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Help the Rich, Hurt the Poor

Recent twists and turns in the special economic zone policies which benefit the rich at the expense of the poor expose the utter ignorance of ground realities by both the central and state governments.

Help the Rich, Hurt the Poor

Case of Special Economic Zones

Recent twists and turns in the special economic zone policies which benefit the rich at the expense of the poor expose the utter ignorance of ground realities by both the central and state governments.


he sordid incidents at Nandigram and Singur have highlighted once again the blatant way in which the central and the state governments are following policies that generally benefit the rich, at the expense of the poor.

In a country where more than 100 million people in the rural areas have no land of their own and another 80 million households own agricultural holdings less than five acres, it is unfortunate that the central and the state governments should rush into forcibly acquiring hundreds of thousands of hectares of arable lands in huge chunks and dole them out to powerful industrial houses and real estate dealers at throw-away prices.

In a way, the recent twists and turns in the special economic zone (SEZ) policies have merely exposed the ruling elite’s utter ignorance of the ground realities of our country and the strong influence that the industrial houses and the real estate dealers continue to exercise over the government’s policies. To a poor farmer, in the words of one of our leaders, the present SEZ policy, that certainly hurts the farmer, is “irreversible”. On the other hand, within hours of a recent union cabinet decision to impose a cap on the extent of land for each SEZ, the spokesperson of an influential industrial house brushed aside the stipulation of any such kind. Hardly a day later, a senior functionary of the government joined the chorus and chose to go along the line of that industry!

Central to the SEZ scheme is the facile assumption that handing over thousands of hectares of land cheaply to promoters of industry and relaxing the laws of the land, including those that relate to the welfare of the industrial workers, protection of the environment, taxation, etc, would automatically promote industrialisation and solve the nagging unemployment problem of the country overnight. Similar doles were tried out in the past, with not much success. What our rulers fail to recognise is that it is bad governance that lies behind many of our failures on the development front.

SEZ Impact

The basic principles of good governance are to involve the people in decision-making, enhance transparency in the functioning of the government, create a competitive

Economic and Political Weekly May 26, 2007

environment, provide greater choice for the citizen in offering public services, minimise the element of discretion and ensure non-discriminatory treatment to all. Government’s policies should be in the direction of creating competitive markets, rather than promote private monopolies. Unfortunately, none of these essential requirements of good governance find place in the recent policies. On the other hand, many so-called “reforms” during the last few years have openly gone against these basic tenets. The case of the SEZs is an excellent example of this.

Decision-making on SEZs has generally been non-transparent. SEZs are imposed on the local people without any prior consultation. Whenever the displaced persons opposed the location of an SEZ, their dissent had been termed “anti-development” and crushed mercilessly with the iron hand of the state.

The process of selection of the promoters of SEZs is in itself highly nontransparent. There is not a single case of SEZ in which the promoter is selected through well-established competitive bidding procedures. This has provided enormous scope for corruption and political patronage.

SEZs displace people on a large scale. The displacement is both physical and occupational. In coastal states like Andhra Pradesh, some SEZs are located along the sea coast, cutting off fishermen’s access to the sea from which the latter eke out their livelihood. In many places, small agriculturists are thrown out of their homelands and, along with them, those that depend on agriculture, such as artisans and rural workers have also lost their livelihood. The latter do not figure at all among the beneficiaries of the rehabilitation packages.

Government’s Stand

The Left-ruled government in West Bengal and the other state governments are trying to obfuscate the main issues of SEZ by saying that they have offered “attractive” rehabilitation packages to the displaced. This argument does not hold water as the potential value of land in the rural areas is much more, as it would become evident if the same lands were to be put to an open auction.

In the normal course, one would have expected the government to stand by the people, make them aware of the potential value of their land and allow them to freely negotiate the price of their land with the developers of an industry. In the case of the SEZs and a host of other similar industrialisation schemes, it is strange to find the government reversing its role and acting as a broker on behalf of the industry. In this role, the government has not even hesitated to invoke its “right of eminent domain” and forcibly acquire land for the SEZs. In the past, the land acquisition law, which is indeed a draconian one, had been used to acquire lands for genuine public purposes such as schools, hospitals, etc. It had rarely been used to further private interest, as is the case now.

The rehabilitation packages announced by the states lack credibility, as there are thousands of families displaced by previous projects still awaiting compensation payments. In some cases, those displaced in early 1970s are yet to receive compensation. In many cases, the true beneficiaries are the absentee landlords, intermediaries and touts that collude with the government agencies. The Andhra Pradesh experience has shown that the poor that were assigned government land were the ones that were deprived of those lands to benefit the SEZ promoters. In some cases, the beneficiaries were the defaulting landlords who were required under the ceiling law to surrender their surplus lands for assignment to the poor!

India’s SEZ Scheme

India’s SEZ scheme seems to have drawn its inspiration from a similar scheme adopted in China. While China has followed a step-by-step approach and set up only six SEZs during the last several years, India has already set up 19 SEZs, approved another 234, accorded “in principle” approval for 162 and notified 19. China’s SEZs are larger in size, whereas the extent of an Indian SEZ seems to depend on the political clout that the promoter wields and the leverage he is able to achieve with bureaucrats and politicians. China has a well thought-out land-use policy that seeks to protect its arable land. India has no such policy.

SEZs are given open-ended tax concessions. The experience so far in the country with tax holidays for industry has not been sanguine. Apart from the direct revenue losses they have resulted in, they also have led to an uneconomic location of industrial units. One estimate of the cumulative revenue loss on account of the SEZs so far finalised places the figure at Rs 1,75,000 crore during the next few years. The loss would be more, as more and more SEZs are approved.

The labour laws applicable to the rest of the country have been relaxed for the SEZs. The existing laws are wellintentioned and they promote worker welfare. Relaxing such laws exclusively for the SEZs shows the government’s lack of conviction in its own commitment to social justice. In going along with this, for the first time, the government has openly accepted the untenable contention that social justice inhibits economic development and, therefore, it could be conveniently jettisoned off its agenda. In some SEZs, the state governments are joint venture partners. In the case of some, special incentives by way of concessional electricity and water tariffs have been offered. In almost all cases, valuable lands have been given away at concessional prices. In return for all these sops that run into thousands of crores, the promoters of SEZs are not willing to assume any kind of social responsibility. For example, they have no intention to reserve jobs for SCs/STs. The employment opportunities that the SEZs would create are limited, compared to the number of poor farmers uprooted. The promise of jobs for the displaced is a hollow one, as none of the displaced families would be able to find even one of its members having the right kind of skills and qualifications required for such jobs. Even if we assume that SEZs do create some job opportunities, the benefit of such limited employment would get more than offset by the number of rural families permanently deprived of their livelihoods.

In the recent years, the industry has been lobbying for relaxations in the procedures for environmental clearances. The SEZ policy has some elements that relate to this. In the case of many SEZs already approved, no detailed environmental impact assessment has been attempted. For example, the industrial units in an SEZ would not only drain surface and groundwater resources at the expense of the local communities, but also their affluents could pollute the local water bodies. The industrial estate at Pattancheru in Medak district in Andhra Pradesh is a standing example of what could happen, if stringent environmental norms are not enforced.

It is well known that the Indian industry, with a few exceptions, has got used to a culture of protection, patronage and subsidies. Many of them are unwilling to submit themselves to the discipline of any law or

Economic and Political Weekly May 26, 2007 regulation that is applicable to the rest of the country. They are encouraged in this by the politician-bureaucracy nexus that has broken down the back of almost all regulatory authorities that enforce the laws. In reality, the concept of the SEZs has been the outcome of the pressures exerted by this lobby. One should not be surprised if the SEZ scheme in itself marks the beginning of a process of handing over huge chunks of land to real estate dealers on a much larger scale than now and of creating affluent islands within the country where most of the laws that are there to ensure social justice would not apply. But, the Indian taxpayer and the common man would still have to pamper these real estate dealers by giving all kinds of concessions.


In the context of the widespread discontent that the SEZ policy has generated among the people of this country, the scheme itself should be abandoned. Forcible acquisition of land should be done away with. The land acquisition law itself should be revoked, in view of its potential misuse. Decisions that involve displacement of people should not be taken without prior consultation with the local communities. The Constitution requires the gram sabhas to be fully involved whenever decisions that might lead to dislocation of people are taken. Models of development with minimal dislocation need to be adopted in preference to those that indiscriminately displace people. The existing rehabilitation policy of the government is flawed, as it does not allow the displaced people to have the status of shareholders of projects. The government should recognise the inherent rights of the local communities to resources such as land, water, minerals, forest wealth, etc. All these call for a paradigm change in the attitude of the government.

Land and water are going to be the two intensely contested resources in our country in the coming decades. Keeping in view the steadily declining per capita availability of land, the emerging land use patterns in the country need to be examined and a sustainable land use strategy should be evolved. Such a strategy would need to be subjected to wider public consultation.

Economic development, growth and industrialisation are the outcomes of good governance, not policies based on sops, subsidies and political patronage. In a democaratic society like ours, the primary the hard reality that without people’s requirement of good governance is to involvement, no economic development provide opportunities for genuine public can take place! consultation. It is high time that our political leaders and civil servants realise Email:


Economic and Political Weekly May 26, 2007

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