B.

Ilayanambi
BA0140022

SEZs Land Acquisition and its Impacts

Introduction:
The concept of SEZ has been introduced to expand the export by attracting foreign investments.
Special Economic Zone is a demarcated area of land owned and operated by a private company.
The true purpose of SEZ was to attract foreign direct investment and promoting export. And it is
deemed to be a foreign territory for the purpose of Trade, Duties and Tariffs. SEZs will enjoy ex-
emptions from Customs, Sales tax, Service tax and Income tax. The stated purpose of creating SEZs
is the promotion of Exports in India and the government also stated that SEZs will attract global
manufacturing through Foreign Direct Investment (FDI). But the government did not think about
the impact, that is caused to the rural by this policy. And because of this policy there were many
Displacement and Loss of Livelihoods caused. And land acquisitions has been made for the purpose
of SEZ by both central and the state in the name of the “Public Purpose”. A lot of land has been ac-
quired by the government for the purpose of SEZ and its developers. But there is no proper rehabili-
tation or resettlement being provided and these people are affected largely because these acquisi-
tions are being done forcibly and in an unlawful manner and the people’s are surrendering their land
unwillingly. And because of this, there exists a lot of scope for the acquired land being misused and
diverted to the “real estate” scams. Its a kind of “Accumulation by dispossession”, in favour of do-
mestic and foreign monopoly capitalists. As a result of forceful eviction and involuntary surrender
of land, the people started struggling against SEZ’s. Furthermore in terms of business and taxes, the
SEZ has been declared as “Foreign Territories” as because they have been exempted from the envi-
ronmental regulations, labour legislations and tax laws and all became one of the main reason for
the violation of human rights and environmental standards. Although there are many disadvantages
SEZ has shown some advantages too, because there has been a dramatic growth of export rate, as it
was 9,96,880 million during the financial year 2008-2009 and later during the first three quarters of
financial year 2010-2011, the export has been increased tremendously and was registered with the
record percentage of 127% increase than the previous year. But the thing it doesn’t matter how
much the export of a country has grown, what good it does if its own people is been affected be-
cause of its policy.1
In this research project the researcher explains about SEZs and Land acquisition and the impact it
creates on the Rural sector (Farmers). This article examines the dimensions of land acquisition with
respect to establishment of economic zones across India. The enactment of Special Economic Zone
(SEZ) Act 2005 allows the government to transfer the land acquired for public purpose under the
Land Acquisition Act to the private companies for development. For private firms, land turning into
most significant incentive for being part of SEZ scheme and profit maximization. It has been ob-
served that large part of acquired land ends up in the hands of the real estate companies rather than
intended productive sectors of industry and infrastructure. Land is the principal source of livelihood
in an agrarian economy. Forcible acquisition and transfer of land to corporates leads to large-scale
unemployment and displacement, especially when large part of acquired land remains unutilized. It
raises many questions on objective and process of establishment of SEZs.Thus researcher attempts
to analyse the problems created by this policy and how unconstitutional this Economic policy is.
There are both merits and demerits in this Economic Policy, whereas the government explains only
the merits of this policy. But demerits of this policy is more compared to the merits. Even though
this policy promotes Export and creates Employment opportunities for many, but compared to loss
of livelihood and public revenue the opportunity created is very less. And the forcible land grab
from the farmers for the sake of SEZs makes us to think whether SEZs is a economic welfare policy
or some real estate scam made by the government.

SEZ in India - Policy and Controversy:

SEZ Act 2005:
The acceleration of Indian economy by increase in export was the main aim of the SEZ Act since it
was passed by the Indian government on 2005, which came into force in June 23rd, 2005. SEZ’s
has been considered and promoted as “Eco friendly zones” which is expected to generate a huge
employment opportunities for the "Newly Urbanized India”. And to promote SEZ further and to
attract foreign investment it provided huge incentives and tax exemptions for those who invest in
SEZ. The SEZ is a geographical region that has more liberal economic laws the that of the existing

1“Venkateswarlu. A, Special Economic Zones (SEZs) and Their Critique : A Case of Nandigram Struggle, National
Seminar on Special Economic Zones: Engines of Growth and Social Development for India, 1-3, 2008.”
laws of the country.2 And it is deemed as a foreign territory for the purpose of trade, operations, du-
ties and tariffs as because they are duty free. And SEZ can be set up by any foreign-owned, public
or private, joint or exclusively state owned company.and that to anywhere in India. Irrespective of a
company and a company’s location an export oriented SEZ establishment can be exempted from a
large range of tax obligation by the government “On Demand”. The SEZ’s units are different from
one another there are both Single manufacturing plant as well as there are Cluster of Industrial units
where as a single plant requires as less than 100 hectares and the cluster of industrial units requires
1000 hectares and in these areas only 35% are to be utilised for the Industry and the remaining areas
should be utilised for other purposes specified and approved under SEZ scheme such as establishing
a residential area, parks, institutions etc.3
Tax Exemptions:
SEZ establishments has a huge tax exemptions than the usual and they are as follows:
• Duty free for the import or domestic procurement of goods for the development, operation and
maintenance of SEZ units.
• Section 10AA of the income tax act provides a 100% exemption for the export income of SEZ
units for the first five years and 50% of tax exemptions for the next five years and in next five
years 50% of the ploughed back export profit.
• Section 115 JB of the IT Act provides an exemption from the minimum alternate tax.
• An external commercial borrowings by SEZ units to 500 millions USD in a year without any ma-
turity restriction through recognised banks.
• A Central sales tax exemption
• Service tax exemption
• Single window clearance for Central and state level approvals.
• An exemption from the state sales tax and other taxes levied by the state government.4

2“Vidya Bhushan Rawat, Mamidi Bharath Bhushan & Sujatha Surepally, The impact of special economic zones in In-
dia:

A case study of Polepally SEZ, Social development Foundation, 3-7 January 2011.”
3 “Ibid.”
4“Vidya Bhushan Rawat, Mamidi Bharath Bhushan & Sujatha Surepally, The impact of special economic zones in In-
dia:A case study of Polepally SEZ, Social development Foundation, 3-7 January 2011.”
SEZ has other various subsidies other than the benefits mentioned above, they get electricity at a
subsidised rates and they have no limits on using ground water and they have a state governments
duty to develop infrastructure around them and so on.5

LAND ACQUISITIONS AND MISUSE OF THE TERM “PUBLIC PURPOSE”:

A SEZ establishment can be established at any land and that includes a privately procured land and
a open market land but it was difficult for the companies to procure a vast area of land which has
sufficient infrastructure and access to urban areas and they also found it difficult to procure land at
reasonable rate. And so the government authorities had taken the matter in their hands and the de-
cided to act as the agents for the Private sectors and they started acquiring lands for SEZ’s and the
Land acquisition Act 1894 has proved to be the legal basis for such Acquisition. The Land Acquisi-
tion Act was established by the British in order acquire land for railways, factories and other public
purposes and they framed it with a view to avail land in a quick and easy manner and the term
“Public Purpose” was not defined in the legislation in order to avoid the “Excessive Compensation”
and it has been whatever the Successive government wanted it to be. And after the independence the
Colonial laws were left to be remained in force unless “Explicitly repealed” as per the Article 372
of our constitution.6
Even in the Nehruvian period the lands were acquired forcibly for the purpose of Private sectors, In
a landmark judgment R.L. Aurora v. state of U.P, 1962, the Supreme court held that acquiring land
for the textile machinery manufacturer cannot be considered as the land acquired for Public Purpose
and acquiring land for private does not come under the purview of the term “Public purpose” and it
further held that the government is not the agent for the private sectors and that is not what Land
Acquisition act contemplates government to be. But the Nehruvian government responded in a dif-
ferent way by amending the law through Land Acquisition (Amendment) Act, 1962, to allow lands
to be acquired for the private companies which is established for the public purpose. But again the
term “Public Purpose was not defined and proved to be sufficiently vague which allowed the con-
tinuous acquisition of land for the various private projects. And the Land acquisition act 1984 has
been introduced and further modifications has been brought, the compensation provisions had been
improved but the term “Public purpose” remained the same. Instead the term “Public purpose” has

5“See: http://www.smeindia.net/export_schemes/DOCS/B-1/THE%20SEZ%20ACT.pdf and http://www.sezindiain-

vest.com/Benefits.htm."
6“Vidya Bhushan Rawat, Mamidi Bharath Bhushan & Sujatha Surepally, The impact of special economic zones in In-
dia:A case study of Polepally SEZ, Social development Foundation, 3-7 January 2011.”
been widened and planned development has been brought under it which facilitates the sale of land
to the private enterprises. Although court in many instances have upheld the rights of the owners of
the land finally the judiciary also let down the rights of the people because in the case of Union of
India v. Krishan Lal Arjena7 in 2004, the court held that the state cannot deprive the right of proper-
ty to that of the owner of the land with the power of Urgency clause and such clause must be ap-
plied by the court with due diligence and utmost care. And the court also held that although the
Right to property is not a fundamental right section 5A of the act was flavoured with the tinge of
Article 14 and 19 and if the application of right to property, Section 5A allows application of Article
14. But finally in Radhey Shyam8 case, the supreme court held that the sovereign state can acquire
any piece of land within its territory with or without owner’s consent under the ground of Urgency
or Public purpose and by saying this the court upheld the Doctrine of Eminent Domain and the
court further held that strict interpretation should be given to the statutes governing compulsory ac-
quisition of the property because its “Expropriators Legislation” and though the state has power to
acquire land under Doctrine of Eminent domain, such land acquisition is subject to Judicial review.
Then the court further held that the “Urgency clause” should be invoked only when there is an
Emergency and by emergency the court means when there is a time less than weeks and so the au-
thorities must be satisfied before excluding section-59 which speaks about right to object and the
court also said that the term Public purpose cannot defeat the persons right to property and he
should be heard if there exists any objections and the Urgency clause can be questioned and can be
challenged if the acquisition of private property is not for the Public purpose but was due to some
malafide intention of the authorities concerned. And Supreme Court has sent notice to seven coun-
tries in order to know the status of the land acquired through SEZ because a petition has been filed
by the advocacy group in Supreme court saying that nearly 80% of the land acquired in past five
years has not been used and most of that were agricultural land and the petitioner “SEZ Farmers
protection welfare association” had filed a petition stating that 5000 hectares (which is 12,355
acres) of land has been acquired from the farmers in last five years (2011-2016) and only 362

7 “Union of India v. Krishan Lal Arjena, 8 SCC 453.”

8 “Shri Radhey Shyam (dead) through L.R.s and Others v. State of UP and Others, (2011) 5 SCC 553.”
9 “Section -5 of LAAR Act, Public hearing for Social Impact assessment: Whenever a social impact assessment is re-
quired to be prepared under Section 4 of this act the appropriate government shall ensure that a public hearing is held at
the affected area, after giving adequate publicity about the date, time and venue for the public hearing, to ascertain the
views of the affected families to be recorded and included in the social Social Impact Assessment Report.”
hectares had been utilised for its intended purpose and they further said that they not only lost their
land but they had been denied of their compensation or alternate jobs promised.10
And there are statistics for the unutilized areas of the land acquired for the purpose of SEZ and the
data has been taken by the researcher from the ministry of commerce and the stats as follows;11

S/No States/UT Total Area Total Area Vacant Areas

Notified (In Utilized (In (In Hectares)

Hectares) Hectares)
1 Andhra Pradesh 11203.52 4493.96 2229.89
2 Tamil Nadu 5288.00 2223.00 2805.03
3 Chandigarh 58.46 23.63 34.84
4 Chattisgarh 108.28 22.04 79.24
5 Kerala 961.16 390.38 455.99
6 Karnataka 2296.07 841.83 1039.12
7 Madhyapradesh 1581.89 209.93 757.72
8 Goa 249.48 0.00 249.48
9 Maharastra 6712.15 1754.51 3235.06
10 Gujarat 12501.74 6818.59 4902.11
11 Manipur 10.85 0.00 10.85
12 Nagaland 340.00 0.00 340.00
13 Odisha 491.08 300.06 190.01
14 Telangana 2048.96 1957.22 469.51
15 Rajasthan 773.30 136.78 637.51
16 Westbengal 235.84 190.71 45.13
17 Punjab 46.12 8.39 30.92
18 Uttarpradesh 753.92 219.20 476.77
19 Haryana 415.49 36.57 293.69
20 Jharkhand 16.42 0.00 16.42
Total India 46085.55 19626.64 18299.29

10"Suchitra Mohanty & Rina Chandran, Supreme Court quarries land use in Special Economic Zones, Jan 12, 2017.
https://in.reuters.com/article/india-landrights-sez-supremecourt/supreme-court-queries-land-use-in-special-economic-
zones-idINKBN14W1Z3. Accessed on 18/04/2018, 4.46pm”
11 “This statistics is taken from the data of Ministry of commerce, GoI, 2015.”
And the above table gives the no of unutilized acquired lands of SEZ policy and still there are many
utilised lands which are not utilised for the intended Public Purpose instead used for the private
purposes or the real estate scams. If the unutilized lands has not been graded from the farmers
forcibly and if it has been left with the farmers many would have been benefitted and would not
have suffered.12
576 formal approvals covering 60374.76 hectares of land was allotted across the country, since the
introduction of the SEZ act in 2005 till 2014, and out of 60374.76 hectares only 45635.63 hectares
has been notified and out of that only 28488.49 hectares are in function and the land allotted to the
other 424 SEZ which is 31886.27 hectares has been laying unused which is 51.81% of total ap-
proved SEZ. And out of 392 notified SEZ’s 30 SEZ’s has not been used for proposed projects in-
stead it has been lying unused there for nearly 10 years. Moreover it was observed that most of the
lands lying unused were Agricultural lands and irrespective of many protest and controversies still
the lands are being acquired forcibly and in an unlawful manner and without any real economical
activity for the country.13

CONCLUSION:
There are more negative impacts than that of the positive in the introduction of the SEZ although
SEZ seems to develop the Export percentage it has dragged down the Agriculture input of many
states. The SEZs main aim was to promote export and Employment but what has been evident is the
opposite although it has promoted foreign investments and the export of the country it could not
give any improvement in the side of Employment and none of the promise made by the government
for the introduction of SEZ has been fulfilled and this on one side is a big disappointment but even
bigger one is the Scams through this SEZs policy the Land Acquisition act has made it even easy
for the politicians and this century being under the influence of “Corporatocracy” everything is
favourable to them. Since the private companies cannot acquire a large amount of land and that to
in a well developed urban area they need a help of a powerful authorities and thats were govern-
ment comes. The government is merely acting as an agents of the corporate sector and the authori-
ties using their power and grabbing the land from the poor and selling the land to the corporate in
the name of SEZ. If we see the history most of the lands acquired under this policy were from the
Farmers and not from any multi millionaires, this explains the conditions of the policy. This policy

12Sazzad Parwez, A Study on Special Economic Zone Implicated Land Acquisition and Utilization, International Journal
of Development and Conflict. 2016 136-153.
13 ibid
cannot be said as Un-Constitutional because it prevents itself under the umbrella of Public policy
and there is no defined definition for the term “Public Policy” and the Supreme court also has said
that the public policy is not a term that can be defined because it term which should be interpreted
according to the situation and circumstances and it pretends to be a solution for even Future prob-
lems so it cannot be defined. And this acts as defence for the politicians and the corporates. And fur-
thermore the Existing legislation does not affect any fundamental but the only problem is that it is
not being followed by the authorities and it needs a amendment regarding the procedure and the En-
forcement mechanisms. And the now amendment should be in a way that the authorities cannot in-
fluence and they should be made to follow the law. Now there can be a only solution for this and
that is exclude all the private sectors from the purview of the term “Public Policy” and the land
must be acquired only for the purpose of welfare of the public and only the government institutions
can acquire the land and no agriculture land should be acquired for the sake of the private sectors
even it functions for the welfare of the public sector but the lands other than agricultural land can be
acquired for the sake of private sector because the main aim of the policy is to develop the foreign
direct invention so the private sectors cannot be denied of the land but the government can exclude
the agricultural land from that land acquisition and it cannot acquired under any circumstances and
there is no such thing called as ultimate urgency so nothing can affect the farmers and the Poor and
most importantly the agriculture of the country which directly affects the Food economy of the
country. And the rehabilitation and compensation process should be ended before the land is being
acquired from the people. As of now this is what the LAAR 2013 Act contemplates but none of this
is been followed. So we cannot abolish the SEZ completely but certain changes in SEZ will make it
a good and credible one. And the following are some of the recommendations to improve the poli-
cy:
• Agricultural Lands should be excluded from the purview of the Acquisition of SEZ.
• The Local workers should be provided employment in the SEZ units.
• Land Ceiling must be provided under the Act and the Ceiling must be according to the necessity
of the project.
• Small scale industries should be prevented from SEZ and the areas of Small scale industries
shouldn’t be affected.
• Rights and duties of the workers must be produced along with the projects.
• The projects that affect the environment should not be approved and the SEZ industries should
not be placed anywhere near a city or village.
• The price of the land should be fixed only with the consultation of the Farmers of that particular
area and it should be reasonable for both parties.
• And finally shares should be given in the project established if the value of the acquit ion can be
afforded with that of the share and only on the demand.
If these conditions are to be fulfilled then at least it could be fair to certain extent.