JSEZ is unmitigated fraud wrapped in an ideology which is sold through the elite and pink papers to the country, says S Gurumurthy

The elites admire them trusting that SEZs are 'growth' engines. The farmers are hostile to them because it is their land that is turned into SEZs. And others, the overwhelming majority, are just indifferent. What is this new economic animal, the SEZ?

Making a complex story simple, an SEZ is primarily established by a private sector developer and investors. SEZs may also be developed by public sector or in joint sector. The developer and the investors plan, develop, finance, manage, market and maintain the SEZ area.

The stated object of SEZs is to promote exports, investments and employment. They are set up under a law of Parliament (the SEZ law) passed in 2005. An SEZ may be only for a specific sector, say IT software or hardware, or, it may be a multi-product SEZ. It may also single product or multi-product situated in an airport or a seaport. The law provides for the minimum area of land - ranging from 10 hectares to 1,000 hectares - needed to establish different SEZs. The maximum is left unspecified; it can go to any extent.

In the last 18 months, 237 SEZs have been given final nod and some 166 in-principle nod, making it 403 in all. Maharashtra tops the list with 75 SEZs. It is followed by Andhra Pradesh with 54 SEZs, Karnataka 46, Haryana 41, Tamil Nadu 37, Gujarat 30, West Bengal 21, Uttar Pradesh 18, Kerala and Orissa 12 each, Punjab and Rajasthan 11 each, Madhya Pradesh 10 and others with less. So, SEZs are spread all over the country.

What will the Government do other than sanctioning the SEZ? It "will create the legal frame work" for the SEZ, add "external linkages and social infrastructure". And will not stop at that. It will use its power to acquire land for SEZ as a 'public purpose' and force the farmers to hand it over to the developer. The police firing at Nandigram caught the West Bengal CPI(M) Government "red-handed" for using the State power to secure lands for a developer of SEZ at Nandigram.

The villagers who were keeping vigil and were not allowing Government officials to enter the village fearing that their lands might be taken over by the State were killed when they resisted the police. Now back to how the SEZ is established and functions. The developer is granted approval to develop and administer the SEZ. Once an SEZ is carved out by such approval, the Government virtually withdraws from the territory of SEZ which then becomes a foreign territory.

The SEZ will have its own municipal services; its own security; its own telephones and electricity. It will have no limit on foreign investment. Its greatest attraction is that there will be no services tax, no excise duty, no sales tax, no customs levy within SEZ and not tax for 10 years on the income earned from units in SEZ. The only condition for units operating in the SEZ is that they must earn more foreign exchange than they spend for their operations.

But, is the claim that the SEZs intended solely for growth, true? No, it is a lie. It will largely transfer the growth from other areas to SEZs. Also, only 25 per cent of the land area in an SEZ is to be earmarked - note the words 'earmarked' - for processing.

So, it need not be used for processing. What if a developer turns the balance 75 per cent areas into a real estate and just 'earmarks' - and not uses - the 25 per cent at all for manufacture or processing? The SEZ law seems to accept it! This is what adds to the land mass in the SEZ a thousand times more value than at what rate the Government grabbed it from the farmer and gave it to the developer. See how a developer establishes SEZs, particularly more than one. Reliance group's new oil refinery of 30 million tonnes at Jamnagar has been declared as SEZ.

Reliance has got two more SEZs - one at Navi Mumbai spread over 14,000 hectares of land which will result in a new city which will be a third of today's Mumbai in size with its own airport and sea connect, and another at Raigarh for which it will get another 10,000 hectares. It has got one more in Haryana. For all this the land comes from the farmers through the power of the state! It is not just Reliance. Many corporates have got nod for SEZs.

Thus, driven by the lure of the lucre that the SEZs offer at the cost of the rest of the country, hundreds of thousands of hectares of land are being acquired by the promoters through the state. Another land grab mechanism is also evolving. There are reports of large-scale land acquisition by traffickers who have bought lands from farmers and kept it in "land banks" for readymade delivery to developers of SEZs and others! No wonder Nandigrams have started reacting.

"Like any other land SEZ is a real estate." This is how Reserve Bank Governor YV Reddy saw the SEZs even as Commerce Minister Kamal Nath was proclaiming "SEZ as one of the major engines of growth". Mr asserted, "There is no better means of generating employment than SEZs which are targeted for exports." The RBI Annual Report (September 2006) officially said, "SEZ policy could result in uneven economic development in the country."

The Chief Economist of IMF, Mr Raghuram Rajan, echoed the RBI and said: "Over all tax sops for the SEZs become yet another give away which the Government cannot afford. By creating tremendous tax incentives you divert industrial activity from the rest of the country into these zones, which creates problems of inequitable regional development. It would be far better to make people compete on the basis of equality of infrastructure they create in such zones."

This view is from the IMF, the very institution that had commended SEZ strategy to many countries. It needs no further discussion to state the obvious. SEZ is an unmitigated fraud, wrapped in ideology - the ideology of growth! - and sold through the elite and pink media to the country.

Courtesy: www.dailypioneer.com, March 20, 2007