The great land grab

Print edition : September 22, 2006

ANDHRA PRADESH CHIEF Minister Y.S. Rajasekhara Reddy addressing delegates at a seminar on Special Economic Zones in Hyderabad. A file picture. - PICTURES: P. V. SIVAKUMAR

Huge swathes of land are being handed over to corporations in `sweetheart' deals and scams centred on Special Economic Zones.

THE year 2006 will go down in history as one in which India witnessed the launching of the Great Land Grab, involving the transfer of mind-boggling quantities of both agricultural and urban land to giant corporations. The year opened ominously - with the Kalinganagar firing in Orissa, killing 12 Adivasis protesting against the acquisition of their land at throwaway prices for the construction of a steel mill.

This year also saw the notification of Rules under the Special Economic Zones (SEZs) Act, 2005, which will create up to 300 privileged enclaves, each with thousands of acres. Simultaneously came efforts to flesh out the Rs.50,000-crore Jawaharlal Nehru National Urban Renewal Mission (NURM) inaugurated last December, which will drastically alter the urban development scenario.

This year also saw the emergence of popular mobilisations against SEZs, especially in Dadri, near Ghaziabad in Uttar Pradesh, and in Haryana and Maharashtra. The V.P. Singh-led movement against the Dadri SEZ, an Anil Ambani group project backed by the Mulayam Singh Yadav government, is creating new political divides and reshaping party equations in Uttar Pradesh. The SEZs have precipitated tensions inside the United Progressive Alliance (UPA), and rifts in the Union Cabinet. The year might end with the UPA ruing what could turn out to be one of its greatest political blunders.

Actually, three processes are under way transferring control over land in a massive way to corporations and private interests in pursuit of profit. In addition to SEZs and NURM, there is the colonisation of land in the distant suburbs and outer peripheries of metropolitan agglomerations by private developers and builders. This land is being sold by the urban development authorities.

This unbridled privatisation of land for purely commercial use devoid of public purpose is now occurring in almost all big cities. It is fairly advanced in the major metropolises.

For instance, Ghaziabad's Dehat Morcha says that in the National Capital Region (NCR) around Delhi, over 4.20 lakh acres (1 acre = 0.4 hectares) have been acquired by government agencies which plan to sell the land to property developers and corporate houses.

The Delhi Development Authority (DDA) has recently acquired one lakh acres for transfer to builders. The Noida and the Greater Noida Authorities have acquired some 80,000 acres abutting Delhi, and Hudco 40,000 acres in Faridabad in Haryana. Similarly, thousands of acres are being bought between Ghaziabad and Garh Mukteshwar from farmers at rates as low as Rs.50 a square metre. Prevalent market rates are 20 to 100 times higher.

This process will soon unfold into colonisation of rural land on an unprecedented scale - the Indian version, albeit a more intrusive and predatory one, of upper middle class-led suburbanisation like, say, that in the United States.

Land privatisation has not yet been consummated. But property prices have already risen so high under speculative pressure that it is virtually impossible in the entire NCR to buy even a modest flat for under Rs.20 lakhs. For those who cannot afford it - and that is the majority in a country with a current per capita monthly income of under Rs.2,000 - the only alternative is a slum.

However, even this iniquity pales into insignificance beside the drive to establish SEZs, which is gathering unbelievable speed. Between last November and February, the number of SEZs cleared by the government rose from 61 to 117, or at the rate of almost one approval a day. Right now, the approved number stands at 150.

Last July, India had 28 SEZs in operation, most of them export-oriented. They accounted for just 5.1 per cent of India's exports. Tamil Nadu had the highest number (7), followed by Gujarat (5). The Commerce Ministry expects 94 SEZs to become operational in the next 18 months, 22 of them in six months. It wants a total of 300.

Many of these are multi-product SEZs, each of which will colonise 10,000 to 35,000 acres of land. They also include single-product or sector-specific zones, varying from 25 to 250 acres. The government has 225 more SEZ applications from overseas companies as well as Indian corporates like the Ambani brothers, both of whom aspire to be big players, Unitech, Adanis, Sahara, DLF, Tatas, Mahindras, Hindustan Construction and so on.

The SEZs' rationale is to create incentives for exports through huge tax breaks and an "internationally competitive" business environment. SEZs are duty-free enclaves and considered "foreign territories" for the purpose of trade operations, duties and tariffs. They are meant to attract foreign investment because of the high tax-free profits that units located in them can generate. Such units can import capital goods and raw materials without licence or levies. They need not pay the terminal excise duty. They have unrestricted access to domestic markets. In SEZs, 100 per cent foreign direct investment (FDI) will be allowed in manufacturing through the "automatic" route. Profits can be repatriated freely.

SEZ tax concessions are handsome even by banana republic standards. Export units will get a 100 per cent tax holiday for five years, a 50 per cent tax break for five more years, and a further five-year tax break on production based on reinvested profits. SEZ developers will enjoy a tax holiday for 10 years. These, and the import duties forgone, will inflict a loss running into Rs.90,000 crores, according to Finance Ministry estimates.

Such losses are unconscionable on a total investment of roughly Rs.100,000 crores. However, the Commerce Ministry is hell-bent on pushing through these sweetheart deals with industrial magnates and real estate developers. It claims, on the basis of rosy, unconvincing assumptions, that the exchequer will eventually gain Rs.44,000 crores in additional taxes.

The Finance Ministry and the Reserve Bank of India (RBI) seem far closer to the truth. The SEZs are certain to be used as tax havens, especially by industries such as Business Process Outsourcing (BPO), whose existing tax holidays are running out.

The Reserve Bank of India says that large tax incentives can be justified only if SEZ units establish strong "backward and forward linkages with the domestic economy" - a doubtful proposition. Even the International Monetary Fund's (IMF) Chief Economist Raghuram Rajan has warned: "Not only will [the SEZs] ... make the government forgo revenue it can ill afford to lose, they also offer firms an incentive to shift existing production to the new zones at substantial cost to society."

As much as 75 per cent of the SEZ area can be used for non-core activities, including development of residential or commercial properties, shopping malls and hospitals. Developers will surely use this to make money via the real estate route rather through export promotion. This represents a potentially humongous urban property racket of incalculable dimensions. India will see a multiplication of "Gurgaon-style" development, under the aegis of big builders such as DLF, Marathon, Rahejas, Unitech, City Parks and Dewan.

Neither the international nor the Indian experience with SEZs has been particularly happy. Globally, only a handful of SEZs, of the hundreds that exist, have generated substantial exports, along with significant domestic spin-offs in demand or technology upgradation. For each successful Shannon (Ireland) or Shenzhen (China), there are 10 failures - in the Philippines, Malaysia, Brazil, Mexico, Colombia, Sri Lanka, Bangladesh, why, even India. A 1998 report by the Comptroller and Auditor General (CAG) on export processing zones (EPZs) says: "Customs duty amounting to Rs. 7,500 crores was forgone for achieving net foreign exchange earning of Rs.4,700 crores... ."

Studies on the Santa Cruz Electronics EPZ show extremely high rates of labour exploitation and job insecurity, especially of female workers, poor technology absorption, and dubious long-term benefits. Going by past experience, the promise of a million new jobs in SEZs means very little. All of India's 28 SEZs have together produced only 100,650 jobs.

The SEZs will also be socially retrograde. No labour laws will apply to them. Workers will enjoy no freedoms and no rights, including the fundamental right of association and peaceful protest. SEZs will be exempt from environmental impact assessment. They will be under no obligation to employ local people or share profits with them.

Just the contrary, the SEZs will have a largely predatory relationship with their environment and its people. They will deplete groundwater and other resources. They will be islands of prosperity in a sea of deprivation and agrarian distress.

To top it all, the SEZs are being established through land acquisition under special Acts passed by the States. Unlike earlier land acquisition laws, which require that there be a public purpose behind government takeover of land, these laws mandate acquisition for private profit and without land-for-land compensation or serious rehabilitation.

The farmer's experience of land acquisition has been extremely negative. For instance, there was at least a 10:1 disproportion between market rates and compensation paid at Kalinganagar. There is a three-fold difference in Dadri and an even higher disproportion in Gurgaon. This latter (25,000 acres) in India's largest multi-product SEZ. It cuts through the Gurgaon-Rewari State highway, the Gurgaon-Rewari railway line and the Gurgaon-Jhajjar highway. It will also interfere with the planned Kondi-Manesar-Palwal Expressway.

The zone abuts the Sultanpur National Bird Park, one of the 10 most important bird sanctuaries in India. As a bird-watcher, I know that Sultanpur was in a state of acute distress for five years because it received no fresh water. Many bird species, in particular migrants, deserted the sanctuary. However, over the last couple of years, the jheel has come back to life. As have nearby marshlands and water bodies such as Basai.

The Gurgaon SEZ will abort or reverse this process. Its construction will also violate the normal 8 to 10 km barrier rule. No industrial or mining project can be allowed within that distance from a nature park or sanctuary. Birds will be badly disturbed and their flight-paths blocked by the SEZ's construction. Residents of the area, as well as Delhi Bird Society, are now gearing themselves up for a fight. Haryana is likely to witness a serious political confrontation on SEZs. Maharashtra too is seething over RIL's Pen (Raigand) SEZ project.

SEZs could soon become a heavy liability for the UPA. Many Congress Chief Ministers talk warily and in hush-hush tones about them.

If lakhs of farmers are displaced and uprooted by these zones even as they see the price of their now-alienated land doubling and quadrupling, there is bound to be serious discontent - and political trouble for the ruling State governments.

These governments are more sanguine about the NURM - if only because easy money totalling Rs.50,000 crores has been promised to 63 cities. As much as Rs. 4,600 crores has been earmarked for this year alone.

But the "renewal", being conducted under the direction of the Asian Development Bank (ADB) and pro-corporate consultants of its choice, will typically mean cleansing city centres of their poor inhabitants, hawkers, cycle-rickshaw-pullers and vendors of sundry but important services.

An attempt will be made to "conserve" and "beautify" monuments artificially, while creating "modern" middle class facilities like car parks, shopping arcades, and stalls selling packaged food.

This will radically alter the social mix of our inner city-populations - against the interests of the majority, by displacing and marginalising the poor or making them invisible. Already, lakhs of people in Mumbai and Delhi have been brutally evicted under Court orders.

The process will be extended to other, smaller cities - with terrible consequences and amidst great mass misery.

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