sez and land acquisition.doc

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SpecialEconomicZones

A. Introduction

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone

(EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. With a view to

overcome the shortcomings experienced on account of the multiplicity of controls and clearances;

absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger

foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April

2000. This policy intended to make SEZs an engine for economic growth supported by quality

infrastructure complemented by an attractive fiscal package, both at the Centre and the State level,

with the minimum possible regulations

B. SEZ Act 2005

After extensive debates, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th

February, 2006, providing for drastic simplification of procedures and for single window clearance

on matters relating to central as well as state governments. The Central Government has also issued

a set of instructions and various States have issued policy documents to further facilitate the setting

up and regulation of SEZs. The main objectives of the SEZ Act are:

a) generation of additional economic activity

b) promotion of exports of goods and services;

c) promotion of investment from domestic and foreign sources; (d) creation of employment

opportunities;

e) development of infrastructure facilities

C. Acquisition of Land for SEZ

There are two different problems relating to acquisition of land for SEZs.

1. Procedure

Procedural provisions in the SEZ Act only extend to the stage at which the land is identified and the

Board approves the project. The procedure for actual acquisition of the land is still carried out

through the Land Acquisition Act. Section 3 to section 8 of the SEZ Act only deal with

identification, notification and setting up without ever providing for a specific process of land

acquisition.

2. Type of land to be acquired

Secondly there is no bar on the type of land that can be acquired for the purpose of setting up an


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SEZ in the Act. However the States in their policies have specified that acquisition of agricultural

land should be kept to a minimum. For example the Karnataka Policy Document on SEZ contains

the following:

III (2). Land for SEZsProponents of SEZs can utilize their own land including jointdevelopment/lease land or acquire the required land by one of the

following procedures:

(v) Acquisition / purchase of land are subject to the following:

a. SEZs can preferably be established in waste, karab, dry and single crop

land. Use of agricultural land to be kept to the minimum . Utilization

of agricultural land is subject to the

Government of India guidelines issued from time to time.

Public Purpose?

In the case ofShah Kantilal Depar and others v. Reliance Infrastructure Limited through Manager

and others it was held that setting up of a Special Economic Zone was public purpose. There are

two fundamental problems with this decision. Firstly the term SEZ is too wide to be designated as a

public purpose in its entirety. There are various types of SEZ and within those types there are

several units, not all of them attuned to a single purpose. Hence classifying the whole category ofSEZ as a public purpose is unsound. The second problem lies in not differentiating the different

types of public purpose. There is a prima facie difference between acquiring land for building a road

and for building an SEZ. This is because firstly the road is essential and in all probability has to be

built in that area whereas the SEZ is neither essential nor does it have to be in a particular area and

secondly the road is a State activity needed or the common good whereas the SEZ's benefits are

questionable at best. This difference is the basis on which the SEZ Act can be heavily criticized.

D. Compensation and RnR

As there is no separate procedure for acquisition, there is also no set compensation mechanism.

Similarly a rehabilitation plan may or may not be imposed under 3(8)(b). The form of the Letter of

Approval as provided in the rules contains a condition regarding the rehabilitation of displaced

persons. State policies however require a rehabilitation plan to be put into place. For example the

Karnataka policy document has the following provision:

III (2)(v)(b) : SEZ Applications for the State High Level Clearance Committee will essentially

include a Resettlement and Rehabilitation plan in line with the guidelines issued by the

Government of India from time to time.


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Since the Act itself does not provide for a concrete compensation and rnr plan the same have to be

carried out under the land acquisition act. Once again the problem lies in not differentiating between

the road as a public purpose and the SEZ as a public purpose. Most SEZ are built and developed by

private parties with extensive resources. Why cannot they be made to pay compensation which is in

sync with their ability in terms of resources?

E. Monitoring and Enforcement of Conditions

The functioning of the SEZs is governed by a three tier administrative set up. The Board of

Approval is the apex body and is headed by the Secretary, Department of Commerce. The Approval

Committee at the Zone level deals with approval of units in the SEZs and other related issues. Each

Zone is headed by a Development Commissioner, who is ex-officio chairperson of the ApprovalCommittee.

Once an SEZ has been approved by the Board of Approval and Central Government has notified the

area of the SEZ, units are allowed to be set up in the SEZ. All the proposals for setting up of units in

the SEZ are approved at the Zone level by the Approval Committee consisting of Development

Commissioner, Customs Authorities and representatives of State Government. All post approval

clearances including grant of importer-exporter code number, change in the name of the company or

implementing agency, broad banding diversification, etc. are given at the Zone level by the

Development Commissioner. The performance of the SEZ units are periodically monitored by the

Approval Committee and units are liable for penal action under the provision of Foreign Trade

(Development and Regulation) Act, in case of violation of the conditions of the approval.

Sections 3(7) and 3(8)(b) allow for the imposition of conditions on the developer of the SEZ by the

Board and the Central Government. Once these conditions are satisfied a letter of approval is issued

to the developer. As an enforcement measure this letter of approval is capable of being suspended or

cancelled at any point of time at which the conditions specified at the time of approval are not met.

However, it is to be noted that the sections clearly say 'may' impose. There is no obligation to

impose these conditions, resulting in too much leeway and in the creation of potential to undermine

the process.

F. Environmental Concerns

SEZ Rules 2006 contain provisions to ensure compliance with existing environmental standards.

Section 18(2)(iii) states as follows:


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18. Consideration of proposals for setting up of Unit in a Special Economic Zone. -

(2) The Approval Committee shall approve the proposal if it fulfills the following

requirements, namely: -

(iii) the applicant undertakes to fulfill the environmental and pollution control

norms, as may be applicable;

Lack of detail seems to be the general trend of the SEZ Act and the SEZ Rules. By not specifying

standards for different types of SEZ, any possible intention of protecting the environment is

negated. Though each and every situation cannot be envisaged, at least an attempt at covering

several probable situations must be undertaken.

G. Questions and Recommendations1) Questions

On examining the SEZ Act certain questions arise.

Can SEZ be actually brought under the ambit of public purpose?

If not then why is the State acquiring land for SEZ?

If it is a public purpose then considering that the development of SEZ is being handled by

private players with extensive resources, should not the compensation and rnr package be

higher?

Is the SEZ Act adequate in terms of covering every aspect related to SEZ?

2) Recommendations

Though the objective of achieving economic growth is laudable, the SEZ does not have enough of

the element of public in it to be a public purpose. Almost all the benefits are derived by private

parties who develop and operate from the SEZ. Thus the acquisition of land for SEZs by the State

should be brought to an immediate end. This does not mean there should be no SEZs. SEZs aregood but forced acquisition of land is not. Take SEZs out of the acquisition process and let the

developers buy the land at prevailing market rates. This allows the developer to get the required

land and the farmer to exercise is choice to sell or not. No negative impact will occur as the

developers can make up the cost of the land in no time given the sops and concessions available to

them. This way the element of compulsion involved in acquisition is taken away. In case SEZs

continue to be classified as a public purpose then the compensation and rnr packages must be made

much more lucrative considering that the developers have boundless resources and can make up thecosts quickly.


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As far as the SEZ Act is concerned, it is woefully inadequate. It does not even contain an indirect

reference to rights of the persons from whom the land is acquired. It is short on procedural aspects

as well. Finally it is too reliant on the Land Acquisition Act and other statutes to be completely

effective. To redress the situation the Act needs to be reworked from end to end in order to make it a

comprehensive and independent legislation that is capable of dealing with all the challenges related

to SEZs

Case Study I

The Singur Experience

Background

The ruling party had gone all out for acquisition of 997 acres (4.03 km2) of multi-crop landrequired for the car factory, questions had been raised about the party forcible acquisition which

was made under the colonial Land Acquisition Act of 1894.

The Tata Motors site was the most fertile one in the whole of the Singur block, and the Singur

block, in turn, is among the most highly fertile in West Bengal. Consequently, almost the entire

local population depends on agriculture with approximately 15000 making their livelihood directly

from it. With the number of direct jobs to be created no more than about 1,000, many of which are

expected to go to outsiders, the local populace felt threatened for their livelihood. Environmental

degradation was also feared.

Reaction of Farmers

While landless peasants and share-croppers feared losing out entirely, sections of the locals,

particularly those owing allegiance to the CPI(M) welcomed the factory. These count chiefly among

the owners of bigger portions of the land even as discrimination in the compensation has been

alleged. A section of those promised jobs at the factory boycotted classes while training in protest

against the alleged going back on the promise.

Protests

Preliminary surveys by officials of the state and Tata Motors faced protests, and manhandling on

one occasion, from the villagers organized under the Save Singur Farmland Committee with

Trinamool Congress forming its chief component.

Chief protesters included the opposition parties spearheaded by the Trinamool Congress under


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Mamata Banerjee and Socialist Unity Centre of India. The movement received widespread support

from civil rights and human rights groups, legal bodies, social activists like Medha Patkar and

Anuradha Talwar, Booker prize-winning author Arundhati Roy and Magsaysay and Jnanpith Award-

winning author Mahasweta Devi. Other intellectuals, writers like the poet Ruchit Shah, artists like

Suvaprasanna, theatre and film personalities like Saonli Mitra, Aparna Sen etc. pitched in. The state

police force was used to restrict their access to the area. The Nobel Laureate Amartya Sen supported

the idea of factory but he however opposed forcible acquisition of land.

Response to Protests

The protesters were attacked verbally by the Communist Party of India (Marxist) (CPI(M)) leaders

and physically by the party's supporters. Benoy Konar, member of the party's state committee,

famously declared that protesting intellectuals would be greeted by women supporters of the partyby showing their behinds. The state government imposed the prohibitory Section 144 of the Indian

Penal Code for initially a month and then extended it indefinitely. The imposition was declared

illegal by the Kolkata High Court.

Lack of Transparency

Other aspects of the process of setting up the factory that had come under severe criticism were the

government's secrecy on the details of the deal and the chief minister's furnishing of false

information, including in the legislative assembly Vidhan Sabha. In particular, the concessions

being given to Tata Motors were not publicly revealed.

High Court Verdict

The Kolkata High Court declared the acquisition prima facie legal. The air seemed to have cleared

somewhat when the High Court ordered the state government to submit correct figures following

which an affidavit but was not satisfied with the result. In a fresh affidavit filed later in June 2007,

the government admitted to 30 per cent of the land was acquired from farmers without consent. The

affidavit remains unclear on whether the lack of consent is based on insufficiency of the

compensation or refusal to sell altogether.

Business Houses' Role

The critics of the government's industrialization policy have argued on the other hand that while

India is moving towards a free market economy, government has been acting as a broker for the

private sector by forcing private citizens to give up their property at throw away prices.


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Pullout

On 23 September 2008, Tatas decided to leave Singur in West Bengal, the decision is reported to

have been made by the Tata management and the Bengal government had been informed. On 3

October it became official that TATA will leave Singur when Ratan Tata announced it in a press

conference in Kolkata.

Case Study II

Falta SEZ

Background

The Falta SEZ is located in the southernmost part of the South 24 Parganas district, near Diamond

Harbour. It is located on the bank of the river Ganga, not far from where it joins the Bay of Bengal.The deltaic alluvial land in the area is one of the most fertile in the world, and fishing is also a

major source of livelihood of most people in the area.

The rationale of setting up the EPZ, and later the SEZ in this locale, was supposedly that the

proximity of the river and the sea would allow the export of the goods manufactured in the SEZ at

low cost, earning foreign exchange in the process. Therefore the SEZ was set up over 280 acres of

land, 193 acres of which belonged to Calcutta Port trust and 87 acres was acquired land. Most of

this land was river silt that had been deposited as land-fill during the widening of the river channel,

which is the best land for agriculture, whereas the rest was agricultural land already in use. Four

sectors (Sectors I-IV) have already been set up, whereas Sector V is in the process of establishment.

Displacement of Locals

People who had already been living in the area prior to river widening were displaced and resettled

in the area now called Highlands. They are facing displacement for a second time because of the

expansion of the SEZ. There a number of densely populated villages all around the SEZ such as

Nainan, Neela and Karaghata from where people go to work in the industries located within the

SEZ.

Decline of Traditional Professions

In Karaghata village, most people belong to the Ruidas (leatherworkers), Bauri (boatmen) and

Muslim communities. The Ruidases traditionally work with leather but also play the ceremonial

drum, the dhaak, and also make cane utensils and furniture. However, these professions are slowly

dying out as people from nearly every family now go to work in the SEZ.


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Effects of SEZ on Surrounding Villages

The SEZ has had immense adverse effects on the life in the surrounding villages too. With the

initial land acquisition for the SEZ, agriculture was adversely affected in the area. The process of

expansion is taking over more agricultural land. Notices for further land acquisition were served to

landowners in Sundarika mouja last year.

The loss of agricultural land and the setting up of industries in the SEZ have put agriculture in

permanent decline in the area. Many of the local inhabitants now also work as casual labourers,

driving cycle vans, working in construction etc. Pollution from the industries located in the SEZ is

also causing tremendous damage to the environment of the surrounding villages and the livelihoods

of people.

In Neela village, a black soot released from the Kohinoor paper mills is covering all plants and

habitations, causing tremendous loss to agriculture. Also, the steam boiler of the hydraulic press of

the Kohinoor factory creates such a terrible noise that children are developing nervous disorders.

In Nainan, periodic release of a red acidic effluent in the canals going through the village is

polluting the groundwater and killing off the fish in the river, which is a major source of income for

this village mostly inhabited by fisherfolk. There is massive groundwater depletion too, and

tubewells can only function if boosters are fitted. Lot of the waste generated in the factories is

carried away by the inhabitants of the surrounding villages for recycling, and this garbage can be

found to be littering the surrounding villages. The entire area is paying the price for being the locale

of an SEZ set up without any environmental impact assessment and with the sole objective of

generating profits.

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