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The Impact of Special Economic Zones on Small Farmers in India

Centre for Education and Documentation

07 / 2009

The lure of Special Economic Zones

The world’s largest SEZ is in Shenzhen, China. It covers about 20,000 hectares and has it own ports, power stations, water supply and airports. This ‘showcase’ of the economic miracle in China is being copied in India where the SEZ are new forms of the earlier concepts of FTZs (Free Trade Zones) and the EPZs (Export Processing Zones) of the 60’s which then emerged as quick-fix solutions for industrialisation. Each of these schemes were meant to give a go-by to some social legislation or tax provision, which was perceived to be an impediment to progress or competitiveness of an export oriented activity.

A brainchild of the ministry of Commerce, the SEZ Act that was passed in 2005, goes much further as it seeks to establish private industrial townships covering thousands of hectares of land. These zones are expected to attract investment of about Rs.1, 00,000 crore which include Rs.25, 000 crore in FDI. In China, the SEZ is developed by private parties but the Government owns the SEZ. In contrast, it is owned and operated by a private developer, in India. The Indian policy goes one step further than China i.e., it provides « Zones on demand » are created at the behest of investment capital, subject only to a centralised and utterly non-accountable and non-democratic Board of Approvals.

The SEZs are provided with maximum subsidies of all kinds be it long tax holiday, state taxes, state excise and even in some cases the central excise is exempted. The State provides electricity at a very nominal rate and in many cases it is even free. There is no restriction on using ground water. The State provides or is to lay down proper roads to the nearest city or other important facility points. The SEZ Rules provide for simplified procedures for setting up units or for a wide range of financial services.

The terms offered was so attractive to corporate that a total of 260 SEZs were notified till September, 2008, as compared to 19 set up before the SEZ act in 2005. Formal approvals were granted to a total of 552 applications, and In principle approvals were granted to 141.

Thus SEZs hits at the sovereignty of local bodies, as they function as self-governing autonomous bodies. A Development Commissioner, who is appointed by the government, is in charge of the SEZ and also has full powers over infrastructure and workers rights. The developer can tax the people inside the SEZ for essential services. The SEZs have jurisdiction over internal security, high walls are built and permission from the Development Commissioner is needed to enter. Therefore, instead of strengthening panchayats (local assemblies) and urban governance institutions under the 73rd and 74th the Amendments the government is undermining their authority.

The Special Economic Zones (SEZ) and agricultural lands

Perhaps the most obnoxious aspect of the new SEZs provisions was that it enabled corporates to grab large tracts of land from farmers. The speed at which agricultural lands were being lost, led to a series of agitations by small farmers. Sukla Sen points out that “the trigger for all these protests, apart from the too obvious and ominous threats to the very existence of a large number of people, is the tremendous outrage at the brazen abuse of the Land Acquisition Act – the gross subversion of the original purpose of “eminent domain”, which was intended to apply to projects of public importance and not to help generate private profits.”

The Supreme Court of India recently dealt elaborately with the meaning of ‘public purpose’, the extent of sovereign power to take over private property. The highest court ruled that, « If the project taken as a whole is an attempt in the direction of bringing in foreign exchange, generating employment opportunities and securing economic benefits to the state and public at large, it will serve public purpose ». In short, what the apex court has said is that private land can be compulsorily acquired and given to industry if this benefits people at large. Thus the judgement gives a new interpretation to Section 3(f) of the Land Acquisition Act which specifically says that ‘public purpose’ does not include acquisition of land for companies. While this will no doubt clear the road for more forceful and unjust land acquisitions, it will also have an impact on the changes that are being considered in the revision of the Land Acquisition Act of 1894.

Case studies in Hyderabad-Secunderabad have shown how the villages and local people have been displaced due to hi-tech spaces which are characterized by social and spatial segregation. These enclaves - for example the Infosys campus or the Indian School of Business, that are major points of contention - enjoy very high levels of amenities whereas there are 17 villages in Cyberabad area, where civic amenities such as water and education are just not available.

A special mention needs to be made of the Dalit (“untouchable”) colony that existed next to Infosys for nearly 25-30 years. They had proper ration cards and all that they needed was a right to their few square yards of land whereas Infosys wanted this land for the second phase of its expansion. They were shifted to a place almost 15-18 kms away, with absolutely no facilities. Their entire livelihoods have been ruined because they do not get any work there. They have to travel all the way using two-three modes of transportation back to these hi-tech areas to get some work engaging in either construction work or domestic labour. (Ramachandraiah)

Voices of Dissent

There has been resistance to SEZs all over India- Mansa district in Punjab, Jhajjar in Haryana, Kakinada in Andhra Pradesh, Nandagudi in Karnataka, Baikampady in Mangalore, Nandigram in West Bengal, Raigad in Maharashtra, just to name a few.

In Kakinada, the promoter of the SEZ is senior bureaucrat-turned-realtor. People were taken by surprise when about 1,000 police personnel arrived in the village in dozens of vehicles with surveyors, revenue officials and so on to coerce villagers into surrendering their lands. The villagers began to argue with the officials eventually leading to the arrest of a few elderly people. The villagers surrounded the policemen forcing them to release the elders from jail. The local media carried front page stories with photographs but this event went completely unreported in the English media in AP. Later the Andhra Pradesh Human Rights Commission (APHRC) visited the village and filed a report in the High Court.

Since then the villagers are threatened from time to time apart from withdrawing development programmes from Kakinada villages. In this particular village the NREGA has been withdrawn, primary health centres have been closed, old age pension has been stopped and so on.

Another instance being that of twenty two villages of Pen Taluka, Raigad district who are notified for land acquisition for a 10,000 ha SEZ led by Reliance Industries, of which 3000 ha is from them. People have been protesting since then saying, « The farmer does not want to part with his land for the project and the government should forthwith withdraw the notices issued under the Land Acquisition Act for acquisition of land. » In the first-ever state-sponsored referendum in the country involving farmers, more than 6,000 land-owners from 22 Raigad villages made their views on a special economic zone. Six months have passed, but the Maharashtra government has not been able to finalise its report on the results of the September 22, 2008 referendum.

These 6000 farmers who voted are only the holders from each land holding family. The other members of the family who are employed on the farm, the fish workers, the agricultural labourers, the rice mill owners, those involved in transportation of agricultural goods did not vote (as part of the terms of reference on the referendum). The farmers who are not from the 22 villages but whose livelihoods are bound to be affected by this mega enclave did not vote either. The local estimate of the affected population is five lakhs. The government estimate is 50,000. The expected employment to be generated by the SEZ is merely 10,000. The irony is that farmers had to struggle to get irrigation water due to them from the Hetwane reservoir and the irrigation project is under near completion but put on hold for lack of funds.

Another case study concerns four villages around the same area of Hyderabad which are basically agrarian in nature. Cereals and vegetables are the main crops grown in these villages and the net sown area is less than 10%. Land values have sky-rocketed in all the villages due to the Hi-Tech City, international airport, software parks and so on. The announcements of establishment of a SEZ in the vicinity in 2006 pushed the land prices further. Most farmers sold their lands below Rs.10 lakh per acre in all the villages. The people have tried to agitate but have had to give up after sometime. People leading the agitations were harassed by filing of false cases against them, sending them to jail and in some cases, making roads through their lands deliberately. The government allotted land to a software firm at the rate of Rs.40 lakh per acre, whereas for the same land another company offered Rs.1.10 crore per acre. At the same location wasteland that is not suitable for cultivation is available, but the government is not allocating it to the SEZ. Instead, it is bent on acquiring the tribal lands which are being cultivated and most of the families are dependant on the land. (Reddy & Reddy)

‘Land to the Tiller’ - a bygone era

In early independent India, land was seen as the basis for equitable development. In 1961 the land reforms law came into being. Il was expected to improve agricultural efficiency, broaden the distribution of benefits, and thereby move towards greater social equality. But one by one, various legislations for land reforms are being diluted to enable changes in the Land situation. Scandalous were the changeover of tourism hotel land and building to the private sector. These lands were acquired from the public, and in many instances farmers in the National Interest, at cheap rates.

There is no proper Land Use Policy in India, except for a couple of states like Kerala. In Kerala this legislation was brought in very recently, when the large tracts of paddy fields were converted to residential and commercial complexes. Just before the recent on ongoing economic crisis, land values near town hit the ceiling, with major auctions taking place.

Shrinking Agricultural Area

The resistance to SEZs across the country is explained by the location on agricultural land, having been created most often on fertile land acquired from farmers. The land size of conversion of agricultural land for non-agricultural purpose has more than doubled over a span of forty years: 7,000 sq km of agricultural land converted for non-agricultural use in 1964-65 versus 14,069 sq km in 2005-06. With more land being allotted for SEZs, townships and industries, land under cultivation has reduced so much that at present, a little over 46 percent of the country’s area is cultivated. As per the Ministry of Agriculture, between 1990 and 2003 the net sown area went down by around 1.5 percent that means 21 lakh hectares whereas land under non-agricultural uses has gone up by 34 lakh hectares.(Goswami)

The demise of local economies

In today’s dispensation, land is looked at as a mere tradable commodity. Even the best compensation packages at best look at the economic value of the main crops.

However in reality, land as livelihood generates much more complex security and lifestyles, than what the money can offer. Besides the main crop, land provide certain foods, environmental services, wild fodder, medicinal plants. Thus those entirely dependent on the land, say artisans, pastoral communities will be at loss. Even today in the villages the common practice is to share grain with the black smith, the potters, and pastoralists. 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 basic educational qualification of SSC.

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.

Key words

agriculture, liberalism, access to land, economic policy, countryman farming

, India


Small scale farming in India


This sheet is also available in French: L’impact des Zones Economiques Spéciales sur les petits agriculteurs en Inde

Further readings:

• Shakar GOPALAKRISHNAN, “Negative Aspects of Special Economic Zones in China”, Economic and Political Weekly, Vol 42. No.17, April 28, 2007, Pp 1492

• Sukla SEN, “SEZ: The Indian experience”, 17 Oct 2008

• Prof C.RAMACHANDRAIAH, “Global Integration and Local Exclusion in High-Tech Spaces”, Centre for Economic and Social Studies (CESS), Hyderabad. Papier présenté à la table ronde sur la société du savoir, 5 Janvier 2009, CESS, Hyderabad

• V. Ratna REDDY and B. Suresh REDDY, “Land Alienation and Local Communities: Case studies in Hyderabad-Secunderabad”, Economic and Political Weekly, August 4, 2007, Pp.3233-3234

• M.A.S. RAJAN, Land Reforms in Karnataka, Delhi, Hindustan Pub. Corp., 1986

• Yogesh NAIK, “ Where has all the farmland gone?”, The Times of India, Mumbai, 21 Nov 2008.

• Bhaskar GOSWAMI, “Diversion of Agriculture Land and Impact on Food Security »

• S. Gopinath REDDY, “Will they give me trees?”, New Indian Express, 05 Mar 2008

See the following websites :

Special Economic Zones in India, Ministry of Commerce and Industry, Department of Commerce

Department of Land Resources, Ministry of Rural Development

Land Acquisition Act, 1894

CED (Centre for Education and Documentation) - CED Mumbai: 3 Suleman Chambers, 4 Battery Street, Behind Regal Cinema, Mumbai - 400 001, INDIA - Phone: (022) 22020019 CED Bangalore: No. 7, 8th Main , 3rd phase, Domlur 2nd Stage, Bangalore - 560071, INDIA - Phone: (080) 25353397 - India - -,

legal mentions