Special Economic Zones

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Special Economic Zones

• Final lap in the race to the bottom
• National Centre for Advocacy Studies, Pune

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What is an SEZ?

• .it is a specifically delineated duty-free
  enclave and shall deemed to be a foreign
  territory for the purposes of trade operations
  and duties and tariffs
• The purpose -
• ... to provide an internationally competitive
  and hassle-free environment for exports

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a background

• it started with the Export Processing Zones in
  the mid 1960s
• a total of 8 export processing zones established
  to boost export and manufacturing Kandla and
  Surat (Gujarat), SEEPZ (Maharashtra), Chennai
  (Tamil Nadu), Falta(West Bengal), Noida(UP),
  Cochin (kerala), Vishakhapatnam (AP)
• in 2000 the SEZ policy was brought in to attract
  more investments foreign and domestic state
  policies were made
• In 2005 SEZ Act and in February 2006 the SEZ
  rules notified by the Ministry of Commerce

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what is special?

• duty-free! exemption from taxes, various
  subsidies and tax sops
• hassle-free! exemption from stringent labour and
  environment regulations
• foreign enclave!
• single window clearance! BOA_ APPROVAL COMMITTE
• land acquisition upto 1000 ha
• Only 25 of the area for industrial activity
  the rest of the area for entertainment and
  residential as well as other commercial
  activities!

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the sez act 2005 and rules 2006

• have created a legislative framework that
  supports the an entirely new structure for
  approval of projects in the country
• all sez projects to be routed through the state
  government to a BoA of the MoC (the joint
  secretary MoEF is a member)
• in principle approval gt Formal approval gt
  Notification of SEZ within a stipulated time
  frame
• at the state level an approval authority with the
  development commissioner as the chief officer

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• The Central Act is silent on land acquisition
  procedures land is a state subject and
  Statement by Minister that state governments
  should stay out
• The SEZ rules do mention that the land can be
  acquired by the developer only after BoA approval
• the exact details of the identified area are to
  be provided by the developer after approval and
  before notification
• Chapt2 Sec4 says that the central government
  after notifying the SEZ, if it considers
  appropriate, can subsequently notify, any
  additional area under the SEZ
• guidelines for notification of sezs are silent on
  environmental and ecological concerns
• both the act and the rules remains unclear at
  what stage and under what conditions would the
  sez require an environmental clearance
• the sez rules mention that environmental norms
  have to be adhered to by individual units and
  pollution control clearance, wherever required,
  will have to be part of the consolidated
  application submitted for approval

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• single window clearance feature makes the
  Approval committee at the state level under the
  DC responsible for approval of all sez units and
  even compliance to conditions of approval if any
  are to be monitored by the AC
• entry into the sez will be open to authorised
  persons only a physical boundary will be built
• chapter viii-sec 51 makes the sez act 2005 makes
  this an act with over-riding effect
• and grievances related to the act can only be
  filed with courts designated by the state
  governments which will only be for trials related
  to civil and other matters of sezs. No other
  courts can try a case unless it goes through the
  designated court first

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EIA notification 2006 and SEZs

• Schedule 1of the EIA notification, 2006 issued by
  the Ministry of Environment and Forests, under
  item 7c covers industrial estates/parks/complexes/
  areas, export processing zones (EPZs), Special
  Economic Zones (SEZs), Biotech Parks, Leather
  Complexes
• The above categories have been exempted from the
  requirement of a public consultation
• in the 1994 notification an amendment was made in
  2001 that exempted SEZs from Public hearings
• Construction projects are out of the perview of
  the EIA notifictaion

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Sez projects requiring EC
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Special Condition!!

• If any zone with homogeneous type of industries
  (under sections of chemical and
  petrochemical/bulk drug industries) , or those
  Industrial estates with pre defined set of
  activities (not necessarily homogeneous), obtains
  prior environmental clearance, individual
  industries including proposed industrial housing
  within such estates /complexes will not be
  required to take prior environmental clearance,
  so long as the Terms and Conditions for the
  industrial estate/complex are complied with

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Ambiguity in the law

• Multi-product, single product zones, tourism
  zones what would be the regulatory mechanisms?
• Entire SEZ clearance vs. clearance for units
• Single window clearances and roles of the
  approval committee
• No mention of the role of the Pollution Control
  Board
• No mention of Coastal Regulation related
  provisions in the sez rules and act. CRZ
  Notifications make space for SEZs with almost no
  conditions and regulation

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Impacts and concerns

• economic logic will the chinese model work? Is
  it relevant? Revenue losses predicted 1,60,000
  crores
• the social implications loss of livelihoods,
  land grab 1,25,000 ha will be acquired for 400
  projects, impacts on farmers, fish workers,
  agricultural labourers and exploitation of labour
• environmental costs not computed costs of loss
  of forest and other common lands large scale
  exploitation of water resources coastal lands
  and lines pollution air and water e-waste
  etc Special Tourism Zones as part of SEZs
  bio-tech parks corporate farming and food parks
  - biodiversity
• governance issues the power of all regulatory
  bodies is in question apart from that of local
  self governments panchayats as well as the
  unprecedented power in the hands of the
  Development commissioner the chief authority