ON April 20, 2012, when Nara Chandrababu Naidu turned 62, he did not celebrate his birthday by receiving gifts and meeting partymen, but by ploughing the fields in the seaside village of Mulapeta, on the outskirts of Kakinada city in East Godavari district. The Telugu Desam Party (TDP) chief was then the Leader of the Opposition in the State Assembly and had been out of power for close to a decade. Obviously, there was politics in the ploughing.
Undivided Andhra Pradesh’s great unifier in recent times, Yeduguri Sanditi Rajasekhara Reddy, or YSR as he was popularly known, had died three years earlier in a helicopter crash, while serving as Chief Minister for a second consecutive term. The TDP was routed in 2004 following YSR’s wildly successful 1,500-kilometre padayatra to highlight the crisis in agriculture.
Following his death, the Congress chose N. Kiran Kumar Reddy as the Chief Minister. But YSR’s son Jaganmohan Reddy weakened the party by leading a breakaway faction. He was facing a series of debilitating corruption charges, too. Chandrababu Naidu knew that the TDP stood a good chance of winning the May 2014 election and he of becoming the Chief Minister of what remained of Andhra Pradesh after Telangana was created. But he needed to shake off the ignominy of having been at the helm of affairs in undivided Andhra Pradesh, focussing solely on sectors such as information technology when the State faced two consecutive droughts that pushed millions of farmers into debt traps and led to a wave of suicides across the countryside.
The land Chandrababu Naidu ploughed was part of about 9,000 acres (3,600 hectares) of fairly remunerative farms acquired by a private company in 2006 to set up a special economic zone (SEZ). That company was Kakinada Seaports Limited (KSPL), which had taken over the management of the city’s deep sea port in 1999 following a decision to privatise its operations by Chandrababu Naidu’s government during his first term in office (1995-99).
In 1998, Chandrababu Naidu sought advice from the United States -based management consulting firm, McKinsey on ways to spur economic growth. McKinsey’s January 1999 report, titled “Vision 2020”, is a striking image of the economic outlook that was shared nationwide in the decades to come. It suggested large-scale private sector participation in vital services such as health, education and port management and cutting of subsidies to the farm sector. Chandrababu Naidu decided to follow the advice. Those sympathetic towards him say he did not have a choice, for that was necessary to secure World Bank aid. Overnight, world leaders who seldom looked beyond New Delhi when it came to matters pertaining to India began heralding him as a reformer and a moderniser. U.S. President Bill Clinton and British Prime Minister Tony Blair made rare detours from New Delhi to Hyderabad.
Vision 2020 envisaged a 9-10 per cent annual growth rate and 20 million new jobs over the next two decades. Without exaggeration, the targets and the methods suggested were outlandish. McKinsey’s heavy peddling of minimum government approach advocated “free trade zones”, that is, SEZs, like the one proposed by KSPL, which would drive a surge in private investment, infrastructure creation and employment. It advocated sops for big corporates instead of small businesses. This eventually led to the Special Economic Zones Act, 2005, envisaging an end to government-created export processing zones.
Kakinada’s deep water port became the first to be run by a private company on the east coast. After successfully bidding for the contract, KSPL set out to increase profitability. It needed a large and assured reserve of cargo, and to increase the viability of the port, it suggested the formation of an SEZ in early 2002. The Chandrababu Naidu goverment’s letter recommending approval of the SEZ to the Union Commerce Ministry said: “KSPL has informed that there are excellent infrastructure facilities already available like National Highway 5; railway line; large number of power projects, and availability of gas and gas pipeline” (emphasis added). And that the Government of Andhra Pradesh had “decided to create infrastructure facilities with private sector investment to achieve its vision by establishing such SEZs that would attract industries and create jobs.”
In 2012, Chandrababu Naidu ploughed the same fields that his government had recommended for setting up the SEZ. He was now in solidarity with thousands of protesting farmers whose lands, at least on paper, belonged to a new entity floated by KSPL, called Kakinada Special Economic Zone Private Limited, or KSEZ. The land acquisition had taken place during the tenure of Rajasekhara Reddy. Chandrababu Naidu was attempting to cultivate a pro-agriculture image. He accused the ruling Congress of “allocating huge tracts of lands at throwaway prices to individuals who were not capable of setting up industries”. He also accused Kiran Kumar Reddy of receiving kickbacks and forcing farmers to sell fertile land. At stake were the lives of over 50,000 people, who depended on agriculture and a thriving fishing industry.
Frontline has in its possession copies of several sale deeds between KSEZ and the villagers and correspondence pertaining to the setting up of the SEZ among various government departments, the Union Commerce Ministry, the State government, the East Godavari district administration and the company from 2002. Frontline has also been able to access government notifications on land acquisitions. A close scrutiny of these documents reveals a pattern of circumvention procedures at every stage, beginning with the Commerce Ministry down to the mandal-level administration, in collusion with KSEZ to favour the company.
Land acquisitionKSEZ was not out of step in proposing the SEZ or setting out to purchase lands directly from farmers. But the lands were initially planned to be procured under the now repealed 1894 Land Acquisition Act. The first ever notification under the Act was made on December 29, 2005, by the Mandal Revenue Office (MRO) of Uppada Kothopalli, where four of the seven revenue villages that were proposed to be acquired were located. The notification states that the lands are to be “acquired for public purpose of a Special Economic Zone for a refinery and future industrialisation”.
The Land Acquisition Act gives broad directions for the acquisition of land for a public purpose. It addresses three main aspects of the acquisition process. The first is putting the affected parties on notice of the intention to acquire their lands, receiving objections to the acquisition, and declaring the lands to be acquired. The second is the process for awarding compensation and a course of redress entitling landowners to approach the courts should they feel aggrieved over the price fixed by the District Collector or the government official concerned. The last includes the rules to be followed if lands are to be acquired for the benefit of a company.
The December 29 notice by the MRO is referred to as Section 4(1) notification. It contains the government’s reason and intention for acquiring land. If the acquisition is for a company, the Act clearly sets out what constitutes public purpose and exhaustively mentions the procedure to be followed. This comes under Part VII, which requires an “agreement” between the company and the “appropriate” government, which is to be published in the Official Gazette following the Section 4(1) notification. Such a notification of an agreement between the Andhra Pradesh government and KSEZ was never made. Government officials did not respond to queries from Frontline on the issue. They have also not placed records of the procedure followed before the Supreme Court in response to a petition filed by aggrieved farmers under the banner of “SEZ Farmers Protection Welfare Association”.
At no stage does the Act allow a company to enter into direct negotiations with landowners for the purpose of acquisition. If the company desires to directly buy land as a private entity, it is free to do so, but it cannot use the Land Acquisition Act as a weapon to force villagers into selling their lands. But that is exactly what happened here.
Government officials ought to have revoked Section 4(1) of the notification if the company had decided that it would suit its purposes better to enter into direct negotiations with farmers instead of going through a process it considered time-consuming and expensive. Under the Act, the company agrees to pay for lands acquired and to comply with the terms of its use. The procurer continues to be the local government, which will have to follow the procedure laid down for acquisition under the Act. This includes the farmers’ right to appeal in a court of law against the District Collector’s compensation award. Section 25 of the Act forbids courts from awarding a compensation that is lower than the amount decided by the Collector unless, as Section 27 (2) notes: “[T]he court shall be of the opinion that the claim of the applicant was so extravagant or that he was so negligent in putting his case before the Collector that some deduction from his costs should be made.”
The lands that have been acquired yield at least two harvests in a year, if not three. The main crops are mango, banana, sugarcane, cashew, rice and vegetables. Chintapalli Lakshmanaswamy, 65, owned five acres (two hectares) in Ramanakappeta on which he grew sugarcane and cashew. His lands were irrigated by the Pithapuram Branch Canal, an irrigation project using waters of the Godavari river. Lakshmanaswamy got three harvests in a year and earned a little over Rs.40,000 every month, an above-average income in the farming sector. He said district officials came “almost every day along with 50 policemen” to his village in early 2006 and “threatened” everybody to sell their lands to KSEZ.
Lakshmanaswamy said: “They told us that if you sell the land you would get Rs.3 lakh per acre. But if you go to court you might only get about Rs.1.5 lakh.” Several landowning families said they panicked, fearing loss of their lands, and that a herd mentality set in as people began caving in. They were forced to sell their lands, lied to about the procedure of acquisition, and kept in the dark about the fact that it was all for a private company.
Penumallu Subbi Reddy, who owned about two acres (0.8 hectare) in the same village, said he had spent 118 days in jail with several others on “false charges of looting, rioting, damage to property and trespass for entering” the same lands they were forced to sell. He accused the company of hiring a private security agency to keep tabs on farmers’ movements. He also claimed that the local police were assisting them.
Subbi Reddy’s sale deed with KSEZ dated May 5, 2006, says that he “is not getting proper income” from his lands and that his lands, “along with others in its neighbourhood, have been notified under Section 4(1) of the Land Acquisition Act by the Government of Andhra Pradesh on January 3, 2006, for the benefit of the purchaser”. It goes on to say that in order “to get a better price and to better utilise the sale proceeds by acquiring income yielding property elsewhere”, Subbi Reddy agreed to sell his lands through “private negotiations” with KSEZ. Nothing could be further from the truth going by several identical testimonies by other villagers. The market price of all the property had been determined to be a uniform Rs.1 lakh an acre, and the sale consideration at Rs.3 lakh. The villagers also complained of not being aware of what the sale deeds contained as they were in English. The deeds, however, mention that the sellers accepted the terms after they were explained to them in Telugu.
Put simply, KSEZ, with the active involvement and support of State officials, enabled its entry into farmers’ lands to conduct surveys by invoking the 1894 Act. Government officials then lied to the farmers by saying that if they approached courts they would get a lower compensation and thus coerced them into accepting the company’s terms. This enabled a land grab of nearly 3,600 hectatres at break-neck speed.
KSEZ became a subsidiary of the infrastructure company GMR Group in January 2011.
The GMR Group denied using strong-arm tactics. It claimed that “though the lands were purchased by KSEZ, either directly or through award, they can only be leased and remain under the control superintendence of the Development Commissioner [a statutory authority with supervisory powers under the SEZ Act] and be used only in the manner permitted by the Ministry of Commerce”.
In a detailed email reply to questions from Frontline , the company denied any illegalities in the procurement process. “Kakinada SEZ had purchased 5,968 acres out of 8,521 through consent mode—sale deed route from the farmers” and the farmers were paid the “market price”, it said. It claimed that it had received the remaining 2,553 acres by way of “awards”, which means that these lands were either owned by the government or assigned to landless families.
Singur agitationFarmers’ anger led to protests in the following years. They drew strength from protests at Singur and Nandigram in West Bengal against proposed land acquisitions there. Various groups of farmers filed petitions in the Andhra Pradesh High Court in 2008, all of which went against them.
Massive protests and police firing in Nandigram in 2007 prompted the Central government to issue directions to all the States not to acquire land by force, effective from April 5 that year. Seven months before that, directions were issued to acquire only “waste and barren lands, and even if it became necessary to acquire agricultural lands”, priority was to be given to single-crop lands. The acquisition of double-crop lands was restricted to 10 per cent of the total proposed project as far as possible.
If these rules are applied in Kakinada, almost the entire SEZ project will have to be shelved. Only about 200 of the 8,521 acres acquired by the company were categorised as non-agricultural lands in the records of the Revenue Department. A November 10, 2009, department notification directs the remaining 8,321 acres to be converted for non-agricultural purposes at no cost to the company. KSEZ was also exempted from paying registration, stamp and transfer duties on sale deeds. While this is in line with the SEZ Act, critics of the policy have highlighted the revenue loss to the exchequer.
Going by a December 2009 Irrigation Department order to cut off water supply to the acquired lands that were not under litigation, over 25 per cent of the land at KSEZ was canal irrigated. The order notes that 2,514 acres (1,005.6 hectares) were under the Pithapuram Branch Canal irrigation project. This means they were double or triple harvest lands.
The forced sale of land by the State government to aid KSEZ was supplemented by the flouting of rules under the SEZ Act by the Centre. The SEZ Act outlines the procedure for application, approval, creation and supervision of SEZs and the functioning of the units within them. There is a three-layered process from application to creation. Any State government or private party can directly approach the top statutory body under the Act—the Board of Approvals created under the Central government’s Department of Commerce. The board, in consultation with the State government, approves or rejects a proposal. It gives an “in principle” approval when a project is proposed. This is valid for a year and during this period the proposer must submit a project report and secure the lands required. This then leads to a “formal approval”, which is valid for three years, by when the proposer must attempt to make the SEZ operational. Even a single unit set up within these three years makes the SEZ “operational”. Both these approvals could be extended for another two years subject to ground-level assessments.
Another layer of approval is the “notification” of the existence of the SEZ. This is done on the submission of a “certificate from the concerned State government declaring that the proposer/developer has legal possession and irrevocable rights to develop the area as an SEZ without any encumbrances.” This is also subject to revision by the board, but one point the 2006 SEZ Rules under the Act do not make an exception to is the possession of vacant land, preferably without any public roads.
KSPL, the original proposer of the Kakinada SEZ, received an “in principle” approval on November 27, 2002, seven months after Chandrababu Naidu’s government recommended its proposal to the Department of Commerce. The letter states that the approval is valid for a year but could be extended by the Department on the basis of merit. Two and a half years later, on June 24, 2005, the department extended this “in principle” approval by another year, exactly a day after the SEZ Act was passed. It can be presumed that absence of action from both sides was because they were waiting for the enactment of the law, which enabled the private sector to establish SEZs. KSEZ was incorporated as a private limited company on October 24, 2003. The company bought the lands for the project within a year from the date it received its “in principle” approval, and it obtained the “formal approval” on June 27, 2006. KSEZ had to show an acquisition of 1,000 hectares, the minimum area legally required, to get the project notified as a “multi-product” SEZ. Phase one of the KSEZ was notified on April 23, 2007.
But over the next five years, after which the notification should lapse automatically, not a single unit came up on the procured lands. The company blames this on the political instability in the State and the rash of court cases filed by aggrieved farmers. KSEZ did build a Relief and Rehabilitation Colony (RRC) in 2009 to accommodate the displaced families. Instead of denotifying the SEZ, the Department of Commerce notified Phase 2 of KSEZ on February 6, 2013, with another 1,013 hectares, almost seven years after it granted formal approval for Phase 1. A 2014 report on the performance of SEZs nationwide prepared by the Comptroller and Auditor General (CAG) of India specifically pointed to this instance to highlight how rules were being flouted by the board, which was granting extensions on auto mode, without examining the merits of each case.
The CAG also reckoned that 49 per cent of the nearly 6,000 acres (2,400 hectares) with KSEZ were irrigated lands. It also pointed out that nearly 50 per cent of the lands held by KSEZ had still not been notified.
In its response to the Supreme Court, the Central government attempted to pass the buck to the States by saying that land was a State subject and that acquisition and enforcement of SEZ rules, therefore, had to fall on them. The CAG, in turn, termed this response as “unacceptable”, stating that the approval and supervisory role was vested with the Board of Approvals and the Development Commissioner under the SEZ Act, both of which came under the Centre’s purview.
The Centre, defending its SEZ policy, said only a fraction of India’s geographical area, that is, 0.02 per cent, had been converted into SEZs. But it admitted that implementation of rules, such as using barren lands and wastelands, had been difficult as companies did not want to set up projects in areas that lacked water, good infrastructure and skilled labour.
While land acquisition for SEZs could seem inconsequential on a national scale, it masks the countless instances of forced takeover of forests and fertile farms, which endangers lives, livelihoods and the ecology.
The Centre also claimed a tenfold increase in employment at SEZs between 2005 and 2014. It said a total of 17,11,657 people were employed in SEZs as on December 31, 2016. Andhra Pradesh was said to employ 59,555 people. In response to a Right to Information (RTI) application in 2015, the Development Commissioner, Visakhapatnam SEZ, the statutory authority with supervisory jurisdiction over KSEZ, mentioned the proposed extent of employment generation at the project alone to be 2,40,000 jobs, but the actual number was 24. Such exaggerated claims are rife. For instance, the APIIC SEZ in Warangal in Telangana proposed to create jobs for 20,000 but not a single person has employed. V.R. Enterprises, also in the same city, proposed to provide jobs for 12,500, but has only 10 people on its payroll.
Speaking to Frontline , Sravan Kumar, the RTI applicant who is also the lawyer for Kakinada’s displaced farmers in the Supreme Court, said: “My clients ask me—‘what is the employment they have provided us so far? We used to employ 10-15 agricultural workers in our fields. Now are we supposed to beg the company for jobs that might pay us about Rs.4,000 a month?’ That’s less than the wage of a farm labourer.”
Nothing came up at KSEZ for 10 years after the first formal approval for Phase 1. A Chinese toy manufacturer, Pals Plush, began operations in January 2016 on two hectares of leased land at Mulapeta village at the very site Chandrababu Naidu ploughed fileds on his 62nd birthday. Pals Plush employs 600 women “trained by GMR’s corporate social responsibility (CSR) arm, Varalakshmi Foundation”, according to the company’s email replies to Frontline . A February 25, 2015, “news and events” announcement on Pals Plush’s website claims that GMR is to develop India’s largest toy-manufacturing hub at KSEZ.
SEZ colonyVillagers at the RRC built by KSEZ, however, say no employment has come their way from the toy manufacturer. The RRC, which the villagers call “SEZ Colony”, houses about 950 families from 12 villages who sold their lands. It is now a separate village panchayat. The families here mostly do not hold more than two hectares each. Some of them were hoping to shake off their caste bondage and get better jobs in the units the company promised would come up.
Eight years later, conditions have deteriorated at SEZ Colony. Pools of stagnant water cause frequent outbreaks of vector-borne diseases. The construction materials used to build these houses are of poor standard. The houses are about 500 square feet in size, and poorly ventilated. Each has a toilet in the backyard and human waste flows into an open drain. Villagers pointed to cracks in their houses, which they said occurred within the first year of occupation.
Varalakshmi, 42, is a widow. She and her husband sold their three acres to KSEZ. When they owned their fruit farm they supplemented their income by working on bigger casuarina groves. Varalakshmi now works on maintaining the railway tracks that run close by. Her 24-year-old daughter, Ganga Bhavani, accused the GMR Group of promising jobs and not offering them. “In an interview they asked me about my child’s age, and then they rejected me. I have a certificate from the computer course they asked me to attend, which was meant to be for three months, but went on for a year. I don’t think the 40 others who attended the computer course have been hired either. My husband is also unemployed.”
KSEZ, however, claims that a “rural BPO [business process outsourcing] centre established in association with the Tata Group has trained educated rural youth in finding employment to enhance their livelihood and career prospects”.
Even SEZ Colony is formed on caste lines. Dalit families living on two of the streets showed toilets in disuse filled with mud and debris in their backyard. They say the toilets have been in the same condition from the time they moved in. All complaints to KSEZ and the district administration have fallen on deaf ears.
Most of the farmers who sold their lands have gone back to cultivating them. They are even more resolute now than they were 10 years ago when they began their protests. They say moving out of their lands now is out of the question. Ravi Satyanarayana, one of the leaders of farmers’ resistance and the main petitioner in the Supreme Court case, is among a significant number of farmers who never sold their lands. He said: “I used to drive around in my car; now I do not have the money to repair it. GMR and the local police harass the leaders of the resistance by coming to our homes to interrogate us at night. We cannot make out the difference between the cops and GMR’s men. Sometimes they come drunk and bang on our doors to bother us. They were thinking that if all the farm labour is taken away to SEZ Colony we might sell our lands. But where will the workers go if you do not have jobs for them? They are back working in our fields, and on their own fields, the ones they sold 11 years ago.”
While admitting that the company employed security personnel, GMR said this was only to protect SEZ lands and that “the accusation of KSEZ indulging in any harassment of villagers is false and unsubstantiated”.
Oil and gas related industries formed the centrepiece of the Kakinada SEZ project right from its inception. This was in sync with the Central government's policy to extract the huge oil and natural gas reserves in the Krishna-Godavari Basin region. An October 7, 2005, letter from the Andhra Pradesh Principal Secretary in the Department of Commerce and Industry mentions a memorandum of understanding between the public sector giant Oil and Natural Gas Corporation (ONGC) and the State government to set up a “refinery project and Kakinada Economic Zone on a priority basis”, for which land was sought to the extent of 10,000 acres. This project never took off. The reasons for this, however, remain rather unconvincing.
GMR said the project did not materialise as “ONGC’s priorities had changed”. However, a former bureaucrat in the Central Economic Affairs Department and a prominent critic of the project, E.A.S. Sarma, believes that the deal with ONGC was aborted because KSEZ preferred a private entity to a public sector corporation.
In fact, another port north of the one KSPL currently operates in Kakinada is proposed to facilitate the KSEZ project. An environmental impact assessment study by the heavy industries construction major Larsen and Toubro Infrastructure (L&T) was submitted for “Kakinada SEZ Port Phase 1” to the State Pollution Control Board for its approval. In the report, L&T states that the “Government of Andhra Pradesh’s Port Policy, 2015, has identified Kakinada SEZ Port as one of the locations for the development of new ports”. The city’s website says it is part of a “Special Economic Zone and a proposed Petroleum, Chemical and Petrochemical Investment Region”.
Environmental impactThe potentially devastating environmental impact of such a project has not been given adequate attention. Deep sea ports are generally man-made. They are built off sandy beaches and require heavy dredging to allow berthing of ships with carrying capacities up to 150,000 tonnes. They make handling large cargoes of oil, gas, coal and iron ore cost-effective. But these are highly toxic raw materials.
Deep sea ports are mired in controversies globally. They have been accused of endangering fragile marine ecosystems and polluting waterways. KSPL has been accused of causing ecological damage by excessive dredging leading to erosion from the beaches of Hope Island, a landmass said to have been formed a little over 200 years ago from soil deposits of one of the Godavari’s tributaries flowing into the Bay of Bengal. Its beaches are one of the nesting places for the endangered Olive Ridley turtle. It also forms a natural barrier in the Kakinada Bay, protecting the harbour and the city of about 4,00,000 during the annual cyclone season. The company has denied the allegation.
The Madras High Court banned the Chennai port from handling coal and iron ore in 2011 citing unacceptable levels of pollution. Chennai’s deep sea port handles three times the cargo volume that Kakinada does. But it is also over a century older and an integral part of the city’s downtown. The dense urban agglomeration around it made the handling of toxic cargoes a potential danger to those living in its vicinity. “The entire hazardous material operations of the Chennai Port then shifted to Ennore further north, leading to a significant loss of revenue. But the oil cargo could not be shifted as it would have been a mammoth project to relay pipelines that ran directly from the port to Chennai Petroleum Corporation’s refineries,” said Amirthalingam Ravindran, a retired official of the Chennai Port Trust.
The new port at Kakinada will mainly handle oil-related cargo.
Despite the delay of over a decade in implementing the project, GMR says it has ambitious plans for KSEZ. It plans to develop the industrial park on the lines of Jurong Island in Singapore and make it “the Houston of India with over 100 companies across the value chain”.
GMR now says talks with GAIL (India) Limited and Hindustan Petrochemicals Corporation Limited (HPCL) for a complex, which is to come up with an investment of Rs.40,000 crore, are at an “advanced” stage. It is expected to employ about 1,000 people directly and another 2,000 indirectly. HPCL-GAIL, the company said, had obtained environmental clearance for the project. Officials at KSEZ, who did not wish to be named, were unclear just how the recent ONGC proposal to acquire a controlling stake in HPCL would affect the proposed project.
Several other private companies have been listed as “downstream” industries, and another private “petrochemical major” is to invest Rs.60,000 crore to set up a refinery and a cracker unit which would employ an additional 10,000 people. All said and done, the company has mentioned an expected employment generation for about 19,000 people, which is over 12 times lower than its initial proposal.
In its response to the Supreme Court on the petition by Kakinada farmers, Chandrabadu Naidu’s current government has fully backed KSEZ, almost sounding like the corporate communications wing of the company. The response mentions the rehabilitation colony and the BPO centre built by the company; and even says that the toy-manufacturing unit employs 1,200 women, while the company itself mentions half that number in its response to Frontline .
Going by his complete U-turn on the SEZ project, one can safely assume that Chandrababu Naidu’s support for the protesting farmers on his 62nd birthday did not signal a radical departure from his economic vision moulded in the aftermath of India’s liberalisation experiment. It was only meant to get him to where he is today.
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