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Published:February24,2012|Author:amit
Category:CompanyLaw|TotalViews:4461|Unrated

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LandAcquisitionForSezsAreEnginesOfGrowthLosingSteam

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amit
AmitabhTewari3rdyear
GLCMUMBAI

WhatIsAnSez?
ASpecialEconomicZoneSEZisanespeciallydemarcatedareaofland,ownedand
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operatedbyacompany,whichisdeemedtobeforeignterritoryforthepurposeoftrade,
dutiesandtariffs.TheyareregionsdesignedforeconomicdevelopmentorientedtowardsFDIandexportsfosteredby
socialpolicyincentivesMootedinMarch2000,themainideatosetupaSpecialEconomicZonewastoboostexports
andtohelptheindustriesrespondtothechangingmarketscenarioinaflexiblemanner.
TheSEZsareanewandamodifiedversionofanEPZ.ThefirstEPZ,developedinKandalain1965aimedatgivinga
boosttoindustriesandexports.Thisledtocreationofsurplusjobsandenhancementofexports.Furtherin2000,the
governmentreplacedtheoldEPZswithSEZs.Themaindifferencebetweenthetwoisthattheformerisanindustrial
enclave while the latter is an integrated township with developed
infrastructure.
OneofthemainreasonsforthedevelopmentofaSEZwastoemulate
China, where there were numerous SEZs doing extremely well. To start with, The SEZ at Shenzhen attracted $30
Billion.AnothersuccessfulonewasatPudong,nearShanghai.AsChinausedSEZstoboostitseconomy,itattracted
$45billioneveryyearinFDIascomparedtoIndiawhichattractedonly$2billionpriortothesettingupofSEZs.This
favorablepositionofChina,wasoneofthefactorswhichinducedIndiatosetupaSEZinitsownterritory.
HistoryOfSezs:
The New Economic Spaces or Special Economic Zones in India came into effect with the passing of the Special
EconomicZonesSEZAct2005.Thehistoryofsuchzones in India predates to the setting up of Export Promoting
Zones. India set up its first Export Processing Zone EPZ in 1965 in Kandla followed by Santacruz EPZ in 1973.
TheseEPZsdidnotenjoyfiscalandcustomincentivesliketheSEZsandFDIrulesandregulationswerealsostrict.
The Tandon Committee Report in 1981 argued that Free Trade Zones would generate export if they are exempted
fromvariouscontrolsandregulationsinplace.Followingthisrecommendation,fourEPZscameupin1984atNoida
Uttar Pradesh, Falta West Bengal, Cochin Kerala and Chennai Tamil Nadu. Another EPZ was set up in
Vishakhapatnam in 1989Shalti Research Group 2008. Post liberalization in 1991, the EXIM Policy 19972002
introduced a new scheme from 1 April 2000 to revamp and restructure the production sites for export oriented
servicesintheformofSpecialEconomicZones.Afterfiveyears,onMay2005theParliamentpassedthe SEZ Act,
which received Presidential assent on the 23rd of June, 2005. After extensive consultations, the SEZ Act, 2005,
supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures
andforsinglewindowclearanceonmattersrelatingtocentralaswellasstategovernments.Themainobjectivesof
TheSEZActare:

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aGenerationofadditionaleconomicactivity
bPromotionofexportsofgoodsandservices
cPromotionofinvestmentfromdomesticandforeignsources
dCreationofemploymentopportunities
eDevelopmentofinfrastructurefacilities
ClassificationOfSpecialEconomicZones:
SpecialEconomicZonesareclassifiedintothefollowingtypes:
aSpecialEconomicZoneformultiproduct:Itisaspecialeconomiczonewhereunitsmaybesetupformanufacture
oftwoormoregoodsinasectorgoodsfallingintwoormoresectorsfortradingandwarehousingrenderingoftwo
ormoreservicesinasectorrenderingofservicesfallingintwoormoresectors.

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b Special economic Zone for specific sector: It is a special economic zone meant exclusively for one or more
productsinasectororoneormoreservicesinasector.

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c Special Economic Zone in a port or airport: It is a special economic zone in an existing port or airport for
manufacturing of goods in two or more goods in a sector goods falling in two or more sectors for trading and
warehousingrenderingofservices.

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Therefore classification of special economic zones helps to regulate the production and it leads to differentiation
amongthegoodsproducedfromdifferentSEZs

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AdvantagesOfASez:
ThemainpurposeofdevelopingaSEZistocreateanenvironmentforthepromotionofexports.TheSEZpolicyoffers
various fiscal and regulatory incentives to the developers in the zone. According to experts, it is believed that the
exports will ultimately grow five times and more than 30 lakh jobs will be generated by SEZs across India. The
government also claims that the SEZs will attract global manufacturing through FDI, enable transfer of modern
technologyandwillalsocreateincentivesforinfrastructure.
Amongitsinnumerousadvantages,oneofthemainisthat:

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LandAcquisitionforSEZ
EverydeveloperandentrepreneurshallbeexemptedfromthefollowingunderTheSEZAct2005
aExemptionfromexcisedutyonthegoods.
bIncometaxexemptionforaperiodoftenyearsinthefirst15yearsofoperation.
cExemptionfromservicetaxunderchapterVofthefinanceAct1994.
dExemptionfromcentralsalestaxforthegoodsusedfordevelopmentoftheSEZ.
eExemptionfromtheSecuritiesTransactionTax
Apartfromthedevelopersitalsopreservescertainincentivesfortheenterprisesalso
a100%FDIpermittedtothemanufacturingsector.
bRequirementsofnoimportlicense.
cExternalmaturityborrowingsthroughrecognizedbanks.
dExemptionfromlicensingregulations
Therefore,SEZsthroughitsvariousadvantageshelpboosttheeconomythroughcreationofjobsanddevelopmentof
infrastructure.
ThePresentScenario:
The SEZ policy has become one of the most vehemently debated issues in the recent years. In many areas of the
country, it has lead to protests by politicians, scholars ,media and civil society. Despite all the advantages the SEZ
policyhasbestowedupon,ithasstillnotbeenaccepted,leadingtopublicpressureonthegovernmenttomodifythe
Act.
For instance, In Karnataka, SEZs are planned at Tadri in Uttara Kannada, Padubidri in Udupi, and Baikampady in
DakshinaKannada. Padubidri was whereCogentrix was to set up its power plant. The Barge Mounted Power Plant
BMPPandtheexpansionofTadriporthavebeen,andcontinuetobe,severelycriticisedbythelocalpeopleforthe
negativesocial,economicandenvironmentalimpactstheycanhave.
TadriissituatedonthebanksofthefertileandproductiveAghanashiniestuaryandthevillagersfearthefalloutofsuch
`development'ontheirricefields,saltpans,fisheriesandmangrovediversitywillbedisastrous.Tadri,infact,hada
shipbreakingunitintheearly1990s.Thiswasshutdownunderpublicpressure, on grounds of ecological damage,
andisreflectiveofwhatthepeopleofthisareaconsideredmoreimportant.
TheshareofSEZswasamere5%intheyear200405.Furthermore,theyaccountedforonly1%ofthefactorysector
employmentand0.32%ofthefactoryinvestmentthatyear.ItisalsosaidthattheSEZpolicywouldcausearevenue
lossofRs9,39,000millionoverthenextfouryearswhichcomestoabout6.7%ofthecentralgovernmentsreceiptsof
200506.
Therewillbelossofagriculturallandwhichcanhaveseriousimplicationonfoodsecurity.Thecompanieswillsimply
relocatetoSEZstousethetaxbenefitsbeingofferedandlittlenetactivitywillbegenerated.
LandAcquisitionAGreyArea:
SEZs and Land Acquisition are interconnected: Large amount of land is required for developing the SEZs. It is
estimatedthatthetotallandwhichwillbeacquiredfromthefarmersis1,50,000hectares,capableofproducingabout
1million tones of agricultural produce. It is also estimated that more than 10 lakh people who are dependent upon
agriculturallandswillbeevictedfromtheirlands.ThefarmingfamilieswillhavetofacelossofaroundRs.212crores
eachyearintotalincome,whichwillalsoleadtoputtingthefoodsecurityofIndiaatrisk.SEZsandLandAcquisitionin
Indiahavenowresultedindissent,uproar,andoppositionfromthefarmers,fortheirlivelihoodhasbeenputatstake.
Forindustrialdevelopment,useofagriculturallandisnotpermissible.Historyshowsthatmostofthelandacquiredby
the government has been sold for commercial purposes at market rate. The entire policy is a scandal, leading to
suicides among farmers on a regular basis. The growing issue of the Special Economic Zones has led to a lot of
resistancefromtheruralpeoplewhichthegovernmenthastermedunreasonableandunnecessary.Insomeareasas
in the outskirts of Mumbai, people have been handed with land acquisition notices by the government. In short,
allowing SEZs to function means land acquisition and conversion of land use with no benefits to the affected
populationandalossoftheirlivelihoods.
Citinganexample,RecentlyduetolandacquisitioninAtchutapuraminVishakapatnam,thefarmershavedeclared
waragainstthesettingupofSEZsontheirland.Theyaccusethatthelandcompensationmoneygivenbythestate
governmentisverylessascomparedtothecostoftheland.
Anotherexample,istheagitationinNandigram,WestBengal,wherethefarmersprotestedagainstsettingupofSEZ
ontheirland.
TheBaikampadySEZhasalsobeendisputedasaresultofthestatementmadebytheUnionMinisterofCommerce
andIndustrysayingthat10%ofthelandscanbedoublecropped
Therefore,TheSEZpolicyhasbecomealandgrabpolicy.Peoplehavealreadyexpressednegativeviewsaboutthe
policythroughagitationsandprotestsanditishightimethegovernmentlooksandrethinkstheentirepolicy.
EnvironmentalIssue
Wheneverthereisdevelopment,environmentisusuallyoneofthemostimportantconcerns.Industriesuseupalotof
natural resources for production, which subsequently leads to air, water and noise pollution. All this has a negative
impactontheenvironmentasthereisdeforestation,destructionofhabitatofanimalsandthefloraandfaunaofthe
region is adversely affected. Therefore to protect the ecology from the whims and fancies of the profit seeking
industries,rigidlawshavetobemadeandeffectiveimplementationoftheselawsisrequired.
ThemostimportantissueisoftheImpactAssessmentProceduresi.e.theproceduretobefollowedforlookinginto
the impact of the development of SEZs on the environment. Some of the projects come under the purview of the
Schedule1oftheNotification.Theseprojectswillhavetocomplywiththeconditionsoforganizingapublichearing
and allowing local people to voice their objections and suggestions about the project. Projects not falling in this
scheduleareassessedbytheStategovernment,andtheclearanceprocessdoesnotmandateapublichearing.The
unitswhichareclassifiedasnonpollutingindustriesdonotneedaNOCfromthepollutioncontrolboard.Although
thedevelopment commissioner has the powers to have a random check, the industries are free to follow their own
methodsofmaintainingenvironmentalstandards.
Itisexpectedfromthegovernmentthattheconflictbetweenenvironmentanddevelopmentberesolvedproperlyand
the environmental regulations be proactive in nature and not to be a barrier on the path of countrys economic
development.
LegalDevelopmentsRegardingSezs:
TocountertheadverseaffectsoftheSEZspeopleapartfromprotesting,have,knockedthedoorsofthejudiciaryto

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LandAcquisitionforSEZ
strikedownthepolicyaswellastheActbyfilingwritpetitionsandPublicinterestlitigationsinthevarioushighcourts
andTheSupremeCourtofIndia.
AdvocateManoharLalSharmafiledaPILintheSupremeCourtcontendingthatvasttracksoffertilelandhavebeen
takenbythegovernment.HePrayedtothecourtstograntaninterimorderandtodirectthelandstobegivenbackto
thefarmers.
In another writ petition filed, the petitioner sought to quash the MOU filed between Reliance Industries and the
GovernmentofPunjabforsettingupanSEZonthegroundsofviolatingthelandallotmentpolicy.
Another example was a writ petition regarding the compensation given to the farmers being questioned and the
Supremecourtgrantinglibertytothefarmerstochallengetheadequacyofthecompensationprovided.
In another writ petition filed, The entire SEZ policy of the Government was challenged on the grounds that it will
causefinanciallossesanditmayleadtothecollapseoftheeconomy.Butthecourtrejecteditonthegroundthatitisa
policymatterbutalsoleftaremarkthatthecourtcaninterfereinthepolicymattersinindividualcaseswhentheparty
concernedispersonallyaffected.
AllthesecasesprovethefactthatthepeoplehavenotacceptedtheSEZpolicyofthegovernmentanditisimperative
onthegovernmentsparttorethinkandrelookintotheentirepolicysothatthereisdevelopmentwithoutcompromising
theinterestsofthefarmersandwithoutcausinganydamagetheenvironment.
SustainableDevelopment:
The term Sustainable Development stresses the balance between the interests of economic growth and
environmentalprotectionemphasizingtheimportanceofintergenerationaltransfers.
While putting in the context of Indian SEZs, three aspects of sustainable development is taken into consideration:
Economy, Society and Environment. A summation of these three aspects shows that there should be development
whichdoesnotresultininequalitiesandoverexploitationofnaturalresources.Iftheseaspectsaretakencareof,then
the SEZs can generate sustainable value. In other words, they should be able to benefit the society in tremendous
quantum.
AnotherfactorwhichcanbeusedtoobtainthegoalofSustainabledevelopmentis:
CorporateSocialResponsibility:
Theconceptofcorporatesocialresponsibilityarisesfromthefactthatallcorporatecompanieshaveadutytowardsall
theirstakeholdersinallaspectsoftheirbusinessoperations.Themotiveandinterestsofcompaniesengaginginsocial
responsibilitiesistoenhancetheirimagebothdomesticallyandinternationally.Itmustbetakenintoconsiderationto
respecttheenvironmentandnottodeprivetheindigenouspeopleoftheirlandandtheirrighttolivelihood.
Conclusion:
ThegovernmentistoutingSEZsasthefutureislandsofexcellence.Butatwhatcostwillitbeachieved?Thatisthe
mootquestion.Asthousandsofacresofagriculturallandareconvertedintoconcretejungles,howwillitaffectfood
security?Willthefarmerswhoarereadytogiveofftheirlandgetafairdeal?Mostofthemfeartheywillgetpeanuts
compared to what the developers will make. Will this attitude of the government and the companies continue when
environmentaldegradationstartsintheracetomakeafastbuck?
The enthusiasm that the government has in setting up the SEZs underline an ugly fact that even after five long
decades of independence, we still do not have the kind of decent infrastructure in the country that should have
normallybeenthecase.Servicesshouldhavebeenavailabletoall,butitcouldnotbecreatedandsonow,therewill
bespecialareasdemarcatedforspecialpeople.Theotherswillcontinuetolivewithoutpower,water,roadsandgreen
areas.Islands of prosperity where the rich are ecologically subsidized are okay, while the lesser mortals live on the
fringes.
********************
#Deardoffsglossaryofinternationaleconomics
#EXIMPolicy2000ofthegovernment
#ExportProcessingZones
#SpecialEconomicZonesLawyersCollectiveVol21.Page8
#AradhnaAggarwalSpecialeconomiczonesrevisitingthepolicydebate
#SpecialeconomiczoneAboonordisaster.ByRameshMenon
#ShaltiResearchGroup.2009.SEZinWestBengal:Growth,TrajectoryImpact.Camp:Kolkata
#Section5oftheSpecialEconomicZone2005
#Section2oftheSpecialEconomicZoneRules.Clausetsubclauseza,zb,zc
#MinistryoftradeandcommerceGovernmentofIndia
#Section26oftheSpecialeconomiczoneAct,2005
#SpecialEconomicZonesMinistryofExternalAffairs,India
#EPZs/SEZsandproductdiversificationacasestudyofindia,ongoingstudyfundedbytheworldbank
#SpecialEconomicZonesrevisitingthepolicydebatebyAradhnaAggarwal
#SpecialEconomicZoneorlandgrabhttp://psdblog.worldbank.org/psdblog/2006/10/special_economi.html
#THEHINDUAtchutapuramryotsfeelletdown,October262006
#DionneBunshaRuralfrontline,October202006
#Environmentalimpactassessmentnotification1994
#ScheduleIVoftheenvironmentalimpactassessmentnotification,1994
# PIL filed in SC regarding land acquisition for SEZs, retrieved from www.indlawnews.com, published on 6th
November2006
#WritpetitionschallengingrelianceSEZs,retrievedfromwww.indlawnews.com,publishedon26thSeptember2006
# SC grants farmers liberty to challenge state on SEZs, retrieved from www.indlawnews.com , published on 13th
Novemeber2006.
#SCrefusestoentertainPILchallengingGovtpolicyonSEZs,retrievedfromwww.indlawnews.com,publishedon6th
November2006.
#DefinitionofSustainableDevelopmentTheconciseoxforddictionaryofpolitics
Theauthorcanbereachedat:tewariamitabh@legalserviceindia.com

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