Critical analysis of
Special Economic Zone
SEZ ACT 2005 in India and
Anti SEZ Movements
The government of India has made
several foreign trade policies and schemes to encourage export-oriented
production. They serve as means to bypass fiscal policy of the nation and
attract Foreign Direct Investment (FDI). The most recent of the schemes is the
Special Economic Zone (SEZ), a duty-free territory with separately developed
industrial infrastructure. Other schemes include the Export Processing Zone
(EPZ) and Software Technology Park (STP), both of which are designed an
Export-Oriented Unit (EOU). All of these schemes are governed by separate rules
and granted different benefits. (SP Mathiraj: 2015)
Special Economic Zone (SEZ) is a
specifically designated, duty-free area deemed to be foreign territory for the
purposes of trade operations and duties and tariffs. Such geographical region
has economic laws different from a country's typical economic laws for the
increase of FDI. SEZs have been established in several countries, including
Latin America, Africa, China, India, Jordan, Poland, Kazakhstan, Philippines
and Russia. SEZs are located within a country's
national borders, and their aims include increasing trade balance, employment,
increased investment and effective administration. To encourage businesses to
set up in the zone, financial policies are introduced. These policies typically
encompass investing, taxation, trading, quotas, customs and labour legislations. (Avishek
Topno:2005)
The main
objectives of SEZ are to enhance foreign investment, increase exports, create
jobs and promote regional development. The other objectives of the SEZ are:
The Term Special Economic Zone includes the following:
Special Economic Zone
Act 2005
In May 2005,
the government of India passed new regulation called the “Special Economic
Zones (SEZ) bill 2005” approving its obligation to a long- term and stable
policy for the SEZ structure which had been only an administrative construct
previously. In addition to tax breaks, the law provides a one-stop clearance
and approval mechanism for setting up SEZ units. SEZs are regarded as foreign
territory for the purpose of duties and taxes, and operate outside the sphere
of the custom authorities. SEZ units are allowed to retain 100 percent of their
foreign exchange earnings in special export earners foreign currency accounts.
They are free to sell goods in the Domestic Tariff Area (DTA) on payment of
applicable duties. Sales from DTA firms to SEZ units are on par with regular
trade transactions and hence eligible to benefit from all export incentive and
foreign currency exemption scheme. In addition, many state governments have
granted a sales-tax exemption for DTA-SEZ sales. SEZ units are also exempt from
the central government service and excise tax regimes. SEZ businesses are
expected to be a positive foreign exchange earner within five years from the
commencement of production. (SP Mathiraj:2015)
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. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes. (Ministry of Commerce & Industry:2018)
To instil confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime, a comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, 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. (Ministry of Commerce & Industry:2018)
The main objectives of the SEZ Act are:
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 Approval
Committee. (Ministry
of Commerce & Industry:2018)
The
SEZ Act consists of 58 sections divided into VIII chapters and three Schedules
Facilities and Incentives for Developers
Amendment Made from
2005 – 2022
The SEZ Act 2005 further amended the
country’s SEZ policy. Many EPZs were converted to SEZs, with notable zones in
Noida (Uttar Pradesh), Falta (West Bengal) Visakhapatnam (Andhra
Pradesh), Chennai (Tamil Nadu), Cochin (Kerala), Santa Cruz
(Maharashtra), Indore (Madhya Pradesh), as well as Kandla and Surat
(Gujarat). Since the Act’s promulgation, the Indian government has also
accepted proposals for additional, far smaller SEZs, which must be proposed by
developers to the Indian Board of Approval. The SEZ rules,2006 lay
down the complete procedure to develop a proposed SEZ or establish a unit in an
SEZ. (Desan Shira & Associates: 2021)
268 (25 are multi product SEZs, remaining are sector specific SEZs)
Source: Desan Shira & Associates: 2021
The Special Economic Zones Amendment Act 2019 No. 8 of 2019 6th. July 2019
Locations of various
SEZ Projects in India
The category 'SEZ' covers a broad range
of more specific zone types, including Free Trade
Zones (FTZ), Export Processing Zones (EPZ), Free
Zones (FZ), Industrial Estates (IE), Free ports, Urban
Enterprise Zones and others. Usually, the goal of a structure is to
increase foreign direct investment by foreign investors, typically an
international business or a Multi-National Corporations (MNC).
The first zone was set up in Kandla as early as 1965. It was followed by the Santacruz export processing zone which came into operation in 1973. The government set up five more during the late 1980. These were at Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamilnadu), Visakhapatnam (Andhra Pradesh) Falta(West Bengal) Noida (Uttar Pradesh) Indore (Madhya Pradesh) in addition 18 approvals have been given for setting up of SEZ at Positra (Gujarat) Navi Mumbai and khopta (Maharashtra), Nanguneri (Tamil Nadu) Kulpi and Salt Lake (West Bengal), Paradeep and Gopalpur (Orissa), Bhadohi, Kanpur, Moradabad and Greater Noida ( Uttar Pradesh), Vishakhapatnam and Kakinada (Andhra Pradesh), Vallarpadam (Kerala), Hassan (Karnataka), Jaipur and Jodhpur (Rajasthan) on the basis of proposal received from the state governments. (Avishek Topno:2005)
Surat
EPZ became operational in 1998. The EXIM policy, 2000 launched a new scheme of
special economic zones (SEZs). India is now promoting EPZ program much more
dynamically than in the first phases of their evolution. Huge amounts of public
resources are being invested in the zones. SEZ in India was announced by the
government in march 2000. To provide a stable economic environment for the
promotion of export-import of goods in a quick efficient and hassle-free
manner, government of India enacted the SEZ act, which received the assent of
the president of India on 2005. The SEZ Act and SEZ Rules, 2006 were notified
on Feb 10, 2006.
(SP
Mathiraj:2015)
Total number of
Operational SEZ in India:
(Desan Shira & Associates: 2021)
Some Important SEZ in India
Navi Mumbai SEZ
The Navi Mumbai Special Economic Zone is located in the satellite
township near Mumbai known as Navi Mumbai in the state of Maharashtra. NMSEZ is
regarded to be the best SEZ in India. The nearness of the Navi Mumbai Special
Economic Zone (NMSEZ) to the national and international transportation system
is one of the major strengths of this SEZ. The NMSEZ also has the Chhatrapati
Shivaji International Airport for airfreight, which is just an hour and a half drive
from the special economic zone. The NMSEZ is also linked with the other parts
of the country by a network of National Highways such as NH3, NH4, NH8, NH9 and
NH17. The Navi Mumbai Special Economic Zone is situated near to the Jawaharlal
Nehru Port Trust, which is the biggest and the most advanced sea port in India.
Since 2005, exports from the country have
increased substantially, largely due to the rise in sourcing and
manufacturing platforms.
According to the Ministry of Commerce and Industry:
Foreseen Dangers by the Farmer Leaders and
Anti-SEZ Activists
Further, farmers learnt about the
effects of the SEZ policy on the agriculture sector. The agricultural sector,
mainstay of 65% of the country’s population, faced unwelcome changes. These
included reduction in subsidies and introduction of ‘contract farming’, which would take farming out of the hands of
farmers and give them to business interests.
Additionally, with only half the
acquired land to be used for industry and the rest for luxury residences l and
recreational facilities this would benefit the builder lobby. The company would
only incur a one-time cost of acquiring land, recoverable through the tax
exemptions, subsidies and other sops handed out by the state.
The evident emphasis of the state
was on promoting and developing industry and urbanisation at great detriment to
agriculture.
In April 2005, the state government issued notices in Raigad newspapers for acquisition of land. It announced its intention to acquire land to set up an SEZ. The notices led to a debate on the SEZ by farmers, media and business man. More than 80% of Raigad’s farmers hold small and marginal lands and unrecorded tenants are the most vulnerable. In June 2005, the farmers in a spontaneous reaction organized a protest march in Pen to demand (the promised) irrigation water from the Hetawane dam. 5000 strong farmers group questioned the government’s Land Acquisition Officer on reasons given by the government for taking over their land. A strong police force prevented them from entering the office. As the crowd grew aggressive and began pushing the closed doors of the office, police dispersed the crowd through lathi charge and teargas. Farmer activists, along with more than 32 agitators were booked under non-bailable offences. Sixteen agitators that included three women were held in jail for nineteen days. Around this time NCAS organized a consultation on the SEZ Act. Eminent social activists, scientists and lawyers were invited to analyse and discuss the Act, in which farmer representatives from Pen Block participated. (Dr. Vaishali Patil:2021)
The government’s land acquisition
for MMSEZ was viewed in the context of the district’s historical struggle to
retain its right to land. This was the first time that the state was acquiring
a huge tract of land for the private sector. Farmers and activists recognised
and realised that the project would appropriate their natural resources,
especially land and water, destroy their traditional livelihoods; and most
importantly would benefit not the people but Reliance industries alone. The
leaders became resolute in not wanting to part with their land and natural
resources. (Dr. Vaishali patil:2021)
Soon,
a small band of knowledgeable, dedicated and active farmers came together on
the issue recognising the need for collective action. A tribal group, from mangaon
block performed a street play on the issue in all the project-area villages.
The play would be followed by discussions on
the proposed SEZ. At this time, land agents appointed by Ambani’s Reliance
company began issuing threats to the activists, asking them to discontinue the
campaign. The activists learnt that a number of unemployed youths, village
level government representatives and key members in some villages were in the
pay of the company. They opposed the anti-SEZ campaign and spread misinformation
about it. (Dr. Vaishali Patil:2021)
At the block level, NGOs and
activists formed a forum Jagtikikaran
Virodhi Kruti Samithi (JVKS) (Forum against Globalization).
Representatives of no political party other than the PWP found space in this
forum. Later, different political parties came together and formed the Chauvis Gaon SEZ Virodhi Shetkari Sangarsh
Samithi (the 42 villages coalition against the SEZ project) or the CGSVSSS under the leadership of Mr
Subhash Mhatre, a project affected person and Tehsildar of the state’s revenue
department. Representatives from the political parties of Shiv Sena, Congress
and NCP were included in this committee along with PWP. A similar forum to oppose the project, the Maha Mumbai SEZ Virodhi Sangarsh Samithi
(MMSVSS) was also formed at the
district level by a lawyers group, under the leadership of former opposition
leader in the assembly, Advocate Datta Patil. The other members of the forum
were P.B. Sawant, former Chief Justice of the Bombay High Court, B.G. Kolse Patil
former judge of Bombay High Court and senior social activist Vilas Sonawane.
This group which is active in the Uran
and Panvel blocks, filed a PIL and
Ambani was disallowed extension of time limit towards acquiring land. (Dr.
Vaishali patil:2021)
PWP organized a massive protest march to the Divisional Commissioner office at Konkan Bhavan, Navi Mumbai to address compulsory land acquisition by the government. On July 27 2007 more than 30,000 farmers walked in protest against the forceful land acquisition by the government. The State Chief Minister made a declaration that no land would be forcefully acquired against the wishes of the people. However, despite the Chief Minister’s assurance, the land acquisition process continued in the absence of any written official order or notification. As an appropriate counter-move, activists demanded a SAZ or Special Agricultural Zone to promote agriculture. In such a zone, increased irrigation could be used to develop horticulture, and fishing augmented and exported. The activists decided to continue their protest until the government stopped acquiring land. In order to galvanize the villagers and exert pressure on the state government it was decided to build village level organizations. It was further planned that villages would take part in chain fasts. Each village fasted for a day, followed by another village the next day. This went on for an entire month in Pen block. The responsibility of organizing, motivating and guiding farmers was with the local village leaders. (Dr. Vaishali Patil:2021)
Indefinite Fast against SEZ and Role of Women
CGSVSSS decided on launching an
indefinite fast. On 17th July
2007 sixteen farmers, half of them women, went on an indefinite fast
demanding the immediate stoppage of the acquisition process and exclusion of
irrigated areas from the project. The fasting was organized in front of the
office of Tehsildar in Pen which went
on for seven continuous days. During this period a large number of
organizations, civil society groups, leaders of various unions and individuals
lent support to the farmer’s demands. Women from all the 24 villages in Pen were at the forefront of every fast
and protest. The activists noted that women could be counted upon to be present
at every village meeting, agitation, indefinite fast or public hearing. Women
were the first to get arrested during the ‘Jail
Bharo andolan’ (fill jails movement). They played an important role in
thwarting the designs of land agents hired by the company.
In July 2008, Prof. N.D. Patil and a representative of the farmers, Janardan Mhatre decided to go on an indefinite fast. Exactly one year after the Chief Minister’s promise of excluding irrigated lands from the project, Mr. Patil began his indefinite fast at Azad maidan, Mumbai. People from all over the state, including farmers, SEZ affected people, trade union members etc arrived in Mumbai in support of the fast. The PWP MLAs, joined by Shiv Sena MLAs demanded a discussion on the matter in the assembly house. On being refused, they staged a walkout from the assembly. In response, the government, particularly the Chief Minister was forced to make a statement on the issue. He declared in the assembly that the government would seek the farmers’ consent on the SEZ. A written order was passed to the Collector of Raigad, asking him to hold a referendum, asking landowning farmers in the project-marked area to vote on the proposed MMSEZ. The referendum was fixed for 21st September 2008. (Dr. Vaishali Patil:2021)
Process of Referendum by Farmers of Raigad
The referendum was conducted only in
22 villages of Pen block. The
Collector appointed a polling officer at the government school in each village.
Zonal officers were appointed for supervision, and the entire process was
recorded on video. For nearly fifteen days prior to the referendum, activists
carried out an intensive campaign in all the villages. The company offered each
farmer Rs10,000 to vote in favour of the SEZ. The activists first compiled the
list of eligible names for the referendum through the Right to Information act
(RTI). Village committees, which had enthusiastically organised the chain fasts
were now roped in to contact farmers individually.
They informed the farmers about the referendum and underscored its importance. It was emphasised how they could vote to decide their future. The voting process for the referendum went smoothly. CGSVSSS organized a press conference and declared the results. The results showed that 96% of the farmers had rejected the idea of SEZ and had asked instead for a SAZ. Farmers had demanded irrigation for their agricultural land as promised by the government. In a further development, the Maharashtra Government has proposed an SEZ state bill which is much worse that the central SEZ act. (Dr. Vaishali Patil:2021)
Remarks of CAG on SEZ
in Financial Audit
A
report on the Export Processing Zones by the Comptroller and Auditor General of
India (CAG 1998): "Customs duty amounting to Rs 7500 crores was forgone
for achieving net foreign exchange earnings of Rs 4700 crores and the
government does not seem to have made any cost benefit analysis." In spite
of this caustic comment, the Central Government, in the 1999-2000 Budget raised
the corporate tax holiday period in EPZs from 5 to 10 years. (India
together:2006)
In 2005 October 6, The High Court in its order
had directed the State government that ''there shall be a total freeze on the
destruction and cutting of mangroves in the entire State of Maharashtra. The
Court orders also directed that all construction and rouble/garbage dumping on
the mangrove areas shall be stopped forthwith. Further, the Court had
instructed that regardless of the ownership of land, all construction taking
place within 50 meters on all size of mangroves shall be forthwith stopped. The
Court order also directed the State authorities that no development permission
whatsoever shall be issued by any authority in the State of Maharashtra in
respect of an area under the mangroves. ''In the event, if the company has not
ordered any work, then you are hereby called upon to stop the earth filling
work in progress, immediately, since the land is in your possession and you are
required to protect the same as also responsible to ensure that no unauthorised
work is carried out in the area in your possession,'' the CIDCO communication
to NMSEZ authorities stated. (One India:2007)
In 2018 September 17 Bombay High court has ordered the state Government to transfer all Mangroves for protection by the forest department but state government has not taken into consideration NMSEZ lands. It is feared that destruction of mangroves resulting into unseasonal floods and loss of fishing zones as well as paddy fields.
Already
revenue department has filed FIR against the NMSEZ companies for destruction of
Mangroves at Pagote and Bhendkal. Mangrove committee has halted filling of
mangroves at Pagote and Bhendkal ordering NMSEZ to restore the land but nothing
has been restored from NMSEZ. (Vijay Singh: 2021)
The High Court-appointed
Mangrove Protection and Conservation Committee has directed CIDCO to have five
choke points at the wetland to allow free flow of tidal water. It is strongly advocated
revocation of the lease of the Panje wetland from Navi Mumbai SEZ (NMSEZ) since
the lease conditions of not harming the environment have been violated.
Moreover, the Maharashtra Coastal Zone Management Authority (MCZMA) has itself
categorised the area as CRZ-1. (G. Mohiuddin Jeddy:2021)
In
December 2009, the two-year period allotted under the Land Acquisition Act lapsed
and the project was de-facto scrapped. In 2011 January, Maharashtra government
announced the scrapping of the MMSEZ project by declaring that ‘the Raigad
farmers were free to utilise their lands as they deemed fit’. The 7/12 land
extract was also de-notified against the lands, allowing farmers to trade their
lands. The project was cancelled due to the company’s inability to acquire
sufficient land in the two years designated period. This was entirely due to
the strong protest campaign by the farmers. (Vaishali patil:2021)
Mukesh Ambani-promoted Navi
Mumbai SEZ Pvt Ltd had sought extension of the validity period of the formal
approval, granted by the board for setting up IT/ITeS SEZ at Ulwe, Navi Mumbai,
Maharashtra, beyond October 24, 2015. In
2016 Central Government has given permission to set up SEZ including Infosys
and Cognizant. About 500 proposals for SEZs have been formally approved by the
government, out of which over 200 are operational. (Economic Times:2016)
While ignoring the Mangrove Committee orders, NMSEZ has begun to develop
plots off the coastal road in Dronagiri. JNPT SEZ has levelled large stretches
of lush-green mangrove zones into virtual desert lands and buried
wetlands, The State Environment Department has already asked the Raigad
District Coastal Zone Monitoring Committee to probe into previous complaints of
mangrove destruction at Holding Pond 2 by CIDCO and at Dhutum and Belpada by
JNPT. SEAP activist Nandakumar Pawar and Nat connect Foundation director B.N.
Kumar argue that the reckless destruction of mangroves and wetlands is already
causing floods in several villages in Uran/Dronagiri as the free flow tidal
water flow has been interrupted with the water finding its own course. Villages
with no-flood history are reeling under floods ever since NMSEZ and JNPT SEZ
began their landfill. (Newsband:2021)
Mukesh Ambani has bought 2,500 acres of Land in Pen area but the
purchased land is scattered as the farmers have sold off part of their Land
only. Hence Reliance is pressurising to capture the rest of the land from
farmers and farmers face challenges from brokers and Reliance Ltd. (Vaishali
patil:2021)
Conclusion
Rules
are meant for humanity. Human beings are not meant for rules. Similarly
Economic growth is meant for human development and welfare. No fool will sell
off one’s own eyes to purchase a beautiful art.
Special economic zones enter the countries promising national income.
The objective of SEZ is to create infrastructures but the corporate owners
manipulate the infrastructure available from the Government and focus on
production and export only. These
profit-oriented business bodies utilise land, natural resources and produce
consumption goods at cost less rate in the name of economic growth. They also
enjoy all tax and duties exemptions in the name of export and withhold the
profit for themselves. CAG report of the Government shows the loss for the
state due to investment on SEZ. Central and state Government provides land at
very cheaper rates, builds up infra structure
Source: (i) MSW II - Vincent Vijayan
(ii) Trust Pen - Ankur
References
Avishek
Topno 2005 What is Special Economic Zone? The Economic Times
Mohan
Brao 2015 Special Economic Zones Act,2005. Legal Service India
G. Mohiuddin Jeddy 2021 High
Court panel directs CIDCO to restore tidal water flow at Panje wetland
Narayana
Raju G. 2019 The special Economic Zones Act, 2019 The Gazette of India