Special Economic Zones and Land Acquisition: Issues and Approaches Liberty Institute, New Delhi Invited presentation at the Workshop on “Property Rights as Human Rights” on August 13-14, 2011 Special Economic Zones and Land Acquisition: Issues and Approaches Ramakrishna Nallathiga NICMAR-CISC (Formerly with Centre for Good Governance, Hyderabad) ASCI Centre for Management Hyderabad

Structure of Presentation Background: Shifts in Economic Policy SEZs in the above background Experience of SEZs elsewhere India’s SEZ model SEZs and Land acquisition Issues of land acquisition Compensation determination Integration of host community Process transparency Governance

Background At the time of independence, India had made the choice of pursuing economic path that focused on building domestic economy In the era after independence, large push was given to creation of capital goods and services which would push growth of consumption goods and services Import substitution was the aim of such approach and the result was low economic growth and lesser economic integration of India with the rest of World Export promotion, which was conveniently forgotten, began to find its importance in economic policy after the economic reforms pursued since 1991

Special Economic Zones The economic reforms of 1990s brought in policy changes in investment/ capital, competition, freeing currency exchange rate and facilitating foreign trade and have made India an open economy The ‘export push’ was still not happening (perhaps given the orientation of functioning of the economic agents) and the means of achieving that was haunting policy makers for some time Special Economic Zone (SEZ) came in as a good approach to promote exports through reservation of space and offering incentives for the setting up of enterprises with global outlook

SEZs and their experience SEZs are exclusive economic zones/ enclaves within the country offering production facilities and other advantages to primarily to serve international community SEZs were set up on a rapid pace and scale in China that led to a substantial rise in the share of its production and foreign trade Globally, the Export Zones (esp in China) have shown that they can contribute to ‘external economy and trade’ in a significant manner but with limited domestic benefits

Indian SEZ model India’s pursuit with Export Processing Zones (EPZ) met a limited success and there was not much push to setting up more EPZs SEZs are rolled down as the areas with significantly upscale of production and integrated production and non-production areas Domestic linkage was brought in by allowances to sell the goods (to a limited extent) to national economy and residential space within them SEZs ‘proposals’ to be made by ‘developers’ that would be forwarded by State governments to be cleared by the Union Government

SEZs: India-China differences

SEZs and Land acquisition As SEZs involve several 100s and even 1000s of hectares of land for offering various facilities, the developers made proposals assuming that land would be acquired and given by the government Land acquisition by Government for ‘public purpose’ has been sanctioned in Land Acquisition Act, 1894 but it was meant for those limited ‘public purposes’ Much before SEZs were set up, eyeing on the real estate value of land, trading on land began and land acquisition began at the behest of private and political players

Issues of land acquisition Compensation determination This has been set based on ‘income from putting land to current use’ ignoring The ‘scarcity value’ of land The ‘labour value’ accruing The ‘future value’ of land capital The current practice of using revenue records to determine ‘production’ and ‘ownership’ has limitations of ‘down-ward’ bias of production Legal and non-legal title disputes non-recognition of ‘shared and other types of contract farming’

Issues of land acquisition Integration of host community The whole concept and experience of SEZs is based on the inalienation of land and development rights of host community Land is an emotional subject as gives a lot of privilege and esteem to its owner and security to tenant Livelihoods of resident people are strongly tied to land and their loss is inadequately compensated in terms of either employment or suitable monetary arrangements The host community loses not only land but also several development opportunities for members

Issues of land acquisition Process Transparency Much of the land acquisition has been taking place through non-transparent methods of acquisition and in partnership with developers Much of it would not be authorized even under Land acquisition act, 1894 if it were read in letters and spirit State Governments are competing in it and often floating proposals in connivance with developers so that they gain at the cost of farmers

Issues of land acquisition Governance ‘Political brokerage’ is emerging with politicians becoming ‘settlement agents’ rather than ‘facilitated negotiation’ promoted by non-State actors Limited accountability of politicians, developers and administrators of SEZ land and development Potential conflicts in governance especially with the established local government institutions ‘Cooperative models’ are largely absent and neither given support or encouragement

Thank You Very Much…