SEZs
For The Rich,
Poor To Bear The Brunt
By Arun Kumar
13 June, 2007
Combat
Law
Special Economic Zone (SEZ) policy
has taken one more turn with the announcement from the Empowered Group
of Ministers (eGOM). The freeze on them is being lifted but several
parameters will be changed to accommodate the farmers, tribals and the
civil society groups who have been agitating against the SEZs.
From the earlier no limit
on the maximum size of the multi-product SEZs now the limit has been
set at 5,000 hectares. The state governments are prohibited from acquiring
land for the private players and they cannot form a joint venture with
a private player unless the latter has the land to offer the project.
States can acquire land for their own SEZ provided they take care of
the relief and rehabilitation as per the new policy to be announced
soon.
Now the SEZs will be required
to at least use 50 percent of the land for processing unit as compared
to the earlier 35 percent so that the real estate component would be
lower. Finally, the export requirement has been made more stringent
compared to earlier.
Clearly, the eGOM has steered
a middle path between the proponents of the SEZs, the corporate sector
and their political supporters and the opponents who wanted SEZs to
be scrapped because of their adverse impact on the poor people in the
rural areas. This was on the cards since the prime minister had stated
that SEZs are an accomplished fact. He implied that there is no going
back on the policy and the government would only do some tinkering to
accommodate the opponents. Where does this leave the policy and the
poor?
Political aspects
SEZs have occupied centrestage
in the national consciousness for the last eight months due to the events
unfolding in Singur (akin to an SEZ though not one) and subsequently
due to the occurrences in Nandigram (a proposed SEZ).
News of dissent in the ruling
party over the proposed SEZs in Haryana and Punjab has been making the
rounds. In West Bengal, the government is determined to continue with
its policy of setting up SEZs and continuing with Singur on the grounds
of industrialisation of the state. At the centre also it is seen as
a strategy for ensuring the continuation of a nine percent growth rate
of the economy. If China can succeed through such a policy, it is argued,
why not India?
SEZs are threatening to sprout all over the country from the most backward
states like, Orissa and Chhattisgarh to the most advanced ones like,
Maharashtra and Gujarat. They would number not in tens but in hundreds
and would cover huge tracts of land across the country. Some of them
would be so large as to create entirely new townships and since they
promise world class infrastructure, they would be unlike the existing
cities.
They promise to create islands
of affluence where foreigners and NRIs can come and live in comfort
segregated from the poverty and squalor ridden cities. According to
an earlier draft of the SEZ Act, they would have been `deemed to be
foreign territory for the purposes of trade operations, duties and tariffs’.
Even though this phrase is no more used in the Act of 2005, it is feared
that they would be functioning as such, given their enclave character.
Currently, seven previously
created Export Promotion Zones (EPZs) stand converted to SEZs, 63 SEZs
are approved and notified, 171 are approved but not notified, 162 are
approved in principle only and 322 applications are pending. Most of
them are by Indian businessmen.
Resistance to these zones
has built up rapidly in the country even though most political parties
seem to be supporting their creation since they are ruling in some state
where they would like them to come up. In different parts of the country,
farmers and tribals who are sought to be displaced by the creation of
these zones are opposing them.
In Singur (not an SEZ), Nandigram
and earlier in Kalinganagar in Orissa there has been fierce resistance.
The opposition parties in the different states have taken advantage
of these movements to put the ruling governments in the dock. However,
only some parties like the Trinamool Congress are going the whole way
while others are ambiguous at best.
Displacement is a larger
issue. Movements around displacement caused by earlier large projects
(Narmada Bachao Andolan is an example of that) already existed and the
civil society leaders (like Medha Patkar) of these movements are providing
leadership to the anti-SEZ upsurge.
New large-scale displacement is being created by the mega projects coming
up all over the country. This includes the setting up of steel mills,
power plants, airports or the expansion of existing airports, the expansion
of the highway network, etc. Millions of families are likely to be displaced
in a short period of time.
Why is the rapid creation
of these enclaves so important for the government, in spite of the build
up of the movements? Politically, perhaps the government believes that
the movements will die down since different political parties are in
power in different states and they will prevent the opposition to the
idea of SEZs from building up. The CPI (M) is a case in point. It is
encouraging Singur and SEZs in West Bengal so its opposition elsewhere
would be held in check and be tokenistic. Further, it is expected to
hold other Left parties in check.
Economic aspects
Finally, the Central government
perhaps believes that the economic gains will dilute the opposition
over time. It expects these SEZs to be the nucleus of new investment,
jobs and greater exports. Thus, it is propagating the SEZs as the solution
to the country’s problems. The critics worry about food security
being jeopardised and in response, it is argued that less than 0.1 per
cent of the arable land will be involved in the proposed SEZs so this
will hardly effect total food production. Another argument is that SEZs
will accelerate development and create a large number of jobs. The critics
argue that it will also destroy lots of low skill jobs in agriculture
and forestry. Further, the adverse impact on small scales sector will
reduce jobs. So in the net it is not clear that it will lead to more
employment.
It is suggested that there are backward and forward linkages of industry
so it will promote development. But does agriculture not have such linkages?
There is a fear that the large number of tax concessions being granted
will lead to loss of revenue. However, the proponents suggest that increased
production will result in enhanced tax collections. Will SEZs spur smuggling
and tax evasion that will cause the tax loss to be larger than what
is being anticipated? The number of questions that are being raised
is quite large so that it is critical to understand where the truth
lies? Some of these issues are dealt with in this paper.
Who gains, who loses?
Clearly, those who will benefit
or lose from the SEZs will be different sets of people. Those who will
be displaced by the SEZs will be the rural people and those who will
come in their place will be the skilled urban people. It is true that
those who lose land will get “market prices” (according
to the government) for their land and theoretically will be able to
invest their money in other businesses. Thus, theoretically, not only
in the SEZs but the new investments by the former agriculturists would
create new non-agricultural jobs and all this maybe expected to lead
to a reduction in the rate of increase of unemployment which has accelerated
in the last 6 years. It is said that agriculture cannot create jobs
anymore and these jobs have to be created in non-agricultural sectors.
The SEZs are likely to curtail
the rights of labour given that there will be no labour commissioner
and the developer of the SEZ will govern the place along with a development
commissioner. There will be no democratically elected body. Under Section
49 of the Act, there will be substantial powers to formulate new laws:
“49. (1) The Central
Government may, by notification, direct that any of the provisions of
this Act (other than sections 54 and 56) or any other Central Act or
any rules or regulations made thereunder or any notification or order
issued or direction given thereunder (other than the provisions relating
to making of the rules or regulations) specified in the notification—
- Shall not apply to a Special
Economic Zone or a class of Special Economic Zones or all Special Economic
Zones; or
- Shall apply to a Special
Economic Zone or a class of Special Economic Zones or all Special Economic
Zones only with such exceptions, modifications and adaptation, as may
be specified in the notification.
Provided that nothing contained
in this section shall apply to any modifications of any Central Act
or any rules or regulations made thereunder or any notification or order
issued or direction given or scheme made thereunder so far as such modification,
rule, regulation, notification, order or direction or scheme relates
to the matters relating to trade unions, industrial and labour disputes,
welfare of labour including conditions of work, provident funds, employers’
liability, workmen’s compensation, invalidity and old age pensions
and maternity benefits applicable in any Special Economic Zones.”
The jobs the SEZs are likely
to create will be of the high skill variety that the displaced farmers
(with different skills or with low skills) would not be able to perform...
they would not encourage the entry of low-skilled displaced workers
It is likely that environmental considerations will be diluted. Many
tax concessions have been announced. Given these considerations, profitability
is being ensured so investment will flow into the SEZs to take advantage
of these features. It is also possible that there maybe relocation of
units from their present locations to the SEZs so that the net investment
would be lower.
It is true that new industry
and businesses set up in the SEZs will generate new jobs. However, at
first people would be displaced, work on the creation of the new infrastructure
would then begin and new industry would take even longer time to come
up so new jobs will not immediately come. Further, the new infrastructure
and industry is much more capital intensive than agriculture or non-farm
rural activities it would displace so that fewer jobs would be created.
Further, the farmers receiving compensation for land would not really
know of any activity other than agriculture so they are unlikely to
be able to invest in new businesses and may simply waste most of the
capital they get. Even the most sophisticated businessmen, especially
in the new environment, usually specialise in a few businesses and do
not venture into businesses they do not know about.
In this age of specialisation
many businesses talk of core competencies and shed their other businesses
or outsource them. How do we expect the ill-trained farmers to seamlessly
transit to other businesses? This is unlikely. Further, every business
requires some minimum capital to start but a large number of Indian
farmers are small or middle farmers who would get marginal amounts of
compensation that would be totally inadequate to start any kind of business
even if they were competent to do so.
Finally, consider the impact
on small businesses which are failing in large numbers due to the new
economic policies. The SEZs will accelerate this process since reservations
will get further diluted. This will result in loss of a large number
of jobs.
Many of the displaced are
not likely to receive much compensation. This would include the landless
who will not receive any compensation and those performing non-farm
activities like the potters, herdsmen, carpenters, etc. These people,
traditionally integrated into the farm economy, would be completely
at sea without much of capital. Such people would constitute about half
the population of the villages and can only add to the ranks of the
unemployed.
The jobs the SEZs are likely
to create will be of the high skill variety that the displaced farmers
(with different skills or with low skills) would not be able to perform.
Further, given their enclave-like character they would not encourage
the entry of low-skilled workers displaced from the rural economy flooding
their territory. Such people would of necessity become encroachers and
slum dwellers in some urban areas. Thus the existing urban areas would
face problems while the new enclaves would flourish creating differential
urbanisation and more problems.
The displaced would require
training to get even the low skilled jobs in the SEZs. The poor who
have not even attended schools or drop out by the fifth grade are unlikely
to be able to afford the training required and would be ruled out of
working in these enclaves. Even if the training is sought to be given,
it will be for low skills (like guards) or will take considerable time
by which time others would get the jobs and the displaced people would
languish.
In brief, the rising unemployment
and underemployment (doubled in the last 6 years according to the Economic
Survey 2006) can only go up. Instead of farmers committing suicide,
it will be the former farmers (and the landless) who would commit suicide.
Are farmers' suicides important?
According to a secretary in the Government of India too much is being
made of this phenomenon. According to the crime statistics of India,
quoted by her, only 16 percent of the suicides are committed by farmers.
There are several lacunae in this argument. One is not talking of the
absolute numbers but of the increase in the suicides. Farmers are supposed
to be hardy people and do not easily commit suicides.
According to available information,
the number of suicides is increasing and specially in some of the better-off
states and amongst the better-off farmers. It is not the landless who
are the poorest in the rural areas who are committing suicides.
The rising unemployment and
underemployment can only go up. Instead of farmers committing suicide,
it will be the former farmers who would commit suicide
What one is talking of is
the growing distress amongst farmers who are unable to face the emerging
challenge of globalisation – an uncertain and unknown entity to
them. Further, do we know how many suicides are being committed? Are
our crime statistics complete? According to the Crime Statistics, Bihar
has the least amount of crime and Kerala the highest (A Kumar, 2002:
The Black Economy in India. Penguin (India)).
Clearly, in India, a lot
of crime goes unreported and unrecorded and that is also the story of
suicides, in spite of all the publicity that this phenomenon is now
receiving. If we go by the amount of narcotics drugs confiscated each
year, then little of it is used in India. What is caught cannot be used
and what is not caught does not exist as far as statistics are concerned
so very little would be consumed in the country which is patently false.
Clearly we cannot go by this argument since what is caught is only a
small amount of the total drugs in use in the country.
According to estimates of
gold brought into India and what was caught as smuggling, the ratio
was 33:1. Thus official data on crime is not reliable and suicides,
etc., maybe more in number than what is officially reported.
Displacement in the past
Displacement in India is
not new. Since Independence, the nation has pursued the policy of development
from above and set up large industries or industrial estates and projects
like, mines, dams, ports, expansion of road and rail network. Each one
of them has displaced people in large numbers. We have also had the
experience of setting up export zones and electronic zones. In most
of these cases, the displaced people have hardly found new employment
in these projects while the educated elite (the five percent of the
work force in the organised sectors) has benefited substantially.
The experience of HEC, Ranchi
or BHEL, Haridwar or the steel plants like, Bokaro and Bhilai has been
that the neighbouring areas have remained largely backward. These industries
were set up in backward areas and they remain some of the most backward.
These have turned out to be mere implants in backward areas with little
impact on the surrounding areas. While the country may have had a strategic
interest in setting up these industries to achieve relative autonomy,
in the absence of basic education for the children of the poor, the
jobs went elsewhere. Mostly the local people did not get jobs except
menial ones in the townships.
The people of these areas
specifically, and the non-elite in general, trusted the post-Independence
leadership that there would be trickle down and they would soon benefit.
So, either they willingly sacrificed for what they were told was the
larger national interest or in the absence of organisation had no choice
but to comply with what those in authority wanted. Now they know better
that trickle down does not work and do not believe the elite ruling
class. A white paper is needed on the impact of the earlier large projects
on the people displaced from where these projects came up.
In brief, those likely to
be displaced by SEZs are unlikely to find jobs in the SEZs and since
they do not have the skills, they would not be able to shift to non-agricultural
jobs.
Market price, justice
It is not that those displaced
did not receive any compensation. However, since most of them did not
know the modern institutions and practices, they did not know what to
do with the compensation received. Often money was blown up in drinks
and conspicuous consumption. This jeopardised the future of the family.
The Government should issue a white paper on what happened to development
in these cases in the areas where some of the large projects came up.
In some sense, the compensation received by the displaced people was
not just.
This raises the larger question of whether there is justice to the displaced?
In the market, if one receives a payment voluntarily for what one offers,
it is a just trade. However, if one is coerced into accepting a price
then this is unjust. However, this applies only to a situation where
both parties understand markets. If one party does not understand the
institution of market and a capitalist economy, then even payment of
a market price taken voluntarily by the seller may not be just.
In a capitalist economy,
the agents understand the idea that if they liquidate their primary
asset, they need to invest the proceeds so as to continue to derive
an income for the rest of their lifetime. Most of the poor people have
little idea of what it means to invest and what is the risk of investment
or how to regulate their investment so as to get a secure future return.
Thus, their ownership of an asset is far more important than the financial
market compensation they may get for it.
Further capitalism assumes
the existence of homogeneous labour which can migrate anywhere to get
work. Family ties are not that critical. That is not true for the agriculturists.
For them, it is an inter-dependent life and kinship is crucial. Thus,
displacement is very painful since it breaks the family and neighbourhood
bonds that are not easy to re-establish in a new setting.
The bonds may be between the labourer and the farmer or the farmer and
the carpenter or the ironsmith, etc. Especially, if the displaced migrate
to an urban or semi urban setting, life is very alienating for them.
These relationships cannot be valued in the market. Thus, paying market
price cannot be just compensation for the displaced because they lose
much more than the land.
Finally, when the land passes on to the businessman and they establish
a market in land then a piece of land bought cheaply form the agriculturist
shoots up in price. Thus, typically, the agriculturist receives a fraction
of the price that the businessman will finally receive. One may ask
where is the justice in all this.
Further, often there is a
land mafia that operates in most areas where land is likely to be acquired.
This mafia often gets to know where land is likely to be acquired and
buys up land at prices higher than the current price knowing that the
price would soon jump to much higher levels. The mafia also coerces
sales by various devices. This is how the real estate developers have
become billionaires. The loser in this process of capitalist development
is the illiterate and poor rural population.
Location close to
metros
Among the many concessions
being offered to the developers of the SEZs, one is cheap land close
to cities and new highways. Land is being allotted much in excess of
the requirement of industries. The implication is clear that land is
being seen as urban real estate where huge profits can be made. While
Singur is not an SEZ, the Tata group is being given about a 1,000 acre
of land when they only need perhaps 70 acre for the car factory. Since
the land in Singur is at the intersection of two important highways,
it is prime land. This kind of consideration is clearly important for
many of the planned SEZs.
While the developers of many
of the SEZs and the proponents of these schemes suggest that real estate
is not the real consideration and development is the real concern, can
these claims be relied on? One line of argument is that since agricultural
development has already taken place now it is time to go in for industrialisation
since agriculture cannot accommodate more people.
What is the guarantee that
land acquired by industries for the SEZs would only be used for specified
purposes and not for speculative purposes as real estate. The example
of DLF and others in Gurgaon come to mind
There is another reason for
the rush to set up these huge estates. In the last three years, the
corporate sector profits have been growing at an average of 30% so that
they have a lot of cash to invest. Real estate is a good proposition
to park their funds in. Thus, we are witnessing the creation of a large
number of new landlords.
Finally, developers hope
that there will be a shift of industries to these new sites. There is
a precedence to this in the fifties and sixties when industry shifted
from East India to West because of rising labour militancy. Many industries
shifted from West Bengal to Maharashtra. Very quickly, the number one
industrialised state West Bengal became a relatively backward one and
Maharashtra became the most industrialised state.
The government and industry
are making a large number of promises regarding the SEZs. They are promising
more investments in industry and massive creation of jobs. However,
as has often happened in the past, industry and businesses have not
kept their promises. For instance, Pepsi Cola was allowed to come into
the country in the `bad old days’, prior to 1991, on the condition
that it would export, it would develop Indian agriculture and create
large numbers of jobs. None of these things materialised and most of
the conditions were later dropped in the nineties since by then Coca
Cola was allowed in without any of these conditions.
In Delhi, hospitals were
allotted cheap land (almost free) on the condition that they would cater
to the needs of the poor by providing a certain number of free beds,
etc. However, not only have they not fulfilled that promise but they
have been doing everything in their power (using political influence,
etc.) to have the rules changed. Many industries have been set up in
the backward areas and as argued earlier, in most cases, these industries
generated few jobs and of these even fewer went to the local people
while most of these jobs were cornered by the educated middle class
people.
Given this past experience,
what is the guarantee that land acquired by industries for the SEZs
would only be used for specified purposes and not for speculative purposes
as real estate. The example of DLF and others in Gurgaon and other places
comes to mind. They acquired advance information as to which areas are
likely to be urbanised around the new NH8 and acquired that land from
farmers at literally throwaway prices (market prices for that time).
They have then released the land slowly over the last 20 years keeping
prices artificially high all along and benefiting enormously. Land prices
in this period have risen almost 500 times. Far higher than any other
index of prices.
When industry goes back on
its promises as it inevitably does, would the land revert back to the
farmers and what would be the mechanism for this (to whom and at what
price?). In a recent judgment the SC has said that the land need not
be returned to those from whom the government acquires it. Thus, it
is a one-way street and a mistake is costly to the displaced. Many farmers
would be displaced and as mentioned above, their social linkages would
have been broken. One cannot reestablish the village again after breaking
it up. This is not a reversible process. Further, who is going to pay
the cost of the transition in which a community is broken up and which
involves the suffering of the women and the children displaced from
hearth, schools, etc.
Mockery of democracy
In setting up SEZs an essentially
undemocratic process is being followed. While industry and commerce
have been consulted regarding what they need, the farmers and civil
society groups have been left out of any consultation process. It is
assumed that they will accept meekly the decision to take away land
from agriculture for the setting up of commerce and industry. It is
assumed that their notion of their own welfare is not important.
It is not that the entire country is being turned into SEZs. Certain
areas are being selected so that the burden of this kind of industrialisation
is going to fall on some people and not all. The question naturally
arises whether in a democracy those to be adversely affected need to
be consulted or not?
The government has adopted the policy of `growth at any cost’
with the cost falling on the deprived and marginalised sections of the
population. The benefits are being taken by the big businessmen
Should it not be the case
that if the collective decides against such a project then the government
should look for alternative sites where the people agree to the project?
If no such site is found, then it means that the majority do not want
that kind of development and then in a democracy that decision should
be implemented and such a project not be allowed to be set up. If people
do not want a certain kind of development, then that decision should
be respected. The government should not assume that it knows best and
it can force its will.
Finally, for the sake of
accountability, land if needed, should be acquired in phases as the
project is set up. Thus, it is necessary that the party interested in
setting up a SEZ should give a time bound plan and if that is not adhered
to then not only should more land not be acquired but what was acquired
should be returned. A fine should be imposed on the party involved and
distributed to those whose land had been acquired. This would make the
system more accountable which today it is not.
For example, if in Singur,
the Tatas are now planning to set up a plant to produce one lakh cars
then it may be allotted say 50 acres of land with the promise that more
would come later as the project progresses to the next phase. After
all, if Maruti producing many times more car can function in a plot
of similar size then why cannot the Tatas? It is also possible that
land to the Tatas be given from out of the closed industries that abound
in West Bengal. This would not add to the displacement. It would be
a much better solution than giving fresh land and causing displacement
and hardship to a large number of people.
Macro aspects
Today, the government has
adopted the policy of `growth at any cost’ with the cost falling
on the deprived and marginalised sections of the population. The benefits
are being taken by the better-off sections of the society and the big
businessmen. It is argued that the SEZ policy would lead to a rise in
the investment rate in the economy to achieve a 10 percent rate of growth.
It is suggested that there would be trickle down and that would lead
to the poor also benefiting.
The question is, is this
the only way to increase investments and the rate of growth in the economy?
One could also ask whether, growth cannot take place through a pro-poor
policy? Finally, one needs to be sure whether there will be trickle
down to the poor or would there be two separate circles of development
a high growth one with the elite benefiting and a low growth path in
which the bulk of the population would be trapped. How often it has
been found in the Indian context that trickle down has not really worked
or has been far too slow and yet the people are expected to put their
faith in these policies once again.
In the last five years, the
investment rate has jumped from around 25 percent to around 32 percent
without the concessions being announced under the SEZ scheme. Then what
is the need for further incentives at the expense of the marginalised
sections of the population? The issue is what are the prerequisites
to investment increase? And, what is the role of concessions in the
investment process?
The concessions in taxes
and relaxation in environmental regulation and labour laws are expected
to make operations in the SEZ highly profitable. All this is being done
in the name of exports, to make these zones export competitive by helping
industry in these zones to have lower costs of production and higher
profits. There is no doubt that with the concessions announced and the
privileged position that is being granted to the SEZs, they will get
investment so that they will generate employment and output. However,
it is equally true that they will also displace production that was
already ongoing in the area where SEZs will come up. The past investments
in agriculture, non-agricultural activities and in the creation of habitation
in that area will be destroyed. Thus, the issue is what would be the
net increase in investment, employment and output.
Further, given the concessions,
much of the investment in SEZs is likely to be at the expense of the
investment in the rest of the economy. Finally, some may even close
their units in the rest of the economy to shift to the SEZs. Due to
these three factors, the net investment will turn out to be much less
than what would be the gross flow of investment to the SEZs. In fact,
because the price of output from SEZ is likely to be lower than that
in the rest of the country, a lot of smuggling will take place and the
output in the rest of the economy will be adversely affected. This will
further affect employment.
Since industry set up in
SEZs is likely to be of the modern variety, it will use much more capital
per worker and generate much higher output per worker. Thus, the SEZs
are likely to generate little employment compared to what it will displace
both inside the SEZ and outside it (and that too of the skilled variety).
This will undermine any trickle down that is being talked of.
There is likely to be diversion of resources from the non-SEZ areas
to the SEZs. For instance, water aquifers would be used rapidly as has
happened in the past and the poor people in the surrounding areas will
be
deprived of water
SEZs are likely to involve
concessions in income tax, corporation tax, excise, customs and sales
taxes so that there will be substantial revenue loss compared to the
potential tax collection. Further, to the extent, industry will shift
from the non-SEZ areas where they are required to pay taxes to the SEZs
where taxes would not be required to be paid, there would be a decline
in tax collections.
Further, due to smuggling
of cheap goods from SEZs to the rest of the country, there will be further
loss of tax collection. When smuggling takes place easily from outside
the guarded borders, it is not difficult to imagine that this would
be easy from the unguarded SEZs. The resultant revenue losses will aggravate
the deficit in the budgets and will result in cut back in expenditures
to fulfill the FRBM Act requirements. Most of the time these cuts tend
to be in the social sectors which will worsen the situation for the
poor.
Finally, as has happened
so often in the past, there will be over investment in the SEZs. As
suggested earlier, this would be at the expense of the non-SEZ areas
of the country. This would result in imbalanced development and a rise
in uncertainty for the economy with consequential impact on the poor
who by then would be out of jobs.
In brief, the macroeconomic
situation will face major challenges. Employment in the SEZs would rise
but would be adversely affected elsewhere. Output net of the loss of
production in the activities that were carried on prior to the setting
up of the SEZs, in the small scale sector and in the displaced industries
would rise much less than claimed. Similarly, investment would rise
but much less than being suggested because of the destruction of assets
in SEZs and the small scale sectors and displacement from the rest to
the SEZs. Loss of tax revenue would be substantial and would affect
the budgetary calculus. All in all, the macroeconomic portents are not
very promising.
Enclave development
It is also clear from the
earlier section, the SEZ areas will develop substantially at the expense
of the non-SEZ areas. This is likely to accentuate the already rising
disparities. Loss of taxes will lead to shortage of funds for development
in the non-SEZ areas.
There is likely to be diversion
of resources from the non-SEZ areas to the SEZs. For instance, water
aquifers would be used rapidly as has happened in the past and the poor
people in the surrounding areas will be starved of water. The only way
to prevent differentiation from rising further is to declare the whole
country an SEZ. One may ask why limit the supposed benefits of SEZs
to only limited areas and aggravate disparities?
Conclusions
This paper has analysed some
of the key features relevant to the creation of SEZs. It is argued in
the article that the SEZ policy is a part of the policy of `growth at
any cost’ with the cost falling on the already marginalised sections
in the rural areas. Huge concessions are being offered to the developers
of SEZs and the entrepreneurs for locating in the SEZs. The beneficiaries
are likely to be the affluent and skilled sections of the population.
Thus, those who gain and those that lose will be different sections
of the people.
It has been argued that those
displaced will not get the market price for their land and even if they
do, this price would not take into account many of the hidden costs,
like, being a part of a community. As such, payment of a market price
for land will not be a `just’ compensation, specially to those
who do not understand the institutions of saving and investment.
Displacement will not be
just of agriculturists but of a far larger number of people associated
with a way of life which will be totally disrupted. Market price does
not factor this in since it is at best based on the future flow of incomes
(with capitalist development) from the piece of land acquired. It is
not valued from the point of view of the displaced to whom the way of
life being destroyed may be worth much more, specially, in the long
run. Unfortunately, some Marxists seem to be going for a new form of
class struggle where the workers and capitalists will together fight
the marginalised, the farmers and tribals who instead of getting their
support are being treated as anti- industrialisation.
The eGOM has not been able
to resolve the problem of acquisition of land. If the government does
so, it would pay much less than the potential market price but if this
is left to the private sector, land mafia would be involved and the
price paid would be much lower than the market price. There is really
no solution. Further, it is argued that many in the rural areas do not
possess land and will get little compensation when they are displaced.
They will join the ranks of the unemployed in the urban areas. Those
who do get compensation will find that they would not be able to start
businesses since they lack the experience for it (this is the age of
core competency). Finally, at a time when the crisis in the small scale
sector would only worsen, asking the inexperienced farmers to start
small industry or business would be doing them a disservice.
It is argued in this paper
that employment generation in SEZs will not be able to compensate for
the loss of employment in the activities the SEZs will displace and
in the small scale sectors which are likely to be hit hard. Further,
the output increase will be much less than claimed and investment will
be at the expense of the non-SEZ areas and less than claimed since there
will also be destruction of capital. Finally, it is pointed out that
the more successful the SEZs the more would be the loss of revenue to
the government due to the tax concessions. There is likely to be large
scale smuggling and new possibilities of transfer pricing and siphoning
out of profits.
There would be enclave development
and disparities would rise. Migration to urban areas will rise and they
will face further collapse. The excess land being allotted to the SEZs
will result in the creation of new landlords. Government is creating
new landlords 60 years after independence and long after it was thought
prudent to end landlordism in the country. Reports suggest that some
large SEZs being set up by the corporates will be known as “…desh”,
like, Bangladesh, where the well off will live in style.
If the overall gains from
SEZs are so unclear and the government is going ahead with the scheme,
then it can only be because it wants to give concessions to certain
sections (who are pushing for it). The central government is playing
the same role as the World Bank and IMF do in making nation states to
compete for capital and give concessions to it. The SEZ policy is making
the states compete with each other to get capital. Those states that
do not go for SEZs will suffer because others will go ahead and attract
investment.
Given the negative features
of SEZs, even allowing 5,000 hectares is too much land for one SEZ.
Having hundreds of them sprouting in the country is even worse. In brief,
if SEZs are the logical culmination of the current Indian strategy of
`growth-at-any-cost’ with the cost falling on Bharat then one
needs to not only scrap SEZ policy but the development strategy itself.
The writer is professor of economics, JNU, New Delhi
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