On the face of it, the Special Economic Zones (SEZs) controversy showcases the vibrancy of Indian democracy or the precarious political support-base of the ruling coalition, which sometimes makes it nervously retrace the one-sided, non-popular steps.
However, the well-entrenched liberalisers will just not allow genuine pro-people changes go beyond artificial media hype. Besides, the Prime Minister has unequivocally asserted that the SEZs are here to stay as an essential part of the reforms.
Thus, it is not surprising that both, relatively and absolutely, the main beneficiaries of the SEZs would be the developers and co-developers of the zones (the Indian and foreign companies, with or without state partnership).
In orchestrated symphony will be the controllers of the units set up in the zones, building contractors, suppliers of various inputs, the foreigners who may import these highly subsidised exports from India and the political-bureaucratic elite (the cronies) that designed this policy and will thereby administer the zones jointly with the developers.
It is evident that the aam adami is nowhere among these beneficiaries, though the major costs would have to be borne by ordinary Indians. On account of various tax exemptions alone, the benefits to the units in these zones have been placed at a whopping sum of Rs 1.75 lakh crore by the International Monetary Fund (IMF).
The loss of food output and livelihoods of millions, owing to overblown demand for land, (running into 2 lakh hectares for over 200 SEZs sanctioned so far), will jeopardise macro and micro food security of two million to three million persons directly and many times indirectly.
The SEZs, with vast tracts of prime land, have been liberally sanctioned to major real estate companies without proven industrial or export competence, and without a provision for penalties or even the refund of the bountiful largess doled out to them should the expected exports and employment were not to materialise.
Given this and the inevitable, sharpening uncertainties and fierce competition, characteristic of the global market, its not unlikely that a good number of the sheds built in the zones may well remain unoccupied; the output may fail to win external markets.
The wild spree of granting approvals to SEZs is propelled on the assumption that there is an infinite demand for Indian exports. Hence, the danger that the developers will finally turn the SEZs into real estate hubs located close to mega cities on the land snatched cheaply from the farmers is real.
This, then, is an all-time wild killing made by real estate big guns in the name of the holy cow called exports.
The cost of these artificially propped-up SEZs would be borne by the farmers and rural workforce, who would lose their land, livelihood and labensbraum living space.
That is the very foundation of their human-social existence. It would be totally unrealistic to presume that the new units would provide them with fair, viable and dignified alternatives in the form of jobs, compensation, fair price, etc. Even importable goods, bought with export earnings, have a rather slim chance of having anything to do with the needs of the majority of low and irregular income earners who constitute the real India. This makes the liberal diversion of resources and artificially boosted profitability of highly problematic exports a deadly blow to the rights of the aam adami.
It has been proposed that once formed the SEZs will move out of the reach of the normal law of the land. The developers (merchants who will become monarchs of the territories ceded to them) would get economic and administrative control of miles and miles of contiguous land in prime locations (bye-bye to democracy!) with little social/public control over the pattern of its use, resale, etc.
The provision of housing complexes for the people, along with the provision of civic amenities (including commercial complexes) along with what is described as world-class infrastructure clearly imply that the non-processing areas would be areas earmarked for real estate development. An equivalent of princely states that existed under the indirect rule of the British are being created to propitiate the simulated gods of growth and exports.
There is no assurance that the entire processing area would be taken up by the new investors.
A strong combination of factors has emerged to put a serious question mark on the supply-side factors determining the export potential of the Indian economy, especially of manufactured goods exports, unless there emerges powerful demand side factorsan unlikely event, as indicated by the stalling of the WTO negotiations owing to the re-emergence of powerful neo-protectionist lobbies in the rich, industrialised countries.
Indeed, the manufacturing sector has been showing dynamism in India only in fits and starts owing to structural constraints and the tendency of the early manufacturing giant conglomerates is to branch out in the services sector, like retail trade, real estate, finance, telecommunications, power and information technology.
The mid-term appraisal of the Tenth Plan by the Planning Commission noted the existence of abnormally high, unused manufacturing sector capacity (between 12 and 18 per cent in the recent past), reflected also in lakhs of industrial enterprises that have been closed down or are sick and are defaulters of bank loans necessitating writing off of over Rs 45,000 crore of loans.
The fact that dozens of countries like India have been forced by the global hegemonic powers to go in for structural adjustment and hence give top-most priority to export production to serve the debts, is a factor limiting our export potential.
These factors indicate that one of the major options available to the SEZs would be to concentrate on real estate business. This sector is bound to show a lot of buoyancy as Indias unfathomable black wealth finds real estate as an attractive investment/ostentation destination, especially as the speculator-investor community keeps generating attractive capital gains in addition to providing a safe haven for the undeclared wealth of business persons, politicians, bureaucrats and the growing land mafia.
To these may be added the education/ health sector private investors, especially those wanting to set up super-deluxe facilities for the super rich and the medical tourists from abroad, with foreign collaborations, to shore up their marketability.
The point is that in the name of export production in the manufacturing sector, an unlimited number of SEZs are being set up without any upper limit, either on the number of zones or size of the land area. The idea of placing a cap on their number has been defeated just as SEZ enthusiasts refuse to limit the size of any single zone. Over two lakh acres of land has been committed to these zones.
No one seems concerned that since 1960-61, almost 7.5 crore acres have moved out of agriculture. The SEZs have been given an unprecedented special treatment in land acquisition and other benefits, by an Act of Parliament, as if this is the most dynamic engine of growth.
This law has been accorded an overriding status, capable of nullifying the provisions of any other law that is in conflict. This has ominous implications.
The intention of the SEZ law goes much beyond the objective of export promotion. Even export promotion cannot be given top priority. We are a nation with formidable domestic problems of poverty, unemployment, disparities and growing threats to the social and ecological balances.
The rest of the world cant supply the goods and services needed by the masses, which must get a secure livelihood with steady improvement in their quality of life. Its clear that home-based production for the home market has an incomparably higher priority than elusive exports for earning the exchange that mainly goes to satisfy the frivolities of the rich, such as 700 to 800 tonnes of gold imports annually. Most of our imports have little meaning for the great bulk of Indians.
What strikes at the very rationale of the SEZs is that the kind of growth and exports visualised by the framers of the policy just cant materialise owing to a combination of domestic and external factors. In the bargain there would be a reverse kind of qualitative transformation of the land-use pattern (irrespective of the quality, except if they are given the ravines of Chambal!) with incalculable socio-economic outcomes in critical spheres, like livelihood, dependence on food imports, social equity and conflict (In a proposed SEZ near Mumbai, farmers have openly asserted that instead of committing suicides, they would choose to kill!). Those who are mesmerised by the alleged employment generation do not seem to reckon with the nature of the exports to the rich countriesour main trading partnersand the technology associated with their production. These exports cannot have any appreciable net positive impact on employment generation, as they are obtained by diverting resources away from mass-consumption goods needed by the Indians. With little progress in getting a manufacturing sector breakthrough, the SEZ developers would be forced to either leave the land and facilities unused or make use of the possibilities contained in the SEZ law. Here, the framers of this law have shown marvellous prescience.
They have defined manufacturing in an entirely unheard of, totally illogical, unscientific and ridiculous manner. After giving the usual definition of manufacturing, the SEZ Act goes on to stipulate that manufacturing includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, sericulture, viticulture and mining. Economics has never been turned so ludicrously upside down.
The real long term interests of the country have been put on the block by the SEZ policy. It would be another futile exercise to woo the investors with one-sided sops (tax havens, etc, including fertile land full of natural resources and minerals) without imposing any reciprocity and performance norms. Even if the assumptions underlying the SEZs remain elusive, the investors would still be happy as they would come to own and control highly valuable real estate and would be able to enter farming and allied activities.
The peasantry and ordinary citizens, who would have to forgo the public services the state would not be able to supply as it forgoes massive amounts of revenue, and the young who would have to do without their land-based occupations, would pay a huge price for this massive misadventure.
The whole exercise backed by such a one-sided law has to be totally recast on solid socio-economic and earthy grounds, may be in terms of village and small town clusters of small and medium enterprises producing mass consumption goods for the greater common good.