Some hard-hitting facts and figures about Special Economic Zones (SEZs) that rarely make it to the headlines | ||||||||||||||||||||||||||||||||||||||
What is an SEZ? A Special Economic Zone (SEZ) is a specially demarcated area of land, owned and operated by a private company, which is deemed to be foreign territory for the purpose of trade, duties and tariffs. SEZs will enjoy exemptions from customs duties, income tax, sales tax, service tax. After the passing of the SEZ Act by Parliament in June 2005, the law came into effect in February 2006, though some states like Gujarat had passed provincial SEZ legislation in 2004. Why SEZs? The stated purpose of creating SEZs across India is “the promotion of exports”. Commerce and Industries Minister Kamal Nath claims that exports will ultimately grow five times, GDP will increase by 2%, and 30 lakh jobs will be generated by SEZs across India. The government also claims that SEZs will attract global manufacturing through Foreign Direct Investment (FDI), enable the transfer of modern technology and create incentives for infrastructure. How many SEZs will there be?
There are less than 400 SEZs around the world at the moment. In India, the government is planning that many in one country alone. | ||||||||||||||||||||||||||||||||||||||
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Will there be displacement and loss of livelihoods? Estimates show that close to 114,000 farming households (each household on an average comprising five members) and an additional 82,000 farm worker families that are dependent on these farms for their livelihoods will be displaced. In other words, at least 10 lakh (1,000,000) people who primarily depend on agriculture for their survival will face eviction. Experts calculate that the total loss of income to farming and farm worker families is at least Rs 212 crore a year. This does not include other income lost (for instance, of artisans) due to the demise of local rural economies. The government promises “humane” displacement followed by relief and rehabilitation. However, historical records do not offer much hope on this count: an estimated 40 million people (of whom nearly 40% are adivasis and 25% dalits) have lost their land since 1950 on account of displacement due to large development projects. At least 75% of them still await rehabilitation. Almost 80% of the agricultural population owns only about 17% of the total agricultural land, making them near landless farmers. Far more families and communities depend on a piece of land (for work, grazing) than those who simply own it. However, compensation is being discussed only for those who hold titles to land. No compensation has been planned for those who don’t. Will SEZs create jobs? The growth of employment in the entire organised sector since the inception of the reforms in 1991 has been negligible. Total employment in the organised sector is still less than 3 crore. Even in IT and ITES, boom areas of the economy, employment is less than 0.15 crore (60% of SEZs are for IT). The Indian labour force is estimated to be 45-55 crore. Thanks to growing automation, modern manufacturing grows joblessly around the world (in India, automobile production has grown rapidly, while employing less labour than before). With more automation, organised services also require limited supplies of labour. SEZs will attract modern industry and services in order to succeed. To that extent they are unlikely to generate too many jobs. Moreover, the few jobs that will be generated will be for highly skilled labour, usually not available in the countryside -- from where working people are being displaced to make room for SEZs. Kamal Nath’s claim that SEZs will create 30 lakh jobs within a few years is a fantasy: those many jobs have not been created in total since the inception of the reforms in 1991! The government does not provide information on jobs lost, only on jobs created. Further, if the experience of existing SEZs in places like Noida (or Shenzhen, China) is anything to go by, the working conditions -- poor wages, non-existent benefits, long working hours, occupational hazards, discrimination, etc -- under which people will be employed will inevitably violate human rights, apart from keeping the benefits of growth away from the poor. Are we moving towards new corporate city-states? Many SEZs, like the Mahamumbai SEZ (to be built by Reliance Industries), will be like mid-sized cities, over 100 sq km in area (the size of Chandigarh). There will be no elected local government. A government-appointed development commissioner will govern the SEZ with the main aim of facilitating economic growth. SEZs have been declared “public utilities” under the Industrial Disputes Act, making collective bargaining and strikes illegal. Infrastructure like power, roads and water supply is guaranteed to investors and developers, not to the people of the region. Several lakh people may be living/working inside the SEZ. In some cases, the developer may have the right to tax the population in order to provide essential services. The constitutional tenability of private monopolies running local governments (for a sizeable cluster of the urban population) without being elected is questionable. All the non-economic laws of the land under the IPC and the CrPC would be applicable to SEZs. However, internal security will be the responsibility of the developer. Will SEZs turn ultimately into sovereign states -- treasure islands of prosperity in a sea of poverty and misery -- unaccountable to the vast majority of citizens in the neighbourhood? Will there be loss of public revenue? Thanks to exemptions from customs duties, income tax, sales tax, excise duties and service tax (even on luxury hotel facilities, shopping malls, health clubs and recreation centres) given to SEZs, the finance ministry estimates a loss of Rs 160,000 crore in revenue till 2010 (the ministry has also asked for capping the number of SEZs at 100. Finance Minister P Chidambaram wrote to Cabinet colleagues saying: “SEZs per se will distort land, capital and labour costs, which will encourage relocation or shifting of industries in clever ways that can’t be stopped. This will be further aggravated by the proliferation of a large number of SEZs in and around metros.”). The foregone tax revenue every year is five times the annual allocation for the National Rural Employment Guarantee Scheme and is enough to feed 55 million people each year who go to bed hungry every day. Furthermore, given the concessions on import duties (not merely for the investors who will produce exportable items, but also for the developer who will not), there are likely to be foreign exchange losses (rather than gains). For the five-year period ending 1996-97 the foreign exchange outgo on imports made by units in SEZs and the customs duty forgone amounted to Rs 16,461.58 crore against which exports of only Rs 13,563.87 crore were reported. Moreover, these zones are exempt from sales tax, octroi, mandi tax etc on the supply of goods from the domestic tariff area (rest of India). SEZs or REZs (Real Estate Zones)? What are SEZs likely to become in a few years’ time? According to a clause in the SEZ Act (Section 5(2)), as much as 75% of the area under large SEZs (above 1,000 hectares) can be used for non-industrial purposes. This lacuna in the law is likely to become a loophole for the accumulation of land banks by private developers and property dealers for the purpose of real estate speculation (this explains why so many of them have been buying areas for SEZs). In fact, it may well be the case that the rationale for the above clause in the SEZ Act is the uncertainty surrounding the economic attractiveness (and ultimate viability) of SEZs. If adequate productive investment is not forthcoming, the SEZ developer can at least cash in on the land value. Conglomerates like Reliance already own upwards of 100,000 acres of land in the countryside. Furthermore, the government has enabled Foreign Direct Investment (FDI) in real estate as of January 2007, leaving the door wide open for massive amounts of international speculative investment in property. Far from giving “land to the tiller,” as the original idea of land reform had promised, the present tendency of the Indian government is to remove all ceilings on the ownership and use of land, thereby serving the interests of big business. It is noteworthy that there is no legal upper limit on the size of land area under an SEZ. Are there legal violations involved? The following are the main legal violations arising out of the SEZ Act, 2005:
Are there resistance movements in defence of rural lives and livelihoods? The political landscape of India in the last 20 years presents ‘a million mutinies’. In every region and state, small and large people’s movements have emerged to fight the appropriation of natural resources, livelihood and survival by government and large national and international corporations. Brief snapshots of these rebellions follow: In the south
In central and western India
In the east
In the northeast
In the north
Prepared by Citizens’ Research Collective, March 2007 |
Monday, April 30, 2007
Some hard-hitting facts and figures about Special Economic Zones (SEZs)
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