It was in 1965 the first Export Processing Zone (EPZ) was started at Kandla,
What is happening under this project is the biggest land grab since 1947. The draconian Land Acquisition Act, 1894 is utilised for this land grab. At present for the already sanctioned SEZs a total of 1.25 lakhs hectares of prime agricultural land are being acquired. The next phase involves almost same area.
Though Kamalnath repeats about
Some Features of SEZs in
- SEZ for gems & jewellery, IT-ITES-BPOs and bio-technology would require a minimum 10 hectare of built-up area. (Later notifications said that the land-area may be reduced to 40,000 square metre or 4 hectare in special cases). Multi-product SEZs must have an area of 1,000 hectare, while multi-services and sector specific SEZs should have a minimum area of 100 hectare. (1 hectare = 2.5 acres, approximately).
- Only in
- The processing area in SEZs would be mere 35%`! In the remaining 65% housing projects, hotels, restaurants, hospitals, amusement centres, multiplexes, malls, playgrounds, golf courses can be built !
- SEZ will be a duty-free enclave and considered foreign territory within the state. If you buy goods from an SEZ, you have to pay import duties. Example: Reliance industries set up a new refinery in
- Generally, the government will provide land to private companies that develop SEZs. Thus, SEZ developers will have access to precious land at throwaway prices (with the help of government muscle), cleansed of all title and litigation issues.
- There will be no elected local government/civic authorities. A development commissioner will govern it.
- So lucrative are the tax-holidays & other concessions offered in these SEZs that there are strong possibilities of older units to relocate in the SEZs to avail the bonanza. There are 6,500 companies located in 47 Software technology Parks (STPs) all over
- In these SEZs all the units/enterprises will be declared as ‘public utilities’ where existing labour laws do not act.
SEZs: Sovereign States?
On a number of critical matters (environment, labour and electricity, among others) that are state subjects or fall in the concurrent list of powers shared by the central and state governments, the states give free rein to developers of SEZs. States such as
There are more dramatic examples of SEZs being granted most favoured nation status. Environmental clearance is one. State governments are promising developers and their clients a quick, trouble-free process by exempting industries from the environmental impact assessment (EIA). This is normally a cumbersome exercise, but essential for understanding how to minimise the adverse impact of development on the environment. Now, some states have decreed that environmental approval will be given by the development commissioner of the SEZs in consultation with an officer of the state pollution control board posted in the zone.
Among other drawbacks, SEZs will not be subject to any town planning or supervision by the municipality, thus negating the 75th Amendment of the Constitution which ensures people’s participation in local government.
What is most worrying in the SEZ Act is Section 49, which empowers the government to exempt any or all SEZs from the operation of any central law through a notification. It puts SEZs, theoretically at least, outside the pale of the Constitution.
After all, the world over, SEZs are set up precisely so that they can avoid the rigidity of domestic law and rely on smoother functioning without bureaucratic hassles. The rub here is that the SEZs are being developed by the private sector.
And, there is also the Godzilla factor — the sheer size of some SEZs. Although these are small by global standards, some have the making of a mega enterprise. Reliance Industries’ twin block in Mumbai is scheduled to cover 14,000 hectares or 140 sq. km. This may be just a third of
The question, therefore, is what happens when large SEZs eventually become townships whose population could run into millions. There is, to start with, the constitutional tenability of private monopolies running local government for sizable cluster of the urban population without being elected. Would the SEZs thus, turn into sovereign states accountable to none? Or, would there be some checks and balances?
What the law lays down is an SEZ Development Authority (SDA) headed by the developer’s representative and run by a development commissioner (DC) appointed by the state government — a super bureaucrat vested with enormous powers. Since SEZs are being designated industrial townships by the status, the DC would work independently with no municipality or the third rung of governance to oversee his functioning.
In other words, all functions undertaken by the civic authorities and some of those provided by the state government (water supply, tax collection, law and order) would devolve on the SDA. Several states have laid down detailed norms for the SDA. From providing birth and death certificates, maintaining cremation/burial grounds (all municipal functions listed in 12th Schedule of the Constitution) to laying out public streets, building bridges and culverts, and fighting epidemics, the SDA would be doing it all. No penalties, though, have been spelt out for dereliction of duties.
Also, unlike a municipality, the developer is not obliged to provide services to all citizens. How then would a resident deprived of such services seek to enforce such a right? In fact, there are doubts whether many of the SEZs would indeed be able to provide such services, given the squeeze on their profitability.
There are related issues like law and order and the judicial process. Although the police force will be provided by the state, internal security will be the responsibility of the developer. But legally, this could open up a Pandora’s Box if the jurisdiction of the security force is challenged. Similarly, SEZs are to be provided with a separate fast track judicial system to ensure comfort to foreign investors in SEZs. But this will be a Government of
Subsidies/Incentives Given to SEZ
- Exemption from industrial licensing for manufacture of items reserved for Small Scale Industries (SSI).
- 100 per cent FDI investment through automatic route to manufacturing SEZ units.
- Facility to realise and repatriate export proceeds within 12 months.
- No cap on foreign investment for SSI reserved items.
- “Write-off” of unrealised export bills upto 5%.
- No License is required for imports, including second hand machineries.
- Profits allowed to be repatriated freely without any dividend balancing requirement.
- Full freedom for subcontracting, including subcontracting abroad.
- The area incorporated in the proposed SEZ is free from environmental restrictions.
- Water, electricity and other services would be provided as required.
- The units would be given full exemption in electricity duty and tax on sale of electricity for self generated and purchased power.
- To allow generation, transmission and distribution of power within the Special Economic Zones.
- Single point clearance system and minimum inspections requirement under State Laws/Rules would be provided.
- For units inside the Zone, the powers under the Industrial Dispute Act and other related labour Acts would be delegated to the Development Commissioner and that the units will be declared as a Public Utility Service under Industrial Dispute Act.
- 100 per cent income tax exemption for a block of five years, 50 per cent tax exemption for two years and upto 50 per cent of the profits ploughed back for next 3 years.
- Supplies from Domestic Trade Area to SEZ to be treated as export.
- Carrying forward of losses.
- 100 per cent Income-tax exemption for 3 years & 50 per cent for 2 years for off-shore banking units.
- Exemption from Central Excise duty on procurement of capital goods, raw materials, consumable spares, etc., from the domestic market.
- Reimbursement of Central Sales Tax paid on domestic purchases.
- SEZ units may import duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets, etc. for implementation of their project in the Zone without any license or specific approval.
- Exemption from service Tax to SEZ units.
- Exemption from State sales tax, octroi, mandi tax, turnover tax and any other duty/cess or levies on the supply of goods from Domestic Tariff Area to SEZ units.
- Enhanced limit of Rs. 2.4 crores per annum allowed for managerial remuneration.
Subsidies/Incentives Given to SEZ Developers
- Developer of an SEZ may import or procure goods without payment of duty for development, operation and maintenance of the SEZ.
- Income-tax exemption for a block of 10 years in 15 years at the option of the Developer.
- Exemption from Service Tax.
- Investment made by individuals etc. in SEZ developing companies eligible for exemption under Section 88 of the Income Tax.
- 100% FDI allowed for: (a) townships with residential, educational and recreational facilities on a case to case basis, (b) franchise for basic telephone service in SEZ.
- Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs.
- Developer permitted to transfer infrastructure facilities for operation and maintenance.
- Generation, transmission and distribution of power in SEZs allowed.
- Full freedom in allocation of space and built up area to approved SEZ units on commercial basis.
- Authorised to provide and maintain service like water, electricity, security, restaurants and recreation centres on commercial lines.
- The area incorporated in the proposed SEZ is free from environmental restrictions.
- The water, electricity and other services would be provided as required.
So the message is laud and clear. Mushrooming of SEZs will not deliver the desired goal of “export promotion”. But these ‘anxious’ critiques cannot oppose the very concept of SEZs. After all they are representatives of the big capitalists.
[For preparing facts and figures of SEZs the Update Series 13 contributed . We acknowledge our thanks-RS]
Table 1 : Snapshots on SEZs (State-wise)*
State Formal Area In-principle Area
Approvals (hectare) Approvals (hectare)
Andhra Pradesh 45 9472.80 9 3768.39
Chhattisgarh - - 2 2029
Dadra, Nagar - - 1 80
Haryana 19 818.41 27 43002.48
Himachal Pradesh - - 3 5030
Jharkhand 1 36 - -
Karnataka 29 1672.12 17 4720.97
Kerala 10 569.92 2 414
Madhya Pradesh 4 71.25 6 9309.25
Orissa 5 745.61 7 4060.03
Rajasthan 3 89.23 8 12251.32+
Tamilnadu 25 1300.57 12 5078.25
Uttranchal 3 468.2 1 14
Uttar Pradesh 8 123.71 10 5954.25
Total 237 35106.08 166 13979.94
Total Approvals = Formal + In-principle = 403
Total Area (Hectare) = 1,74898.02+
*October 2006; some of the bigger SEZs still not get any form of approval.
Application pending at the commerce ministry = 247
Table 2: Land to be acquired by the
Project Place Land
1. Salim (MNC) 59,250 app.
a) Chemical Hub (SEZ) Nandigram (
b) SEZ (multi-product) Haldia 12,500
c) Barasat-Raichak Expressway -------- 3,500
g) Motorbike Factory Uluberia (
h) Township Kukrahati (S. 24 Pargana) 5,000
i) Fish Farming Project Amta (
2. Videocon SEZ N. 24 Pargana 2,700
3. Videocon SEZ (IT) N. 2 Pargana 310
4. Videocon SEZ Siliguri (
5. Salarpuria SEZ N. 2 Pargana 520
8. Industrial Development Zone Uluberia (
9. S. 24 Pargana District Hqs. Baruipur 3,000
10. Industrial Development Area Kharagpur 1,200
11. Cement Unit Murshidabad 150
12. Several Projects Siliguri (
13. IT Complex Jagadishpur 330
14. Industrial Projects (Telcom/ Kharagpur (
Telecom/Tata, Tata Metaliks, etc.)
15. Jindal Steel Salboni (
16. Tata Motors Singur (Hoogly) 997
17. Township Baruipur (S. 24 Pargana) ,750
18. Township Bhangur (S. 24 Pargana) 1,500
19. Township N. 24 Pargana 1,000
20. Commercial Blocks Eastern
21. Industrial Area Adjacent to District Hqs. 1,000
22. Small Industry Development Backward districts 2,032
23. Track Terminal +
+ Sports Complex
24. Nuclear Power Plant Haripur (E. Medinapur) 700
25. Thermal Project Katwa (Bardwan) 1625
28. Sagardighi Project 150
Total 1,04,826 Acres (Approximately)