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Can We Afford Sez?……yes, We Can ….. We Must


Can We Afford Sez?……yes, We Can ….. We Must

Last updated: April 22 2007
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  • Can We Afford Sez?……yes, We Can ….. We Must


    The Indian SEZ policy attracts a lot of questions and we have seen lots of debate within the country. The government and industry are of the strong opinion that such policy will prove instrumental in strengthening the country's economic and business growth.

    The main intention of these policies are to develop SEZs like the Free Trade Zones or Enterprise Zones of the United States of America or the Special Economic Zones of China and the Middle East, which will attract large global investment within the territory of India and will in turn provide large scale employment and sourcing opportunities for Indian business and high returns
    In 1980 China set up first group of four SEZs in the Coastal area of South East China, followed by other 10 in coastal cities as second group. In the beginning of 1984, Chinese government, based on the experience of these SEZs, decided to establish Economic & Technological Development Zones (ETDZ) along coastal line. it was the meticulous and careful planning, which helped the success of the SEZ scheme in China.
    The Indian government believes that by offering the similar benefits to the global investor, investment in India will be more attractive and will lead to larger investment and growth that will drive India's economy forward. The setting up of globally focused businesses will lead to larger employment opportunities for Indians and also provide smaller Indian businesses an opportunity to service these larger units in the SEZs.

    A “SEZ Bill, 2005” was proposed in 2005. The salient features of the Bill were to decide, Matters relating to establishment of SEZ and for setting up of units therein, including requirements, obligations, setting up of off-shore banking units and units in International Financial Services Center, the fiscal regime for developers and units set up therein.

    The few expertise started criticising that in SEZ neither the government, nor farmers, nor the labour that are gaining. The government loses the revenue, farmers lose their land and the labour loses their earning. The sole beneficiaries are the corporates and MNCs for whom it is a golden opportunity to loot the land and revenue.

    One strong criticism against the present structure of the SEZs is that it favours a select few and puts this high cost of development on the larger masses, who stand to gain little from the growth of these SEZs. I rate this as a negative criticism and feel that the large masses will stand to gain if select few industrial groups invest and make it happens.

    To support my claim that the large masses stand to gain, I below emphasize on a positive side of SEZ giving more stress on Reliance group controlled, Mumbai Special Economic Zone (MSEZ) and Navi-Mumbai Special Economic Zone (NMSEZ), who are investing 300 billion rupees ($6.8 billion) on building a trade zone on the outskirts of the commercial hub of Mumbai. The project is being set up as two adjacent special economic zones on more than 14,000 hectares and is expected to attract investments worth 3 trillion rupees from various industries including banking, finance, jewelry making units and biotechnology companies to set up businesses.

    Job opportunities

    The Commerce Ministry claims that one million new direct jobs will be created on account of SEZs in the next five years and depending on the nature of an industry, every new direct job will create five to ten jobs through indirect employment. Out of which, Reliance SEZ itself will create job opportunities for more than 2 lacs people and many more indirect employment will also be created.

    It is observed, workers in our country make a living by doing odd jobs. With a bit of skill development, they can easily be absorbed in productive employment in SEZs and ancillary industries. There will presumably be upward pressure on agricultural wages, as demand for agricultural labour will fall less than the fall in supply of such labour.
    For example, at the country’s largest gems and jewellery SEZ set up by Gitanjali Gems at Ranga Reddy district in Andhra Pradesh, of the 700 women and 300 men undergoing training currently . The SEZ is expected to hire nearly 5,000 employees over the next year. Most of the workers come from landless families, have been unemployed for some years and live within a radius of 4 km from the SEZ. Just getting a job is a big morale-booster for their self-esteem and transforming their families.

    Land acquisition and Rehabilitation policy:

    Land acquisition is another big issue, and one that tends to make news and attract popular attention for a variety of reasons. It is being argued that a large number of agricultural jobs will be lost on account of acquiring agricultural land for SEZs. This is not true and figures will testify to that. According to the latest survey, an agricultural worker gets an average 71 days’ employment a year.

    A majority of agricultural workers in our country make a living by doing odd jobs. There will presumably be upward pressure on agricultural wages, as demand for agricultural labour will fall less than the fall in supply of such labour. Detailed rehabilitation packages beginning with skill formation/upgradation and engaging local people (including women) in the developmental activities have ensured direct and indirect benefits, including employment for the affected family members.

    As in case of Reliance, they have offered a fantastic compensation package, which possibly is the best package ever offered so far to PAP (Project Affected People).
    As per the press release, the Reliance Group has offered to buy land from farmers and landowners at 2.5 million rupees a hectare; this amount is much more than the compensation decided by the Indian government.
    Under the 12.5 per cent Developed Land Scheme, the MSEZ will allocate 12.5 per cent developed land in proportion of the original land holding to the legal land holder at a price to be determined by the State Government and this will become a permanent source of income for the PAPs. Reliance has also offered to train and employ one person per household in the 45 villages from where land will be acquired.

    The monetary compensation option (in lieu of the 12.5 per cent scheme) offers the landholder Rs 5 lacs per acre of land originally sold as one-time payment or a lifetime monthly payment of Rs. 5,000.
    The MSEZ is also willing to buy land under paddy at Rs. 10 lacs per acre and varkas (unproductive) land at Rs. 5 lacs per acre. A landowner may additionally opt for employment of one nominated family member and this arrangement too has two options.

    Knowing the need of educating and training the project affected people and absorb them by offering suitable employment, the Reliance group has offered free technical and vocational training programme to PAP (including women), during which the minimum wages of Rs. 60 per day would be paid to every individual. Once training is completed, employment with a monthly income range of Rs. 4,000-5,000 is assured. Under the second option, the MSEZ will pay a one-time payment of Rs. 3 lacs per PAP if training and employment is not opted for.

    As far as the land to be acquired for Reliance project is concerned, most of the land being acquired is either salty land or single (rice) cropland, wherein the average income of the individual farmer is not even Rs. 6000 per annum per acre. So the charges framed against the group for acquiring cultivable land is baseless and false. Therefore it is not wrong to say that the farmers are not neglected from the benefits and if a serious thought without prejudiced mind is given, the PAP will enjoy every fruits if the SEZ project takes place.
    Keeping in mind the above facts, it is important to give a serious thought on the statement of our beloved Prime minister, wherein he said,” How long will we continue celebrating our potential even while restraining ourselves from realising it, as we, day after day, continue putting blocks in the path of our own progress?

    Considering the uncertainty in implementing the SEZ policy, Mr. Vivek Mehra,
    Executive Director, PricewaterhouseCoopers, quotes in his statement ”The frantic calls I have received from a couple of global shoe manufacturers having time bound plans to manufacture sports shoes in SEZs in India, instead of China, wishing to employ over 40,000 people, are fully justified. How do they plan their global manufacturing if such uncertainty keeps coming up?”

    We should also be careful that we do not continuously send wrong messages to global investors. We must break the pattern of sending out messages of an inconducive policy environment, which in the past has often deprived the country of great opportunities. Lastly, I feel it essential to give a serious thought on the quoting of Mr. Pradeep Mehta, who had said in his article on SEZ, which is essence of the above thoughts. He says, “The real question is not can we afford to have SEZs, but can we afford not to…”
    Last edited April 28 2007, 08:41 PM.
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