Left impact

Behind the making of the Special Economic Zones Act, 2005, lies the watchdog role played by the Left in Parliament.

V. VENKATESAN in New Delhi

THE Atal Bihari Vajpayee government, through Commerce Minister Murasoli Maran, announced a Special Economic Zone Scheme in April 2000 with a view to providing an internationally competitive environment for exports. The objectives of SEZs include making available goods and services free of taxes and duties, integrated infrastructure for export production, quick approval mechanisms, and a package of incentives to attract foreign and domestic investments for promoting exports. While the policy relating to SEZs is contained in the Foreign Trade Policy, incentives and other facilities offered to SEZ developers and units were being implemented through various notifications and circulars issued by the Ministries and departments concerned.

The United Progressive Alliance (UPA) government, after coming to power in 2004, felt that the existing system did not inspire enough confidence in investors for them to commit a substantial amount of money for the development of infrastructure. To provide a long-term and stable policy framework with a minimum regulatory regime and to provide expeditious single-window clearance, the government thought it necessary to bring a Central Act for SEZs in line with international practice.

Before the SEZ Bill was introduced in the Lok Sabha on May 10, 2005, there were 11 functioning SEZs. In addition, approvals had been given for setting up 35 new SEZs in the private/joint/state sector. The Bill was passed by both Houses of Parliament on May 12, 2005, and it secured the President's assent on June 23, 2005. The passage of the Act and its subsequent notification after the framing of rules has given a fillip to the birth of more SEZs: as on September 29 this year, the Board of Approvals set up under the Act had approved a total of 181 SEZs across the country.

While the quantitative expansion of SEZs has been a noticeable achievement of the Act, the fears expressed during the debate in Parliament and the crucial amendments moved by the Left parties to the original Bill introduced by Commerce Minister Kamal Nath need to be highlighted in the context of the controversy over certain aspects of the Act.

Section 50 of the original Bill said: "The State government may, for the purposes of giving effect to the provisions of this Act, notify policies for developers and units and take suitable steps for enactment of any law granting exemption from the State taxes, levies and duties to the developer or the entrepreneur... ." It further said: "Directing that any of the provisions of any State Act relating to trade unions, industrial and labour disputes, welfare of labour including conditions of work... invalidity, old-age pensions, and maternity benefits or any other activity relating to the SEZ shall not apply... ."

In the Lok Sabha, Rupchand Pal of the Communist Party of India (Marxist) made it clear that if the government wanted Left support it would have to remove the part that denied people their basic human rights. He said: "It is not acceptable. Even in a SEZ the basic human rights, maternity benefit, compensation should not be denied."

Section 49 of the original Bill was even more blatant. It said: "The Central government may, by notification, direct that any of the provisions of this Act (other than Sections 54 to 56) or any other Central Act or any rules or regulations made thereunder or any notification or order issued or direction given thereunder (other than the provisions relating to making of the rules or regulations) specified in the notification shall not apply to a SEZ... ."

It did not take long for Rupchand Pal to detect the government's hidden agenda in using the phrase "any other Central Act", which include laws intended to protect the interests of workers. He sought an amendment to the Bill to protect labour rights if the government wanted the Left's support.

Section 3(4) of the original Bill had the potential to derail the federal structure. It said: "In case a State government intends to set up a SEZ, it may, after identifying the area, forward the proposal directly to the Board for the purpose of setting up the SEZ... Provided that the Central government may, after identifying the area, suo motu set up and notify a SEZ without referring the proposal to the State government concerned or the Board."

Rupchand Pal asked in the Lok Sabha: "How can it be done without making a reference at least to the State government in a federal set-up?" His plea was that State governments should not be ignored because `land' is a State matter. "Land, water, etc., will be provided by the State governments and the State governments will have their representatives in the Board. So, why should they ignore the State governments for nothing?" he asked.

Gurudas Dasgupta of the CPI added: "However justified may be your economic programme, if labourers are given a raw deal and if labourers are harassed and exploited, there cannot be any success to any programme, least of all the SEZs."

Nilotpal Basu of the CPI(M) warned in the Rajya Sabha: "The word `without' is infringing the very spirit and the very framework of the Bill. The motion of cooperative federalism is the heart of the entire legislation."

Thanks to the MPs' intervention, the government accepted the suggested amendments. Section 3(4) of the Act reflects the amendment suggested by the Left parties: the Centre may, after identifying the area, suo motu set up and notify the SEZ, but only after consulting the State government concerned.

The government deleted the clause exempting application of any State Act relating to trade unions, industrial and labour disputes, welfare of labour, including conditions of work in the SEZs, while drafting Section 50 of the Act. The government also deleted the clause denying old-age pensions, maternity benefits and concessions to invalid persons.

The Act carries an important proviso to Section 49, to address the concerns of the Left parties that SEZs might be kept out of the purview of the labour laws enacted by Parliament. The proviso says that this Section shall not apply to matters relating to trade unions, industrial and labour disputes, welfare of labour including conditions of work, provident funds, employers' liability, workmen's compensation, invalidity and old-age pensions and maternity benefits applicable in any SEZ. It means that the Centre cannot by notification direct that laws relating to these matters will not apply to SEZs.