October 3, 2007
Scrap Special Export Zones (SEZs), Promote Agri Export Zones (AEZs)
Dr. Krishan Bir Chaudhary
I have written an article on how big Corporate houses are grabbing farmlands from farmers in India at a platter. This is due to the government policy of Corporate pampering, ignoring the food security of the nation.
This article appeared in the July 2007 edition (number 83) of Economic Journalist, the organ of the Forum of Financial Writers. The Forum of Financial Writers is the apex association of Indian business mediapersons.
Below I am reproducing the article.. I would like to welcome your valuable comments or clarifications on my article.
Dr Krishan Bir Chaudhary
Bharatiya Krishak Samaj (Indian Farmers' Organisation)
Indian Society For Sustainable Agriculture And Rural Development
New Delhi, INDIA
Governments oft-repeated mantra for ensuring food security and well being of the farmers has turned out to be a lip service – only to gain political mileage. It's real intention is clear – to benefit big corporate houses and multinational corporations at the expense of farmers.
With this intention the government has begun the process of acquiring prime farmlands from farmers at a platter and gifting it to the corporate houses to set up their kingdoms in the name of Special Economic Zones (SEZs). This process can be rightly termed – "Robbing Peter and Paying Paul".
Farmer has become an insignificant being in the eyes of the government – he deserves to be looted and driven to an extreme point of committing suicide. But who needs to be pampered more than a son-in-law? Not the farmer who provides food security, but big corporate houses and the MNCs.
Mighty Kingdoms :
According to the recent data put up on the official website 234 SEZs have been formally approved and 162 SEZs have got in-principle approvals. The figures show that 396 mighty kingdoms are coming up in the form of SEZs. There are many more in the pipeline.
SEZs are no less than kingdoms. The government has done its best to give SEZs the status of kingdoms, except they will issue their currency notes.
These SEZ will be duty free zones - complete exemption from excise duty, custom duty, sales tax, octroi, mandi tax, turnover tax, as well as income tax holiday for ten years are some of the inducements. They can invite 100 per cent foreign direct investment, enjoy exemption on income tax on infrastructure capital fund and individual investment, and have assurance for round-the-clock electricity and water supply. The SEZ promoters have also been given a waiver from carrying out an Environment Impact Assessment.
No Inspection :
SEZ owners are authorized not to permit any inspection of their premises by any official of the government and for conducting search or seizure operations without prior permission. They are empowered have their own private security system. By all these qualifications SEZs are, therefore, kingdoms within the Republic of India.
What more the government has doled out to the SEZs ? They are permitted to external commercial borrowings up to US $ 500 million without any maturity restrictions and hedge in commodity exchanges. They are free to bring in export proceeds without any time limit and make foreign investments from it and are exempted from interest rate on import finance. They are allowed to set up off-shore banking units with income tax exemption for three years and subsequently 50 per cent tax for another two years are some of the financial enticements. And if they were to sub-contract production to local manufacturers, there would be duty drawbacks, exemption from state levies and income tax benefits. The fiscal sops extended to SEZs would cause a revenue loss to the government to the tune of Rs 10,00,000 million as per most conservative estimates.
SEZ Forever :
Moreover the SEZs are left to use the land gifted to them they way they like. As per SEZ rules, they can use only 35 per cent of the land for the business for which it was allotted, the remaining 65 per cent of the land can be used the way the SEZ owner like – for real estate or for their leisure and pleasure. If the SEZ owner fails in his business operation, the land cannot be restored to farmers. It would be gifted to another corporate house or MNC who can promise better business. Once a SEZ is always a SEZ, says the law.
The official website says that all the SEZs are not set up on farmlands, this may be partially true. But there are instances where SEZs have grabbed large chuncks of prime farmlands and lands owned by tribals. In Orissa the state government is planning to amend the Scheduled Area Tribal Immovable Property Act to make it possible for big companies to acquire lands owned by tribals.
Left Parties :
The Left parties, which have indoctrinated themselves with the new fond market economy ideology, are not behind in the race. The Left front government in West Bengal has gifted prime farmlands in Singur to Tata group and intends to enact the same drama in Nandigram, despite stiff opposition from farmers and the local people. West Bengal has 7 approved SEZs and 14 SEZs which have got in-principle approvals. The Left front ruled Kerala has 10 approved SEZs and 2 SEZS approved in-principle.
SEZs kingdoms have come up or slated to come up in several parts of the country including Andhra Pradesh, Chhattisgarh, Delhi, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand, West Bengal and in Union Territories like Chandigarh, Dadra & Nagar Haveli, and Pondicherry.
The official website says that for setting up of 396 SEZs 1750 sq km land would be required – all would not be on farmlands. Farmland would constitute only 1393.53368 sq km. Our estimate, however, points out that the loss of farmlands would be much more. The government claims that with an estimated investment of Rs 53561 crore (Rs 535610 million) by 100 notified SEZs, 15,75,452 additional jobs would be created – a complete hoax. The SEZs have not been able to create the desired level of employment generation with the level of investment they have already made.
Has the government ever estimate the loss incurred to the nation on account of SEZs ? The food security would be a problem wit the shrinkage of farmlands. The displaced farmers would lose their livelihood. As per the National Sample Survey Organisation (NSSO 2005), the average income of a farming household stands at Rs. 2,115 per month (income from cultivation - Rs. 969; farming of animals - Rs. 91; wages – Rs. 819; and non-farm business – Rs 236). Of these, income from the first two sources (Rs. 1,060) will be immediately lost. Therefore, each farming household will lose Rs. 12,720 every year. The total loss of annual income for the 1.14 lakh (11.4 million) displaced farm families works out to Rs.145 crores (Rs 1450 million).
Economic Security :
As per the National Rural Labour Commission, an average agricultural worker gets 159 days of work in a year; and as per NSSO (2005), the average daily wage of agricultural labour in rural areas is around Rs. 51. Considering this, the estimated 82,000 agricultural labourers' households will lose Rs. 67-crore in wages. And put together, the total loss of income to the farming and the farm worker families is to the tune of Rs. 212-crore (Rs 2120 million) a year. For the marginalized, the loss of income – even if it hovers around the poverty line – has disastrous implications. Farmland is the economic security for farmers and farm labourers.
WHAT IS THE WAY OUT ? :
According to the latest data for 2006-07, the new generation of SEZs could generate only Rs 9301 crore worth of exports. Comparatively, the 60 Agri Export Zones which do not enjoy any special fiscal sops, despite putting up a good performance, failed to top decision makers' priority list. The scheme for setting up AEZs was conceived in 2001 and today they are 60 in numers, spread across 20 states. Despite low investments and inadequate infrastructure, AEZs have received an exports earning of over Rs 60,000 million in the last five years.
And in the last six years, not much investment has flowed in. This is despite promises made to agriculturists and traders. Both central and state governments have not been playing a proactive role to bring in investment, let alone encouraging private sector to invest.
As per initial criteria, investments by the Centre, states and the private sector has to be in the ratio of 1:1:2. Accordingly, the total investment for 60 approved agri export zones (AEZs) was estimated at Rs 17, 179.50 million. Against this, the total flow of investment to date is only 8,111.80 million.
Despite low investments, AEZs could achieve about 50% of the export target (Rs 118, 214.70 million) over a period of five years. The government also admitted that there is a lot of under-reporting by the state governments about the movement of produces from AEZs for exports. The total export figure would be much more than Rs 51, 852.30 million in five years. This should exceed Rs 60,000 million.
Deliberate Negligence :
Against the deliberate negligence of AEZs, the government pampered the controversial special economic zone (SEZ) scheme by extending all possible sops.
Another reason for exports performance being below target is that all AEZs were not set up in 2001. Many of them were set up much later. And majority of the exporters are of the similar view. They believe that majority of the investments done so far are by the private sector. The investment could have been much higher had the central and state governments developed better infrastructure, encouraged investment and put in their share of the investment.
According to commerce ministry sources, the APEDA had recently asked for Rs 2,500 million to support AEZs under the government's scheme for assistance to states for infrastructural development for exports (ASIDE). But the ministry agreed to render only Rs 500 million to AEZs under ASIDE scheme.
Unlike the SEZs, the AEZs do not have specified physical boundary. They are confined to specific regions in states, known for growing specific crops. The AEZs are designed for bringing integrated development of larger area including boosting income prospects.
So far, the AEZs have been set up for crops like pineapples, litchi, potatoes, mangoes, vegetables, Darjeeling tea, gherkins, rose onions, flowers, vanilla, Basmati rice, medicinal and aromatic plants, grapes and grapevines, kesar mangoes, onions, pomegranate, banana, oranges, mango pulp, chilli, apples, walnut, garlic, seed spices, wheat, lentils and gram, cut flowers, cashewnuts, honey, sesame seeds, cherry pepper, ginger, coriander and cumin.
Revenue Loss :
Unlike SEZs, the AEZs do not enjoy any special fiscal sops and hence there is no revenue loss for the government. The government has already admitted that the revenue loss due to SEZs would be over Rs 10,00,000 million by 2009-10. SEZs are being set up on prime farmlands at the expense of food security. Out of the acquired land for SEZs, only 35% is for real business and the rest is for real estate. AEZs are much better for farmers.
AEZs do not displace farmers, rather are aimed at strengthening their income and livelihood. If the government is interested in integrated rural development, it should support AEZs and scrap the SEZ scheme. If SEZs are to set up it should be done on 552, 692.26 sq km of identified wastelands in the country