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What is a SEZ?

Special economic zone or SEZ refers to a totally commercial area specially established
for the promotion foreign trade. A Special Economic Zone (SEZ) is a geographical region
that has economic laws more liberal than a country's typical economic laws. Usually the
goal is flourishment in foreign investment.[1] In other words SEZs are specifically
delineated enclaves treated as foreign territory for the purpose of industrial, service and
trade operations, with relaxation in customs duties and a more liberal regime in respect of
other levies, foreign investments and other transactions.[2] These regions exists in many
countries of the world and China perhaps the oldest to give reality to this concept.
Although they exist in several countries, their attributes vary. Typically they are regions
designated for economic development oriented toward inward FDI and exports fostered
by special policy incentives.[3] The SEZs in India are the outcome of the present
government’s industrial policy which emphasizes deregulation of Indian industry and to
allow the industries to flexibly respond to the market forces. All undertakings other than
the small scale industrial undertakings engaged in the manufacture of items reserved for
manufacture in the small scale sector are required to obtain an industrial license and
undertake an export obligation of 50% of the annual production. This condition of
licensing is, however, not applicable to those undertakings operating under 100% Export
Oriented Undertakings Scheme, the Export Processing Zone (EPZ) or the Special
Economic Zone Schemes (SEZs).[4]

Basic Difference between EPZs and SEZs

The SEZs are the new nomenclature of modified earlier Export Promotion Zones or
EPZs. The first EPZ in India was set up in 1965 Kandala. They were created as privileged
zones with the facilities of liberal tax and labour laws. They were to attract the foreign
investors to import materials for use and export the manufactured commodities. In this
way jobs would be created and export got enhanced.[5] The main difference between an
EPZ and a SEZ is that the former is just an industrial enclave but the latter is an
integrated township with fully developed infrastructure.[6]

Background of SEZ India.

During late 1990s the then Union Commerce Minister Murasoli Maran visited the high
tech SEZs in China and got impressed by their contribution to the rapid growth of GDP
of the country. He then thought about taking measures to do the same in India. However
by that time India was already introduced with the first export processing zone in
Kandala. But the main difference that it was not SEZ but EPZ. India was not deemed to
be very happy with the EPZs because they were falling short due to various reasons. As a
result the expectation rose high and the SEZs were conceived to be far efficient,
calculated and modernized than the EPZs. In the light of the experiences drawn from
international level it is evident these centers have added tremendously in the growth of
employment and foreign direct investment or FDI. Their role has been evaluated as very
significant in the growth of the economy of the host country.[7] In New Delhi the
International Convention on Special Economic Zone was arranged on March 21, 2002.
The main guest was undoubtedly Mr. Maran, the Honorable Minister for Commerce and
Industry on that time. In his speech he pointed out that for a long period of time foreign
trade in India has been viewed as suspicion rather an optimum potential to charge a high
growth rate of the economy. The time has come when the country is moving towards
export fatalism to export apathy. This change of notion would definitely lead to an
incentive to the economic progress of the country and for this the need of SEZ is
inevitable. The SEZs would act as vehicles of production and the FDI increase swiftly.
As a result India will attain a considerable place in its contribution to the world economy.

Dream becomes Policy and Policy becomes Law.

The government of India announced SEZ policy in March 2000 under the export-import
policy for the augmentation of export production[9]. At that time Mr. Murasoli Maran
was the union minister for Commerce and Industries. However he could not fetch his
plans far as the existing government was defeated in the general election of 2004. But this
defeat perhaps did not create any disappointment in the minds of Mr. Maran because the
new government took sufficient measures to give the SEZ policy a form of binding law.
We all know that a policy may not be enforced but a law can be. The new government
came out with Special Economic Zones Act in the year 2005 which attained the assent of
the president on 23rd June. This Act provided for the establishment, development and
management of the Special Economic Zones for the promotion of exports and for the
matters connected therewith.[10]

Some Important Provisions of the Act[11]

1. SEZs can be established mainly for manufacturing of the goods, for providing
specified circumstances and as a free trade and warehousing zone.
2. SEZs will include three types mainly. They are multi-product SEZ, sector specific
SEZ, port or airport based SEZ and free trade and warehousing zone.
3. They will have their own adjudicating, enforcing and administering agencies.
Therefore absolute non interference by the state.
4. There will be 100% tax exemption and relaxation from strict labour laws.
5. They will not have any burden to comply with any sort of minimum obligation to
6. Except for certain kind of offences the no investigation or inspection can be carried out
in any of the SEZs without prior approval from the development commissioner.
7. The Development Commissioner will be entrusted to the overall administration and
supervision of the SEZ and exercise all necessary controls and co operations to foster
speedy and effective development of the SEZ concerned. The development commissioner
shall be appointed by the central government.

How will be the Special Economic Zones?

The main underlying purpose behind the creation of SEZs is to create a hassle-free
environment for the promotion of exports. These zones are regarded as duty free enclaves
and for the purpose of trade operations they are deemed to be foreign territories. The SEZ
policy offers various fiscal and regulatory incentives to the developers within the zone
along the incentives available with central SEZ policy. They are to emerge as zones of
excellence.[12] The basic presumption behind SEZs is that they will bring large scale
investment of global funds into the manufacturing and service sectors and pump the
economy to its top. As a result the infrastructure conceived is world class. There will be
easily available marketing initiatives and from them Indian industry is expected to gain
benefit. The setting up of the SEZs will allure investment from within India and abroad.
This will also lead to the development of the concerned area, ensuring better quality of
goods and services, large scale employment and many other elements highly expected to
boom the already growing market economy of India. According to the government if all
these are totaled then it will lead a total forwarding of Indian economy.[13]

To develop SEZs there has to be someone who needs to improve the basic infrastructure.
Upon that infrastructure the superstructure of SEZs will function. The infrastructure will
play one of the key roles behind the success of each and every SEZ. For example if
production is huge and ready to reach the port but due to bad transportation goods can not
be reached there n time then order is cancelled. It implies no fault in the superstructure
but in the infrastructure. If such thing takes place then the manufacturer will soon loose
the motivation and the success will be at stake. Therefore by our common sense we can
understand the importance of infrastructure.

The government is also in the same footing of common sense with that of an ordinary
prudent person and after a cautious observation of the main objectives of the SEZ policy
it has came to this opinion that there shall be no lack of efforts in the infrastructural
development of the SEZs. As a result the role of developer has been conceived with due
care and attention.

Developer means a company that develops the infrastructure and other facilities on land
earmarked as SEZs[14]. The incentives under this policy given to the developers are:
# Items imported for setting up, operation and maintenance of SEZs will be exempted
from customs duty.
# Exemption from excise duty for the goods required for abovementioned purposes.
# Income tax exemption for a period of 10 years in the first 15 years operation.
# Exemption from central sales tax for the goods used for development and maintenance
of SEZs.
# Exemption from service tax with reference to the services required in connection to the
development and maintenance of the SEZs.
# Drawbacks and any other benefits are admissible from time to time.

Apart from the developers it also preserves certain incentives for the enterprises also.
Let’s have a look on them.[15]

# 100% income tax exemption for a considerable period of time.

# 100% FDI permitted to the manufacturing sectors except for some specified.
# External maturity borrowings through recognized banks with any hard regulation.
# Requirements of no import license.
# Exemption from licensing regulations for the items reserved under SSI sector.
# No routine examinations by Customs for export and import cargo.
# Exemption from Central Sales Tax and Service Tax.
# Exemption from customs duties, Central Excise duties and the like.
The term ‘exemption’ is very commonly used here. But there has been no proper
justification in order to boom up the economy whether the loss of public revenue is an
inevitable requirement or not.

To attain the goals management is a very important factor in any business entity. This
concept is also applicable with respect to SEZs. The public sector units in India in their
long term of functioning received the stigma that interpose by the govt. in the
management of the business units proved to be an utter failure because it is alleged to be
inefficient and not compatible with the changing situations of corporate world. As a result
govt. has lost interest in running business units and privatization has been preferred. This
is also true with regard to the coming SEZs. According to section 11 of SEZ Act there
will be a development commissioner appointed by the central govt. and that person will
be the overall in charge of the zones. He is also entitled to exercise all the necessary
administrative powers to ensure proper functioning of the SEZ concerned.

Why the Present Unrest?

The above discussion clicks in our mind that the govt. has deliberated the SEZ policy
with all due care in order to enhance the economic growth of India. Since policy can be
changed with the change of government therefore to give it a binding nature, government
has enacted SEZ Act for enforce the development envisioned by it. In a broader aspect
SEZs will create employment, quality goods and services and India will be able to bag a
good position in the international economic scenario. Therefore for the sake of argument
it can be presumed that SEZ policy is a welfare policy and all shackles to be removed
from its way of calculated success. But people from various parts of our country are
vehemently protesting against the coming up of SEZs. The question is ‘why’? Let’s take
a drive to address this question by taking into account the various concerns related
inevitably to SEZs.

Land Acquisition: Industry can not be framed in air. It needs land and by virtue of being
seventh in the world as far as territory is concerned India still has ample quantity of land.
However the quantity of land is neither adequate to support the growing need for shelters
to bulk of the people nor it is of very high productivity to meet the growing demand for
additional food grains. Irrespective of this fact we call India to be self sufficient in the
food grains but the productivity of Indian farmlands as compared in hectors with the
other countries like china is very less. Land is required for agriculture, land is required
for shelter and land is required for the economic development of the country. It is the
right of the farmer to grow crops in his land, it is the right of all human beings to seek
lands for shelter and it is the right of the government to foster economic growth of the
country in order to sustain the same in the international competition and to make a good
image of it in the family of nations. But if a question comes as to which amongst the
three rights is most competent then “all” will be the unanimous answer. But as state is
vested with a huge amount of resources it has got the power to decide which right is
given foremost importance in the given circumstances. The decision of the state may not
be matching with that of the individuals.
Our present discussion does not take into account the right to have shelter because the
lands being pointed out for the development of SEZs are non-agricultural or so called
semi-agricultural or barren lands. Therefore the present conflict is between right to
livelihood and right to economic development. The government has employed total of its
force and justification to sustain the latter. The ministry of commerce and industry has
discussed that the SEZs will be coming only on barren lands and single crop lands. But in
practice it has not been so. The policy of SEZ has already acquired the stigma of “land
grabbing policy” or a “new model of real estates business by giant developers” and the
like. People have already expressed their negative views over SEZs saying destroying
valuable agricultural plots seems especially ill-conceived, as farmers are not likely to
make an easy transition to the jobs on offer at these SEZs. For getting industrial
development sacrifice of agricultural land is non-permissible. The history shows that
most of the land acquired by the Government at minimum rates have been
commercialized and sold at market rate by manipulations. It is a scandal and will end up
in a mess. Already more than 10 farmers are committing suicides every day.[16]

The growing issue of SEZ also leads to the growth of resistance from the rural people.
Govt. and the developers are claiming that the resistance is unreasonable. Since the
meaning of ‘reasonableness’ has not been defined anywhere therefore a live example may
workout. In some area in the outskirts of Mumbai the farmers have been handed over
land acquisition notices by the authority and the developers. The local officials’ claim
that the land earmarked is unproductive but by a drive through the villages one can really
eyewitness as to how “unproductive” is the lands. Further there is a difference of opinion
amongst the officials also. According to an official from Maharashtra the policy clearly
talks about non acquisition of irrigated and double-cropping land. But this is also true that
some organization named Posco-India has acquired multiple cropping lands in Orissa.
The officials from the Karnataka Industrial Areas Development Board have said that
under the given guidelines 10% of the required can be double-cropped. The Baikampady
SEZ has been disputed as a result of the statement made by the Union Minister for
Commerce and Industry saying that 10% of the lands can be double cropped.[17]

Environmental Issue: Whenever we talk about industries, environment comes very

usually as one of the important concerns. Industry uses natural resources at a huge scale.
Proper utilization of natural resources is expected at all levels but simultaneously over
utilization, reckless operation etc. adversely affects the ecological balance. Therefore to
protect the environment from the whims and fancies of the selfish industrialists it has
become necessary to frame and implement rigid laws in order to prevent any kind of
harm to environment and also to undertake a subsequent survey to find out the necessary
implications left out on the environment by the industry. SEZs also therefore should not
be exempted from the environment regulations. In other words environment can not be
sacrificed on the excuse of economic development of the country. There should be no
compromise in this regard.

However the SEZ units are exempted from Environmental Impact Analysis under the
provision of the Environment (Protection) Act. Further, the development commissioner
will be empowered to issue consent and no objection letters in consultation with the
officers of the state pollution control board. The units, which are classified as non-
polluting industries, do not require a consent letter. The development commissioner can
give clearance without consulting the pollution control board. The units are permitted to
submit a compliance report for maintaining prescribed pollution standards. Although the
development commissioner has powers for a random check, the units within the SEZ are
free to follow their own methods to maintain environmental standards. It has also been
expected that the conflict between development and environment needs to be resolved
properly and the environmental regulations must be proactive in nature and not to be
barrier on the path of country’s economic development. If the nature of the environmental
norms remains prohibitive in nature then it will be difficult for the private entrepreneurs
to participate in the issues concerning environment.[18] Thus it can very easily be
inferred that SEZ developers as well as the entrepreneurs are in the want of more and
more relaxation in the environmental norms which the govt. is in the way of granting.

Issue of Labor Welfare: Apart from the issues deliberated above, there are other aspects
also which are required to be taken into consideration. The issue of labor is very
important. The parliament since the time of independence has enacted a number of
legislations concerning welfare of the labors. The main object behind this was to promote
the interests of the labor class and to protect them from the exploitation of the
industrialists. But a reading of the SEZ Act leaves us under the apprehension that it
hardly gives any space for the welfare of the labors. A member of the Rajya Sabha raised
a very pertinent doubt regarding this. He said “there is an ILO recommendation about the
Grievance Redressal Authority and the Development Commissioner. The ILO
recommendation is that these two persons should be different persons, but here, the
Development Commissioner has been given the authority to look after the task of
grievance redressal. This should not be done.”[19] It is further apprehended that all the
rights concerned the labor class have been tactfully withdrawn by both the central as well
as the state govt. The rights of the labor class have been attacked in this Act under
Section 49(1) which categorically says “Provided that nothing contained in this section
shall apply to any modifications of any Central Act or any rules or regulations made there
under or any notification or order issued or direction given or scheme made there under
so far as such modification, rule, regulation, notification, order or direction or scheme
relates to the matters relating to trade unions, industrial and labour disputes, welfare of
labour including conditions of work, provident funds, employers’ liability, workmen’s
compensation, invalidity and old age pension and maternity benefits applicable in any
Special Economic Zones.” Similarly, the right of the State Government for granting
exemption from the labour rights has also been deleted. The original draft was “The State
Governments may, for the purpose of giving effect to the provisions of this Act, notify
policies for Developers and Units and take suitable steps for enactment of any law:-
…….. (b) directing that any of the provisions of any State Act relating to Trade Unions,
industrial and labour disputes, welfare of labour including conditions of work, provident
funds, employers’ liability, workmen’s compensation, invalidity and old age pensions
and maternity benefits or any other activity relating to the Special Economic Zones-(i)
shall not apply to a Special Economic Zone or a class of Special Economic Zones or all
Special Economic Zones; or (ii) shall apply to a Special Economic Zone or a class of
Special Economic Zones or all Special Economic Zones only with such exception,
modifications and adaptations, as may be specified in the notification;”. Existence of bold
portion would also invite competition among the states in withdrawing the rights and
facilities of the workers. So the entire bold portion has been withdrawn from the Bill
before its adoption. Section 3 (4) of the draft gave right to set up and notify a Special
Economic Zone without referring the proposal to the State Government. That also has
been amended.[20] It is also alleged that SEZs are centers of immense exploitation. The
zones are declared to be “public utility services” and that in effect bans trade unionism
and application of labor laws. Minimum wages are not implemented; employees are
forced to work overtime without any extra payment; safety equipments are not provided
adequately; crèches are not provided; instances of sexual harassment are very common.

Legal Recourse to Oppose SEZ.

To counter the mechanism of SEZ people have not only started protesting vehemently but
have also knocked the doors of the judiciary to strike down the policy as well as the Act.
Several writ petitions and public interest litigations have been filed in various High
Courts as well as the in the Supreme Court of India. An advocate Manohar Lal Sharma
filed a PIL in the Supreme Court seeking a CBI probe into the alleged land scandal. He
contended that vast track of fertile lands have been acquired illegally in Delhi, Kolkata
and Mumbai. He has also submitted graphic details and alleged that there is an unholy
nexus between the industrialists and the politicians. He also brought in to the notice of the
Court that in those places police has used its force to humiliate and assault the people in
order to receive the possession of the lands concerned. He prayed before the Court to
grant interim stay and to direct the lands to be given back to the real owners.[22] In
another instance the petitioner contended that in some places the lands were acquired
without the consent of the farmers. The Acts under challenge are Centre's Special
Economic Zones Act 2005, National Capital Region Planning Board Act 1985 and
Haryana's SEZ, 2005. The petitioner has particularly prayed for nullifying the colourable
exercise of power which is both malafide in law and malafide in fact in respect of
Reliance which has been given about 1700 acres of land for Garhi Harsaru SEZ site in
Haryana. In response to that petition the Supreme Court issued notice to the centre, states
concerned and the developer to examine the conflict arisen.[23] In another writ petition
the petitioner sought to quash the MOU signed between govt. of Punjab and Reliance
Industries limited for setting up of SEZ on the alleged ground of blatant violation of land
allotment policy.[24] In another writ petition the adequacy of the compensation given to
the farmers was challenged before the Court. The Court granted liberty to the farmers to
challenge the adequacy of the compensation provided.[25] In Allahabad High Court a
writ petition was filed to restrain the government from finalizing the setting up of a SEZ
in Noida on the alleged ground that the lands were acquired at the pittance of the farmers
and it is in violation of Article 14 and 300(a) of the Constitution.[26] In another petition
the entire SEZ policy of the govt. was challenged on the ground that it will create a huge
financial loss and the economy may collapse. But the Court refused to entertain the
petition on the ground that it was purely a policy matter but left a remark that the Court
can interfere in the policy matter in the individual cases when the party concerned is
personally affected.[27]
Expert’s Opinion
Opinions given by experts find a very specific reference under the Indian Evidence Act
1872[28]. The jurisprudence behind providing a clause for expert’s opinion is to
substantiate the evidence submitted before the Court with the help of a person who has
undertaken a through study or research in that particular subject matter which is being
used as evidence. But the scope of using expert’s opinion is not only limited to the Court
cases but in any other place where some views is expressed and the author tries to justify
them. In the present article also there is ample opportunity to use opinion of the persons
having sound political background as the matter of SEZ has already obtained political

According to Mr.V.P.Singh, SEZs are models for the development of the country. These
models should be inclusive as to every one has a share in the cause. But the present
model is so designed that some people pay the price and suffer. If in a market economy
the buyers and sellers have no choice to exercise then it is not market economy in its true
form. In a democracy everyone dictates its term over the government but the farmers can
not. It is injustice. Vast tacks of prime agricultural lands have been taken over by the
govt. of UP and other states. If this goes on then activities of the landless laborers will
come to an end. In this way the country will advance to a major socio economic crisis.
[29] The farmers have been given the price of Rs 150 per square yard in Dadri. The same
land without any development has been valued at Rs 5,700 per square yard by Reliance
and it is demanding a loan from the bank on the basis of this assessment. The thesis is
that the rate at which the company has valued the land for the bank appraisal should be
the real value of the land. If it is not, then the bank is being cheated. And if it is the real
value, then the farmers are being cheated.[30]

Recent Developments
The first and second world wars taught a great lesson to the people of the world. After
these two disasters democracy has been seen as a global entitlement. People started
abhorring totalitarianism and dictatorship as those two have already proved their status.
Presently democracy is the best alternative available. Since democracy is a government
by the people, of the people and for the people therefore public opinion plays a crucial
role. A true democracy is the rule by the majority and willingness of the minority to
accept the rule. The role of minority is very important because it brings into the notice to
the public about various flaws in the present government and suggests for the reform. If
the present govt. does not acknowledge and address the flaws pointed out by the
opposition then there is a reasonable apprehension that in the next election people will
not give them a chance to rule. Therefore the majority can not blatantly deny the role of
opposition. This has also been true with reference to our present Indian government as far
as the SEZ policy is concerned. Keeping in view the growing opposition and grievance
amongst the people the govt. had to give a fresh thought to the SEZ policy and some
necessary amendments were brought in. The measures taken are:

1. The policy of SEZ has already become a political football that worries the present
govt. of inviting popular backlash. The controversy has already become a major election
issue. Therefore the govt. decided not to grant permission for new SEZs until and unless
the rehabilitation policy put into place properly. This is due to the political cost involved
in the issue being measured too high to bear.[31]

2. The new National Rehabilitation and Resettlement (NPR) 2006 policy suggests that
first priority should be to provide land for land. People whose lands are acquired should
get jobs in the new industries established on their land. The compensation package
includes allotting a free house site to the affected family, allotting cultivable land and a
rehabilitation grant equivalent to 750 days minimum agricultural wages, giving fishing
rights where dams are made.[32]

3. The govt. has further decided to make the final version of the policy (NPR) legally
enforceable. “This kind of policy will have no meaning unless it is enforceable in a court
of law’’ said Raghuvansh Prasad Singh, Minister, Rural Development. This policy
introduces the concept of Social Impact Assessment (SIA) along with the current norm of
Environmental Impact Assessment. The SIA would also involve public hearings on
displacement-related issues, loss of livelihood, compensation, effects on family. Sources
said there is also a proposal to set up a statutory National Rehabilitation Commission to
ensure “independence” of the monitoring mechanism.[33]

4. New ceiling has been imposed on the size of SEZs. Minimum processing area has been
raised from 35% to 50%. This new norm has already upset some of the developers of
multi-product SEZs which had to cut down certain plans chocked out earlier.[34]

5. Speaking at a FICCI meeting, the PM said issues such as land acquisition and
displacement of people and their rehabilitation and resettlement should be transparently
addressed. Urging the Indian industry to be sensitive to the need to empower the weaker
sections of society, Mr. Singh said industrial development is not a zero-sum game.[35]
According to the PM the policy of SEZ is irreversible but since it is exposed to certain
problems which can not be dismissed. It is the strength of our democracy. A mechanism
is to be set up to address those gaps in the policy. There will be a comprehensive review
of Empowered Group of Ministers (EGoM) with reference to the pending approvals. He
said “I do believe that we should address these concerns if we want the policy to succeed
in the long run”.[36]

6. The other developments include i) Area of an SEZ capped at 5000 hectares; states can
fix lower ceiling, ii) state govts are barred from acquiring land, developers will have to
do it of their own, iii) at least one job per family of those displaced, iv) developers to
devote at least 50% area for core activities like manufacturing v) list of non-processing
activities may be reviewed.[37]

7. One more step has been taken to make special economic zones more acceptable to
critics. State governments have decided not to give any tax exemption to non-
processing[38] areas in SEZs. As a result of this decision states levies on building
material and fuel are now expected to be applicable with reference to non-processing
activities in SEZs.[39]
Some Safeguards
When the govt. undertakes a project or policy in a democratic country then the people
have reasonable expectation to be benefited without any kind of detriment to any section
of the society. SEZ policy is also not out of this test. After all the underlying philosophy
behind is to generate more employment and advance to the cause of equitable
development. To fulfill the above objective it is necessary to take the following safety
measures into consideration.

Corporate Social Responsibility: Corporate social responsibility (CSR) is a concept that

suggests that commercial corporations have a duty of care to all of their stakeholders in
all aspects of their business operations. CSR argues that enterprises should be obliged to
make decisions based not only on financial/economic factors (e.g. Profits, Return on
Investment, dividend payments etc.) but also on the social, environmental and other
consequences of their activities.[40] In the context of SEZs the concept of corporate
social uprightness is very important. The main justification behind putting the SEZs in
the scanner of CSR is ‘doctrine of enlightened self-interest’. According to this doctrine,
the motive and interest for companies engaging in social responsibilities is to enhance
their reputation and image both locally and internationally. Corporate social
responsibility must be taken into consideration to respect environmental concerns; to not
to deprive the indigenous people from their long time entitlements; to ensure social
security measures to the people working and the like in those de-regulated zones.[41]

Cost-Benefit Analysis: The concept of cost benefit analysis is very popular in

Economics. Cost benefit analysis refers to analysis of the cost and benefits involved in a
project undertaken. Here the terms ‘cost’ and ‘benefit’ are understood in context of the
society and calculated in terms of money. If the social cost is less than or equal to the
benefits derived then the project is undertaken. The concept of cost-benefit analysis is
very pertinent with respect to the coming SEZs.

According to Mr. R. Venkatesan “For the Government, profit alone cannot be the motive
as it has an obligation to ensure that such projects do not adversely impact the people. To
gauge the likely impact of a project on a State's economy, a Social-Cost Benefit Analysis
(SCB Analysis) is often commissioned. Computation of social profits at the economic
hurdle rate is a key step in assessing whether the project is in the national interest and for
computing the kind of concessions that can be provided by the Central/State
governments, such as tax concessions or waivers, or giving it SEZ (special Economic
Zone) status. Such an approach allows the assessment of the impact of a project on the
national economy, unlike financial analysis which has a narrow perspective — of profit
accruing to the project, and to the stake-holders”.[42] The SEZs in India have got
momentum from that of China. But we should remember that there are differences
between the two models. The lacunae inherent must be addressed properly. The fiscal
policy in promoting SEZs should be such that a zone generates more revenue than an
industry would. The factors like employment and personal income tax must be
considered thoroughly well[43]. It should be ensured that proportion of employment in
the SEZs is higher than that of the displacements caused due to setting up of the SEZs.
Keeping in view the guidelines referred under section 5(1) of the Act vis-à-vis the
amount of direct and indirect tax exemptions, the cost benefit analysis has to be worked
out and a set parameter be fixed based on which performance of each SEZ has to be
assessed. The enormous revenue loss of Rs. 97,000 crore reportedly estimated by the
National Institute of Public Finance and Policy, has to be counter balanced by earning for
an objective assessment of the “success” of the SEZs as otherwise the common man have
to bear the brunt of additional taxes.[44]

Sustainable Development: The coming up of SEZs must be put under the scanner of
sustainable development as it is being emphasized world wide that development be it
social, economic or political must bear substantial value. While putting in the context of
Indian SEZs three aspects of sustainable development must be taken into consideration.
These three aspects are economy, environment and society. A summation of the three
aspects tell us that SEZs must be so formulated that they can ensure production of goods
and services in a continuous basis, avoidance of sectoral imbalances, restraint from over
exploitation of natural resources, maintenance of biodiversity, atmospheric stability,
achievement of distributional equity, adequate provision of social services and the like. If
these aspects are taken care of with comprehensive and proper deliberation then SEZs
can generate sustainable value. SEZs should be envisaged as a self-sustaining value
creation proposition. In other words they should benefit the society in tremendous

Social Justice: The constitution of India embraces social justice in its preamble. The
directive principles of state policy are embodied in the constitution to fulfill the noble
objective of social justice. It is thus expected that whatever policy or measure being taken
by the state must ensure advancement of the cause of social justice. The policy of SEZ is
also comes under the same footing.

Dr. Bhimrao Ambedkar, one of the main visionaries of the constitution of India,
advocated democracy in every field: social, economic and political. For him social Justice
means maximum happiness to the maximum number of people, upliftment of the poor,
backward and downtrodden.[46] The present trend to set up SEZs shows lands
(sometimes even agricultural) are being taken up for establishing industry. This
phenomenon resembles with the situation that emerged in Soviet Russia under the
dictatorship of Stalin. In that regime state sponsored land-grab mechanism reached its
peak. Millions of peasants were deported, the protests were suppressed in bloodily
manner, and country sank into starvation. The object behind doing so was to accrue the
increasing number of peasants to industry. The immediate effect was reduction of Soviet
agriculture to a stage of decline from which it has not yet recovered. The destruction of
the Soviet peasantry, who formed three quarters of the population, was not only an
economic but a moral disaster for the entire country.[47] As a result of this present
motion of SEZs there comes a web of complex land laws restricting the freedom of
enterprises to acquire land and the freedom of individuals to sell land in the name of a
dubious cause called Social Justice. There is no Social Justice in the State playing
facilitator to get around a web of laws that owed their existence in the first place to the
State. The current approach to SEZ Land Acquisition with the State at its heart fails the
tests of Social Justice. There is no Social Justice in the State playing an active role in
Land Acquisition for private enterprises.[48] Therefore it should be taken care of.

The development process in India presently exposed to two fold challenges. On the one
hand, how do we make our agriculture more productive so that we maintain our food
security? On the other hand, how do we increase the manufacturing base to absorb a large
army of unemployed and underemployed labour in industry? India is an aspiring nation
of young people, and unless these challenges are addressed with appropriate policies, the
country is at serious risk of social and economic Balkanization.[49] The protests being
organized in the various parts of the country, the views being expressed continuously
through the media clearly shows that there is something genuinely wrong. In such a
circumstance it would be unfair to blindfold the eyes and drive the dream by bulldozing
the expectation of millions of people. When a country comes up to be economically
developed then one should not be under the impression that it is the industry which only
contributes. If economy is conceived to be a hanging bridge then agriculture and industry
are the two pillars of it. If one is sacrificed at the benefit of the other then it does not
remain bridge at all. We should try to give equal importance to both of them rather than
getting mad over any of them. Development should to gather at one pocket, let it spread
throughout the country in all aspects, all factors. This is true development. A man gains
belly because all the food gathers in a particular place, had it been spreading all over the
body then he would look slim and feel comfortable. The train of development travels
over the two tracks made simultaneously by agriculture and industry. If one track is
absent then it is impossible to drive the train.

[1] Special Economic Zone; retrieved from:, visited on 22.1.07.
[2] Industries & Commerce Department - Policy framework for Special Economic Zones
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[3] Deardorff's Glossary of International Economics, Retrieved from: http://www-, visited on 23.1.07.
[4] “Industrial Policy”, retrieved from: Visited on 22.1.07.
[5] Sangita Mulji, “Special Economic Zones”, From Lawyers Collective, Vol.21, No. 9,
October 2006, p.8.
[6] Aradhana Aggarwal, “Special Economic Zones: Revisiting the Policy Debate”,
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[8] International Convention on Special Economic Zone, March 21 2002, New Delhi,
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[9] Ramachandra Bhatta, ‘Karnataka: SEZs and the Environment’, retrieved from:
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[10] The Gazette of India, No. 31. The Special Economic Zones Act, Dated 23rd June,
New Delhi.
[11] Id
[12] Retrieved from:, visited on 18.1.07.
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[14] N.K.Patel, SEZs-Reform to Reality-1, Times Property, The Times of India,
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[17] Dionne Bunsha ,‘Rural Resistance’, Frontline ,October 20. 2006.
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[19] Labor Issues in Parliament on Special Economic Zones, Published in ‘Working
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[20] Chittabrata Majumdar, THE SPECIAL ECONOMIC ZONES BILL 2005, Published
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Class’ on August 2002, retrieved from:, visited on
[22] PIL filed in SC against land acquisition policy for SEZs, Retrieved from:, published on
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[23] SC notice to Centre, states on SEZ petition, retrieved from:, published on 7
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[24] Writ petitions challenging Reliance SEZs, retrieved from:, published on
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[28] See Chapter II (Relevancy of Facts) of Indian Evidence Act 1872, Sections 45 to 51.
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[38] Non Processing Area refers to real estate and other businesses that fall outside the
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[39] “States limit sops to SEZs”, The Telegraph, Front Page, Calcutta, Sunday, 6 May,
[40] “Corporate social responsibility”, Wikipedia the Free Encyclopedia, Visited on
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[45] J.P. Singh, “Special Economic Zones: Do they create Sustainable Value”? Updated
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