SEZS – WHAT DO THEY REALLY MEAN FOR INDIA?

SEZS – WHAT DO THEY REALLY MEAN FOR INDIA?

 A few weeks ago, the Government of Haryana signed an MoU with the Reliance Group for an SEZ. The numbers are staggering: 25,000 acres, Rs 40,000 crore investment, anticipated annual returns of Rs 10,000 crores, with a 24% minority stake for the state. A week later, the Mahindra Group signed a similar MoU with the Rajasthan Government. Over 100 such proposals have been cleared by the Government of India. The future tenants of these SEZs are multinationals – Indian and foreign. Mukesh Ambani said, “We will get the best of the Fortune 500 companies here.” Clearly, SEZs are the latest buzzword in India’s charge onto the world economic stage.

 What do SEZs promise? There are fiscal goodies - customs duty exemption, income tax and service tax benefits – that are intended to generate economic and employment benefits. However, these are being questioned, with talk of job cannibalisation and fiscal distortions. I want to focus on a less discussed aspect of these SEZs: the land cannibalisation and –more importantly - governance distortions that they create.

 The fiscal benefits are really a red herring to draw attention away from the real estate benefits that developers are getting from these SEZs: access to precious land at throwaway prices, cleansed of all land title and litigation issues. Some of these land arguments are already being made. In Haryana for example, a Congress MLA Kuldeep Bishnoi has raised questions about the Reliance deal, but has been issued a show-cause notice by his party; an independent MLA Naresh Yadav has threatened a farmer protest on August 1^st, raising issues of water equity and loss of land to the farmers. Cynics might dismiss these as opportunistic politics, but there is no denying that there is more to SEZs than just economic incentives. These are not necessarily tiny plots of land: the Reliance SEZ is 25,000 acres. All of Bangalore is 50,000 acres. In Superman Returns, ace villain Lex Luthor says– “It's all about land. You could manufacture anything else, but you can never make land."

 The governance issue has attracted less attention. The reality is that SEZs are like a governance virus in the areas where they are located. Read the SEZ Act, it is full of unilateralism. Section 31 says that the Development Authority of the SEZ shall have “the Development Commissioner, three officers of the Central Government, (and) not more than two nominees of entrepreneurs.” This is centralised and privatised governance, a throwback to the feudal state, with traces of the Raj – a dangerous mix of public and private interest.

There is more. The SEZ has the mandate to develop infrastructure within it, provide water and sanitation services, levy user charges and collect property “fees”. SEZs will essentially function like sanitised local governments, without the politics. This is a complete violation of the 73^rd and 74^th Constitutional Amendments which mandate that rural and urban local governments would be responsible for these functions; reforms that activists and advocates fought hard for, working the tortuous but critical

political process along the way. Despite the Amendments, it has taken 15 years for panchayats and municipalities to get their share of finances and responsibilities - and the battle is still being fought.

 Against this background, the SEZs are a businessman’s dream response, the creation of a kind of political “cleanroom”. And so, while some parts of government are engaged in the legitimate political battle of decentralisation, other parts of the very same government sanction thousands of acres of SEZ projects, slicing up our villages and towns and auctioning them off to the highest bidder.

 I don’t believe these things begin with a group of conspirators sitting down to figure out how to carve up the country. I think that the process begins with the genuine desire to improve the responsiveness of government to economic demands; but in a globalised world that is moving at warp speed - with everyday comparisons being made to China -there is little time to follow due process. Pretty soon, we have the end justifying the means. Unfortunately, most businessmen and bankers are constrained to think only of their interests, which is exactly why they are successful at what they do; and which is why we need the government to act as the check-and-balance here, not become an IPO-partner with a conflict-of-interest.

 Are we making too much of these developments? After all, every successful country made compromises between development and equity as it moved up the prosperity ladder. The SEZ issue is symptomatic of complex intertwined issues, of how globalisation is reaching into countries and shredding their political identities; how a new localised phenomenon of interlinked cities across the world is setting the development agenda. Saskia Sassen, professor of sociology at Chicago, writes of this and how the political process - which is meant to slow the pace and allow for deliberation – is increasingly getting tainted by economic forces.  

Business leaders know that great institutions are distinguished by their governance processes. We all know that India needs to strengthen its democratic institutions even as it responds to its economic impulses. This tension between progress and process is similar to that between liberty and equality in a democracy, and can only be resolved through imperfect solutions where the benefits outweigh the costs. Unfortunately, SEZs tilt the scales too far – even as they provide sops to the business community; they severely compromise our public institutions and debilitate our democratic processes.

 It’s not too late, the SEZ mania has just begun. We need to hit the pause button, and nurture debate about what they really mean for India, and the price we will have to pay for them in the long run.

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The author is founder of Janaagraha. He can be reached at ramesh@janaagraha.org