Dark future for India’s SEZs plans

By Penny MacRae NEW DELHI, AFP

Deadly clashes over India’s plans for Special Economic Zones, touted as a way to woo foreign investors and spur economic growth, have cast a dark cloud over their future, analysts say. Hailed as one of the biggest pushes for industrial expansion in post-independence India when the Special Economic Zone (SEZ) act was passed in 2005, the protests have sparked a national debate about acquiring farmland for the gated business enclaves.

“Compensation for the land is not enough. Even if you give farmers money… the money will get spent and what will they do then?” said Ajai Sahni, executive director of the New Delhi-based Institute for Conflict Management. Unrest over the duty-free zones boiled over last week when 14 villagers protesting moves to buy their land for a chemical hub to be built with the help of Indonesia’s Salim Group died in police fire in Nandigram in the eastern state of West Bengal. The killings took place in a state ruled by Marxists for the past 30 years, who have recently attempted to show an investor-friendly face to the world. Thursday’s violence was the bloodiest yet over efforts to get land for SEZs — privately-run parks with world-class infrastructure promoted by New Delhi as central to India’s economic growth drive.

“The killings in Nandigram have put a big question mark over the proposed industrial parks acquiring agricultural land,” said political analyst Sabyasachi Basu Roychowdhury. Violence two months earlier at Nandigram in which 11 protesters died prompted the central Congress-led government to put on hold dozens of SEZ applications, but it insisted on Saturday it would press ahead with the zones.

Federal Commerce Minister Kamal Nath said India remained “absolutely” committed to the SEZs, adding if New Delhi did not swiftly clear the applications, investment could be lost to other countries. “There’s investment competitiveness from Thailand, from Philippines, from Indonesia. If FDI (foreign direct investment) is coming to our Special Economic Zones it can also jolly well go to Thailand, Philippines and Indonesia,” he said. There are 14 SEZs in India and proposals for hundreds more.

India’s plans for SEZs were inspired by the tax-free zones Beijing set up a quarter of a century ago that helped propel China’s rapid industrial growth. Keen to become more competitive with China in drawing global investment but lacking the political muscle to quickly improve water, power and transport, the government decided to allow the private sector to set up SEZs. In return for establishing infrastructure, SEZ developers would get tax breaks. But controversy has dogged acquisition of the land for the zones. Just 35 percent of land has to be devoted to industrial activity and the remaining 65 percent can be used for commercial complexes or housing projects — raising fears the zones will simply spark a real estate gold rush. “Why should incentives be given to real estate developers in the name of SEZs?” asks Communist leader Sitaram Yechury. Some two-thirds of India’s billion-plus population are employed in agriculture. “When we convert agriculture land, we take away from a household its main source of income, its main occupation,” said Laveesh Bhandari, head of Indicus Analytics, an economics research firm. “Therefore it is not surprising to see farmers, their wives and children all vehemently protesting against such a takeover,” he said. Thursday’s killings in Nandigram came on the same day as Maoist rebels stormed an isolated police post in central Chhattisgarh state, killing 55 officers in one of their biggest attacks in recent years. Sahni, who has studied the insurgency for a decade, believes Maoist militancy is on the rise in India and the unhappiness over land acquisition is providing the rebels with a “very, very fertile recruiting ground.” Police in West Bengal said Maoist militants are active in the region. “Some Maoist groups operating in West Bengal have joined a committee to save agricultural land,”said Raj Kanojia, state police inspector general. “The administration is very worried about this development.”