Home >Documents >Special Economic Zone: Land Acquisition, Rural and … · 2018-07-03 · Special Economic Zone:...

Special Economic Zone: Land Acquisition, Rural and … · 2018-07-03 · Special Economic Zone:...

Date post:22-May-2020
View:6 times
Download:2 times
Share this document with a friend
  • 149


    Special Economic Zone: Land Acquisition, Rural and

    Environmental Implications

    7.1 Introduction

    Land, the basic and long lasting source for production as well as for human

    inhabitation, is one of the most disputed issues in the public policies in India.

    Decisions concerning land allocation and land use pattern comprise diverse array of

    issues that can go beyond the considerations of economic growth. The matter of land

    use is predominantly important due to large agrarian population in economies such as

    India, where access to land, in absence of alternative employment-income

    opportunities and social security, provide economic security and therefore is rendered

    high in terms of social status (Patnaik, 2008; Bhagwati & Panagariya, 2013). Ideally,

    diversion of land from agricultural to non-agricultural sectors should be preceded by a

    considerable shift of workforce and local population (NCRWC, 2001; Shah et al,

    2012). In the absence such provision, diversion to non-agriculture use is most likely to

    invite resistance from farmers and local communities. The Land Acquisition Act

    (LAA) has been used to take land without the owner‟s consent has been practiced

    since the colonial rule. Growing spatial inequality with economic growth, only few

    livelihood opportunities for the rural poor may aggravate the issue of land (Pasinetti,


    The situation gets further stressed when the Government, being a custodian of

    land, tends to play the role of a trader as it has come out from the real on ground

    practices under the LAA. The enactment of Special Economic Zone Act 2005 goes a

    few steps ahead by allowing the Government to transfer the land acquired for public

    purpose under LAA to the private companies for development. Application of LAA to

    acquire land is often go along with various kinds of pressure tactics by the corporate

    and state to get consent of the land owner, as later owing the low bargaining power. It

    has been observed that the process of acquisition and conversion of agricultural land

  • 150

    reflects failure of the state and the market; in fact largely both of these form a nexus to

    indulge in „primitive accumulation‟ by the state (Chandrashekhar, 2006; Patnaik,


    Question is being asked on procedures of acquiring the land rather than the

    need of acquiring agricultural to promote industrial economic activities such as

    manufacturing units and infrastructure (World Bank, 2008; Shah et al, 2012). It is also

    evident from the experience that ambiguous implementation processes generally result

    in diversion of large tract of land, often more fertile, than what is actually required. It

    has been also observed that large part of acquired land ends up in the hands of the real

    estate companies rather than intended productive sectors and infrastructure. The

    absence of land use the policy and federal structure of governance where land is

    primarily a state subject has been the main culprit for faulty conversion or diversion

    of land from the agricultural and allied sector. The most critical issue is that of the

    nexus between the state and the private sector (Patnaik, 2008).

    Short term interest of politicians and builders has impeded the processes of

    public discourse and consensus building. Environmental implications further enhance

    the criticality of issue, diversion of land from the agricultural sector. Lack of clear

    environmental policies, also provide new dimension to the debate, sadly concern are

    only reflected when land is diverted out of primary sector and being threat to the

    livelihood of the farmers. Establishment of unaccounted SEZs across the country has

    also created threat to the environment in large. Effluent from these SEZs units has

    been threatening to ecology and creating problem of water shortage and pollution.

    Largely in practice SEZs Act do away from the environmental clearance

    (Environmental Impact Assessment). The extreme nature of these SEZs needs to be

    analysed through proper policy making.

    7.2 Land Acquisition and Rehabilitation

    The socio-legal issues such as land acquisition, displacement, rehabilitation

    and compensation has been the complex subject to deal with. Same time real estate

    development and land speculation has been the threat. As companies from other parts

    of country are also looking to take advantage of SEZ incentives, re-locating of various

    companies leads to consequent loss of income and rise in regional inequality. It has

    been extensively reported that the farmers are protesting against the forced acquisition

  • 151

    of agricultural land, with obsolete Land Acquisition Act of 1894 in the name of public

    purposes. The establishment of SEZs countrywide would lead to livelihood losses for

    farmers and dependent, whose land will be acquired and in reality little job creation,

    use of advanced technology or network can impact negatively. Gifting the thousands

    of acres of valuable land to developers in insignificant amount to conduct business by

    relaxing the laws of the land, including those meant for welfare of labour,

    environmental protection, taxation, etc., in the hope that it will automatically

    encourage industrialization and solve the prevailing problem of unemployment and

    poverty is futile (Chandrasekhar, 2006).

    Figure no 7.1: SEZ Hybrid industrialisation

    Source: Conceptualise by the Author, 2015

    Farmers and peasants in various states such as West Bengal, Uttar Pradesh,

    Maharashtra, Uttarakhand, Odhisa, Punjab and many more has opposed to the land

    acquisition for setting up SEZ, it is a growing issue across the country. Water problem

    due to SEZ is also a major emerging issue as it has been reported from Mundra

    Economic Zone, it expects to get at least 6 Million litres per day by the Sardar Sarovar

    project, and same is the case with other operational and proposed SEZ throughout the



    Incentive Long






    Sunk Cost




    phical Ideo-


    Lack of








  • 152

    country. The other major issue is relaxation of labour laws which is applicable to the

    rest of the country but shall not apply to the SEZs units. It‟s like creating state with in

    state with different land of law and norms. Existing labour laws are established with

    good intention to promote the welfare of workers. Relaxing labour laws only for these

    economic zones reflects the lack of conviction of government towards its own

    commitment to social justice.

    Land is the principal source of livelihood in an agrarian economy. Over the

    period the issue of land acquisition has become the most obvious medium of

    acquisition and then transfer of resources from average and poor people to private

    business corporations, leads to the loss of livelihood and large scale displacement of

    local population. In this kind of developmental process, always the beneficiaries are

    the big corporations and losers are the ordinary people and farmer community

    dependent to land in several ways, the peasants and tenants, agricultural labourers,

    tribal‟s and fishing community. The SEZ fast becoming and representing the most

    outrageous symbol of pro-corporate, anti-people, anti- labour established as model of

    industrialization (Banerjee, 2006; Nielsen, 2010; Roy, 2007 and Shah et al, 2012).

    Due to inaction of government, there is growing perception that only popular and

    mass resistance could make the government to re-think and to have a moderate stand.

    Difference between acquisition land for setting up production industry, and land for

    mining is very little, so far it is evident that due to inadequate industrial policy, land

    reform and social auditing has led to destruction of livelihoods and displacement

    (Banerjee, 2006; Patnaik, 2008).

    Figure no 7.2: SEZ’s impact on Society

    Source: Conceptualise by the Author, 2015

    Gender Inequality & Poor

    Labour Standard

    Social Aspects Employment


    Impact on Environment Women and Working


  • 153

    To understand the impact of SEZ on society and environment following figure

    7.2 reflects the five different types of impact that SEZ can cause at various level and

    how all these effects are interacting with each other.

    According to SEZs regulations and guidelines a multi-product SEZ is needed

    to have 1000 hectares while the single product SEZ can be established in as little 100

    hectares of land. Thus, SEZs may incorporate a single manufacturing unit, or a cluster

    of multi product industrial units. Guidelines also suggest that 35 per cent of land have

    to be assigned for the industrial or processing purposes; rest of land can be used for

    housing purpose, services, institutions, parks, and so on (Dept. of Commerce,

    Government of India, 2015). Only units approved under the SEZ scheme are to

    establish units in premises of SEZ.

    Apprehensions have been expressed about the misuse of the Act for acquiring

    land and relocating the existing industries into SEZs premises to take advantage of

    relaxations and incentives. However, so far evidences shows that these apprehensions

    are untrue to the certain extent, new investments has been made and employment

    opportunities have been created in the SEZ units. The subsequent benefits of

    spillovers effect, investments made, employment opportunities and acceleration of

    economy in general is expected to compensate the losses of revenue on account of tax

    relaxations and exemptions provided under SEZs scheme (Aggarwal, 2006; Dev,

    2008). These SEZs are supposed to be new instrument of economic development.

    Apprehensions from various corners have been stated regarding acquisition of

    agricultural land for setting up new SEZs. Even though, there are guidelines by the

    Central Government to the state governments for peaceful land acquisition process,

    the first targeted land for acquisition should be of waste and barren and, if necessary,

    single-crop agricultural land could be acquired for the SEZs through lawful

    acquisition machinery.

    Further, it has been said that only if essential than a portion of double-cropped

    agricultural land can to be taken to fulfil the minimum land requirements, especially

    for the setting up of multi-product SEZ, and acquired land area should not be more

    than 10 per cent of the total land required for the establishment of SEZ (Department

    of Commerce, GoI, 2015).

    The Supreme Court of India recently ruled, “If the project taken as a whole is

    an attempt in the direction of bringing in foreign exchange, generating employment

  • 154

    opportunities and securing economic benefits to the state and public at large, it will

    serve public purpose”. However, in a recent judgment (May 2010), the Supreme Court

    of India sternly criticised the abuse of Land Acquisition Act and proposed for

    development of pro-people land acquisition policy. It has clearly stated that the state

    must act as a benevolent trustee of people‟s land. It directed the government to

    develop laws supporting those whose land is being taken.

    The displacement by the land acquisition for notified SEZs is approximately

    1.14 million, which is 18 times higher than the number of people officially claimed to

    get direct employment in these notified zones. The Department of Commerce (2010)

    estimates suggest that 10 lacs new direct jobs and while 14 lacs persons get indirect

    employment by creation of an SEZ. This estimate lead us to the conclusive numbers

    as total employment created from SEZs to be just about one-eighth of the loss

    signified by displacement for land acquisition. This estimate raises many questions on

    objective and process of establishment of SEZs.

    7.3 SEZ and Land Acquisition

    Since inception SEZs has been versed with various kind of controversies

    which has put question mark on SEZ Act and government policy. Land seems to most

    important element of SEZs policy as it is evident by the ambiguous use of Land

    Acquisition Act 1894, diversion of land for other purposes and impact on


    7.3.1 Land Acquisition Act 1894

    The aspect of land acquisition has been core to the controversies on SEZs.

    Though, SEZs were not the first instances which became base of land acquisitions by

    central and state governments for establishment of industries. India‟s public sector

    enterprise has been acquiring land for expansion of production since independence.

    The expansion venture of several central and state public units, as well as the

    development of new townships (for example, Chandigarh, Bhubaneswar, Bokaro,

    Bhilai, and Durgapur) based on large-scale land acquisitions and rehabilitation of

    local populations. Several past and present land acquisitions have been conducted

    under the umbrage of „public purpose‟ clause of the LAA of 1894.

  • 155

    7.3.2 What is ‘Public Purpose’?

    The Land Acquisition Act (LAA) 1894 has been criticised for long time, being

    an archaic legislation. This is, nevertheless, a relatively recent criticism emerging in

    response to establishment of SEZs. There is no clear explanation why the LAA 1894

    was not controversial topic when India‟s public sector enterprise was on an acquiring

    splurge. One clarification could be that „public purpose‟, the apparent basis of land

    acquisition for government agencies is sanctified by the LAA, was never controversial

    as long as the land remained with the public sector firms. The same „public purpose‟

    became point of contention when land being allocated to private firms for

    development of SEZs.

    As state agencies acquired large tract of contiguous land under the clause of

    „public purpose‟, than allocating it to private developers, the debate created a critical

    question that „can states acquire land in „public purpose‟ for use of private firms‟.

    The SEZ policy of government of India has two apparently irreconcilable

    facets. It depends largely on the active involvement of private enterprises for

    development zones. The SEZ policy empowers state governments to be „facilitators‟

    in land acquisitions on behalf of developers. Implication of such expectation is based

    on realisation that land markets suffer from inefficient market-based transactions due

    to information asymmetry. Thus, state governments are expected to play role of

    mediator between landowners and developers.

    Section 4(1) of the LAA 1894 provide rights to the state (and central)

    governments to identify land for acquisition and issue necessary notifications

    accordingly. Any kind of objections against land acquisition can be filed under

    Section 5(1) are to be heard by the district administration and the final declaration

    against land acquisition is issued under section 6(1) of the LAA.

    It is imperative to observe that the only aspect of this acquisition process that

    can be questioned in a court of law is the amount of compensation provided for land

    to the land owners. The acquisition of the land by state under clause of „public

    purpose‟ of LAA cannot be questioned legally.

    Part II, Section 4(1) of the LAA clearly says that “whenever it appears to the

    appropriate government in context of the land in any locality (is needed or) is likely to

    be needed for any public purpose (or for a company), a notification to that effect shall

    be published in the Official Gazette and in two daily newspapers circulating in that

  • 156

    locality of which at least one shall be in the regional language, and the Collector shall

    issue public notice of the substance of such notification to be given at convenient

    places in the said locality”.

    The LAA defines „public purpose‟ as an extensive modus. An amendment

    made in 1984 (68th amendment of 1984) prolonged the original definition to

    accommodate the requirements of industrial projects of private firms. While Central

    and State governments have been traditionally employing „public purpose‟ clause of

    LAA to acquire land for social welfare and public sector purposes. But the utilisation

    of state machinery to acquire land for SEZs has provoked the criticism that „public

    purpose‟ is being misused for the benefit of private developers at the expense of actual

    owner of land (Sarkar, 2007; Levien, 2011).

    The inclusion of infrastructure projects in list of public purposes in 2007

    amendment is understood and justifying SEZs development. On the other hand,

    criticism is mainly due to the government‟s „overtly‟ proactive role in the land

    acquisition process. Indeed, contentious cases of land acquisition occur when some

    small number of landowner offer resistance and prevent developers from acquiring

    large contiguous land (Chandrashekhar, 2006; Patnaik, 2008).

    Section 23(1) of the LAA says that, compensation for acquired land is to be

    determined and calculated on the basis of the market value of land as on the date of

    notification for acquisition and damages sustained (if any) by the owner on various

    accounts (such as damage to crops and trees or property or from shift in residential

    property induced by acquisition). It disregards the fact that value of land depend upon

    use of land, in case of establishment of SEZs supposed to raise the price but

    landowners end up getting only small fraction of real value of land.

    On the other side, Section 24 of the LAA talks about factors that affects

    compensation amount to the land owner. It comprise of degree of significance cause

    leading to acquisition, unwillingness from the side of land owner and appreciation due

    to future use of land as well as from developments on the land. These provisions have

    serious implications on determinations of final compensation amount. It has been

    identified as a distinct „anti-farmer‟ bias in the process of acquisition of land and

    awarding of compensation (Swaminathan, 2007). Prevailing Market price is

    apparently the key for determination of compensation. But question is that how

  • 157

    government and companies arrive at right market valuation in opaque land markets

    and vague information?

    The determination of compensation under the LAA bestows upon the

    Collector or the District Commissioner. The only endorsed indicators of land

    valuation are sale or purchase deeds. But in reality these deeds are rarely accurate

    indicators of prevalent market prices. Stamp duty in Indian market is more than ten

    per cent, making it far more expensive than those prevailing in developed western

    countries just 1-2 per cent stamp duty. High stamp duties develop scope for under-

    quoting of prices in land sale and purchase deeds. It would be unrealistic to expect

    land records in India will be maintained in an orderly and updated manner as much as

    to assume that such records contains correct data are exhaustive. Barring these miss-

    quoted prices, there is no other database for prevailing land prices available with

    district administrations (Sarkar, 2007; Department of Commerce, GoI, 2015). It is

    evident that determination of correct market price for land remains a difficult task.

    The issue of inability of the LAA in recognising the appreciated value from

    „new‟ use has been incorporated by the amendment in the Land Acquisition

    Amendment Bill. It specifies that while determining the market value of land for

    compensation, the executive (Collector) shall consider the proposed use of land and

    comparing it with the value of the land in the intended category in the same region.

    Yet these provisions have failed to address the core of the issue. Even if the

    Collector knows about the intended purpose, it is practically impossible to determine

    ex-ante the value of the land following the given guidelines. It is given that the value

    of non-agricultural land in the locality in any case will not be comparable to that in a

    modern state-of-art SEZ set up by a reputed developer.

    7.3.3 SEZ and Agricultural Land

    State Government and Corporations ventures account for over 20893 hectares.

    In these cases, the land already available with the State Governments or state

    development corporations or with private companies has been used for establishment

    of SEZ. The land allotted for the 352 notified SEZs where operations have since

    commenced comprise approximately over 43258.42 hectares (Department of

    Commerce, GoI, 2014).

  • 158

    Table no 7.1: Land Allocation to SEZ as Approvals, Granted under the SEZ Act,

    2005 (in Hectares) as on 21.01.2015

    Source: Computed by the Author from data of Department of Commerce, GoI, 2015

    Out of the total land area of 2973190 sq. km in India, total agricultural land is

    of the order of 1620388 sq. km (54.5 per cent). Out of this total land area allocated to

    SEZ, the share of 352 notified SEZs amounts to approximately over 432.58 sq. km

    only. The formal approvals granted to 32 SEZ has also works out to be around

    9981,16 hectares (Department of Commerce, GoI, 2014).



    States In principle approvals

    granted under the SEZ

    Act, 2005



    List of Formal Approvals

    granted under the SEZ

    Act, 2005



    1 Andhra Pradesh 477 1.76 11253 22.03

    2 Chhattisgarh 29 0.11 111 0.22

    3 Gujarat 7198 26.55 13812 27.04

    4 Haryana 6199 22.86 840 1.64

    5 Karnataka 0 0.00 2789 5.46

    6 Madhya

    Pradesh 2000 7.38 900 1.76

    7 Maharashtra 7653 28.23 7344 14.38

    8 Orissa 1620 5.97 1923 3.76

    9 Puducherry 243 0.90 346 0.68

    10 Rajasthan 220 0.81 442 0.87

    11 Tamil Nadu 1191 4.39 5534 10.83

    12 Uttar Pradesh 112 0.41 671 1.31

    13 West Bengal 200 0.74 324 0.63

    14 Chandigarh 0 0.00 57 0.11

    15 Goa 0 0.00 367 0.72

    16 Jharkhand 0 0.00 16 0.03

    17 Kerala 0 0.00 1197 2.34

    18 Manipur 0 0.00 10 0.02

    19 Telangana 0 0.00 2700 5.29

    20 Uttrakhand 0 0.00 440 0.86

    21 Total 27113 100.00 51076 100.00

  • 159

    Table 7.1 shows total approved and notified SEZs in across the states in India.

    The Maharashtra has highest number of SEZ approvals (69) and operational (52),

    followed by Telangna and Karnataka. It is visible that the less economically

    developed which lacks adequate physical infrastructure has less SEZ approvals in

    India. But total land allotment to the in- principal approved and formally approved

    SEZ in Maharashtra and Gujarat are maximum in country with 7653 hectares and

    13812 hectares respectively. It comprises of 28.23 per cent and 27.04 per cent

    respectively, total land allocated for SEZ and being closely followed by Andhra

    Pradesh and Haryana. The share of India‟s biggest and most populated state Uttar

    Pradesh (UP) in allocation of land to in-principal approved and formally approved

    SEZ has been just 0.41 per cent and 1.31 per cent respectively.

    The acquisition of agricultural land for setting up SEZs is one of the most

    serious and vital implications of the SEZ policy and price are paid by the poor

    farmers. Findings of the Committee on State Agrarian Relations and Unfinished Task

    in Land Reforms (2009) raises many questions on India‟s SEZ policy as the report

    highlighted that the total area of land under SEZs is expected to be over 200,000

    hectares next few years. This amount of land on current production capacity is

    capable of producing more than 1 million tons of food grains. Committee also

    estimated that farming communities will have to suffer from losses of around Rs. 212

    crore each year in total income after acquisition of said quantity of land in the country.

    This policy of land acquisition may lead India„s towards food security risk in near


    All these kind of act in the name of economic development raises many

    questions on SEZ policy and its implementation mechanism such as; how can state

    governments be permitted to violate their own land use plans for establishment of

    SEZs, without inviting public interest litigation (PIL)? How can the state allow the

    acquisition of prime agricultural land from farmers for industrial purposes in the name

    of public purpose? Why does not the government encourages industry to develop and

    establish their unit in the more than 20 per cent (680000 sq. km) of the country„s land

    area that is officially declared as wasteland (Sharma, 2007; Basu, 2007). These are

    very serious questions marks on India‟s special economic zones and land acquisition

    policy, which needs to be addressed.

  • 160

    7.3.4 SEZ and Land Acquisition Issues

    Total Land Area in India is 2973190 sq. km out of which agricultural area is

    54.5 per cent (1620388 sq. km) and non-agricultural area is 45.5 per cent (1352802

    sq. km). Out of 45635.63 hectares of land notified in the country for SEZ purposes,

    operations commenced in only 28488.49 hectares (62.42 per cent) of land. It reflects

    on emergence of a trend wherein developers approached the government for land

    allotment/purchase more than what they need. Approximately 491 SEZs have been

    formally approved, notified SEZ are 352, in-principal approvals are 33 and operation

    SEZ are 196 with 3,864 approved units which in India which covers 51,055.73

    hectares of land. Total Area (including In-Principal approvals) covered by SEZs is

    0.058 per cent of total land area and 0.317 per cent of agricultural land (Department of

    Commerce, GoI, 2015).

    India‟s adoption of the SEZ model was motivated by the achievement of

    China‟s SEZs, which turned rural remote place like Shenzhen into global

    manufacturing destination within two decades. But, India‟s SEZ policy is unusually

    different from the Chinese SEZ model. In China, the stress was on big sites –

    industrial town, whereas Indian SEZs can be established in meagre 10 hectares of

    area. Lack of economies of scale, it is challenging to retrieve the costs of

    establishment of standard infrastructure. Further, without a huge cluster of firms in a

    given sector, the collaboration‟s arising from „clustering‟ are lost (Astarita, 2013).

    More considerably, China‟s SEZs were built on land own by the state, and developed

    by Chinese government agencies in expectation of rental space and facilities to private

    companies; but in case of India, the policy charter relies mainly on private developers

    to develop, and operate the SEZs.

    Land is the most significant natural resource, upon which almost all human

    activity is based since ancient time. Land continues to have enormous social,

    economic and symbolic relevance, particularly in case of India where affiliation with

    land is not only source of livelihood and same time emotional one too (Tantri, 2012,

    Astarita, 2013). Access to land, ownership of land and its documentation are essential

    to the livelihoods of the large population of India, particularly in the rural and tribal

    areas. Land policy and management are serious determinants of the transactions costs

    connected with access and transfer of land, both for commercial and residential

    purpose. Land continues to be a major source of Government revenue and is a key

  • 161

    element in implementation of wide range of government schemes. Land policies and

    institutions restructuring is going to have far reaching effect on the country's

    capability to sustain economic growth and development, on the degree that it will

    benefits the poor.

    Land acquisition refers to the process by which the government forcibly

    acquires private land for a public purpose with or without the consent of the owner of

    the land, valuation of land is generally lower than market price. It has been

    experienced from the recent land acquisition attempt for establishment of SEZ,

    process is not voluntary but forceful in nature and without any consent. The major

    issue with establishment of an SEZ, it generally requires forceful land acquisition and

    the eviction of its previous users and local people (Pandey & Tewari, 1996; Levien,

    2011). It is blindly implemented by the states governments under the Land

    Acquisition Act of 1894 for public purposes. The states in which the SEZs are to be

    allocated land and have been approved are facing intense protests against the land

    acquisition, from the local population particularly from the farming community. They

    are accusing the Government for snatching there fertile land forcibly at very lower

    price than the prevailing market prices. There has been many incident of protest in

    recent year by the land owners against the forceful acquisition in the name of public


    Farmers are protesting against land acquisition because it is depriving them

    from their rights, adequate compensation, lack of livelihood, rehabilitation difficulties

    and other despairs. Even though there is unanimity that no development activity can

    be accepted at the cost of social equity, the one going drive of the setting up of SEZs

    creates different kind perception. The implementation of scheme has created several

    problems and the most important aspect is the issues of rehabilitation of displaced

    population. People depending on agricultural land lose their livelihood provider, the

    only occupation and source of income. Further, compensation given for acquired land

    is meagre in compare to the present rate. Displacement from the land leads to the

    search of new job to earn livelihood. Lack of skills and limited knowledge agricultural

    activities makes it difficult for them, and they end up becoming casual unskilled

    labour in some industrial unit. Further, there has been many cases reported which

    suggest that affected people have to struggle longer period of time even to get

    promised compensation and livelihood.

  • 162

    7.3.5 Inadequate Compensation and Rehabilitation

    Since independence, India has adopted a policy of industrial development with

    establishing large industries or industrial enclaves and various kinds of projects on

    heavy engineering, dams, ports, mines and development of the road and rail network.

    Each one of these industrial scheme or project has led to displacement of people in

    large scale. Since India has been the first country in Asia to establish economic zone

    (Kandla SEZ-1965), and many more has been till today. In most of the cases of land

    Acquisition and rehabilitation process, affected population has rarely found new

    employments in these SEZ while only the educated elite, which constitute only the 8

    per cent of the workforce in the formal sectors, have benefited. The Land Acquisition

    Act treat land as a commercial entity that is lost through acquisition and landowners

    are the only one to be affected and there are no other stakeholders.

    Rehabilitation policy indirectly characterise labour as homogenous in nature,

    which can migrate anywhere for work. This is not the case with farmers in the

    country. For farmers it is an interdependent process and affiliation is fundamental.

    This displacement of local resident is very painful experience since it breaks the

    family and relationship with neighbourhood that is very difficult to establish in a new

    environment. The relationship may be between the farmer and labourer or the farmer

    and the shopkeeper or the carpenter, and so on are being destroyed. From past

    experiences of displacement and rehabilitation it is evident that the rehabilitation

    process of farmers, as it is implemented, does not work. It is not the case that those

    affected by the displacement did not receive any form of compensation. But the issue

    is that most of them did not know how to utilise the compensation amount and they

    also skills to work in modern industries. Due to lack of education, knowledge and

    exposure they do not know how to spend compensation amount received wisely to

    secure livelihood and better social life. Most of time compensation amounts are being

    spent on drinks and luxurious consumption.

    Other aspect is that, it is not only land owners or farmers lose their livelihood,

    eviction also lead to lose of livelihood for the landless people whom are not going to

    receive any compensation and those performing non-farm activities like the

    carpenters, potters, dairy work and so on, whom are generally integrated into the

    agricultural economy, are left without compensation for the loss of livelihood. In fact,

    most affected stakeholders due to displacement will be the farmers and labourers, the

  • 163

    small shopkeepers and service providers. Disturbing part is that legally these landless

    people do not even have a basis for compensation and neither government policy

    provides any kind of support.

    Another significant criticism of forced land acquisition is that it often

    discriminates against the most marginalised sections of affected area, particularly

    people belongs to scheduled castes and tribal community. These poor people are also

    victim of malpractice and corruption in the distribution of compensation amount and

    other rehabilitation benefits. In recognition of the loopholes and inadequacy of the

    measures, the Rehabilitation and Resettlement Bill, 2007 has been proposed by

    Government of India for better rehabilitation process (Desai, 2011).

    SEZs and land acquisition are interlinked, to set up SEZs, there is requirement

    of large amount of land. Since the Indian government started promoting SEZ, it led to

    drive for land acquisition across the country. As per Indian SEZ policy, a special

    economic zone means an area of land that has been demarcated and is treated as a

    foreign territory for various purposes such as trade, tariffs and duties. These economic

    enclaves enjoy exemptions and concessions from various kinds of income tax, service

    tax, sales tax, and customs duties and also from the prevailing labour legislation. The

    government of India has made several policies changes and restructuring to promote

    SEZs in the country. The Indian government is encouraging the establishment of SEZs

    in the country in anticipation of economic growth and employment generation.

    Table 7.2: Minimum Land Area Requirement for SEZs

    Classes of SEZ Area in Hectare

    Multi Product SEZ 1000

    Multi Product SEZ for Services 100

    SEZ in North Eastern Region 100

    SEZ in Jammu & Kashmir, Goa and UTs 100

    SEZ for Specific Sector or Port or Airport 100

    SEZ for Electronic Hardware/Software, IT 10

    SEZ for Bio-Technology, non-conventional energy, Gems & Jewellery 10

    SEZ for Specific Sector in NER 50

    SEZ for Specific Sector in HP, Uttarakhand, J&K, Goa and UTs 50

    Free Trade and Warehousing Zone 40

    Source: Department of Commerce, GoI, 2014

    India's SEZ policy (2015) says that for establishment of multi-product

    manufacturing SEZ, it should have at least 1000 hectares or more of land and for the

  • 164

    multi-product service SEZ; it requires at least 100 hectares or more of land. India has

    more than 491 multi product and single product SEZ spread all over the country,

    resultant land acquisition on a large scale is taking place so that more and more SEZs

    can be established.

    SEZs and Land Acquisition as a policy being implemented primarily by

    acquiring land, it has been observed that governments are also acquiring the large

    chunk of agricultural land from the farmers. Across India, the total amount of land

    acquired to accommodate SEZ goes up to 150,000 hectares, large part of acquired

    land has capacity of producing more than 1 million tons of agricultural food grain

    (Ghatak and Dilip, 2011). The several benefits of SEZs and land acquisition has

    attracted substantial amounts of foreign currency into the country, created jobs

    opportunities, also helped to bring in knowledge, technologically advancement into

    the country.

    The most significant adverse impact of SEZs policy has been the large amount

    of land acquisition led displacement. Ministry of Rural Development, GoI (2010), has

    estimated that land acquisition will lead to displacement of more than 10 lakh people,

    whom are directly or indirectly associated with farming and related activities. SEZs

    driven land acquisition has affected livelihood security of local population and same

    time several forceful attempt of land acquisition has resulted in to dissent, outcry, and

    protest from the farmers and local population.

    Recently there was attempt for land acquisition in Atchutapuram (Andhra

    Pradesh), forced the farmers to protest against the establishment of SEZ, as the

    compensation amount offered was much lower than the market price in real estate


    Nandigram (West Bengal) witnessed the violent protest against land

    acquisition for the establishment of SEZ. The West Bengal state government's tried to

    acquire huge piece of land amounting up to 10,000 acres (4,000 hectares) for setting

    up SEZ (chemical hub and industrialization) to be developed by the Salim

    Group from Indonesia. The Nandigram protest was a violent incident, where the state

    government forcefully attempted to take over land. Local farmers and resident were

    resolute, they did not want to give away their land for obvious reasons, they protested

    against it. Police forcefully entered the Nandigram region and agitated protest led to

    police firing and at least 14 villagers died and more than 70 more injured. Following

  • 165

    the violent protest from villagers against the land acquisition, plan to set up SEZ was


    There was another protest in West Bengal against the land acquisition for the

    proposed Nano car factory of Tata Motors at Singur. Protest at Singur attracted global

    media attention since Tata Motors started construction of a factory to manufacture

    $2,500 car, at Singur. The West Bengal government used the controversial legislation

    of 1894 land acquisition act to adamant takeover of 997 acres of agricultural land to

    facilitate Tata to build its factory. The Act is meant for public purpose projects but it

    was meant for private company with commercial purpose. Establishment of the Nano

    car project was opposed through violent protest by activists and opposition parties in

    West Bengal (ILO, 2011).

    There was another protest in western part of India as on November 2006,

    farmers from the Jamnagar District (Gujarat) moved first the High Court of Gujarat,

    and later on to the Supreme Court to counter the establishment of a 4000 hectare SEZ

    by Reliance Industries. Farmers claimed that the acquisition of large tracts of

    agricultural land was contrary to the public interest and violated the Land Acquisition

    Act. This incident forced the government to consider placing a ceiling on the

    maximum land area that could be acquired for multi-product zones and to slow down

    the rate of SEZs approval. Despite that, the Reliance SEZ in Janmagar kept on

    growing and expanding its oil refinery plants in the area (Astarita, 2013).

    Displacement has been invariably without proper rehabilitation process in

    India. West Bengal is not only state which has mismanaged the politics of SEZs as it

    is evident. Maharashtra, Gujarat and Goa in western India and Orissa in the eastern

    region have found themselves involved in such dispute. In most cases related to land

    acquisition, the state government has acted coldly in dealing with land owners

    (farmers) whose land was being acquired.

    Land acquisition Act, 1894, a law enacted during the British rule, is still being

    used for acquiring not only land and houses, but also the livelihood of peoples is

    being taken away for meagre amount of cash.

    In many cases it has been witnessed that state is offering incentives by means

    of land at discount rate, concessional electricity and relief from water tariffs have

    been offered.

  • 166

    The Indian states have a dire track record at Resettlement and Rehabilitation

    process for people affected by the land acquisition (Desai, 2011; Expert Group-

    Planning Commission, 2014; Ghatak and Dilip 2011). Even though Supreme Court

    and state‟s High courts have also mandated and directed that government authorities

    take specific measures to compensate people affected by these projects but

    implementation has been appalling. It is not surprising that people are against land

    acquisition, as they have witnessed the failure of government to provide adequate

    compensation with appropriate resettlement and rehabilitation in the past. For local

    resident and farmers, land has symbolic as well as economic value.

    Playing the role of political brokerage by some state government, needs to be

    devising in a way to be proactive, vigilant and reformative for fulfilling the promises

    of general welfare. State government need to apply context-sensitive approaches to

    compensating appropriately to the affected population. All action of the state

    government should incorporate transparency, accountability and citizen-friendly

    mechanisms, if they are to be credible and trustworthy. One reason why even

    apparently attractive offers of compensation are declined by affected people is the

    lack of credibility and responses (Sarkar, 2007; Shah, Nandani and Joshi, 2012). State

    government should create institutions for better implementation and coordination

    between government and citizens.

    It is an open question whether SEZs will develop into islands of docile

    modernity amongst a bundles of undefined dysfunctional mechanism, which

    symbolize the beset India‟s democratic experiment, or whether SEZs can create new

    and responsible model of governance that the rest of Indian economic and industrial

    establishment will emulate to create quality democratic processes which symbolises

    modernity and inclusiveness.

    The land acquisition mechanism under the SEZ scheme has been contentious

    in nature across the country. Resultant, most of the approved SEZs never came

    became operational. It was also suspected that some of the SEZ acquired more land

    than needed, while some tried to divert the acquired land for SEZ to some other

    profitable commercial uses. Due to many inadequacies and controversies,

    the Commerce Ministry, as reported, is also not keen to continue the SEZ scheme as it

    desires to encourage the National Manufacturing and Investment Zones (NMIZ)

    policy, under the National Manufacturing Policy. The Parliamentary Standing

  • 167

    Committees on Commerce and Finance have been reported to opposing the new SEZ

    policy as it has led to several scams and unwanted controversies.

    7.4 SEZ and Land Utilisation Pattern

    Land appeared to be the utmost decisive and attractive element of the scheme.

    In total 45635.63 hectares of land notified in the country for SEZ oriented activities,

    operations started in only 28488.49 hectares (62.42 per cent) of acquired land.

    Furthermore, it can be observed that a pattern in which developers approached the

    government for allotment/purchase/acquisition of unjustifiable exceeding amount of

    land in the name of establishing a SEZ.

    Table no 7.3: Selected State-wise Notified/Utilized/Vacant in Processing Area of

    Special Economic Zones in India (As on 03.12.2014)

    (In Hectares)


    No. States/UT

    Total Area


    Total Area


    Area Lying Vacant in

    Processing Area

    1 Andhra Pradesh 11203.52 4493.96 2229.89

    2 Chandigarh 58.46 23.62 34.84

    3 Chhattisgarh 101.28 22.04 79.24

    4 Goa 249.48 0.00 249.48

    5 Gujarat 12501.74 6818.59 4902.11

    6 Haryana 415.49 36.57 293.69

    7 Jharkhand 16.42 0.00 16.42

    8 Karnataka 2296.07 841.83 1039.12

    9 Kerala 961.16 390.38 455.99

    10 Madhya Pradesh 1581.89 209.93 757.72

    11 Maharashtra 6712.15 1754.51 3235.06

    12 Manipur 10.85 0.00 10.85

    13 Nagaland 340.00 0.00 340.00

    14 Odisha 491.08 300.06 191.01

    15 Punjab 46.12 8.39 30.92

    16 Rajasthan 773.30 136.78 636.51

    17 Tamil Nadu 5288.00 2223.00 2805.03

    18 Telangana 2048.96 1957.22 469.51

    19 Uttar Pradesh 753.92 219.20 476.77

    20 West Bengal 235.84 190.71 45.13

    India 46085.55 19626.64 18299.29

    Source: Computed by the Author from data of Ministry of Commerce, GoI,2015

    It has been observed that only a portion of the acquired land being utilised for

    development and SEZ, later on denotification was also resorted within a few years for

  • 168

    remaining land to profit from price appreciation. In case of diversion of land other

    commercial use, it has been estimated that 5402.22 hectares (14 per cent) out of

    39245.56 hectares of land notified in the six major states was denotified and diverted

    for other commercial purposes (not related to SEZ) (CAG, 2014). A large amount of

    lands was acquired in the name of the „public purpose‟ clause of Land Acquisition Act

    1894 but eventually used for profit oriented commercial activities. Therefore, it is

    evident that land acquired is not meeting the core objectives of the SEZ policy.

    Land and its development is state subject, but acquisition of land is on the

    Concurrent List (Government of India, 2015). SEZ Act 2005 says that, land for setting

    up SEZs, needs to be acquired and the developer to have irrevocable privileges over

    the land. Land is acquired and being allocated by the State Government directly or

    through agencies such as Land banks depending upon the proposals made by the

    Developers. Acquisition of land is based on vide section 4 read with Section 6 of Land

    Acquisition Act 1894 legislation. In past and also in recent times, the issue of land

    acquisition for SEZs has faced gradual increase in instances of widespread protest

    across the country. Huge amount of tracts has been acquired in the process of

    industrial development and establishment of SEZs across the country. The

    government acquiring the land from the public is emerging as major issue and transfer

    of wealth of land from the rural population to the corporate firms (motivated only by

    profit) raises question on SEZ policy and its necessity.

    Table 7.4 reflects on the present scenario of land area notified and land lying

    unused with in the premises of Central Government owned SEZs across India. It says

    that 21310.03 hectares of land out of 47803.77 notified land lying vacant all over the

    India and it represent up to 44.57 per cent of land. It also suggests that Kandla Special

    Economic Zone (12889.99) and Vishakhapatnam Special Economic Zone (12168.68)

    are top two SEZ in terms of notified land area and same time they have highest

    number vacant land area in terms of 5172.89 and 4425.854 respectively. On the other

    hand in terms of percentage of land utilised and unutilised these two SEZ perform

    better than the rest of government owned SEZs in India.

    It is also evident from the table 7.4 that in most of government owned SEZ

    more than 50 per cent of land is lying vacant. Falta Special Economic Zone and

    SEEPZ Special Economic Zone are performing poorly, it suggest that unused land in

    both SEZ is 61.22 and 65.27 per cent respectively. It is clearly visible that there is vast

  • 169

    gap between land utilised (55.43) and land unutilised (44.57) with in premises of

    SEZs units across India. It raises some serious questions on land acquisitions policy

    and direction these SEZ are heading for.

    Table no 7.4: Zone wise Notified Land Area Details

    Zone wise Notified Land Area Details (as on 23.01.2014)

    (Area in Hectares)

    (in %)



    Name of the


    No. of

    Notified SEZ's







    Area lying

    Vacant in

    Processing Area

    Area lying

    Vacant in

    Processing Area


    Cochin Special

    Economic Zone

    65 3192.49 1298.04 1534.00


    2 Madras Special Economic Zone

    58 5380.42 2202.64 2738.562


    3 Noida Special

    Economic Zone

    82 4671.53 671.50 1288.083


    4 Vishakhapatnam Special Economic


    80 12168.68 4172.01 4425.854


    5 Kandla Special Economic Zone

    33 12889.99 6880.26 5172.89


    6 Falta Special

    Economic Zone

    20 1264.64 571.13 774.25


    7 SEEPZ Special Economic Zone

    70 8236.02 1893.48 5376.40


    Total 408 47803.77 17689.06 21310.03 44.57

    Source: Department of Commerce, GoI, 2014

    Issues and concern have already been raised on loss of revenue and the

    adverse impact on agriculture production. An Expert Group Report (2014) of the

    Planning Commission had questioned the benefits of SEZs policy. Further, to attain

    more transparency, efficiency and monitoring of process of land acquisition, allotment

    and denotification of land, a detailed study from independent organisation needs to be


    7.4.1 Underutilisation of Land in SEZs

    More than 53,000 acre or around 215 square kilometres of land is lying vacant

    in Special Economic Zones across the country, even though industry is complaining in

    respect of land acquisitions. It has been reported that, land remains vacant also due to

    cancellation of setting up economic zones due to their inability to acquire necessary

    amount of land. Cancellation of SEZ also takes place due to change in policy of the

    government as it was noticed in the case of proposed SEZ in Punjab by the Reliance

  • 170

    Industries. According to available data maximum amount of vacant land in SEZs is in

    Maharashtra, followed closely by Gujarat.

    According to observation from CAG report (2014) on extent of land being

    actually used in the selected operational SEZs suggested that the processing area

    earmarked for SEZs has not been able to utilise the allotted land for the intended

    purpose in 18 SEZs involving an area of 4185.19 hectares across eight states. These

    SEZs has been only utilising about 16.29 per cent of the land alloted for the industrial

    processing activities as against the norm of 50 per cent. Though many of them were

    notified in 2006/2007 (except Adani Ports in Gujarat) the percentage of utilisation of

    land has been appalling.

    Table no 7.5: Underutilised Land in Processing Area of SEZ in Major States


    State Processing area underutilised Processing area underutilised


    Andhra Pradesh 2823.55 89.23

    Chandigarh 27.00 87.10

    Gujarat 5639.09 87.11

    Maharashtra 98.52 30.70

    Odisha 21.24 30.70

    Rajasthan 23.38 52.88

    Karnataka 319.79 71.70

    Tamil Nadu 9372.52 81.01

    Total 18325.09 83.71

    Source: Computed by the researcher, 2015 on the basis of data from CAG Audit report, 2014

    There is major 17 SEZ, which were notified as early as between 2006 to 2008

    comprises unused land up to 18325.09 hactres (83.71 per cent) of total processing area

    earmarked. In case of controversial Adani Ports with notified (2009) area of 6472.86

    hactres, only 833.77 hactres of land was operational and remaining of 5639.09 hactres

    (87.11 per cent) still remain unused. It has also been observed that some activities of

    the units in SEZs were not related to the sector specific, as and when land was allotted

    to them. There is provision in the SEZ Rules regarding termination of lease agreement

    in case of expiry or cancellation of lease agreement. Further, there is lease agreement

    of land with 99 years in most of cases and resultantly even though land is unused,

    firms are keeping the land in the anticipation price appreciation future. Thus, the units

    in SEZ are not willing to vacate the land even though agreement has been cancelled.

  • 171

    It is also the fact that sometimes land in SEZs remain vacant due to non-setting up of

    Unit, it has been observed earlier. Investment in SEZs depends on many factors like

    change of government policies, market conditions, on-going global recession, industry

    specific reasons, domestic factors etc.

    Since the enactment of SEZ Act 2005, till January 2015 there is 491 formal

    approvals given to proposed SEZs covering 60374.76 hectares of land, only 392 SEZs

    covering 45635.63 hectares have been notified so far. It has been observed that out of

    392 notified zones, only 152 have are working at their functional capacity (28488.49

    hectares). The land allocated to the rest of 339 SEZs (31886.27 hectares) has been

    laying unused (52.81 per cent of total approved SEZs). More than 54 cases the

    approvals and notifications date back to 2006 reflects on situation. It is being

    observed that 30 SEZs (1858.17 hectares) out of the total 392 notified SEZs, are

    located in states such as Gujarat, Maharashtra, Andhra Pradesh and Odisha. The

    developers of SEZ have not even commenced the dinvestments in the proposed

    projects and the land had been lying idle in their custody for more than 2 to 10 years.

    Figure no 7.3: SEZ Land Lying in Across the Country in Some Major States

    Source: Concetualised by the Researcher,2015

    It has been observed that even after a lapse of notification by several years,

    developers has not been able to implement the proposed project on lands acquired by

    invoking Land Acquisition Act under the clause of „public interest‟. Further,

    considering that agricultural land was acquired in many cases in the midst of protest

  • 172

    and huge amount of controversies but yet persistence trend of the acquiring vast tracts

    of land without any real economic activity is matter of serious social and economic

    concern, demanding a cautious approach towards policy of acquisition and allocation

    agricultural land for industrial purposes.

    As per the Government of India, central government does not allocate any land

    to SEZs, only state governments are authorised to acquire land through their Industrial

    Development Corporations or other means. In most of cases large part of land is

    acquired by the private developers themselves. Depending upon recommendation

    made by state government, the Department of Commerce (GoI), conduct verification

    of ownership and continuity of the land, then permission to the SEZ is given.

    Department of Commerce (GoI) also says that before denotification of any SEZ

    across the country, clearance from the state government is essential.

    7.4.2 Diversion of SEZ land

    It has been observed that Special Economic Zones (SEZs) policy has resultant

    in to large scale diversion of land acquired for establishment of manufacturing

    facilities and creating employment but evidences reflects that land is being diverted

    for real estate projects for greater profit. As earlier mentioned that a trend is advent

    that developers approach for allotment of vast areas of land to set up SEZ, but only a

    fraction of the land notified for SEZ based activities and later on denotification is

    resorted to within a few years to gain from price appreciation of land.

    One of the most controversial issues of SEZs, the substantial involvement of

    commercial real estate developers such as DLF, Ansal, Raheja, Parsvnath and

    Unitech. It has creation of perceived notion that SEZs could be turning in to

    speculative instruments for opaque urban real estate market. It is evident that

    substantive engagement of leading real estate developers in building SEZs across the

    country. There are some regional real state players (for example, Maytas Properties,

    Suzlon Infrastructure, Emaar MGF, Videocon Realty Infrastructure and many more)

    whom are active in a particular area or respective state (Basu, 2007). SEZs have been

    the attractive opportunities for real estate developers for development of commercial

    ultra-modern urban facilities and taking the advantage of substantial concessions.

    Land area for Special Economic Zones are divided into „processing‟ and „non-

    processing‟ categories. Non-processing areas can house residential, hotels, offices,

    recreational centres and other commercial facilities. The permitted commercial

  • 173

    activities make SEZs ideal development options with strong profitable prospects for

    private companies.

    Due to growing public criticism and concern for SEZs rather than being

    manufacturing hub becoming a real estate hub, has compelled the government to

    reduce some the concession and incentives. It includes reduction in non-processing

    area to a maximum of 50 per cent of the total zone area from the earlier ceiling of 65

    per cent. Additionally, it was also specified that vacant non-processing land could not

    be leased to any entity other than co-developers (Department of Commerce, GoI,


    But for the establishment of SEZs require contiguous land free of

    impediments, which is not easily available in general. A number of real estate

    companies have land banks with capacities for developing the diverse array of

    facilities envisaged in zones which provide them competitive advantages over other

    firms in developing SEZs. Removing such practices and monopoly would not be

    possible until the land markets are unlocked, making the supply of land a

    determination of the market and the government invests in development of initial

    infrastructure of economic zones.

    Land Acquisition Act 1894 imparts rights to state governments to acquire land

    under „public purpose‟. To understand the gravity of the situation, it has been also

    observed with respect to SEZs in major state such as Andhra Pradesh and Gujarat,

    only 6241.03 hectares of land being actually notified (55.09 per cent) out of the total

    allocated land of 11328.12 hectares to establish SEZs and related units. The allocated

    land to SEZs has been was acquired over the years by using the government

    machinery under the “public purpose” clause of LAA. Rest of land, 5087.12 hectares

    was allocated to their private Domestic Tariff Area (DTA) firms or kept with the

    developer. Therefore, massive 44.91 per cent of the total acquired land of 11328.15

    hectares is not being utilised for the economic activities. It has been also noted that

    out of the total notified land, large chunk of 1667.66 hectares of land were later

    denotified by the developers leading to the overall non utilisation of land for intended

    purpose of SEZs development amount to 59.62 per cent.

    To control the on-going diversion of acquired land a committee of ministers

    (EGoM-Empowered Group of Ministers), stressed on the need of limiting the use of

    „Land Acquisition Act to acquire land for promotion of private SEZs and suggested

  • 174

    that the LAA would no longer be used for making land transfers to private SEZs. But

    the effectiveness of this instruction has been questioned due to widespread diversion

    of land from SEZ related activities to non SEZ related activities in mass scale.

    In the Development Plan 2031 of Government of India, 4570 hectares of land

    earmarked for SEZ which includes 1458.03 acres of land acquired from farmers for

    development and later on converted for residential/commercial use, but there were no

    more takers for SEZs.

    It has been observed that, SEZs are being converted into industrial area as well

    as residential colonies. Policies such as incentivised the developers to utilize the land

    for other purposes: the state governments removed the limit of the maximum height of

    the buildings in case of Group Housing Colonies and Commercial Colonies for which

    the licences were issued. After this notification, developers were allowed to construct

    any number of multi storeys buildings in the land earmarked for SEZ. Resultantly,

    developers engaged in Real Estate were benefitted. Since land is a State subject, State

    Governments are free to frame any law/rule on the subject.

    It is clear case of establishment of SEZ with purpose of acquiring substantial

    amount of land to gain profit from the appreciated land price and utilising the land for

    real estate development and other commercial purposes rather than producing export

    oriented products to create jobs and contribute to the economy.

    7.4.3 Denotification of Land

    For establishment of SEZ a considerable amount of land is required, such land

    is generally acquired through state machinery under the “public purpose” clause of

    Land Acquisition Act for setting up of SEZs. After being notified as SEZs by

    Government of India, few developers consequently opt for de notification from the

    SEZ scheme. Though SEZ Rules 2006 restricts the developer firm from selling any

    land within the SEZs, there is no restriction on usage of denotified land. This

    encourages the developers to denotify SEZ land and either keep it in their possession

    or sell it in the absence of any preventive policy.

    According to the SEZ scheme in place, a developer who is not interested in

    continuing trade under SEZ is left only option of denotification of part or full area of

    land by applying with an undertaking that firm will pay back the concessions availed

    on account of various exemption/concessions given by Central and State

    Governments. Except this, there are no other binding instructions attached to it. It is a

  • 175

    general perception that following the denotification of a project, the valuation of land

    in and around the project site increases either instantly or in due course of time, as the

    project progresses, depending on the nature of the project. As it is already visible that,

    most of the SEZs in the India are IT and ITES based and they are situated by in large

    in the urban agglomeration, and therefore appreciation of these lands is inevitable. In

    this background, owing to lack of a preventive provision in the Act to discourage

    denotifications, developer firms route to denotification of the entire or part of SEZ

    land allocated to them for setting up unit, and in several cases it has been found that

    they are diverted for commercial usage.

    Table no 7.6: Details on Denotification of Land

    State Number of

    Notified SEZs

    Area (ha)


    Number of SEZs

    Denotified (partial/full)

    Area (ha)


    % of Area



    Partial Full

    Andhra Pradesh 78 13291.40 12 7 2102.08 15.81 (24.35)

    Maharashtra 66 9280.76 00 19 1856.21 20 (28.78)

    Karnataka 40 2416.81 3 1 61.95 2.56 (10)

    Gujarat 32 13432.19 2 4 1209.51 9.00 (18.75)

    Odisha 5 635.70 0 2 152.35 23.97 (40)

    West Bengal 9 188.70 0 2 20.12 10.66 (22.22)

    Total 230 39245.56 17 35 5402.22 13.76 (22.61)

    Source: Department of Commerce, GoI, 2014

    It is evident from the table 7.6 that out of 230 notified SEZs in Maharashtra,

    Andhra Pradesh, Karnataka, West Bengal, Gujarat and Odisha, 52 were denotified

    involving 5402.22 hectares of land from total of 39245.56 hectares of notified land. It

    was observed that 35 SEZ out of 52 SEZ denotified, 100 per cent land got denotified

    by developer, putting serious question mark over the reasoning behind determining

    the area of land acquired and subsequent application for denotification.

    The table 7.6 also illustrates state wise denotification data which indicate that

    52 (23 per cent) out of 230 notified SEZs, were denotified either partially or in full

    involving 5402 hectares of land. It is evident that though Andhra Pradesh possess the

    highest number of notified SEZs (78) in the country, the state also has distinction in

    being home to 19 denotifications i.e., partial and in full scale. As mentioned earlier

    that even though SEZ land cannot be sold by the Developers, but denotification and in

    the absence of restrictive provision, and on-going competition between the states lead

  • 176

    to formation of certain condition which allow companies to be able to sale or lease out

    the land with much higher value. Selling or leasing out will further leads to other

    commercial activities rather than the prescribed economical activities.

    In view of the vast extent of land that had been denotified without any

    economic activity for many years, the big question arises that whether these land

    would ever be returned to the original owners. Central government suggest that it is

    up to state government to define rules and conditions on use of land after a developer

    exit from the SEZ Scheme by denotifying the SEZ land. Without proper control on

    diversion of land through denotification to gain profit, it is difficult to attain the

    desired results and it is also defeating the core objective of the SEZ scheme.

    7.5 Implications of SEZ on Rural India

    Many rural areas are undergoing a process of “de-agrarianization”, with

    younger rural workers moving out of agriculture because of lack of jobs, low incomes,

    agro-climatic constraints and most significant one is forced industrialisation. The

    movement of rural people out of agriculture in order to find jobs in industrial sector is

    a major ingredient of the developmental process especially in developing economies.

    Migration from agricultural sector to industrial set up does provide a good benchmark

    for the factors that can determine the success of industrialisation. However, few

    empirical studies have established the fact that success of industrialisation depends on

    impact of migration on rural households and the quality of migrant‟s employment. In

    theory, if migration is successful after several decades of migration one should be able

    to observe a declining gap in welfare between rural and urban areas. However, as

    shown in the World Bank‟s World Development Report (2008), this is not the case,

    and India remains among the countries with a very high rural–urban divide. Migration

    opens up more opportunities for the rural population to get into more productive

    employment opportunities.

    SEZs have emerged as one of the most relevant topic in the recent times with

    diverse dimensions. Issues related to the SEZ has aggravated to all important

    dimensions ranging from environmental, land acquisition, economic, political, socio-

    legal issues and to many more. These challenging issues are relevant to the entire

    nation in general. The setting up of SEZs requires substantial amount of land across

    the region. Consequently, providing the land for setting up of SEZs may take away the

  • 177

    large amount of agricultural land for industrial purposes. It can be said, fixed assets

    created by the companies with SEZ in the environment of undefined and unrestricted


    Even with prevailing constraints, it can be maintained that the acceleration of

    economic growth in general, and the urbanization of the rural areas in particular

    provide multiple livelihood strategies. These, in turn provide an opportunity cost

    making agriculture an economically unviable source of livelihood with risk attached

    to it.

    7.5.1 Impact of SEZ on the Agriculture

    Today countries are striving towards socio-economic development, SEZ is

    new instrument to achieve it. A Special Economic Zone is a geographical region

    which has economic laws that are more liberal than a country‟s general economic

    laws. It is a specifically delineated duty-free enclave treated as a foreign territory for

    the purpose of industrial, service and trade operations, with exemption from customs

    duties and a more liberal regime in respect of foreign investment and other


    To set up large number of SEZs across India, there is need for amount land to

    be acquired. The land area of India is 29,73,190 sq. km out of which 16,20,388 sq. km

    area is used for agriculture (agricultural land). The share of the agricultural area in the

    total area is 54.5 per cent and the non-agricultural area in India is 13,52,802 sq. km

    (Ministry of Agriculture, GoI, 2014). The total area for proposed SEZs (formally

    approved and in principle approved) is approximately 2061 sq. km which would not

    be more than 0.069 per cent of the total land area and not more than 0.12 per cent of

    the total agricultural land in India (Department of Commerce GoI, 2015).

    If SEZs are set up on non-agricultural land, especially on barren land, then

    they play an important role for the social and economic development of the country.

    They can generate employment, enhance export and attract foreign direct investment

    (FDI) and technology at low social cost. In case of China SEZs are set up on non-

    agricultural land. Therefore they have played an important role for the economic

    development of the country. It is well supported by the fact that during 1980 to 1995,

    the annual rate of economic growth of China was near about 10 per cent (Astarita,


  • 178

    On the other hand, if SEZs are set up on agricultural land, it may not be

    appropriate for the social and economic development. If fertile land is used for the

    establishment of SEZs, then the area under agriculture will decline. This will lead to

    decrease in the production of agriculture. India at present is facing a food problem

    (ex. on-going import of wheat) and this problem will become more severe if the area

    under agriculture declines.

    Setting up SEZ on agricultural land has emerged as major issue. States such as

    Punjab, Haryana, UP, West Bengal, Maharashtra and some other witnessing the

    protest and resistance against SEZs are being set up on fertile agricultural land. For

    example, the land in West Bengal is basically good for agriculture but sake of

    economic growth Government is allowing SEZs take place and leading to the protest

    in Nandigram and Singur. Those were SEZs has been established on fertile land,

    witnessed adversely affected the agricultural production. The social cost of setting up

    SEZs is more than the benefits.

    7.5.2 Livelihood Implications: Converting Farmer into Labour

    SEZs are noted for their ability to create new employment opportunity. India

    being the country with a labour surplus, consequently employment creation is a policy

    priority. SEZs have a dualistic employment generation effect. SEZs create direct

    employment for individuals employed in units operating within the SEZ. It also create

    indirect employment for individuals engaged in industries and services which support

    the activity within SEZs, such as trucking of goods to SEZs and many more. In all,

    SEZs have generated substantial employment and are predicted to continue generating

    employment in increasing volumes.

    India may suffer huge socio-economic loss due to SEZ policy, which has been

    ignored. An estimates of Ministry of Rural Development (2010), reveals that close to

    114,000 farming households (each household on an average comprising five

    members) and an additional 82,000 farm worker families who are dependent upon

    these farms for their livelihoods, will be displaced due to establishment of SEZ in

    India. In other words, at least 10 lakh people who primarily depend upon agriculture

    for their survival will face eviction. Experts calculate that the total loss of income to

    the farming and the farm worker families is at least Rs. 212 crores a year. This does

    not include other income lost (for instance of artisans) due to the demise of local rural


  • 179

    The government promises „humane‟ displacement followed by relief and

    rehabilitation. However, the historical practices does not offer much hope on this

    count: an estimated 40 million people (of which nearly 40 per cent are scheduled

    tribes and 25 per cent scheduled castes) have lost their land since 1950 on account of

    displacement due to large development projects. At least 75 per cent of them still

    await rehabilitation. Almost 80 per cent of the agricultural population owns only

    about 17 per cent of the total agriculture land, making them near landless farmers

    (Desai, 2011). Far more families and communities depend on a piece of land

    (agricultural labour, for work, grazing) than those who simply own it. However,

    compensation is being discussed only for those who hold titles to land. No

    compensation has been planned for those who do not own the land but highly depend

    on the land for their livelihood.

    A survey conducted by the National Sample Survey Organisation (2003)

    reveals that nearly 40 per cent of the farmer households disliked farming and wanted

    to give up the profession due to its unprofitable nature. These farmers largely belong

    to the small and marginal category (84 per cent of the farmer households belong to

    this group), which are characterised by extremely low levels of income and mainly

    undertake subsistence cultivation. Moreover, with rising costs of cultivation, low

    remunerations, high risks with crop failure occurring frequently, declining agricultural

    growth, and mounting debts have led the farmer to a distress-like situation of the kind

    mentioned earlier.

    As SEZ has been established in either in outer part of cities or interiors of

    states, which attract mostly, displace local population, agricultural labour and farmers

    as prospective manpower, it leads to the creation of few jobs but largely destroy more

    number of livelihood opportunities. Individual opt for SEZ related employment not

    because there is better earning opportunity but main reason has been economic

    unviability of farming and lack better options.

    On the brighter side, if the farmers invest their compensation money in a

    proper way, invest the money on the education of children and creation of alternative

    livelihood. The agriculture labourers are being hired in SEZs largely as a casual

    labour. The wage rate is generally higher in SEZs as compared to the agricultural

    sector. So it may leads to improvements in their socio-economic conditions. Thus

    SEZs can play an important role for the transformation of labour from the agricultural

  • 180

    sector to the industrial sector. Then the burden of the population on the agriculture

    sector will decline and this will be beneficial for both, agriculture and industry. It will

    also lead to elimination of disguised unemployment in the rural areas with proper

    utilisation of manpower.

    However in reality, land generates much more complex security (livelihood)

    and lifestyles. Besides the main crop, land provides certain foods, environmental

    services, wild fodder, and medicinal plants. These factors are entirely dependent on

    the land. Communities involve artisans; pastoral communities will also be at loss. In

    fact the ones worst affected will be the share-croppers and labourers, the petty traders

    and service providers. These landless people do not even have a legal basis for

    compensation. The rehabilitation package offers one job per displaced family, and that

    also requires the member to have a certain basic educational qualification. There

    higher probability that affected population engaging in self-employed activities due to

    lack of skills and education, it also explain their lower participation SEZ workers.

    Based on the accounts of locals, contractors are primarily used by the

    companies to pass on responsibility, and take no legal binding on the employment of

    casual labour. The contracting of work to contractors also allows companies to be

    flexible on the staffing, as one villager noted „hiring and firing if and whenever they

    want is easier‟.

    According to a study conducted by Society for Participatory Research in Asia

    (PRIA) in 2008 on the conditions of workers in economic zones reveals that only few

    workers have long-term employment contracts. Short-term contracts are used for

    flexible hiring and firing and for avoiding costs such as maternity and redundancy

    pay. Further, there is no regard for the impact of SEZs on local livelihoods, the

    opinion is not positive as it has been argued that the SEZs will eventually lead to

    distress migration of locals. Therefore, the communities such as fisher folks, farmers,

    landless labourers, women other marginalised will remain untouched by all new

    employment opportunities arising out of the SEZs.

    It is important, therefore, that, in addition to suitable financial compensation,

    the displaced farm labour and allied workers are given preference in employment by

    the SEZ developer. There should be a provision for their subsequent absorption in

    employment in the SEZ establishment and in the processing units. They should get a

    preferential treatment. Each SEZ proposal must include a plan for rehabilitation of the

  • 181

    workers who would be displaced from their traditional employment. A proper

    implementation of that plan with specific required condition to secure affected

    population to formed and approved, proper supervision the implementation of the

    rehabilitation plan must be executed.

    Given arguments does raise several questions such as, are the SEZs in the

    interest of the farmers, agricultural and non-agricultural communities who are living

    off the land? Is the Land acquired in the name of “compelling and overriding national

    interest” is really for the masses? Actually, in the name of „development‟ we are only

    creating disparities with wealth in a fewer hands and nowhere near making growth

    „inclusive‟ which would be based on the concepts of sustainability, ecological

    sensitivity and an ingrained understanding of the cultural roots of a people. Besides

    farm size distribution, tenure systems and changing farm types, developments in

    terms of diversification and pluriactivity, i.e. labour allocation changes, are attributed

    to the phenomenon of structural change. The effective direction is not always

    unambiguous: labour markets determine structural change and vice versa. Labour

    allocation decisions are driven by economic incentives such as wage differentials, but

    non-economic motives may also play a decisive role.

    Inclination towards SEZ related employment opportunities, not due to better

    employment opportunity but due to less productivity of farm activities. The impact of

    SEZ on rural employment can be considered as negative in the sense that it may

    generate a labour shortage and deprive rural areas of the youngest and best educated

    people. The impacts, whether positive or negative, vary greatly and depend on a

    number of factors and variables, which policy makers and development practitioners

    need to address. SEZ is hiding behind myths of „trickle-down effect‟23

    for growth to

    give itself license to strengthen the hand of corporate elites, thereby contributing at

    once to accelerated growth for the already enriched and growing poverty for the

    impoverished. It is thus contributing to rapidly rising economic inequality. Goals can

    only be realised with SEZs, when policy is aligned, proposals are based on hard

    economic criteria and the government tries to partner with the local community rather

    than forcing against their will.

    23 Trickle-down economics, is the theory that providing economic benefits to those with upper-level

    incomes will ultimately benefit society as a whole, through the extra wealth being invested into the

    economy and therefore creating jobs that provide wealth for lower-income earners (with that wealth in

    turn being spent back into the economy).

  • 182

    7.6 Special Economic Zone: Environmental Implications

    Generally the environmental dimensions of SEZs are less deliberated, because

    the position of political parties is a disdainful towards environment. There is not much

    information available on the impacts of the Special Economic Zones on environment

    in and around these zones. Broadly, SEZ has three kinds of impacts that can have

    adverse effects on environment. First it may create problem of water shortage, as

    diversion of water for SEZ use is very substantial. Second impact would be the impact

    of release of intoxicated effluents from the SEZ units. It is evident from the pollution

    created by the SEZs in locations like Ankleshwar in Gujarat and Patancheru in Andhra

    Pradesh, scores among other locations as illustration. SEZs release of untreated

    effluents from the economic zones has polluted and affected the local populations.

    Thirdly, land allocated to SEZ could mean destruction of groundwater recharge

    systems. It must be noted that in India, right to extract groundwater is connected with

    the ownership of land. Hence SEZs even in relatively small area can pump out and

    consume huge quantity of water, resultant drying up the wells of the surrounding area.

    The SEZ Act 2005 has not mentioned much about environment protection,

    there is no requirement of environmental clearance as it has been assumed that units

    in zone will be non-polluting entity and all the authority regarding environment

    protection and clearance has been vested on Development officer of SEZ. It has not

    mention anything regarding sources of water for the proposed economic zones, leave

    aside the question of environment restrictions or impact assessment. The SEZ Act

    prescribed orders or notifications to states across India has given freeway to the water

    requirement and practices. For example, the Gujarat SEZ Act says, “The SEZ

    developer will be granted approval for development of water supply and distribution

    system to ensure the provision of adequate water supply for SEZ units”. Similar

    situation is there officially or unofficially in other states.

    7.6.1 SEZ and Environmental Degradation

    Right to Life comprises Right to live in a pollution free environment. To

    protect the environment, there have been provisions such environmental checks,

    clearance and more to reduce the harmful effects of industrlisation. However,

    surprisingly the SEZ units are exempted from environmental impact analysis. The

    Development Commissioner of SEZ can give environmental clearance without taking

    in to account and consulting the pollution control board. Generally SEZ units have

  • 183

    been permitted to follow their own methods to maintain environmental standards, but

    it is evident that pollution control or environment protection is the least among the

    priorities of these profit oriented firms.

    The SEZ Act says that to set up a multi-product SEZ, a minimum of 1,000

    hectares of land is required. Traditionally these lands would have been under multiple

    uses and could be source of livelihood. They could be agricultural land, agro

    biodiversity farmlands, residential villages, mangrove belts, wetland and even forest

    patches. Each of these has an important ecological role in sustaining healthy

    environment in addition to being an inherent link with people‟s livelihoods source.

    Thus, when these lands convert in to SEZs, the ecological mechanism and human

    existence are bound to be affected.

    The Supreme Court definition on right to housing, shelter and livelihood as

    part of the all-encircling Right to Life under Article 21 in the landmark case of Olga

    Tellis vs. Bombay Municipal Corporation, local people are protesting against the

    projects, on

of 40/40
149 CHAPTER VII Special Economic Zone: Land Acquisition, Rural and Environmental Implications 7.1 Introduction Land, the basic and long lasting source for production as well as for human inhabitation, is one of the most disputed issues in the public policies in India. Decisions concerning land allocation and land use pattern comprise diverse array of issues that can go beyond the considerations of economic growth. The matter of land use is predominantly important due to large agrarian population in economies such as India, where access to land, in absence of alternative employment-income opportunities and social security, provide economic security and therefore is rendered high in terms of social status (Patnaik, 2008; Bhagwati & Panagariya, 2013). Ideally, diversion of land from agricultural to non-agricultural sectors should be preceded by a considerable shift of workforce and local population (NCRWC, 2001; Shah et al, 2012). In the absence such provision, diversion to non-agriculture use is most likely to invite resistance from farmers and local communities. The Land Acquisition Act (LAA) has been used to take land without the owner‟s consent has been practiced since the colonial rule. Growing spatial inequality with economic growth, only few livelihood opportunities for the rural poor may aggravate the issue of land (Pasinetti, 1981). The situation gets further stressed when the Government, being a custodian of land, tends to play the role of a trader as it has come out from the real on ground practices under the LAA. The enactment of Special Economic Zone Act 2005 goes a few steps ahead by allowing the Government to transfer the land acquired for public purpose under LAA to the private companies for development. Application of LAA to acquire land is often go along with various kinds of pressure tactics by the corporate and state to get consent of the land owner, as later owing the low bargaining power. It has been observed that the process of acquisition and conversion of agricultural land
Embed Size (px)