Thoughts on economics and liberty

Help the Rich, Hurt the Poor: Case of Special Economic Zones by EAS Sarma

Note: I agree with much of what EAS Sarma is saying here. However, I don’t agree with his defence of labour laws.

(Extracts from Economic and Political Weekly May 26, 2007)

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.

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 m1gging 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 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
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.

India’s SEZ Scheme
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.

The labour laws applicable to the rest of the country have been relaxed for the SEZs. The existing laws are well ­intentioned and they promote worker wel­fare [Sanjeev: disagree – these laws need to be revised to ensure greater liberty of contracting]. 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.

Conclusion
Forc­ible acquisition of land should be done away with. Decisions that involve displace­ment of people should not be taken with­out prior consultation with the local com­munities. 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.

Economic development, growth and industrialisation are the outcomes of good governance, not policies based on sops, subsidies and political patronage.

 

Sanjeev Sabhlok

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