act for acquiring land for private development — and that too without specifying in the said notices as to for whom and for what purpose the said land is to be acquired — when the relationship between the idea of an SEZ and public purpose is remote at best — is clearly illegal.
Connected to this is yet another fundamental question. What if a certain developer acquires some land for an SEZ but no industrialists come forward to put up industries in that SEZ? The SEZ Act does not say anything about what use the land is to be put to or in what manner it is to be put, in such an extreme case. It is clear that the developer who has bought the land or taken it on installments will not allow any other person to enjoy that land in any manner whatsoever. In this situation, what will be the future of that land? The Act imposes a condition that at least 35% (now 25%) of the land should be used as the “processing area”. Supposing that sufficient industries producing goods and services do not come forward to take up the land in a particular ‘SEZ’, there is no guiding principle in the Act as to how the surplus land should be used by the developer. This is yet another result of the fact that the relationship between SEZs and ‘public purpose’ is not direct but remote.
Contradiction between SEZ and Non-SEZ Areas
A new contradiction is going to be created in the country between industries within an SEZ and industries outside SEZs. Due to the various tax concessions given to industries in an SEZ naturally, their competitiveness will be greater than other industries functioning all over the country. Thus in competitive market conditions – both nationally and internationally – industries functioning outside of SEZs will find it difficult to survive and will naturally be clamoring for their relocation within SEZs. There is thus the danger that the already existing unevenness of industries and businesses based upon regions and zones, will grow even stronger. As a result it is obvious that the problems that we face today due to regional disparity will take on an even more aggressive form. Basically, we have to seriously consider whether the creation of a distinct geographical entity is essential if the aim is to increase exports and to increase India’s share in the world market by encouraging exports. Why then should the Government not give the same tax concessions to export oriented units functioning anywhere in the country, which are given to industries in an SEZ?
The Employment and Labor Laws:
One of the biggest casualties of SEZ is the procedure of employment and labor laws and is subject matter of separate discussion. However a glance at the issue is necessary. As the units in the SEZs are to be export oriented, hence their first priority is to maintain the competitiveness of their goods at what they consider to be a high level. The competitiveness of their prices increases by keeping down the cost of production of their goods and services. Hence it is to be expected that units within an SEZ will use labor-saving, capital-intensive technology to bring down their costs of production. The issue of whether labor laws are applicable in an SEZ or not will be besides the point if these units decide to take a stand of employing workers and staff only on a contract basis since most labor laws do not apply to contract labor at all. Hence, in practice, the provision to make labor laws applicable to units in SEZs has little meaning. We must therefore be circumspect about the claims of the media that we are losing out on a chance for a large-scale employment generation or that the opposition to the conception of SEZ is significantly narrowing the path of employment generation down. The same media which emphasizes the massive loss of jobs due to the opposition to SEZ never publishes the figures of how many peasants have been turned into destitutes due to the acquisition by the Government of agricultural land.
Peasantry Devastated:
Devastation of peasantry and dangers to the country’s food security are again the subjects of separate discussions. No doubt the Government will give some compensation to the peasants whose lands will be taken away. But who can pay for the efforts that human beings has invested in making the land cultivable? We must not forget that the loss of cultivable land does not come under any head of compensation.
SEZ as Foreign Colonies
The SEZ, deemed to be “foreign territory” would badly hamper the citizenship rights of the Indian people within their own country, depriving them of their fundamental rights imbued upon them by the Constitution. The most controversial issue concerns the provision of identity cards to those who want to enter an SEZ those who live there or the workers who work there. We can understand the condition of producing and ID card when entering the premises or building of a private company. However, the imposition of an ID card to visit a whole geographical area is clearly a violation of the fundamental right to the freedom of movement guaranteed to every citizen of India under the Constitution. This provision of the SEZ Act is clearly unconstitutional. Even before independence we had removed the need of ID cards to enter establishments. Now, in independent India, to enforce it for entering and moving around on a part of the country, is surely a new form of colonialism. This too is a matter of separate discussion.
Next problem arises in case if no industrialist shows any interest in starting the new unit, in such extreme conditions land will be kept unused. Then what is the fate of this land? The rules say that developer must use 35% areas for processing .If the 35 % also is not utilized? If manufacturers or the service sector does not show any interest? In that situation how developer is going to develop the land? In such situation there are no guidelines for the use of land. The relation between new established SEZs and public service sector is unclear or remote. This is the indicator of this realty. As regards to acquiring the land for SEZ , nothing is mentioned in SEZ Act. This issue
Opposition to SEZ
I would not go into the details of the anti-SEZ movements, protests and discussions going on all over the country that also is subject matter of a separate discussion. Heroic struggle of the Nandigram peasants and its brutal suppression by a government is well known. The victory of Nandigram movement, though short term and temporary needing consolidation, has become inspiration for the anti-displacement movements in India. On the first anniversary of the martyrdoms of 13 peasant protesters, killed on 2nd January in Police firing while resisting the land grab by the government for Tata’s, thousands of people of various social groups from across the country, across the political spectrum and anti-displacement movements showed solidarity with the heroic struggle of Kalinganagar peasants and vowed to link all the anti displacement movements with the anti-SEZ movement. The Kalinganagar and Nandigram have become inspirations to all the anti-displacement movements.
So the message is laud and clear. Mushrooming of SEZs will not deliver the desired goal of “export promotion” but would make a heavy dent on the India’s ex-chequer and people’s democratic rights as Indian citizen. The ruling class parties of India instead of looking into the pro-people models of development without or with minimum displacement are acting as the agents of the imperialist globalization. In the inconclusive conclusion, we find that SEZ Act is a short circuit into people’s rights. Millions displaced people shall be turned into destitute and the “foreign territories” is a cheap and effective tool of corporate led imperialist globalization. Hence those who are concerned with human dignity and national sovereignty must oppose the SEZ and support and/or join the movement against displacements by the people all over India and debate over the alternative models of development in place of displacement oriented development.

More than 140 SEZ’s have been planned in country. In Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Nodia (Uttar Pradesh), at Indore ( Madhya Pradesh ) Positra (Gujarat), Navi Mumbai and Kopata (Maharashtra), Nanguneri (Tamil Nadu), Kulpi and Salt Lake (West Bengal), Paradeep and Gopalpur (Orissa), Bhadohi, Kanpur, Moradabad and Greater Noida (U.P.), Vishakhapatnam and Kakinada (Andhra Pradesh), Vallarpadam/Puthuvypeen (Kerala) Hassan ( Karnataka), Jaipur and Jodhpur ( Rajasthan) on the basis of proposals received from the State Governments.

FARMERS STRIFE AGAINST LAND ACQUISITION UNDER RELIANCE SEZ FOR GREATER MUMBAI

On June 22, a few Mumbai-based Marathi newspapers carried the news of the demonstrations of hundreds of farmers against the land acquisition by the state government for the Reliance Company for a 10,120 hectare Special Economic Zone (SEZ). The farmers in the obscure Pen tehsil in Raigad district Maharashtra took a strong protest rally of almost 4000 farmers against Reliance SEZ on 21st, that curbed by police lathi charge on the rally which was a response of stone throwing by some miscreants and damaging the property. Later it was found that, that was not done by the protesting farmers.

“The Reliance Company managed to create disturbance in the peaceful meeting of hundereds of farmers and our process of presenting objections to the Land Acquisition notices to the officials. The company is nervous about the growing resistance by the farmers for usurping their productive land and therefore trying to use the police to crush the movement" told Arun Shivkar, of Pen Panchkroshi Sheti Bachao Samiti (Pen area Committee for save the farmland).

The villagers now know fully well they are pitted against the formidable adversary – the giant Reliance, which has just obtained 25,000 hectares land for its own SEZ in Haryana, already took the governments in Uttar Pradesh, Gujarat and Maharashtra and even the so called the Left wing government of W. Bengal. It is spreading its wings in textiles, power, contract farming, medicinal herbs, sugar industries and retail stores. They realize that the Company has enormous sway over the political, bureaucratic establishment and the media. This company has been given the largest SEZ in the 45 villages in Pen-Panvel-Uran area, in the name of the activities like manufacturing, trading, services, processing, logistics, repackaging, warehousing etc.

"There is no question of increased compensation for the land – we just do not want to give our land to the Reliance," that was the spirit of the meeting held on June 24-25, hosted by the Samiti and the NCAS, at Bardawadi near Pen. The meeting, attended by various organizations in Konkan region along with the representatives of NAPM, People's Political Front (PPF), and Shoshit Jan Andolan resolved to intensify and widen the struggle against the SEZ, by involving the affected people in other parts of Maharashtra and India. A detailed campaign against the Reliance's money power and the SEZs as a whole was planned-

1. A week long Padyatra to show resistance to the proposed foreign autonomous territory in farmers land
2. A daylong hunger protest and rally with meeting with various officials
3. Lobbying with state and national groups and with political party representatives

The people's movements from various parts of the country under the aegis of the NAPM, in the recently held Bangalore convention, have decided to take up the issue of the SEZ and mobilize the nationwide resistance to the creation of the SEZ. The organizations made it clear that the issue at the stake was 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. They resolved to protect the natural resources of the communities – land, water, forest, sea-coast; oppose the violation of the laws and regulations and the sovereignty of the people.

This is one of the 27 approved SEZs in the state out of 53 proposed, both by the private parties (13) and the Maharashtra Industrial Development Corporation (MIDC, 11). There are other 17 SEZs that are to be given approval (11 private and 7 MIDC). These SEZs are part of the more than 140 SEZs that are earmarked in almost all the parts of the country. With this one stroke of SEZ Act, the corporate powers have cornered exemptions from almost every tax, while getting the services of water supply, electricity, usurping the natural resources, distorting the constitutional sovereignty of the people.










According to the Union government's handout, the SEZ is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purpose of trade operations, duties and tariffs. In 2000 the Government of India formulated the SEZ policy and in 2005 the SEZ Act was made. It came into force from February 10, 2006


Some Specific Features of SEZ-
 The SEZ should have a minimum area of 1000 hectares and at least 35 % of the area is to be earmarked for developing industrial area for setting up of processing units.
 Minimum area of 1000 hectares will not be applicable to product specific and
 100% FDI allowed for:
(a) townships with residential, educational and recreational facilities on a case to case basis,
(b) franchise for basic telephone service in SEZ.
 Income Tax benefit under (80 IA) to developers for any block of 10 years in 15 years.
 Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs
 Exemption from Service Tax /CST.
 Income of infrastructure capital fund/co. from investment in SEZ exempt from Income Tax
 Investment made by individuals etc in a SEZ co also eligible for exemption u/s 88 of IT Act
 Generation, transmission and distribution of power in SEZs allowed
 Full freedom in allocation of space and built up area to approved SEZ units on commercial basis.
Authorised to provide and maintain service like water, electricity, security, restaurants and recreation centres


FARMERS PROTEST IN RAJGURUNAGAR AGAINST MIDC SUPPORTED BHARAT FORGE

In only Pune district more than seven SEZ has been approved out of 27 in Maharashtra. These are mainly private sectors zones and the developers are varied e.g. Syntel International, Serum Institute, Mahindra Realty, Bharat Forge, City Parks, Raheja Coroporation, Hiranandani and Xansa India, etc.

One of this is Bharat Forge limited, for which the land would be acquired from 16 villages like Gulani, Wafgaon, Wakalwadi, Warude, Gadakwadi, Chaudharwadi, Chinchbaigaon, Jaulake Budruk, Jarewadi, Kanesar, Pur, Gosasi, Nimgaon, Retwadi, Jaulake Khurd, Dhore Bhamburwadi and Pabal.

The 7,500 hectares agriculture and non-agriculture land has been identified by MIDC. On which most of the land is under cultivation by Maratha, other backward and Adivasi communities. Their major crops are potato, onion, sorghum, jowar, rice, flowers and pulses. Village youths are engaged into agriculture and allied industries by running their own businesses like poultry, milk collection, pig raring and Shahamrug farm. Nevertheless, people’s livelihood is dependent on farming activities dependent on monsoon rain and irrigation by well. Their demand for water, drinking and irrigation, from the Chas-Kaman Scheme, is pending for a decade unheard by the same government which has proposed land acquisition today for Bharat Forge. Electricity for irrigation is a far distant dream for people of Gulani, the largest village among all proposed for land acquisition.

There has been a drinking water scheme which is about 35 crore’s investment but due to the lack of maintenance it is not in use. Even though this area comes under the Bhima River basin and surrounded by small watersheds, Dhimbhe Dam, Kukadi and Chaskaman Irrigation scheme.

On this background to oppose SEZ project farmers and local people’s representatives have constituted a Khed Taluka Purva Vibhag MIDC Virodhi Kruti Samiti (Anti Land Acquisition Committee from East Khed-Wafgaon and Gulani Village) under the chairmanship of Mr. Rajusheth Jawalekar, Wafgaon. Many people have been involved in this committee like Kisanrao Garde, Sudamrao Karale, Dadasaheb Rode, Sitabai Ranpise, Bhalchandra Rode, Kaluram Pingale, Balasaheb Sutar, Ashok Jare, Santosh Karale etc. All these people are Sarpanch and member of Grampanchayat and Taluka Panchayat. Their larger aim is to stop the land acquisition and cancel the SEZ resolution, which is disturbing their socio-economic and cultural life.

Their previous experience of earlier projects has made them wise enough to oppose this SEZ project because ‘once one looses the land, it looses the bargaining power’, as this had happened incase of previous projects e.g. Chakan International Airport project. On 11th July, 2006 more than four thousand people gathered to protest (Morcha) against Bharat Forge SEZ at Rajgurunagar-Khed Tehsil Office. They submitted a memorandum to tehsildar Vijaya Pangarkar demanding that MIDC-SEZ should be cancelled. Their major demands were
1. Water for drinking and irrigation, support to the agriculture-allied activities and support to small business.
2. Complete the work of drinking water scheme and Gulani percolation tank at the earliest.
3. Save the agriculture land from the MIDC and SEZ project.

The farmers have warned to government officers that they will fight against SEZ unless and until it gets stopped the survey and entire project, the Gram Sabha’s have passed resolutions to this effect. They would rather increase the agriculture production qualitative and quantitative for exports if government provides only waters to them.