Infochange India

Trade & development

Wed 3Sep2014

You are here: Home | Trade and development | Analysis | Adjust kar lenge: The new SEZ policy?

Adjust kar lenge: The new SEZ policy?

By Aseem Shrivastava

What do the latest changes in the Special Economic Zones policy mean?

The cataclysmic events at Nandigram on March 14 - in which no one still knows how many people were killed, how many raped, how many are still missing - led to the scrapping of the 10,000-acre SEZ for the Indonesian Selim Group and the CPM's hasty retreat from the area.

Most importantly, the central government was forced back to the drawing board. It came out with some not insignificant changes in policy.

What are they? There is a ceiling of 5,000 hectares (12,500 acres) put on an SEZ. There was no cap earlier. Much more significantly, state governments can no longer acquire land for an SEZ on behalf of private developers. In other words, though the government stopped short of spelling this out in so many words, no recourse is going to be taken to the Land Acquisition Act of 1894. It is also left unspecified whether SEZs are to be treated as a "public utility" nonetheless, exempting them from the full operation of the Industrial Disputes Act (which gives workers various bargaining rights).

Nor can state governments form joint ventures with private developers if they do not already have land in hand to offer the project. States can also acquire land to develop SEZs on their own, provided they stick to the new relief and rehabilitation package to be announced soon.

Moreover, at least 50% of the total area in an SEZ is to be earmarked for processing units. Earlier, the norm was 35% for multi-product SEZs. SEZs will also have tougher export norms to meet—instead of being merely net foreign exchange earners, they will have to have export earnings at least equal to their purchases from the domestic tariff area.
These were the major changes announced.

If actually implemented, the changes are significant. For instance, the new policy implies that private developers will have to deal directly with farmers and landowners to acquire SEZ land. There will be a free market in land for once, without interference from the state. In a country like India, where the acquisition of large chunks of contiguous land in a farmed area is complicated by the number of different owners the acquiring company has to deal with, the transaction costs for the company are substantial. (Of course no such problem would arise if government invited the private sector to purchase degraded land, but who wants to spend any money on building infrastructure when it is already there to piggyback on?) There is also the risk that the company may fall short of the minimum land required for the industry in question due to the unwillingness of one or a few owners to sell their property.

This was the very reason that the Land Acquisition Act of 1894 was invoked to accumulate land for SEZs. The state would then effectively act as a broker for private companies, hardly a role behoving a democratically elected set of people's representatives. The conflicts and protests during the last several months in West Bengal, Maharashtra, Punjab and elsewhere, have revealed the moral folly of such an approach. (In contrast to their Communist counterparts in West Bengal, the Gujarat government has skilfully minimised such conflicts by staying out of land deals in the first place. It has also avoided some problems by keeping agricultural lands out of the reckoning.)

"This is not the Gita or the Bible. No?"

That is how Union Minister for Commerce and Industries Kamal Nath responded to the media when queried about the new policy ruling on land ceilings for SEZs. Not surprisingly, just the previous day the Reliance spokesman on SEZs, Anand Jain, had told NDTV: "I am sure this is not a final no. There is much more to come. We will go to the government, we will place our ideas with them, and we are sure they will change their mind." A good sample of how policies are made, unmade and remade in this fascinating democracy. Policies are made in the shadows. The government implements them by stealth. People protest. Government appears to budge. Money whispers. The media feels sorry for the megacorps. Politicians nod. They wait for people to get tired. Soon everything goes back to where it started.

Kamal Nath was visiting China when he made that remark. Perhaps the perspective of distance made him feel secure in making the statement, within two weeks of the meeting of the Empowered Group of Ministers on SEZs. The echoes of Nandigram might have faded in the din of Beijing.

Being the biggest accumulator of SEZ land in the country, Reliance was "hardest hit" by the policy ruling of April 5. It had the sympathies of the media. Reliance has been in the process of acquiring, among other properties, two huge areas of over 25,000 acres each near Gurgaon in Haryana and near Mumbai. Evidently, their confidence is unshaken by the new policy ruling. They are not giving up: "The cap on the size of SEZs does not exist in any other country. This is one of the vital issues that will be taken up with the government," Anand Jain told PTI the other day. (SEZs do not exist in most countries, the reason why caps on their size do not exist either.) Reacting to the government's decision to distance itself from acquiring land for SEZs, he said: "The government cannot have it both ways. They cannot insist on the SEZ being on contiguous land and then refuse to get involved..." It becomes clearer how the government is being cornered to play the role of land broker once again.

When asked how Reliance would acquire land in the face of protests by farmers and activists, Jain told NDTV that the compensation package to farmers will be like a lottery. So much for fair compensation.

Exactly who calls the shots when it comes to economic policymaking ultimately becomes clear when you listen to Kamal Nath after his return to New Delhi: "Should a proposal for an SEZ be for an area larger than 5,000 hectares, after examining its impact on the economy overall, the government could consider it...Once the rehabilitation policy is in place the government will look into it. It (the ceiling) is not part of the SEZ Act, but part of the rules."

So why all the song and dance about the government changing SEZ policy?

It wastes a lot of the public's time.

Movers and shakers

According to The Times of India, having learnt from the events at Nandigram, the newly elected government of Prakash Singh Badal in Punjab may reverse its predecessor's decision to acquire 485 acres of land for the giant builder-developer DLF across seven villages near Amritsar. This despite clearance from the central government for the SEZ projects in the state.

Yogesh Verma, head of the SEZ division of DLF told the newspaper: "We had decided to go to Punjab following an assurance by the state government to provide us land. How can it go back on its promise? Land acquisition for our project should be considered retrospectively."
Given that DLF is planning investments of Rs 1,800 crore at an SEZ near Ludhiana, in addition to the Rs 453 crore planned for the Amritsar SEZ, it remains to be seen whether the Badal government is strong enough to stick to its word.

The new Punjab government will do well to remember that the Amarinder Singh government had suffered a bitter defeat in the recent assembly elections in Punjab thanks to its pro-corporate, anti-farmer policies. There is no barren land in Punjab, only some of the most fertile arable land in the world. The anger and resentment of farmers against state policies runs high.

Besides DLF in Punjab there are investors in other parts of the country who are looking for a reinstatement of the original SEZ policy of the government. There is, for instance, the South Korean steel transnational POSCO, slated to bring the largest-ever foreign investment into India ($12 billion or Rs 52,000 crore, in order to access cheaply some of the best and largest iron ore deposits in the world) and waiting for the Orissa government to complete acquisition of the 4,000-odd acres of land in Jagatsinghpur district. The acquisition has been stalled not merely by the central government's recent policy of suspending the clearance of SEZs (before April 5) but also by the fierce resistance the state has faced from three local tribal villages who are defending their heritage in a way no less zealous than the peasants of Nandigram fought for theirs.

POSCO has applied pressure from the top, by getting the mayor of Seoul to approach the Indian Prime Minister himself. A dozen platoons of the Orissa police have surrounded the three villages, waiting for orders to strike. The villagers are ready for them. But Nandigram is too haunting a recent memory to allow either the Prime Minister or the Chief Minister (Naveen Patnaik) to take recourse so readily to force yet again. Besides, it would be a direct contradiction of the stated change in government policy (on April 5) if the government still found it within reason to use the Land Acquisition Act to take over the land from the tribal communities.

And yet, an Orissa government release to The Times of India on April 20 has the temerity to claim that "the government of India requested government of Orissa to expedite land allotment to POSCO...POSCO may negotiate with land users for acquisition of private land if they want SEZ status, in which case the state government can facilitate the process."

So there we go: the state as land broker yet again.

The alternative

It is clear that the State must stay out of land acquisition (for SEZs or indeed, for any other purpose). That is the message of Nandigram and Singur. Wouldn't the farming community then be vulnerable to local land mafias, who can be deployed by private builders and developers to seize the land of farmers?

The State has a Constitutional responsibility to defend the private property of farmers and peasants. It is legally obliged to use its coercive policing powers to ensure that the land mafia does not use threat or force to seize the land from vulnerable peasants. This must be the demand made of governments across the nation as regards the policy of land acquisition.

If governments can't learn that lesson from Nandigram and Singur, they should at least draw it from the string of recent electoral defeats for incumbent parties throughout India. People have had enough of their needs being trampled upon by a State all too cosy with corporate India - in cruel disregard of pre-existing rights of the underprivileged.

InfoChange News & Features, April 2007