SEZs = land grab

SEZs : AUTHORIZED LAND GRAB?
Urban Development Consultant, Prakash M Apte expose on the SEZ scam

A national Act was introduced in April 2000 for setting up of Special Economic Zones in the country to provide an internationally competitive and hassle free environment for exports. Units could be set up in SEZ for manufacture of goods and rendering of services. The units in the Zone have to be net foreign exchange earner but not subjected to any minimum export performance requirements! Special Economic Zones are deemed to be foreign territory for the purposes of trade operations, duties and tariffs. As of 2007, more than 500 SEZs have been proposed, 220 of which have been created. This has raised the concern of the World Bank, which questions the sustainability of such a large number of SEZs.

The Act violates the right to life and livelihood of people, who are being forcibly displaced for implementation of projects, The principle of “eminent domain,'' which is the basis of the Land Acquisition Act (1894), is being misused and even given priority over the principles in the 73rd and 74th Amendments of the Constitution that give primacy to gram sabhas as autonomous decision-making entities. The status of `deemed foreign territory’ being granted to the SEZs further undermines the sovereignty of local governance systems. However, what is really horrific is the concentration of power in the hands of the Development Commissioner at the State level who are the Bureaucrats subservient to their political masters who in turn are controlled by the big industrialists.

The logic claimed for creating a special economic zone is to offer infrastructure and other facilities that cannot be provided quite so easily across the country as a whole. This would mean assured electricity, good transport links and more flexible labour laws. The crucial element that justifies making special provisions for infrastructure and relaxing labour laws is the additionality factor. In other words, the investment that comes into a special zone should be over and above what would have taken place in the normal course. The danger is that, if the primary attraction of an SEZ is the tax benefits that are offered, The SEZ can become a tax-dodge, India already has tax loopholes of many kinds, and does not need to add another one. The cost of providing tax exemptions (according to the statement of the country’s Finance Minister) is substantial, Rs 158,000 crore.!

The zones themselves are often too small--as little as 100 hectares. (except where large tracts of land close to metropolitan areas like Mumbai or Navi Mumbai are being acquired as these are highly lucrative real estate development propositions) For some special kinds of industries (software, bio-tech, gems and jewellery) the minimum size has been reduced to 10 hectares--which is little more than the size of an industrial plot. Providing quality infrastructure in such a small area can have no real meaning. No transport advantages would exist and the electricity generated within the SEZ will be by a medium-sized diesel-generating unit. Instead, why not declare every large factory in the country as a special economic zone? Possible, but that would rob the PBT combine of generating huge kickbacks when private industrialists forcibly acquire huge tracts of land and pay compensation to small farmers who for generations have known no other occupation than farming and agriculture!

The SEZ ideas that worked in Communist China don’t quite translate so well in Democratic India. China first set up some SEZs in the late 1970s in southeastern China, with an eye on luring dollars back to the motherland from compatriots in Hong Kong, Macao and Taiwan. The SEZs were vital to the development of China’s export machine. But what has been the cost to China? Will similar cost not be applicable to India also?

China has to feed 22 percent of the world's population on only 7 percent of land. In July 2005, China's countryside had over 26.1 million people living in absolute poverty and was home to 18 percent of the world's poor, according to Chinese Minister Li Xuju quoted in the People’s Daily. Every year, an additional 10 million people have to be fed. Despite this daunting target, between 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 just thirteen years, between 1992 and 2005, twenty million farmers were laid off agriculture due to land acquisition.

SEZs like Shenzen in Guangdong showcasing the economic miracle of China, are beset with problems. After growing at a rate of around 28 percent for the last 25 years, Shenzen is now paying a huge cost in terms of environment destruction, soaring crime rate and exploitation of its working class, mainly migrants. In 2006, the United Nations Environment Programme designated Shenzen as a 'global environmental hotspot', meaning a region that had suffered rapid environmental destruction. Shenzen sky is thick with choking smoke, while the crime rate is almost nine-fold higher than Shanghai.

While export-driven policy for economic growth has helped China touch record growth figures, the income gap is widening and rapidly approaching the levels of some Latin American countries. Going by a 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. In comparison, income inequality figures are 0.33 in India, 0.41 in the US and 0.54 in Brazil. Further, the rural-urban income divide is staggering – annual income of city dwellers in China is around US $1,000 which is more than three times that of their rural counterparts.

There is no doubt that exports play a significant role in boosting GDP. However in the case of India, with a sizeable domestic market, the choice lies with the producer to either export or supply to the domestic market. Household consumption in India at 68 percent of the GDP is much higher than that of China at 38 percent, Europe at 58 percent and Japan at 55 percent. This is an important source of strength for the domestic manufacturing industry of India.

In India with 65 percent of the population depending on agriculture as a means of livelihood, industry ought to be complementary to agriculture. Through SEZs however, industry is being promoted at the cost of agriculture. Valuable resources spent to create SEZs will be at the cost of building better infrastructure for the rest of the country. Creating so many SEZs would seem to exacerbate widening inequality in India – both in terms of individual income and national infrastructure.

The SEZs are being granted approvals, with no single mention of studies being carried out on social environment impact and damage. India is already going through a crisis in terms of water scarcity as well as loss of forests and biodiversity. The costs of loss of forest and other common lands, large scale exploitation of water resources, coastal land, and environmental pollution are not even being computed.'' The very legislative framework of SEZs makes it a draconian Act that promotes large scale privatization and monopoly of resources in the hands of a few private developers at huge costs to the State exchequer as well as the economy and environment. This is nothing but Authorized Land Grab to benefit private developers and get huge kickbacks for the PBT combine!

The impact of this liberalization on urban development will be,
a luxurious habitat for the rich resulting in:

Destruction of environment and ecological balance,
Paucity of land for agriculture, horticulture and vegetable farming, making these commodities scarce for city dwellers,
Displacement of large Adivasi population which may migrate to cities adding to slums,
Deforestation resulting in climate changes,
Increased vehicular traffic to existing cities from these townships for work, recreation, higher education and medical facilities,
Serious imbalances in the urban economy leading to crime and lawlessness.

Not for a moment should one imagine that this impact is not comprehended by those in power! On the contrary that is what is the purpose of this liberalization, to create more problems or accentuate existing ones making life miserable in the urban areas so that the politicians can initiate, Bureaucrats can programme and Technocrats can prepare blue prints to undertake new projects like flyovers, metro rails, sea links, multistoried housing, that will generate an eternal source of kickbacks for the PBT combine!

(excerpts from a Paper submitted by the Author for the West Zone Conference of the Institute Of Town Planners India, at Navi Mumbai, India November 2007)