Foreign Enclaves on Indian Soil
--Arindam Sen
Already notorious as special eviction (for the “development refugees”), exemption (for the investors) and exploitation (for the workers) zones, SEZs call for a closer examination from the perspective of people’s resistance against this latest technique of rapacious capital accumulation.
An SEZ will be almost a foreign enclave in our homeland, the bigger ones like islands of prosperity in this sea of poverty. You’ll have to have a passport or special identity card to be there. Peasants who once tilled that very land will now have to show ID cards to stand on it. A good many laws of the land will be partly or wholly inapplicable in these zones. The Constitution of India gives us the Panchayati Raj and the right to self-governance, but here much of that power is delegated to the Development Commissioner, who is to be appointed directly by the Central Government. According to of the SEZ Act 2005, the development authority of an SEZ will mainly comprise “the Development Commissioner, three officers of the Central Government, not more than two nominees of entrepreneurs.” None of these persons are elected by the people, but they have the mandate to develop infrastructure within the zone, provide water and sanitation services, levy “user charges” and collect property “fees” (the word “tax” has been avoided!). This means, in place of a democratically elected body of local self-government we will have a professionally (read bureaucratically) administered and thoroughly depoliticised apparatus that will be answerable not to the local people but to the Central Government and the corporate bosses.
Those who develop these zones or set up shops there are exempted from a big bunch of economic and fiscal regulations. For instance, 100% FDI, including in units manufacturing SSI-reserved products is allowed, and so is free repatriation of profits. There will be full exemption from income tax for the first five years and for the next 10 years it will be charged at greatly reduced rates. (For details, see SEZs: the Paradise of Capitalism by Sundaram, Liberation, August 2006). On the other hand, workers in SEZs are systematically deprived of many of their rights, including the right to strike (see ibid).
The Cunning of Capital
It is not the concessions alone, or the license to hire and fire labour at will, that attract capital to an SEZ. The latter also doubles up as a covert means to grab land. If speculation in stock and money markets is the most favoured destination of big finance today, probably the second place is occupied by real estate and infrastructure development: building apartments, shopping malls, hotels, electricity generation and so on. All this requires land -- lots and lots of it. And that is a resource which is in absolutely limited supply and which one cannot manufacture or find an alternative to. So, go get it. Get as much as you can, and before others do, before prices shot up. This is the universal craze among lords of capital growing into a new breed of landlords or corporate landlords.
But there is a hitch. The owners of investable surplus know that people will raise an alarm if they say they are going to evict the peasants, adivasis and the urban poor for building things like entertainment parks. To grant this will be rather embarrassing for the government too. So the cunning of capital has combined with the shrewdness of our smart politicians to project a sure shortcut to development: the SEZs. The nation needs industries and infrastructures, IT units and hospitals with state-of-the-art technologies, we are told, but in this age of global competition we must offer the entrepreneurs very special incentives and lots of land at prime locations. And how do we provide all this if not in the shape of SEZs?
The SEZ road helps capital in numerous ways. For one, the state governments vie among themselves to rope in the Ambanis, Mittals and their ilk to develop SEZs and take upon themselves all the hassles of acquiring land. In some cases the former keep an amount as commission or cut money, paying the owners of land less than what they take from the developers, yet the latter always end up paying less than the market price. The government may even take less from the developer than what it pays those whose lands are acquired. In Singur for instance, the State government reportedly handed over the nearly 1000 acres of prime farmland to the Tatas at Rs. 20 crore, to be paid back over the next five years at an annual interest rate of 1%, effectively making the land price just about Rs. 12 crore, whereas the government will be paying around Rs 150 crore to those whose land is being acquired.
Secondly, in the case of single product zones, the developer (a private, state or joint entity) is required to earmark only 50% of the total land area for the “core process”, that is, the basic economic activity (not necessarily manufacture, any activity generating regular cash flow satisfies this condition). The rest of the acquired area the developer is free to use for construction of anything from apartments to swimming pools. If it is a multi-product zone, the SEZ Act 2005 (which came into force in February 2006) is even more liberal. Here as much as 75% of the acquired land can be used up for such non-core processes -- for real estate business in plain language. Moreover, it is easy to start with a small single product zone and then expand into a multi-product one. This is what is actually happening. For instance, Mahindra Gesco, which originally got the government’s formal approval for a 49-hectare IT/ITeS (IT-enabled services) SEZ in Jaipur, has now received an in-principle approval to expand it into a 1,000-hectare multi-product SEZ. Even Reliance Industries Ltd has got a similar approval to expand its 440-hectare petroleum and petrochemicals SEZ in Jamnagar into an over 1,000 hectare multi-product SEZ. Obviously, much of the more than 750 hectare free land will be used for real estate development, maybe part by part.
Real estate business via the SEZ route is especially attractive because here you get duty-free raw materials while the state government arranges for guaranteed supply of water and electricity. Thanks to the transport and communication revolution, it is a smaller world now, and even the land market has become globalised. According to Merrill Lynch the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015. Lots of foreign money is therefore flowing into the Indian realty sector. By mid-2006, Morgan Stanley invested $68 million in Mantri Developers, a midsized construction firm in Bangalore, and Merrill Lynch $50 million in Panchsheel Developers, a regional builder. Real estate funds set up to invest only in India have already raised more than $2.7 billion. And new funds worth as much as $4 billion are being planned by J.P. Morgan, Britain’s Knight Frank, and other foreign investors.
The SEZ bonanza is being eyed by the tourism industry too. Talks are on for building special tourism zones having the following special attractions:
• 100% tax exemption for a period of 10 years
• Exemption from import duty on capital goods
• Withdrawal of luxury tax, lower VAT etc.
• Exclusive tourism zones for high-end global tourists (where entry of ‘natives’ will be restricted or forbidden and which will be a dreamland of sex tourism).
‘China’s Path our Path’?
China achieved spectacular success by following the SEZ route and so will India, it is often claimed. Without going into an assessment of the pros and cons of the Chinese policy, let us first see how far the Indian trajectory is at all comparable to the former.
China’s SEZ initiative is government driven and ownership of land remains with the state. In India the private sector will develop most of them and a limitless amount of land is being handed over to the corporate houses for this purpose.
Compared to only six SEZs in China, India is going to have some 300, according to an estimate of the commerce ministry. There the zones measure 40,000 hectares or more, while the average size of Indian zones approved so far is only 420 hectares. The annual exports from Shenzhen alone surpass India’s total (not only from the SEZs, but of the country as a whole).
China’s SEZs are strategically located in the southeast, three of them in Guandong province alone. These export-oriented industrial areas are close to ports and trade partners like Hong Kong, Macau and Taiwan. In India there is hardly any long-term perspective regarding location: capitalists are free to set up zones wherever they like.
In China incentives differ from zone to zone and are based on the number of years of operation, use of advanced technologies, extent of exports and the type of activities. For example, companies involved in building infrastructure get special tax benefits. In other words, it is a give-and-take affair. What concessions an enterprise gets are closely linked to what it contributes to the national economy. India offers tax incentives across-the-board to all companies.
Two things are clear. One, what we are doing here is simply a caricature of the Chinese SEZ initiative. There it is the government which is in the driver’s seat; in India that seat is occupied by corporate houses while the government serves merely as the “helper”, so to say.
This is but natural. China achieved independence two years later than we did, but it achieved swaraj with socialism, as Bhagat Singh had dreamt of in India. So it could take quicker strides forward and overtook us in building a self-reliant economy with a big home market and a strong industrial infrastructure before cautiously embarking on an open door policy in late 1980s. What such a nation can do with SEZs, an underdeveloped country like India -- which remains very much dependent on imperialism -- simply cannot expect to. All talk of India emulating the Chinese SEZ ‘model’ is, therefore, plain political chicanery indulged in, interestingly, even by people who claim to be Marxists.
The Opposition Within
While the entire spectrum of ruling class parties and politicians -- the ruling Left not excluded -- basically agree on the curb-labour-woo-capital principle of SEZs, on two points there is considerable opposition from within the ruling elite. One, excessive exemptions would cost the exchequer too much and make it difficult to balance budgets. This concern was forcefully expressed by the finance ministry in the late August 2006 meeting of the empowered group of ministers which decided to lift the cap on the permissible number of SEZs in our country (for details see Let the Working Class Rally Against the SEZ Subterfuge by Arindam Sen, Liberation, October 2005). The FM’s stand was supported by the RBI, which observed that big tax incentives were justified only if SEZ units established strong “backward and forward linkages with the domestic economy” -- a very doubtful proposition. On September 14, the IMF research director Raghuram Rajan described India’s SEZ policy as a tax “give-away” that was likely to shift Indian production to SEZs rather than create new economic activity. He criticized it for offering “often misdirected subsidies, guarantees, and tax sops that a stretched budget can ill-afford”.
The other opposition is not on economic grounds; it stems from the survival instinct of politicians. Chief ministers and state party bosses, including those from the Congress and other UPA partners, are afraid of the probable electoral backlash from peasants and others being evicted in the name of development. Their concern was articulated by none less than the Congress president and UPA chairperson, following which the commerce ministry had to issue a notification to State governments containing a few restrictive guidelines. As far as possible, it was directed, agricultural land should not be touched, but if it has to be taken it should not exceed 10% of the total land acquired for an SEZ. Bourgeois ideologues like VP Singh also raised their voices, and by late 2006 large-scale eviction of peasants and related police highhandedness turned the whole issue of SEZ into a matter of national debate.
CPI(M)’s Amendments...
It was just at this juncture, when the demand for repeal of the SEZ Act 2005 was growing popular and powerful, that the junior partners of the ruling dispensation -- who had offered crucial support to the passage of the said Act -- came forward with suggested “corrective steps”. The more important among these are:
No transfer of land ownership to the private developers. The latter should only be allowed to take land on lease or build infrastructure on a BOT basis. A provision limiting the acquisition of agricultural land should be built into the SEZ Act itself.
Ensure the livelihood security of the displaced families in addition to providing adequate compensation. Frame a National Rehabilitation Policy. Suitable amendments to be made to the Land Acquisition Act.
Specify separate caps for the total number of multi-product and sector specific SEZs.
The Central Government should consider setting up of SEZs through public investment in those States where private investment is not forthcoming. This is important from the point of view of regional balance.
The processing area of SEZs should not be less than 50%. Further, 25% of the non-processing area should be dedicated for infrastructure development. Building of residential and commercial complexes should be permitted over 25% of the total land area. The SEZ Rules should be suitably amended in this regard.
The Government should revisit the tax concessions.
Protect Worker’s Rights (e.g., concretely address the issue of housing facilities for the workers in the giant SEZs).
Prevent Enclaves of Speculative Finance.
(From “Note on Special Economic Zones” issued from the CPI(M) headquarters on behalf of the Left Front on 19 October 2006)
Does not the whole set of proposals read like those offered by well-meaning bourgeois economists and the RBI? They exude that spirit of ‘constructive criticism’ which has always marked the social democratic approach to bourgeois policy. It is not surprising that this ‘Left model’ of SEZ with a human face, which the CPI(M) leaders claim to be implementing in States under their rule, has earned kudos from many Congress and BJP leaders.
In addition to the proposals, at the meeting of the fourth consultative committee (attached to the finance ministry) meeting held last year, Left members of the panel asked the Finance Ministry to create a mechanism within the Board of Approval (BoP) to verify the State Governments’ claims, because the latter often allot fertile farmlands for SEZs but claim otherwise. (Needless to say, this did not apply to the Left-led governments, which are always truthful and correct, as in the case of Singur!)
The dualism does not end here. The CPI(M) has suggested amendments to the Land Acquisition Act 1894, but it had no qualms in applying the same in a most barbaric manner in Singur. Meanwhile, the West Bengal government is running full steam ahead down the SEZ Road, or rather, it was, until Nandigram happened (see below) and forced Buddhadev Bhattacharya to change gear and slow down. In addition to the three SEZs -- Falta, Manikanchan or Gems and Jewellery and Wipro -- which have been operational for some time now, seven more have received final approval and another sixteen have got “on principle” approval; nine more are in the queue seeking approval.
... And our Rejection
As against this ambivalence and opportunism, our position is straightforward: we don’t want SEZs in our country, repeal the anti-people SEZ Act and the colonial Land Acquisition Act. This is also the slogan of the lakhs of people whose land and life are threatened by this organised onslaught of the obnoxious nexus of corporate power and state power. The principal points of our objection are:
• Large-scale eviction resulting from what historian Sumit Sarkar has called the “biggest land grab movement in the history of modern India”.
• Unbridled exploitation -- the conspiracy of putting capital-labour relations back by some hundred years
• Thoughtless exemptions inevitably leading to further curtailment in social sector spending
• Environmental impact of unplanned setting up of SEZs
• Further intensification of regional disparity, with more than 80% of SEZ proposals coming from the relatively advanced states like more Maharastra, Gujarat, Tamil Nadu, Karnataka, Andhra Pradesh etc. and none from Bihar or the northeast.
• Further damage to our national economic sovereignty due to free flow of predatory foreign capital and attacks on civil and democratic rights as discussed earlier.
Moreover, we cannot but reckon with comparable international experience, such as in Malaysia, the Philippines etc, which is far from encouraging. The social cost of the Chinese success is also considerable, as the Chinese Communist Party itself has recognised. In India too, the record of EPZs, the forerunners of SEZs, is dismal, as reported in the 1998 CAG report (see Sundaram’s article in Liberation, August 2006).
This principled opposition of ours many people try to misrepresent and obfuscate in terms of a spurious “agriculture versus industry” controversy. We are Marxists, we are a party of the working class. We cannot be against industrialisation. What we strongly oppose is the big lie that SEZs are the only available or desirable path of industrialisation, against the fraud that evicted peasants will find jobs in the high-tech industries/IT centres/entertainment complexes etc. to be built up in the zones. As many economists have pointed out, if in the overall interest of development it became necessary to encourage particular branches of industry or sectors of the economy, or if it is believed that all new entrepreneurship should be encouraged and so on, all this could well be done in the country as a whole. Why should some particular entrepreneurs be awarded special privileges in the name of special economic zones? Does this not amount to a sort of indirect protection proposed by theorists of free trade and level playing field?
Moreover, the SEZ path would perforce accelerate the process of concentration and centralisation of capital. It would thus strengthen the grip of monopolies on our lives and enhance regional disparities. It is also feared that new ways of corporate corruption will open up. For example, it would not be difficult for companies having units both within and without SEZs to manipulate accounts and show much of the profits earned elsewhere as accrued in an SEZ and thus reduce or eliminate the income-tax burden. As mentioned earlier, bourgeois economists have pointed out many other ills of this strategy.
So if the government of India -- or a State government for that matter -- is really serious about industrialisation, it should first try and fulfil the primary conditions: radical land reform followed by extensive agrarian and rural development measures and creation of a robust home market. If this is avoided and the SEZ shortcut pursued, the masses will suffer even as the privileged few prospers. This is why we are agitating for total rejection of the very concept of SEZ.
Where There Is Eviction There Is Resistance
This position of ours perfectly represents the popular spirit in the country. Peasants everywhere are up in arms against schemes of pseudo-development. Their fight is against the Tatas, Reliances, Salems and even more against the State governments which, as capitalists’ henchmen, send the police to rob them of their dear land at gunpoint. But for the State governments, this would have been at least legally impossible. The involvement of governments makes even the most inhuman and unjust eviction just and legal because our courts of law then treat the whole thing as an exercise in ‘people’s interest’ or ‘national interest’. Thus peasants in Jamnagar, Gujarat, challenged the acquisition of their farmland for building an SEZ. Defeated in the High Court, that appealed to the Supreme Court, but again in vain.
With all components of the state machine united against them, the masses facing eviction are building various forms of resistance throughout the country. Kalinganagar and Jagatsinghpur (Orissa), Dadri (UP), Barnala (Punjab), Raigad ( Maharashtra), Singur and Nandigram (WB) have emerged as new hot spots, to name a few. Myriad organisations and coordinating bodies are coming up at local, State and national levels to unite the broad masses in these agitations cutting across party lines. A number of people’s movements against eviction met in a convention late last year at Bangalore under the NAPM banner to coordinate the struggles at the national level. In Haripur (WB) a broad platform has been formed to roll back the nuclear power plant project. Expert teams sent by the central government failed to visit the area and had to go back several times in the face of massive agitation. In many places, for instance at Poonamallee (30 kilometres from Chennai) people are fighting to roll back a scheme of building housing complexes on farmlands.
The power of people’s movements is also making itself felt in intensified contradictions within the ruling cliques. Recently agriculture minister Sharad Pawar and Rural Development Minister Raghuvansh Prasad Singh sent letters to the commerce minister Kamal Nath urging restrain in the matter of SEZ approvals. In West Bengal, growing dissension of junior partners of the Left Front, intense pressure from the CPI(M)’s rural base and most importantly the revolt at Nandigram (see details elsewhere in this issue) have combined to force the State government beat a temporary retreat from its eviction-for-industrialisation drive.
Thus it is that the land question has once again come up as the central issue of class struggle both at the grassroots and in national politics. If 2006 began with Kalinganagar (January 2) and ended with the horrifying state repression at Singur (December 2), 2007 begins with the upsurge at Nandigram and it is very significant that the Bengal bastion of social democrats has emerged as a forward post in this all India movement. Evidently, peasants of India and other sections of the working people are in no mood to let the SEZ challenge go unanswered.