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									           PARLIAMENT OF INDIA
                    RAJYA SABHA

DEPARTMENT RELATED PARLIAMENTARY STANDING
         COMMITTEE ON COMMERCE

                        EIGHTY THIRD REPORT


                              ON


              THE FUNCTIONING OF
        SPECIAL ECONOMIC ZONES

 (PRESENTED TO HON’BLE CHAIRMAN, RAJYA SABHA ON 20TH JUNE, 2007)
   (FORWARDED TO HON’BLE SPEAKER, LOK SABHA ON 20TH JUNE, 2007)


     (PRESENTED TO THE RAJYA SABHA ON THE 20TH AUGUST, 2007)
  (LAID ON THE TABLE OF THE LOK SABHA ON THE 20TH AUGUST, 2007)




                RAJYA SABHA SECRETARIAT
                       NEW DELHI
               AUGUST, 2007/ SRAVANA, 1929 (SAKA)
                                   CONTENTS


                                                                            PAGES



1.   COMPOSITION OF THE COMMITTEE

     I.      COMPOSITION OF THE COMMITTEE ON COMMERCE

     II. COMPOSITION OF THE SUB COMMITTEES

2.   PREFACE

3.   REPORT

     Chapter I. Introduction
     Chapter II. Written and Oral Submissions:
                  Central Ministries/Departments
     Chapter III. Written and Oral Submissions: State Governments
     Chapter IV. Written and Oral Submissions: Political Parties and
                  Trade Unions
     Chapter V. Written and Oral Submissions: Developers,
                  Entrepreneurs and NGOs
     Chapter VI. Observations and Recommendations

4.   OBSERVATIONS AND RECOMMENDATIONS AT A GLANCE

5.   APPENDICES

     (i)       List of approved SEZs
     (ii)      Checklist on land issues, issued by Ministry of Agriculture
     (iii)      Suggestion of the Government of West Bangal for Changes In SEZs
     (iv)       Study Note on the visit of the Sub Committee for SEZs to Haryana,
               Andhra Pradesh, Karnataka, Gujarat and Maharashtra 11th to 16th
               February, 2007



6.   ANNEXURES

     (I)       Note on SEZs by Shri A.B. Bardhan, General Secretary CPI
     (II)      Note on SEZs by Shri Prakash Karat, General Secretary
               CPI (M)
     (III)     Note on SEZs by BJP
      (IV)     Note on SEZs by All India Kisan Sabha
      (V)      Note on SEZs by Centre of India Trade Unions
      (VI)     Note on SEZs by Dr. Kirit Somaiya, Ex-M.P.
               and Convenor, BJP Investors’ Cell
      (VII)    Note on SEZs by Bhartiya Mazdoor Sangh
      (VIII)   Note on SEZs by Hind Mazdoor Sabha
      (IX)     Note on SEZs by All India Trade Union Congress

7.    MINUTES

      (I)      Minutes of the meetings of the Committee
      (II)     Minutes of the meetings of the Sub Committee on SEZs
      (III)    Minutes of the meeting of the Sub Committee to finalize the draf report




                                               I

                            Composition of the Committee

                            As constituted on 5th August, 2005

1.        Dr. Murli Manohar Joshi  Chairman

         RAJYA SABHA
2.       Shri Thennala G. Balakrishna Pillai
3.       Shri Abu Asim Azmi
4.       Shri Dinesh Trivedi
5.       Shri Robert Kharshiing
6.       #Shri Rajkumar Dhoot
7.       &&Shri K. Keshava Rao
8.       &Shri Arun Jaitley
9.       @Shri Jai Prakash Aggarwal
10.      Vacant

          LOK SABHA

11.      Shri K. Francis George
12.      Shri D.V. Sadananda Gowda
13.      Shri Anantkumar Hegde
14.      Shri Radhey Shyam Kori
15.      Shri N.N. Krishnadas
16.      Shri Vikrambhai Arjanbhai Madam
17.      Shri Shankhlal Majhi
18.      Shri Ram Chandra Paswan
19.      Shri Virchandra Paswan
20.      Shri Jivabhai A. Patel
21.      Shri Jaysingrao Gaikwad Patil
22.      Shri Shisupal N. Patle
23.   Shri Badiga Ramakrishna
24.   Shri Kashiram Rana
25.   Shri Haribhau Rathod
26.   Shri S.P.Y Reddy
27.   Shri Bharatsinh Madhavsinh Solanki
28.   Shri Sarbananda Sonowal
29.   Kunwar Sarv Raj Singh
30.   Shri C.H. Vijayashankar
31.   $Shri Ashok Kumar Rawat

_____________________________________________________________________________
                 th
# Nominated w.e.f 4 November, 2005
                     st
$ Nominated w.e.f 31 May, 2006
                   th
& Nominated w.e.f 5 June, 2006
                      th
&& Nominated w.e.f 5 June, 2006
                      th
@Nominated w.e.f 11 July, 2006
                                       II

                        As constituted on 5th August, 2006

1.     Dr. Murli Manohar Joshi  Chairman

       RAJYA SABHA
2.     Shri Thennala G. Balakrishna Pillai
3.     Shri Jai Parkash Aggarwal
4.     Shri K. Keshava Rao
5.     Shri Arun Jaitley
6.     Shri Banwari Lal Kanchhal
7.     Shri Moinul Hassan
8.     Shri Rajkumar Dhoot
9.     Shri Dinesh Trivedi
10.    Shri Robert Kharshiing

       LOK SABHA

11.    Shri Omar Abdullah
12.    Shri C.K. Chandrappan
13.    Shri D.V. Sadananda Gowda
14.    Shri Radhey Shyam Kori
15.    Shri N.N. Krishnadas
16.    Shri Jivabhai A. Patel
17.    Shri Virchandra Paswan
18.    Shri Shisupal N. Patle
19.    Shri E. Ponnuswamy
20.    Shri Gingee N. Ramachandran
21.    Shri Kashiram Rana
22.    Shri Haribhau Rathod
23.    Shri S.P.Y Reddy
24.    Shri Nikhilananda Sar
25.    Shri Bharatsinh Madhavsinh Solanki
26.    Shri Sarvananda Sonowal
27.    #Shri Manjunath Kunnur
28.    $Shri Amitava Nandy
29.    *Shri Braja Kishore Tripathy
30.    Shri Sippipari Ravichandran
31.    **Shri Balashowry Vallabhaneni

       SECRETARIAT

      Shri Ravi Kant Chopra, JS & FA
      Shri Surinder Kumar Watts, Director
      Shri M.K. Khan, Under Secretary
      Shri D.K.Mishra, Committee Officer
_____________________________________________________________
                   st
# Nominated w.e.f 31 August, 2006
                      st
$ Nominated w.e.f 31 August, 2006
                   th
* Nominated w.e.f 8 September, 2006
                       th
** Nominated w.e.f 11 December, 2006
                                       I

              COMPOSITION OF THE SUB-COMMITTEE ON SEZs

                     (As constituted on 12th January, 2007)


1.   Shri Kashiram Rana-Convenor
2.   Shri Dinesh Trivedi-Co-Convenor

     MEMBERS

     RAJYA SABHA
3.   Shri K. Keshava Rao
4.   Shri Moinul Hassan
5.   Shri Thennala G. Balakrishna Pillai

     LOK SABHA

6.   Shri Omar Abdullah
7.   Shri C.K.Chandrappan
8.   Shri D.V. Sadananda Gowda
9.   Shri Braja Kishore Tripathy
                                   II

          COMPOSITION OF THE SUB-COMMITTEE ON COMMERCE

                      (As constituted on 30th May, 2007)



1.   Dr. Murli Manohar Joshi-Chairman

     MEMBERS

     RAJYA SABHA

2.   Shri K. Keshava Rao
3.   Shri Banwari Lal Kanchhal
4.   Shri Moinul Hassan
5.   Shri Dinesh Trivedi

     LOK SABHA


6.   Shri C.K. Chandrappan
7.   Shri Virchandra Paswan
8.   Shri Kashiram Rana
9.   Shri Braja Kishore Tripathy
                                      PREFACE


       I, the Chairman of the Department Related Parliamentary Standing Committee
on Commerce, having been authorised by the Committee, present this Eighty-third
Report of the Committee on the Functioning of Special Economic Zones (SEZs).
2.      The Department Related Parliamentary Standing Committee on Commerce took
up for an indepth study the subject of Functioning of SEZs on 8th December, 2005. The
Committee held discussions with the Secretary, Department of Commerce. It also heard
the views of the representatives of the various Ministries of the Central Government,
State Governments, Political Parties, Trade Unions, Developers/Promoters,
entrepreneurs, NGOs etc. It considered the information on the subject supplied by the
Department of Commerce, Ministry of Commerce and Industry, besides the other
papers/documents received during the course of deliberations on the subject. The
Committee held a total number of eight sittings. The Committee visited Kochi and
Mumbai from 27th to 30th January, 2006, Kolkata and Chennai from 8th to 11th July, 2006
and Noida, Ahmedabad, Kandla, Surat, Mumbai and Visakhapatnam from 6th to 13th
November, 2006, where it held discussions with the developers/promoters, farmers,
besides Officials of the concerned State Governments. The Committee took note of the
unrest among farmers on the issue of acquisition of agricultural land and constituted a
Sub Committee to interact with the farmers. The Sub Committee visited Haryana,
Andhra Pradesh, Karnataka, Gujarat and Maharashtra from 11th to 16th February, 2007,
where it held discussions (Appendix IV) with the representatives of the farmers and
Officials of State Governments.
3.     The Committee also constituted a Sub Committee to consider and finalise the
draft Report on the Functioning of Special Economic Zones. The Sub Committee
considered the draft Report in its meeting held on 5th June, 2007.
4.      The Committee wish to express thanks to all the representatives of various
Ministries, State Governments, political parties, trade unions, developers/promoters,
entrepreneurs, NGOs etc., for placing before them the material and information, required
in connection with examination of the subject
5.    The Committee considered and adopted this report at its sitting held on 8th June,
2007.


NEW DELHI;
June 8, 2007                                             DR.MURLI MANOHAR JOSHI,

                                                                           Chairman,
                                                     Department Related Parliamentary
                                                                             Standing
                                                            Committee on Commerce




                                       REPORT
                               CHAPTER I

                           INTRODUCTION


*A PEEP INTO INDIA’S TRADE HISTORY

1.1   India had commercial relations with the outside world from
ancient times.     Several sources point to a thriving system of
international trade that linked the ports of Southern India with those of
Ancient Rome. The chronicles of the Greek Periplus reveal that
Indian exports included a variety of spices, aromatics, quality textiles
(muslins and cottons), ivory, high quality iron and gems. India
imported from Rome exotic items such as cut-gems, coral, wine,
perfumes, papyrus, copper, tin and lead ingots. The balance of trade
was considerably in India's favour. The balance of payments had to
be met in precious metals, either gold or silver coinage, or other
valuables like red coral i.e. the hard currency of the ancient world.
India was particularly renowned for its ivory work and its fine muslins.
However, these items must have been quite expensive since the
Roman writer Pliny (AD 23-79) complained of the cost of these and
other luxury commodities that were imported from India. "Not a year
passed in which India did not take fifty million sentences away from
Rome", wrote Pliny. This trade surplus gave rise to prosperous urban
centres that were linked to an extensive network of internal trade.
Literary records from that period paint a picture of abundance and
splendor. The Silappathikaarum (The Ankle Bracelet), a Tamil
romance roughly dated to the late second century AD, provides a
glimpse of the maritime wealth of the cosmopolitan cities of South
India. Set in the prosperous port city of Puhar (Kaveripattanam), the
story refers to ship owners described as having riches 'the envy of
foreign kings'. Puhar is portrayed as a city populated by
enterpreneurial merchants and traders, where trade was well
regulated. The Northern India also had its flourishing urban centres.
This can be inferred from descriptions of archaeological sites in
ancient Taxila. Patliputra
_______________________________________________________
_________
* Sources of India’s Trade History
1. History and Culture of Indian People edited by R.C. Majumdar
   (Bhartiya Vidya Bhawan, Bombay, 1960-66)
2. A social, Cultural & Economic History of India by P.N. Chopra, B.N.
   Puri and M.N. Das (Machmillan India, 1974)
3.       Economy of India-Wikipedia, the free Encyclopedia
   (http://en.wikipedia.org/wiki/Economy_of_India)
4. South Asian Media Net (http://southasianmedia.net)

(now Patna) during the Mauryan period was described by travellers
as one of the grandest cities of that period.

1.2   The era of the Kushana and Gupta kings was marked by rapid
development in the sphere of foreign trade. This was facilitated by
close contacts maintained first by the Kushana Kings and later the
Gupta rulers with foreign lands.      Trade involving sea routes also
expanded. The ancient Indians were skilled navigators and appear to
have been able to make use of the monsoons long before the Greek
sea-captain Hippalus discovered them            in the middle of the first
century A.D.    The Indians traded with Arabia, the Mediterranean
countries, and their vessels went as far as Africa. Egyptain traders
used to send their ships to India, and Indian merchants, according to
the Periplus, took up permanent residence on the island of
Dioscorides (Socotra). Many ivory articles dating back to Kushana
times have been found in Begram (Afghanistan). A lively trade was
also carried on with the countries of South-East Asia and Ceylon
(now Sri Lanka). Ships were depicted on Satavahana coins, which
points to the growing importance of maritime trade.

1.3   Rome played an important part in the Oriental trade of that
period. The Romans imported many goods from India and at the
same time set up their own trading stations in the country.         A
particularly   famous   one   was   at   Arikamedu    (near   modern
Pondicherry), where Roman coins, amphoras and roman glass have
been found. Trading in commodities from Southern India was very
much to Rome’s advantage, and it is no accident that large quantities
of Roman coins have been found in that part of India. There are
records of several embassies India sent to the court of the emperors
Augustus and Trajan.     There are also records of the gift sent to
Augustus by King Pandian, who would appear to be the ruler of the
South Indian Pandya kingdom. In Pompeii, an ivory statuette of the
Indian goddess Lakshmi was found.

1.4   The popularity of Indian spices may be gauged from the fact
that when Alaric, the King of Visigoths, laid siege to Rome in 410 AD,
he demanded by way of ransom an enormous quantity of pepper,
which he was given.
1.5   India used to import various commodities from the West mainly
via the port of Barygaza (Bharukachha). In this particular period, the
Great Silk Route linking the Far East with the West and passing
through India, assumed great importance.
1.6   During the medieval period there were mainly two direct sea
routes connecting India with the West : the Persian Gulf route and the
Red Sea route. The latter was rather hazardous due to the existence
of a number of rocks, violent winds and thick fog. Therefore, sailors
and   merchants preferred the Persian Gulf route which ran from
Baghdad in Iraq to Canton in China. With the advent of Islam and the
supremacy of the Arabs on the high seas, these direct contacts were
no doubt affected to some extent but they were by no means cut off.
Ibn Batuta, the great Arab traveller (1333-1346),found at Aden a large
number of ships belonging to Indian merchants. They had brought
merchandise from many Indian ports, such as Cambay, Quilon and
Calicut. Indian goods were carried from there to Damascus and
Alexandria, the coasts of Africa, and to various countries of Europe.
From these ports Indian goods were also shipped to China, Ceylon,
Indonesia and     the Indian Archipelago. There were a number of
important ports in India which were visited by a large number of
merchants from various parts of the world, namely, Lahari Bandar on
the western coast, Cambay in Gujarat (till the sixteenth century) and
Goa and Cochin further south, Masulipatam, Pulicat and Najarkattan
on the eastern coast, and Hugli, Satgaon, Sripura and Chittagong in
Bengal. About Surat, the traveller Manucci (1653-1708) writes:
Arabian and Persian vessels which import great quantities of dates,
horses, sea-pearls and Jew's stones, in return are loaded with white
and black sugar, butter, olive and cocoa. The traders took Indian
wares, particularly textiles, and brought back precious and semi-
precious metals which were required for the manufacture of utensils
and a variety of luxury items.
1.7   The main items of Indian export during medieval times were
cotton manufactures, food-grains, oil seeds, millets, sugar, rice,
indigo, perfumes, aromatic wood and plants, camphor, cloves,
coconuts, skins of various animals, particularly rhinoceros (horn) and
leopard, sandalwood, opium, pepper and ginger.
1.8   There was a great demand for Indian cotton cloth abroad, both
in the east and the west. Indian calicoes were popular in England
and replaced the more expensive linens imported from Holland and
Germany.     Fine muslin was exported to Persia and Arabia,
particularly Egypt.    Varthema, who visited India (1503-1508),
mentions that the two ports of Cambay in Gujarat and Bangala in
Bengal, supplied ‘all Persia, Tartrary, Turkey, Syria, Barbary, that is
Africa, Arabia, Felix, Ethiopia and many islands of the Indian Ocean
with a variety of cotton and silk goods'.    He refers to about three
ships of different countries visiting Cambay each year and estimates
that the export of cotton     and silk from Bengal comes to fifty
shiploads. Moreland, author of From Akbar to Aurangzeb, estimates
that in the seventeenth century the annual export of cotton goods
amounted to nearly 8,000 bales of which 4,700 went to European
countries. There were about 150 varieties of cloth indexed as cotton
goods in the records of English factories.   The silk manufactured at
Surat, Banaras, Bengal and Ahmedabad was exported mainly to
Europe, Burma and Malaya. It is also on record that one Shaikh Bhik
or Shaikh Beg of Malda sent three ships of Malda cloth to Russia by
the Persian Gulf route. Gum lac was manufactured at many places in
Bengal, Orissa and at Dhar. It was exported in large quantities to
Persia by the Dutch. Opium, which was mostly grown in Bihar and
Malwa and internally exported to Rajputana, Berar and Khandesh,
was also shipped in considerable quantities to Pegu (Lower Burma),
Java, China, Malaya, Arabia and by the overland route to Persia.
Rice was exported from Bengal to Batavia. Tobacco, too, figures
among exports in 1623. It was sent to Arakan and Mocha. Sugar
was exported in small quantities to Persia, Kabul and even France.
Saltpetre was used in Europe as a raw material for the manufacture
of gun-powder and was imported from India. Among other article of
export were iron and steel, asafoetida, lace, myrobalan, drugs,
precious stones, alabaster and marble.
1.9   Precisious metals constituted the main items of import to India.
Although there were no gold or silver mines in India, large quantities
of both were imported from foreign countries and it was forbidden to
export them. A seventeenth century English traveller’s remarks that
‘Europe bleedeth to enrich Asia’      represented the contemporary
Western view. William Hawkins (1608-13), wrote in the same strain:
‘India is rich in silver for all nations bring coin and carry away
commodities for the same and this coin is buried in India and goeth
not out. The import of     bullion to India was estimated to range
between £500,000 to £ 600,000. Terry, another traveller (1622), was
of the view that an Indian ship returning to India after completing Red
Sea transactions was worth 2 million sterling, mostly in bullion. Quick
silver was imported from Lisbon. Lead as well as superior woolens,
silk, satin and velvet clothes came from Europe.    Chinese porcelain
was much in demand and it is on record that Akbar left behind him
crockery worth Rs.2,500,000.

1.10 Horses were another important article of import. The people of
Azaq in Turkistan specially bred horses for export to India. They
were sent in droves of 6000 or even more. The Arab traveller, Ibn
Batuta mentions that horses of good breed from Hormuz, Aden,
Crimea and Azaq were sent to India. These animals were tamed
both at Sind and Multan.

1.11      Moreland, in his India at the Death of Akbar, calculates Indian
shipping to Europe as being 6000 tons (1590-99), to the coast of
Africa as 1000 tons, to the Red Sea as 10,000 tons, and to Persia a
little less. Thus, according to him, the total tonnage of exports to
countries in the West comes to between 25,000 and 30,000 tons.
Trade to Pegu was in the neighbourhood of 5000 tons, to Malacca
and beyond, 17,000 tons, to Java 2000 tons and to the port of Achin,
3000 tons. Moreland, therefore, estimates a total of 27,000 tons as
being the trade of India with the countries lying to the east. Thus the
total volume of trade to Europe and the East was a little less than
60,000 tons, equivalent to 24,000 to 30,000 tons of today (1920)
1.12 The balance of trade on the whole continued to be in India’s
favour. Merchants from all countries frequented Indian ports and paid
in gold and silk in exchange for commodities. herbs and gums. The
British East India Company ordered the scrutiny of the list of its
exports to reduce the unfavourable balance of trade. Such was the
demand for the muslins and printed and dyed calicoes in England
that the British Parliament passed special statutes in 1700 according
to which “from and after the 29th of September 1701 all wrought silks,
Bengals and stuffs mixed with silk or herba, of the manufacture of
Persia, China or the East Indies and all calicoes, painted, dyed,
printed or stained, these which are or shall be imported into this
Kingdom, shall not be worn or otherwise used in Great Britain, all
goods imported after that day shall be warehoused and exported
again”.
1.13 Prior to the arrival of the Portuguese in the Indian Ocean in
1498, no single power had attempted to monopolize the sea lanes
that connected the ports of the Indian sub-continent with the Middle
East and East Africa on the West, and the ports of South East Asia
and China to the East. Unlike in the Mediterranean where during
Roman times, rival powers attempted to control the oceanic trade
through military means, peaceful trade had remained the norm in the
Indian Ocean. Although there were periods when rulers of the
Malabar coast and Southern India were powerful enough to demand
toll taxes from passing ships, and Arab rulers had attempted to
control the shipping lanes through the Red Sea, there had not been
any systematic attempt by any single political power to eliminate all
others from the oceanic trade that touched the Indian subcontinent.

1.14 But once the Portuguese had discovered their new route to
India, they displayed considerable zeal in seizing the most profitable
ports of East Africa, the Persian Gulf, and the Saurashtran, Konkan
and Malabar regions of India. A chain of fortified coastal settlements,
backed by regular naval patrols, allowed the Portuguese to gradually
eliminate many rivals, and enforce a semi-monopoly in the spice
trade by the middle of the 16th century. Local traders were coerced
into buying safe passes and paying customs duties to the
Portuguese. However, this attempt at a monopoly was challenged by
other maritime powers.
1.15 First the Dutch and then the English attempted to replace the
monopoly of the Portuguese with a monopoly of their own. This led
each of them to form their own fortified settlements along the chief
trading routes as alternatives to the former Portuguese trading
bastions. Initially the Dutch appeared to be more successful than their
British and French rivals, and succeeded in establishing their pre-
eminence in Indonesia, and once they had outmanoeuvered the
Portuguese, they also came to dominate the shipping out of Gujarat
and Sind. It was now the Dutch who imposed their will on most Indian
shippers, exacting the taxes that were earlier levied by the
Portuguese. At the same time, each of Portugal's European rivals
began setting up local factories and trade outlets that matched or
exceeded Goa(which was under the Portuguese occupation since
1510). Surat (1612), Madras (1639), Bombay (1668), Pondicherry
(1674) and Calcutta (1698) thus gradually overshadowed Goa, and
took over as the main centers of Indo-European trade.

1.16 All this while, India continued to maintain a positive trade
balance with respect to its European trade, and European traders
were compelled to cover this trade deficit with a steady supply of
precious metals. As long as the European traders furnished the
Indian subcontinent with gold and silver, Indian monarchs had some
incentive to tolerate the European traders even as they continued to
expand their presence, and artfully resisted political control over their
Indian activities.

1.17 But once the Mughal empire began to disintegrate, it was only a
matter of time before one or the other of the European powers that
dominated the Indian Ocean trade would find a way to extend its
domination on the Indian heartland as well. In the end, it was the
British who won the battle to rule over India, edging out their
European rivals who found other territories to colonize in Asia and
Africa.
1.18 The colonization of India was followed by the colonization of
Burma, Indo-China, the Middle East and virtually all of Africa. China's
coastal areas also came under European domination. By the dawn of
the 20th century, the US had also emerged as a colonial power, as it
took over Spanish colonies in the Caribbean and in the Philippines.
The almost complete subjugation of much of the planet by the
Western European and American powers led to an enormous and
unprecedented flow of wealth from the colonies to Europe and North
America.
1.19 The Journal of European Economic History records that India’s
share of world manufacturing output was 24.5% in 1750, and that
during the British rule, it fell to 19.7% in 1800, 8.6% in 1860, 1.7% in
1900, and stagnated at that level till the time of Independence.
India’s share of world exports was around 2.5% in 1947, which fell to
0.4% in the early eighties. Even after the substantial growth in the
nineties and thereafter, India’s exports constitute today only around
0.9% of the world trade.

CHALLENGES OF THE 21ST CENTURY

1.20 Macro economic policies have significant impact on the
economic development of a country. The ever-increasing global
competition requires the Government to adopt contemporary trade
strategies, to push up exports, with a view to pace up the overall
growth rate of the economy. For almost five decades after
Independence, India remained a restrictive trade regime in the world,
and followed the import-substitution strategy, which didn’t give the
much needed advantage in terms of export performance. The country
remained committed to achieving self-sufficiency, rather than export
growth, resulting in reduction of its share in the world exports to less
than one percent. The country, over the past decade, has
progressively opened up its economy, to effectively face the
challenges and opportunities of the 21st century. To compete in the
global market, the Government has liberalized export policies and
licensing of technology, and implemented tax reforms, providing
various incentives.

1.21 The Indian exports have been growing consistently, by over 20
per cent in dollar terms, during the four years period from 2002-03 to
2005-06. The growth rate was 20.3 per cent in 2002-03; 21.1 per cent
in 2003-04; 30.8 per cent in 2004-05; and 23.4 per cent in 2005-06.
With this growth rate, India’s share in world exports increased from
0.66 per cent in 2000, to 0.9 per cent in 2005.
1.22 The Government announced its Foreign Trade Policy (2004-09)
in August, 2004. While announcing this Policy, the Government had
stated that trade was not an end in itself, but a means to economic
growth and national development. The primary purpose was not to
merely earn foreign exchange, but to stimulate greater economic
activity. The Foreign Trade Policy was rooted in this belief and was
built around the following two major objectives:
  (i)    To double India’s percentage share of global merchandise
         trade within the next five years; and
  (ii)   To act as an effective instrument of economic growth, by
         giving a thrust to employment generation.

1.23 These objectives were proposed to be achieved by adopting,
among others, the following strategies:
  (i)    Unshackling of controls and creating an atmosphere of trust
         and transparency, to unleash the innate entrepreneurship of
         our businessmen, industrialists and traders.
  (ii)   Simplifying the procedures and bringing down transaction
         costs.
   (iii)   Neutralizing the incidence of all levies and duties on inputs
           used in export products, based on the fundamental principle
           that duties and levies should not be exported.
   (iv)    Facilitating development of India as a global hub for
           manufacturing, trading and services.
   (v)     Identifying and nurturing special focus areas, which would
           generate additional employment opportunities, particularly in
           semi-urban and rural areas, and developing a series of
           initiatives for each of these.
   (vi)     Facilitating technological and infrastructural upgradation of
           all the sectors of the Indian economy especially through
           import of capital goods and equipment, thereby increasing
           the value-addition and productivity, while attaining
           internationally accepted standards of quality.
   (vii) Avoiding inverted duty structures and ensuring that our
         domestic sectors are not disadvantaged in the Free Trade
         Agreements/Regional Trade Agreements/Preferential Trade
         Agreements that we enter into, in order to enhance our
         exports.
   (viii) Upgrading our infrastructural network, both physical and
          virtual, related to the entire foreign trade chain, to
          international standards.
   (ix)    Revitalising the Board of Trade by redefining its role, giving it
           due recognition and inducting experts on Trade Policy.
   (x)     Activating our Embassies as key players in our export
           strategy and linking our Commercial Wings abroad through
           an electronic platform, for real time trade intelligence and
           enquiry dissemination.
   (xi)    Establishment of an effective Grievance Redressal
           Mechanism to obviate/reduce litigation with the business and
           industry, in general and the exporter community in particular,
           so that all become partners in the achievement of goals and
           objectives stated in the Foreign Trade Policy.
1.24 The export performance of around US $ 75 billion during 2004-
05 was sought to be doubled to US $ 150 billion by the final year of
the present Foreign Trade Policy, i.e. 2008-09. For the first time in the
history of planning, doubling of exports in five years is being seen as
an achievable target. Exports crossed the landmark figure of US $
100 billion, to reach US $ 103 billion during 2005-06.

SPECIAL ECONOMIC ZONES

1.25 The Special Economic Zones (SEZ) model, as a successor of
Export Processing Zone (EPZ) model, has been identified as one of
the policy instruments under the Foreign Trade Policy (2004-09), for
the revival of manufacturing industry in the country, and to attain the
objectives of Foreign Trade Policy, that is, to double India’s
percentage share of global merchandise trade by 2009 as well as to
act as an instrument of economic growth, by giving necessary thrust
to employment generation.

1.26 It may be recalled that India was one of the first countries in
Asia to recognize the effectiveness of the Export Processing Zone
(EPZ) model, in promoting exports. The first EPZ in India was set up
in Kandla, Gujarat in 1965, as a Free Trade Zone. The Santacruz
EPZ in Mumbai came into operation in 1973. However, the EPZ
policy was deficient on account of several factors, like limited power
of Zonal authorities, absence of single window facility within a Zone,
rigid Customs procedures for bonding and bank guarantees,
restrictive   FDI   policy,   procedural   constraints   and    severe
infrastructural deficiencies. The EPZs were not able to emerge as
effective instruments for export promotion also on account of
multiplicity of controls and clearances, absence of world-class
infrastructure, and an unstable fiscal regime.

1.27 With a view to overcome these shortcomings and attract larger
foreign investments in India, the Special Economic Zones (SEZs)
Policy was announced in April, 2000. This policy was intended to
make SEZs an engine for economic growth, supported by quality
infrastructure, and complemented by an attractive fiscal package,
both at the Centre and the State levels, with minimum possible
regulation. SEZs functioned from 1st November, 2000 to 9th February,
2006, under the provisions of the Foreign Trade Policy. The fiscal
incentives were made effective through the provisions of relevant
statutes. To instill confidence among the investors and signal the
Government’s commitment to a stable SEZ policy regime, thereby
generating greater economic activity and employment, ihe Special
Economic Zones Act, 2005 was passed by Parliament in May, 2005,
which received Presidential assent on the 23rd of June, 2005. The
SEZ Act, 2005, supported by SEZ Rules, 2006, came into effect on
10th February, 2006.

1.28 The main objectives of the SEZ Act are:-

   ●   Generation of additional economic activity;
   ●   Promotion of exports of goods and services;
   ●   Promotion of investment from domestic and foreign sources;
   ●   Creation of employment opportunities; and
   ●   Development of infrastructure facilities.

1.29 Conceptually,      Special   Economic      Zones   (SEZs)      are
geographical regions that have economic laws, different from the
typical economic laws of the country. SEZs are believed to create a
conducive environment to promote investment and exports. Hence,
many developing countries are developing the SEZs, with the
expectation that they would provide impetus to their economies to
achieve industrialization.

1.30 The whole idea behind the SEZ policy is to impart
competitiveness to Indian exports, for achieving export-led growth in
manufacturing. The pathetic downfall of manufacturing sector since
1991 has taken a real toll on the competitiveness of the Indian
industry, with the irony that the country has one of the largest and
brightest technical manpower in this world. SEZ, as a competitive
tool, attempts to bring hope to revive our slackening manufacturing
industry, to put India in a robust situation of pursuing exports-led
growth.

1.31 The SEZ Act envisages key role for the State Governments in
Export Promotion and creation of related infrastructure. A Single
Window approval mechanism has been provided through a 19
member inter-ministerial Board of Approval (BoA). The applications,
duly recommended by the respective State Governments/UT
Administrations, are considered by this BoA, periodically.        All the
decisions of this Board are arrived at with consensus.

1.32 The developer submits the proposal for establishment of an
SEZ to the concerned State Government. The State Government
has to forward that proposal, with its recommendation, within 45 days
from the date of receipt thereof, to the Board of Approval.         The
applicant also has the option to submit the proposal direct to the
Board of Approval. The Board of Approval has 19 Members, with the
following composition:
(1)   Secretary, Department of Commerce              Chairman

(2)   Member, CBEC                                       Member

(3)   Member, IT, CBDT                                   Member

(4)   Joint Secretary (Banking Division),
      Department of Economic Affairs,
      Ministry of Finance
(5)   Joint Secretary (SEZ), Department of        Member
      Commerce
(6)   Joint Secretary, DIPP                       Member

(7)   Joint Secretary, Ministry of Science and    Member
      Technology
(8)   Joint Secretary, Ministry of Small Scale    Member
      Industries and Agro and Rural Industries
(9)   Joint Secretary, Ministry of Home Affairs   Member

(10 Joint Secretary, Ministry of Defence          Member

)

(11 Joint Secretary, Ministry of Environment      Member
    and Forests
)

(12 Joint Secretary, Ministry of Law and          Member
    Justice
)

(13 Joint Secretary, Ministry of Overseas         Member
    Indian Affairs
)

(14 Joint Secretary,      Ministry   of   Urban   Member
    Development
)

(15 A nominee of the State Government             Member
    concerned
)

(16 Director General of Foreign Trade or his      Member
    nominee
)

(17 Development Commissioner concerned            Member

)
(18 A professor in the Indian Institute of            Member
    Management or the Indian Institute of
)   Foreign Trade

(19 Director or Deputy Sectary, Ministry of     Member Secretary
    Commerce and Industry, Department of
)   Commerce



1.33 The functioning of the SEZs is governed by a three- tier
administrative set up.   The Board of Approval is the apex body,
headed by the Secretary, Department of Commerce. The Approval
Committee at the Zone level deals with approval of units in the SEZs,
and other related issues. Each Zone is headed by a Development
Commissioner, who is ex-officio chairperson of the Approval
Committee.

1.34 Once an SEZ has been approved by the Board of Approval,
and the Central Government has notified the area of that SEZ, units
are allowed to be set up therein. All the proposals for setting up of
units are approved at the Zone level by the Approval Committee,
consisting of Development Commissioner, Customs Authorities and
the representatives of the concerned State Government. All the post-
approval clearances, including grant of importer-exporter code
number, change in the name of the company or implementing
agency, broad-banding diversification, etc. are given at the Zone
level, by the Development Commissioner. The performance of the
SEZ units is periodically monitored by the Approval Committee, and
the units are liable for penal action under the provision of Foreign
Trade (Development and Regulation) Act, in case of violation of
conditions of the approval.
1.35 The SEZ Rules also provide for simplified procedures (single
window clearance) for development, operation and maintenance of
the Special Economic Zones; for setting up of units and for
conducting business in the SEZs; for matters relating to Central as
well   as   State      Government   approvals;    simplified   compliance
procedures       and   documentation,   with     an   emphasis   on   self
certification.

1.36 The incentives and facilities offered to the Units in SEZs for
attracting investments, including foreign investment, are duty-free
import/domestic procurement of goods for development, operation
and maintenance of units; 100% Income Tax exemption on export
income under Section 10AA of the Income Tax Act for the first five
years, 50% for the next five years thereafter, and 50% of the
ploughed back export profit for next five years; exemption from
minimum alternate tax under section 115JB of the Income Tax Act;
external commercial borrowing by SEZ units upto US $ 500 million in
a year without any maturity restriction, through recognized banking
channels; exemption from Central Sales Tax; exemption from Service
Tax; single window clearance for Central and State level approvals;
exemption from State sales tax and other levies, as extended by the
respective State Governments.

1.37 The major incentives and facilities available to SEZ Developers
are exemption from customs/excise duties for development of SEZs
for authorized operations, approved by the BOA; income Tax
exemption under Section 80-IAB of the Income Tax Act; on export
income for a block of ten years in 15 years exemption from minimum
alternate tax under Section 115 JB of the Income Tax Act; exemption
from dividend distribution tax under Section 115 0 of the Income Tax
Act;   exemption from Central Sales Tax (CST); exemption from
Service Tax (Sections 7, 26 and Second Schedule of the SEZ Act).
1.38 The area requirements stipulated for various categories of

SEZs are:-

Type            Minimum Area               Minimum       Area     For
                                           *Special States/UTs
Multi-product   1000 hectares              200 hectares
Multi-          100 hectares               100 hectares
Services
Sector          100 hectares               50 hectares
specific
IT             10 hectares & min. built    10 hectares & min. built up
               up                          area of 1 lakh sq. mtrs.
                area of 1 lakh sq. mtrs.
Gems      and 10 hectares & min. built     10 hectares & min. built
Jewellery      up area of 50 thousand      up area of 50 thousand sq.
               sq. mtrs                    mtrs.
Bio-tech and 10 hectares & min. built      10 hectares & min. built up
Non-           up area of 40 thousand      area of 40 thousand sq.
conventional sq. mtrs.                     mtrs
energy
(including
solar energy
equipments/
cell       but
excluding
SEZs       for
non-
conventional
energy
production
and
manufacturin
g)
FTWZ           40 hectares & min. built    40 hectares & min. built up
               up area of 1 lakh sq.       area of 1 lakh sq. mtrs.
               mtrs.
*The Special States are Assam, Meghalaya, Nagaland, Arunachal
Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal,
Sikkim, Jammu & Kashmir and Goa.


1.39 The area of the Special Economic Zones (SEZs) is segregated
into two parts viz. “Processing” and “Non-Processing”.            The
Processing area is that area where units can be located for
manufacture of goods or rendering of services, as well as         area
meant for trading and warehousing purposes. The non-Processing
area is intended to provide support facilities to the SEZ processing
area activities, and may include commercial and social infrastructure.

1.40 In the opinion of the Department of Commerce, the experience
with the Industrial areas and Industrial clusters has been that large
slums come up in the neighbourhood of these areas. Besides, the
additional population creates pressure on the Municipal System. The
SEZ concept recognizes the issues related to economic development
and provides for developing self-sustaining Industrial Townships, so
that the increased economic activity does not create pressure on the
existing infrastructure. The concept of non-processing area is for
creation of support infrastructure. The SEZ Developer would be
responsible for all the civic amenities and infrastructure, including
roads, sewerage systems, open spaces, green spaces, education
facilities, power, water supply, housing, etc.

1.41 The Urban Development Plan Formulation & Implementation
(UDPFI) guidelines issued by the Ministry of Urban Development,
Government of India, prescribe model area utilization for large scale
projects. The present guidelines and the actual proposed usage as
per actual Master Plan of a Multi-product SEZ are as under:
Land Use                  % area allocation as   Actual proposed in
                          per guidelines of      Multi Product SEZ
                          Ministry of Urban
                          Development
Residential               35-40%                 27%
Commercial                4-5%                   2.8%
Industrial                10-12%                 35%
                                                 (Processing Area)
Recreational              18-20%                 8.4%
Public & semi-public      12-14%                 6.6%
Transportation            12-14%                 7.2%
Others                    Balance                13.2%
Total                     100%                   100%


1.42 In the case of multi-product SEZs, the minimum processing
area requirement is prescribed as 35%, with a provision of relaxation
up to 25% by the Board of Approval. Since the smaller 100 hectares
sector-specific SEZs would be comparatively closer to urban centers,
and the developer may not have to provide the entire civic and social
infrastructure, the minimum processing area has been kept at 50%. In
the case of IT/ITES, there is provision for minimum built up
processing area of one lakh square meters. Similarly, in case of
Gems and Jewellery SEZs, minimum built-up area shall be 50,000
square meters and for Bio-tech SEZs, minimum built-up area shall be
40,000 square meters. Any further deviation in the non-processing
area would lead to the Government having to provide for the civic and
social infrastructure at their cost.

1.43 To regulate the usage of SEZ area by the developers, the
Central Government has notified the list of operations which can be
authorized by the SEZ Board of Approval. Moreover, the Board will
assess the size requirement of infrastructural facilities like housing,
commercial space, recreational amenities, etc., based on the
employment generation potential of the SEZ, and allow development
in    a    phased   manner,   depending    upon    the   progress    in
allotment/occupancy of units in the processing area.       In the first
phase, it is proposed to allow only a maximum of 25% of the
approved housing, while the other approved infrastructure will be
allowed to be created as per the developer’s plans, and as approved
in the Master Plan. The balance housing shall be allowed to be
established by the Approval Committee in three phases, depending
upon the progress in allotment/occupancy of units in the processing
area.

1.44 Since the SEZ Act 2005 and the SEZ Rules 2006 came into
effect on 10th February, 2006, 237 formal approvals have been given
of which 3 proposals have been withdrawn/cancelled. Thus the total
number of valid formal approvals as on date is 234 spread over 17
States and 2 UTs. Besides, 162 in principle approvals spread over 17
States and 1 UT have been granted for setting up SEZs. Out of 234
formal approvals, notifications have been issued so far in respect of
101 SEZs (as on 9th May, 2007). The details in this regards is as
follows:
S.N       Name of the      Formal approvals       SEZs notified
o.        State/UT         granted                under the SEZ Act,
                                                  2005
1         Andhra Pradesh            44                    26
2         Chandigarh                 2                      1
3         Delhi                      1                     -
4         Goa                        4                      1
5         Gujarat                   19                      7
6         Haryana                   19                      7
7         Jharkhand                  1                      1
8     Karnataka                     27                   14
9     Kerala                        10                     6
10    Madhya Pradesh                 4                     2
11    Maharashtra                   47                   13
12    Orissa                         5                    -
13    Puducherry                     1                    -
14    Punjab                         4                     2
15    Rajasthan                      3                     1
16    Tamil Nadu                    25                   16
17    Uttaranchal                    3                    -
18    Uttar Pradesh                  8                     3
19    West Bengal                    7                     1
      Total                         234                  101


1.45 Sector wise distribution of formal approvals given for 237 SEZs
is as below:
Agro                                               1
Auto                                               3
Bio-tech                                           9
Ceramics and glass                                 1
Chemicals                                          1
Engineering/Auto       engg./Stainless             7
steel/high-tech engineering
Food Processing                                     2
FTWZ        (Free       Trade     and               2
Warehousing Zone)
G&J                                                 3
IT/ITES/EH (Information Technology                 148
/Information Technology Enabled
Services/Electronic Hardware)
EHTP        (Electronic     Hardware                1
Technology Park)
Electronic Products/industry                        2
Leather/Footwear                                    4
Metallurgical                                       1
Multi Services/services                             6
Multi Product                                       9
Non Con. Energy                                     1
Petro                                               1
Pharma                                                  13
Port-based multi product                                 4
Power                                                    3
Sugarcane processing                                     1
Textiles/apparel                                        13
Writing and Printing                                     1

                                CHAPTER II
                  Written and Oral Submissions: Central
                          Ministries/Departments

2.1     The Committee considered the background note on the
functioning of SEZs, received from the Department of Commerce.
Besides inviting written submissions on the subject, the Committee
heard       the   views    of   representatives   of   various   Central
Ministries/Departments, which are summarized below:
Department of Commerce

2.2     The Department of Commerce informed that the concept of
Export Processing Zones had developed in Ireland in 1958 around
Shannon Airport. Special Economic Zones have been established in
a number of countries in the world including China, India, USA,
Indonesia, Philippines, Thailand, Sri Lanka, Pakistan, Bangladesh,
South Korea, etc. However, India was the first country in the Asia
Pacific region to set up a Free Trade Zone in Kandla in 1965.
Subsequently, seven more Zones were set up in the country, but it
did not prove to very effective model, due to multiplicity of controls
and unstable fiscal regime. Various models were studied while
formulating the policy for SEZs in India.         The policy was finally
evolved, with a view to suit the specific requirements and conditions
in India.
2.3   The Commerce Secretary deposed before the Committee and
submitted that the main objectives of the SEZs have been achieved.
There are four primary objectives for which the Special Economic
Zones have been/are being set up.          The main objectives of the
Special Economic Zones, especially after enactment of the Act were
(i) creation of additional economic activities, (ii) promotion of exports,
(iii) creation of additional infrastructure, and (iv) creation of
employment.
2.4   With regard to the number of SEZs functioning in China and
differences in respect of Indian and Chinese SEZs in respect of their
geographic locations, size, etc, China adopted regulations for the pilot
establishment of SEZs in certain regions such as Shenzhen, Zhuhai,
Shantou and Xiamen in August, 1980. The SEZ Regulations adopted
granted foreign investors the right to establish joint ventures with
Chinese enterprises and provided preferential tax treatment and other
incentives. These Regulations empowered the local governments to
work independently, without interference of the Central People’s
Government, in developing policies and the laws, to encourage
economic development and job creation. The other SEZs functioning
in China are in Hainan province (whole province) and Shanghai’s
Pudong district. The SEZs in China are very large. The conditions
in India are not comparable with that in China, where the entire land
is owned by the Government. All the SEZs there are in the Coastal
regions.
2.5   After coming into effect of the SEZ Act, 2005 and the SEZ
Rules, 2006 w.e.f. 10 February, 2006, 237 formal approvals and 164
in-principle approvals for setting up of SEZs have been granted so
far. These are spread over 19 States and three Union Territories.
These approvals cover large parts of the country. Further, approvals
also cover both small SEZs for IT/ITES and large Multi Product SEZs,
taking into account the federal nature of the Indian polity, and the size
of different States/UTs and Special Category States.
2.6   Forty-five Special Economic Zones had been notified. While
some of them had become operational, the remaining were yet to
become operational. An investment of Rs. 10,000 crore had been
made and 40,000 additional jobs for employment had been created.
The employment generated in the SEZs, converted from Export
Processing Zones, had only been 1,40,000,. Bulk of employment
was in the manufacturing sector. So far, no trading units had been
sanctioned.    However, all the labour laws were applicable in the
SEZs. Even when the Parliament passed the Act, it had said that the
Central Government could make no changes, so far as labour laws
were concerned.
2.7   Study on the functioning, levels of performance, achievements
and shortcomings of SEZs, had been made privately. According to
that study, there were a lot of procedural impediments in the SEZs.
Some shortcomings had also come out in the study report. However,
the Government had not done a formal study. Some of the State
Governments had passed their own SEZ Acts. They had provided
some relaxation in terms of public utility. Zone itself is a public utility
service.      They had delegated powers to the Development
Commissioners. In some cases they had brought out the possibility of
the contract labour. It was admitted that contract labour is over and
above the hire and fire policy.
2.8   Earlier, the Act did not provide any income-tax concessions to
the developers. It provided this concession only for the units. Now, it
provides the same for the developers also. However, whatever they
sell in the domestic area, the income-tax liability is there.     The
Development Commissioner keeps a track of foreign investment
coming in the country.        The Department does not monitor the
quantum of FDI, directly.
2.9   On the issue of land, the Department submitted that the
developer can acquire       land by direct purchase for establishing a
SEZ. In cases where State Government acquires land or the land is
in the ownership and possession of the State Government, or a State
Government Undertaking, the State Government may either transfer
on ownership basis or on lease basis to the developer, depending
upon the terms and conditions under which the land is acquired, and
on the policies and procedures adopted in the particular State.
However, as per the SEZ Rules 2006, the developer cannot sell the
land in a SEZ, and the land in the processing and non-processing
area can be allotted only on lease basis.
2.10 With regard to a mechanism to send somebody or some
agency, to go and report back to the Department about observance of
the guidelines on land acquisition and purchase, the Secretary
accepted the suggestion to ask the Development Commissioners to
independently verify in each of the cases whether the guidelines in
this regard are being followed or not. If the party does not do any
developmental work, there is a provision in the Act itself for taking
over the land by the Central Government.        Also, if the developer
either defaults or becomes bankrupt, the Central Government can
take it over.
2.11 To decide the percentage of land for residential purposes, the
Department of Commerce had put a condition for multi-product
Special Economic Zones that 35 per cent should be the minimum
processing area. The remaining 65 per cent non-processing area
would include the housing colony, shopping complex, schools,
medical facilities, water supply, power plant, sewerage, roads and all
other facilities.   A multi-product Special Economic Zone can have
between 40,000 and 80,000 people working therein, however, the
developer has to first develop the Zone.
2.12 With regard to development of infrastructure around the SEZs
and monitoring thereof, the developer is not responsible for creation
of infrastructure outside the SEZ. However, the Department provides
support for creation of external infrastructure under the ASIDE
(Assistance to States for Development of Infrastructure for Exports)
Scheme. The proposals in this regard are received from the
Development Commissioners and/or State Governments. As regards
creation of infrastructure within the SEZ, as per the SEZ Rules 2006,
a developer is required to take effective steps to implement the
approved proposal within a period of three years from the issue of the
letter of approval. The Board of approval, if satisfied, can extend the
validity period for a further period, not exceeding two years, upon a
request made in writing. Of the proposed investment of over Rs.
60,000 crore in the new SEZs, notified after implementation of the
SEZ Act w.e.f. 10th February, 2006, investments of the order of about
Rs. 11,713 crore had been made, majority of which were on creation
of internal infrastructure.
2.13 About the functioning SEZs, which had not come up to the
standards set in the objectives for functioning, it was primarily
because the infrastructure development did not take place fully, due
to lack of funds. In most of the Government SEZs, the land allotment
was made to the industrial units at low rate, even though the
Government subsequently raised the rate slightly.        However, the
rates were still much below the prevailing market rates. Whereas, in
the SEZs like Moradabad, Indore, though the Uttar Pradesh
Government or the Industrial Development Corporation in Madhya
Pradesh were supposed to build infrastructure, they had not done so.
Therefore, the number of units that came up in such SEZs was very
small, and even they had faced difficulties because of lack of power
or water.
2.14 Regarding the measures, if any, taken by Government to
enable the lower income groups and the less developed areas,
contiguous to SEZs, to benefit from the SEZ activities, and provision
of social responsibility clause for the units set up in the SEZs, though
the developer is not responsible for development of the area outside
the SEZs, yet, it is a fact that gains of economic development go to
the nearby areas also, as the ancillary industries develop in the
neighborhood of main industrial areas and the workforce from the
neighbouring places gets job opportunities. Some of the SEZ
developers have started training programs in such areas, to ensure
availability of trained manpower. The displaced persons and the
unemployed persons in such areas are going to be major
beneficiaries in such cases.
2.15 With regard to the impact of SEZs on the national/indigenous
industries, located outside the Special Economic Zones, the
Department was of the view that since the SEZ units are permitted to
source their requirement of raw materials and services from the
Domestic Tariff Area (DTA) under the SEZ Rules, 2006, subject to
the conditions prescribed therein, there is a good scope for
development of strong backward linkages with the DTA. Supply of
raw materials and services from the DTA to the SEZ are treated as
exports, and the enhanced economic activity in the SEZs will result in
increased demand of goods from DTA. All the sales to the Domestic
Tariff Area (DTA) are on payment of applicable Duty, as if the goods
are being imported, and as such, the DTA sales from SEZ are not
likely to affect the DTA industries, and a level playing field for other
industries in DTA is ensured. Further, the SEZ Act, 2005, read with
the SEZ Rules, 2006, does not allow for conversion of existing units
to SEZs.   The SEZ Rules, 2006 have been amended, prohibiting
usage of the domestically used Capital Goods by the SEZ Units, and
as such, any relocation of DTA units into SEZs has been blocked, so
that the existing DTA business activities are not affected. As only
around 20 of the new SEZs notified had become operational, it was
not possible to indicate adverse impact, if any, on DTA units.
2.16 To ensure that private parties do not misuse the facilities in the
name of establishing SEZs, and acquire property at concessional
rates, without fulfilling the obligations connected therewith, the SEZ
Act, 2005 and the SEZ Rules, 2006 came into force only from 10th
February, 2006, and are at a nascent stage. As per the SEZ Rules
2006, a developer is required to take effective steps to implement the
approved proposal within a period of three years, from the issue of
the letter of approval, and the incentives and facilities offered under
the SEZ Act, 2005 and the SEZ Rules, 2006 are available to the
developer and the units, only after the particular area is notified as
SEZ. Further, as per Section 10 of the SEZ Act, 2005, under certain
conditions, the Board of Approval may, on application or with the
consent of the developer or otherwise, suspend the letter of approval
and appoint an Administrator, to discharge the functions of the
developer. As per Section 16 of the SEZ Act, 2005, the Approval
Committee, headed by the Development Commissioner of the
respective Zone, may, at any time, if it has any reason or cause to
believe that the entrepreneur has persistently contravened any of the
terms and conditions or its obligations, subject to which the letter of
approval was granted, may cancel the letter of approval. From the
date of such cancellation, the unit shall no longer be entitled to any
exemption, concession, benefit or deduction available to it, being a
Unit, under the SEZ Act.      Same is the position for evicting the
defaulting entrepreneurs and right of private developers to evict
defaulting entrepreneurs from the SEZs. Apart from this, the units
are liable for penal action under the provision of the Foreign Trade
(Development and Regulation) Act, in case of violation of the
conditions of approval. While granting approval for establishment of a
SEZ, the State Governments also impose certain conditions. In case
of acquisition of property by private parties in the name of
establishing SEZs, and non-fulfillment of the obligations, it is for the
concerned State Governments to take appropriate action under their
respective policies and procedures since land is a State subject.
2.17 In the case of SEZs set up by the Government, the
Development Commissioners have been declared as Estate Officer
under the Public Premises (Eviction of Unauthorized Occupants) Act,
1971, and have been conferred the powers for eviction.
2.18 To see that the investors are not front men for any dirty money,
both in the case of developers, as well as the units, the
representatives of the Home Ministry, Defence Ministry are there in
the Board of Approval. Before the approval is given, the background
of promoters is sent to the Ministry of Home Affairs. Where there is
any objection from the Home Ministry, the approval is not given.
Regarding the Zones situated on the seashores, where smuggling
could take place easily in the opposite direction, rather in the direction
of the SEZs, each Special Economic Zone had a boundary wall. The
processing area is Customs bonded. There is a track of every goods
coming in or going out. The Department had entered into an
arrangement with the INFOSYS to work out a software, to keep track
of the goods coming in and going out. This software was expected to
be ready within 3-6 months.
2.19 On the need to give full support in terms of staff and monitoring
mechanism to handle the problems of coming in and going out of the
undesirable goods like AK-47, RDX and Uranium, and to be very
careful about it, the Secretary admitted that there is a shortage of
staff. Though the Commerce Ministry has been sending proposals for
creation of posts to the Ministry of Finance, the latter have not yet
sanctioned them, and the same is still pending with them. There is a
shortage of staff in various departments, including the Development
Commissionerate. The Ministry shall try to push the proposal again.
Even during the time of the previous Government, the Department
had got Cabinet approval for staffing pattern for a multi-product SEZ,
with 23 numbers of staff, including the Development Commissioner,
Joint Development Commissioners, Customs officials, etc. But
unfortunately, the system is that every time the Ministry wish to create
a post, it has to approach the Finance Ministry, even though there is
Cabinet approval. The Commerce Ministry is struggling to get the
sanction approved and has written to the Secretary, Expenditure.
2.20 All the SEZs don't have any direct access to any port or airport.
Every cargo enters either through the regular JNPT Mumbai or
Chennai port, which are having security arrangements. In Mumbai,
an X-ray examination of all the container cargo is done, before it
comes into the SEZ. When it comes into the SEZ, every single cargo,
even if self-certification is accepted, goes into the Zone, with the
knowledge of customs officials. The Customs have their own
regulations. They have the right to open a certain percentage of
cargo, and they do it. However, they don't open it at the gate. An
official goes to the unit, opens the sealed container, as it had come,
and verifies the cargo, and releases it.   Upon being asked as to
whether there were any points where pilferage could take place and
things could be changed or exchanged, the witness replied that every
container goes through the Customs. On the issue of the pitfalls like
removal or replacement of seals, he was of the view that in the case
of SEZs, it is far more secure than the domestic area, because an
SEZ is a Customs-bonded area. However, there is always scope for
improvement.
2.21 Regarding      co-ordination    between     the    Development
Commissioner, SEZ, and the Customs people, and the administrative
lacunae or shortcomings, he responded that there is always a
provision for the Department of Revenue Intelligence to get
intelligence from the Special Economic Zone. This is not prohibited
even under the Special Economic Zones Act. Self-certification only
means that in bulk of the cases and as part of the risk management,
the Customs are checking two per cent of the coming cargo
containers. It is random selection on the computer. They just take
two containers for checking. It is part of trade facilitation. Hundred
per cent checking of all the containers cannot be done.            The
Government also have a separate DRI intelligence wing.             The
Customs officials also see the remittances from banks. An exporter
gets benefit only after he gets bank realisation certificate. It is not
that somebody says that he has exported something and he gets
benefits of income tax. It has to come through the bank. They check
what has gone out. The Development Commissioner and Customs
people monitor all these things.
2.22 With regard to providing facilities for screening goods in the
containers at ports, the Department of Commerce has placed order
for the purchase of screeners which can scan the containers in the
ports. A screener is already there in JNPT. The airports also will
acquire them, so that they can screen the containers.
2.23 As per the SEZ Rules, 2006, the land can be allotted to the
private developers for setting up units only on lease basis, and the
lease period shall be co-terminus with the validity of the Letter of
Approval. In these cases, the eviction of defaulting entrepreneurs will
be guided by the conditions stipulated in the lease deed.
2.24 In respect of exemptions and incentives, the developers and
entrepreneurs do not get the same facilities. For developers, it is a
one-time measure. The developer gets benefit only for constructing
the buildings, and the maintenance thereof is not covered. Whereas,
the entrepreneur in the unit gets the concessions from day one, till he
manufactures. The investment is also much more for a developer.
The recovery is over a ten-years’ period, in a gap of 15 years.
However, if a developer builds a captive power plant, getting
incentives first as a builder, and then as a supplier, and if he has
surplus electricity, he would sell it outside SEZ, at cheaper rates, so
long as he supplies electricity to the units in the SEZ, he will get
concessions; however, the manner and the rate at which he would
sell electricity in the domestic market, was yet to be worked out. It
would be finalised in two to three months.
2.25 On the issue of setting up of SEZs in predominantly agricultural
States like Punjab, Haryana and other States, which do not have any
mono crop or fallow land, each State has its own Industrial Policy in
place and acquisition of land by the State Governments for various
purposes is governed by their respective policies and procedures.
The Board of Approval considers only those proposals, which have
been duly approved by a State Government. However, the State
Governments have been advised that in case of land acquisition for
SEZs, first priority should be for acquisition of waste and barren land
and if necessary, single crop land could be acquired for the SEZs. If
a portion of double cropped agricultural land has to be acquired, the
same should not exceed 10% of the total land required for the SEZ.
2.26 Regarding representation to the Ministry of Agriculture in the
Board of Approvals, the witness stated that they can call a
representative of the Ministry of Agriculture as special invitee. The
views of everybody are taken seriously and in the Board of Approval,
every decision is taken by consensus. Even if one Member raises an
objection, it is sent to the empowered Group of Ministers for direction.
However, the composition of the Board of Approval has been
provided in the Act itself. The Department will have no problem to
invite a representative of the Ministry of Agriculture, till the Act in this
regard is amended.
2.27 Regarding the different procedures for acquisition of land and
compensation thereof prevalent in different States, being simple in
some States and cumbersome in others, and regarding the feasibility
of having some model procedure for the sake of uniformity, the
Department stated that while there is a Central Land Acquisition Act
of 1894, extensively amended in 1971, the States have made
modifications to the same and have their own compensation and
Relief & Rehabilitation measures, depending upon a State’s
requirements and necessities. It would not be possible for the
Department of Commerce to issue any model procedure. On the
issue of fixing of an upper limit on acquisition of land for the SEZs,
there is no proposal at present with the Department        to fix any
maximum land area for establishment of SEZs.
2.28 Regarding the extent of acquisition of land for setting up of
SEZs and the type thereof, no fresh acquisition had been done in
respect of 237 formally approved SEZs. The land was already with
the State Industrial Corporations, or with the private companies. The
fresh acquisition was taking place in respect of in-principle approved
SEZs.   In some places, acquisition had not started, and in some
places, it was going on. However, the information was available with
the State Governments, because the Department does not have the
area-wise information of the agricultural land in respect of the in-
principle approvals.
2.29 Basically, the State Governments do the acquisition, if required.
So far as the Central Government was concerned, a broad framework
for the SEZs had been laid. If the parties have land in possession,
they come and make application with the State Governments, and
upon the recommendation of the State Government, it comes to the
Board of Approvals for approval. Where the party does not have the
land, but has the intention to set up an SEZ, it comes and takes in-
principle approval. It is also recommended by the State Government.
Otherwise, the Department does not give approval. After that, it is
upto the party, either to go and purchase the land directly, or request
the State Government for acquisition. Sometimes, after acquiring the
area, the party intimates the State Government of its willingness to
set up an SEZ in that area. Because of the Zoning regulations in
every State, sometimes the State Governments say that this area has
been earmarked as residential area and, therefore, commercial
activity cannot be allowed. In that event, the party has to drop the
proposal.   A proposal for SEZ had to be dropped due to the
environmental restrictions in Aravali area.   The developer, who is
SPV of Kakinada Multi-product SEZ, had purchased land directly
from the farmers, but had not been able to get contiguous area. It is
in bits and pieces. Even though the Department has given the in-
principle approval, it has not come back for the formal approval. After
acquisition of 800 acres of land by the State Government, it will be
able to get a contiguous area of 6,000 acre. It is an individual case
between the State and the party.       In some cases, the Industrial
Development Corporations have already got the land.
2.30 The guidelines for acquisition of land for SEZs have been given
wide publicity. The Department had received representations from
farmers' associations, MLAs, etc., and in such cases, it had called for
a report from the State Governments. The State Government of Tamil
Nadu had to remove the double-cropped land from acquisition, and
go for some other land in some of the cases. However, in all other
cases, because the land is a State subject, the Department is
depending upon the State Governments.
2.31 With regard to the mechanism for redressal of grievances,
against the shortcomings in implementation of the SEZ Act, all the
representations received in the Department are promptly attended to
with a view to address the grievances. The Department has also
started a Bulletin Board service and on-line chat service, for attending
to the queries and grievances through the Department’s website. As
per information available, the two companies had surrendered their
Letter of Approval granted to them:-
     (i)      M/s.Hewlett Packard for establishment of SEZ in IT
              sector at Bangalore, Karnataka.
     (ii)     M/s. C.A. Computer Associates India Pvt. Ltd. for
              establishment of SEZ in IT/ITES sector at
              Nanakramguda Village, Ranga Reddy District, Andhra
              Pradesh.
2.32 Regarding any mechanism to see that the land being acquired
was non-agricultural, one-crop or multi-crop agricultural land, reports
from the State Governments were being obtained in terms of this
requirement of the Board of Approvals. It is also ensured that
Development Commissioners give separate reports on the status of
the lands in respect of SEZs, which come up for approval before the
Board of Approvals.
2.33 In respect of the apprehensions that while the records in
possession of the farmers show the land as agricultural and cultivated
land, there could be manipulation in the current records, showing the
land as non-agricultural land, fallow land, a land without any crop or
only a single-crop land, the Secretary submitted that the Department
of Commerce will take a number of steps. Some arrangement can be
made to see that these documents are made available to the local
Gram Panchayats to have a look at it by them.        The Development
Commissioners may be asked to give a report, after physical
inspection of the land, and when the Development Commissioners go
to the site and do the physical inspection, they can also convene a
meeting of the farmers' representatives or the farmers there.
2.34 Responding to a suggestion regarding setting up of certain
SEZs on pilot scheme basis, and expanding them after evaluating
their performance and the results, instead of expanding them all of a
sudden and without having a proper assessment of their impact, the
Secretary stated that this is the time when people want to come to
India, and this is an area where we have given kick-start. The total
area in both the formally approved and the proposed in-principle
approvals, if all the in-principle approvals are given and acquisitions
are done, it just comes to 350 sq. kms. for formal approvals and 1400
sq. kms. for in-principle approvals. So, 1700 sq. kms. area in the
country of this size is not much. In China, it is about 34,000 sq.kms.
2.35 With regard to the number of employment generated in SEZs
and applicability of the labour laws therein, it was informed that 1016
units were in operation in the SEZs (in 7 Government SEZs and 12
private SEZs notified prior to the SEZ Act) providing direct
employment to over 1.79 lakh persons (about 40% of whom were
women). After the SEZ Act and the SEZ Rules came into effect, 51
SEZs had been notified.        The current direct employment in the
notified SEZs was of the order of 12,386. 5,00,000 direct jobs were
expected to be created by December, 2007.          As per experience,
indirect employment is 2-3 times the direct employment. The Labour
laws are applicable to SEZs.
2.36 The Ministry of Finance had estimated a loss of taxes to the
tune of Rs. 90,000 crore.      Considering the average tax rate to be
about 30 per cent means that there is an income of Rs.3,00,000
crore. Since the Ministry of Finance takes 20 per cent as export
profit, this income means an export turnover of Rs.15 lakh crore.
Forty per cent of the turnover is normally paid by way of wages and
salaries. As per rough estimates, about 25-30 per cent of the amount
paid as wages and salaries comes to Government in terms of indirect
taxes, by way of consumption. This means there will be an indirect
tax revenue generation of about Rs.1, 50,000 crore, while the losses
are being projected as Rs.90,000 crore. So, in the opinion of the
Ministry of Commerce, if the economic activity takes place as
planned, there would not be a loss but actually there would be a gain.
Department of Industrial Policy and Promotion


2.37 The Department of Industrial Policy and Promotion had not
conducted any study on the subject so far, because the SEZ policy in
the form of an Act, had come into existence only recently.       As a
result, it might not be a subject ready for evaluation, particularly
because the number of SEZs, where action had begun or activities
had begun, was rather limited. The domestic industry had not been
adversely affected in the process, and there had been increased
investment in the industry, because of incentives for purposes of
exports. Industries had got an additional market, that earlier might
have been domestic only and       as a result, the economic activity,
industrialisation, employment, etc. would tend to increase. If no duty
were to be paid for sales in the domestic area, the adverse effect on
the local industry would have been there. In addition, units in SEZs
also pay export tax.   By way of this arrangement, the industry is
getting better infrastructure and quicker clearances.   Single-window
clearance has become effective. The Industry is looking for better
infrastructure to grow and it has been able to get somewhat better
infrastructure. If anyone in SEZs is providing better facilities, there is
a temptation. The requirement for being in an SEZ is one dollar more
exports than imports over a five-years’ time period. So, even for
making domestic area sales, industry would find it favourable to go
and locate in an SEZ, if it can get faster clearances, and better
infrastructure.
2.38 In a situation when one industry can go to the SEZ and use all
the benefits, and by exporting a small amount, could export the rest
to the domestic area, by paying the fee and duties. But, they might
become competitive because they get all the facilities, better
amenities and quicker permissions and quicker clearances. In these
circumstances, a situation could arise where similar industries outside
the SEZs would be at a loss, or without much competitiveness. The
witness clarified that it is theoretically possible.    But an existing
industry has an advantage of lower capital cost. After ten years, the
difference will always remain there. The companies will always be
the same.
2.39 To a query as to what         development will be done by the
developer, as the markets in the country had already reached
saturation, and what would be the situation in case the country does
not get any more developers, the witness stated that as per the
estimates of the Government, about 350 billion dollars are required
for infrastructure, and the Government cannot do on its own. The
focus of the Government would be to concentrate on a few SEZs.
Therefore, the mode of the infrastructure development is envisaged
to be based on the Government's money, plus private developer's
money. The private developer in any business would come only if
there are profits.   Further, in single-product SEZs, the companies
themselves will set up the units. However, in multi-product SEZs,
developer will be somebody else and the units will be set up by
somebody else. Within a time-limit after getting the approval, the
developer has to complete the development process. He has to be in
a position to ensure that industries start coming. The developer will
do this because he has paid for it. It is in his own interest that he
develops the infrastructure quickly, so that the units can come up and
start manufacturing. There will be very few people who would want to
stay on and wait for appreciation of the value of land. The status of
development of SEZ is monitered by the Board of Approvals, which
constantly reviews it. It can revoke it if he is not taking action as per
the rules. He is required to submit quarterly, half-yearly or annual
reports to the Board of Approvals, listing out the effective steps.
There is no penalty clause. But the status can be reviewed.
2.40 The Department had not studied the result of investment in a
particular State, because earlier SEZs were very small. If the number
of SEZS is going to be as large as is being projected, the impact on
outside industries has to be studied.
2.41 Regarding the shift in paradigm from the industrial growth
model to export growth one and its desirability as well as effect on the
industrial growth outside the SEZs, the witness submitted that had
the SEZs had no element of domestic territory sales, it could have
been said that Government was seeking a model of growth which
was exported.    The fact is that any amount of sales in domestic
territory is allowed, and only over the last five years the Government
was seeking one dollar more export than in the past. This is not
exactly an export growth model.
2.42 Responding to a query as to whether the Department of
Industrial Policy and Promotion gives inputs, based on the benefits
that the Department individually observes or on the totality of the
benefits that the country as a whole would get, the witness stated that
the Department had predominantly an industry promotion role, but it
has to adopt an integrated view, to fix into the overall policy of the
Government. No Department can function in isolation and only look
at its own narrow objectives. This Department is represented on the
Board of Approvals. The unresolved issues go to the Union Cabinet,
and then to the Group of Ministers. The fact is that one has to trade
off against a possible revenue loss, with possible increased economic
activity. If it is in favour of increased economic activity, one has to
live with a little bit of revenue loss.
2.43 With regard to necessity of having large number of SEZs, some
giant sized and some small sized, not only in coastal areas but all
over the country, the witness stated that Government drew inspiration
from China. Chinese SEZ is more like an investment region, which
runs into several hundred square kilometres, so that both the
external, as well as the internal infrastructure of that place remains
viable.
2.44 Commenting on the issue of having very small areas in SEZs
for manufacturing and the rest for accommodation, malls, hospitals,
etc., the witness stated that outside industrial estates or industrial
parks, slums were coming up, because people did not have housing
and social amenities like schools, etc. In the SEZs, the idea is to
develop these two sets of development. The Government want to
have 50 per cent area for development of industries and 50 per cent
for development of infrastructure. In fact, in the multi-product area,
35 per cent is for manufacturing and 65 per cent for infrastructure,
which would include power, water, effluent treatment plant, etc. All
these have become a part of the industrial infrastructure. This brings
about a better integrated urban planning approach.


Ministry of Agriculture


2.45 The Ministry of Agriculture, vide its written note, submitted that
“the National Agricultural Policy of 2000 categorically states that the
National Land Use Policy will seek to promote “technically sound,
economically viable, environmentally non-degrading and socially
acceptable use of country’s national resources-land, water and
genetic   endowment,      to   promote sustainable   development     of
agriculture.   Measures will be taken to contain biotic pressure on
land, and to control indiscriminate diversion of agricultural lands for
non-agricultural purposes”.
2.46 The Regional Plan, 2021 for the National Capital Region
emphasizes that good agricultural land in the region should be
protected and conserved. Master/Development Plans for towns in
the Region should incorporate land suitability analysis for the land
use allocations, which would identify areas, intrinsically suitable for
settlement, agriculture, forestry, industry and recreational uses.   It
has been recommended that while preparing Master/Development
Plans for the towns, it is to be ensured that the proposed
development should not be permitted in the natural conservation
zones, planned green areas, agriculture areas, ground water
recharging areas and water bodies. The regional Plan, as a policy,
has suggested that existing cultivated land be conserved for
agriculture use, as far as possible.
2.47 The Ministry, quoting extracts from the final report of National
Commission on Farmers, under the Chairmanship of Dr. M. S.
Swaminathan, observed that the prime farmland must be conserved
for agriculture and should not be diverted for non-agricultural
purposes, and for programmes like the Special Economic Zone.
Such special programmes should be assigned on wastelands and/or
land affected by salinity and other abiotic stresses that reduce the
biological potential of land for the purpose of farming. Every State
should constitute a Land Zonation Team consisting of soil scientists,
agronomists and remote sensing specialists to earmark soils, with a
low biological potential for farming, such as wastelands, lands
affected by salinity, acidity, etc., for industrial activities and
construction. It is in our national interest that agriculture and industry
both prosper in a mutally reinforcing manner.
2.48 The total cultivable land decreased from 185 million hectare in
1980, to 183 million hectare in 2003. In the same period, the per
capita availability of cultivable land declined from 0.27 to 0.18
hectare.   During the same period, non-agricultural use of land
increased from 19.66 million hectares to 24.48 million hectares. This
decrease is mainly due to diversion of agricultural land for non-
agricultural purposes, such as urbanisation, roads, industries, etc.
Therefore, there is a concern for maintaining sustainable agricultural
production, to meet the requirement of increasing population in the
country.   During the period between 1980-81 and 1990-91, the
annual average increase in non-agricultural use of land was 1.68 lakh
hectares, whereas during the five years from 1999-2000 to 2003-04,
the annual average increase in non-agricultural use became 2.25
lakh hectares. Moreover, land has been used for non-agricultural
purpose, which is a very disconcerting picture.            The satellite
imageries and space research analysis have found that there is a
drastic reduction in agriculture land.
2.49 The net-sown area in the country is about 141 million hectare,
consisting of 55 million hectare irrigated and 86 million hectare
unirrigated. In spite of several efforts, the overall productivity of
agricultural crop is stagnant, especially for cereals, coarse grains,
pulses, etc. and, therefore, diversion of agriculture land to non-
agricultural purposes is very detrimental to the food security of the
country.    About 127 million cultivators and 107 million agricultural
labourers depend on on-farm income. The diversion of 1000 hectare
of cultivated land to non-agricultural uses will deprive about 900
cultivators and about 760 agricultural labourers of their livelihoods.
The number will be higher in terms of the population adversely
affected.
2.50 The issue of food security should be addressed with a broader
perspective. There is a need for land for common purposes also,
especially grazing of cattle. Land which is not owned by farmers, but
is used for grazing, can have adverse implications, if it is diverted for
other use, including industrial and urban use.       This aspect is as
important as the change of use from agricultural land.
2.51 Regarding diversifying the labour force in Agriculture to some
other industry, the witness submitted that there can be two
approaches. One is to develop the rural non-farming sector, the non-
agricultural sector, within the rural areas or in the surrounding areas.
In many countries like Thailand, it has happened.            The other
approach is to diversify agriculture into horticulture or marketing, etc.
providing more stability to their income. The third thing could be to
encourage agro-processing, so that there is value-addition.           The
Agriculture Ministry has started a new scheme as part of the National
Horticulture Mission, called Terminal Markets, which will be near the
consumer centers, but the collection centres will be in the rural areas,
where some amount of grading, processing, etc., can take place,
providing employment opportunities to the farmers and also for
marketing.        The fact that land is not only an economic asset, but
has   enormous     social,   cultural,   psychological     and   emotional
implications also for those deprived of the asset. Rights and access
to land are fundamental to help empower the poor, specially at the
present stage of our economic development.               This is more so,
because in spite of higher rates of growth of GDP in recent times,
there does not seem to have been corresponding increase in
employment opportunities for the rural poor.
2.52 Diverting land from agriculture does not merely mean reduction
in production or income to farmers.         The farmer is deprived of
potentials and benefits, simply because the rate of compensation,
and even the valuation process, do not capture the future potentials,
inherent in the intrinsic value of land. Regarding land acquisition,
there are old laws and practices. The sales statistics for the last five
years or ten years do not represent the actual value. However, if the
industry negotiates directly with the farmers, they can get higher
price. After the development takes place, the land value can increase
within two years. That benefit is not going to the farmers who
originally owned the land. Apart of that, some share of the Industry
can be given to the farmers. If the company does well, he should also
get a part of the profit and the land should be taken as the capital
investment by the farmer.        In many of the joint ventures, the
Government land is given as a part of investment. Similarly, farmers'
land should also be given in this way.
2.53 The Ministry of Agriculture has taken some steps in this matter.
The Union Minister of Agriculture wrote a D.O. letter in October, 2006
to Union Minister of Commerce, expressing concern regarding
transfer of agricultural land for SEZs. The latter was also provided
with a check-list is (at Appendix II) to facilitate the Board of Approval,
while taking a decision on the issue of diversion of agricultural land.
The checklist was also circulated to all the State Governments on 3rd
November, 2006 by the Ministry of Commerce, to be considered
while proposing a SEZ plan. Besides, all the States were advised to
take the following steps:-
  a)    Land Use Boards at the State Level should be revitalized.
        Whenever they do not exist, they must be created.
  b)    Land Use Policy must be evolved by all users of land within
        Government jointly and must be enforced on the basis of
        both legislation for enforcing land use as well as their
        promotional and preserving methods.
  c)    Urban Policy must be restructured so as to ensure that highly
        productive land is not taken away. Town planning should
        also provide for green belts.
  d)     Heavy penalties should be imposed against those who
         interfere with land resources and its productivity. It must be
         recognized that environmental protection cannot succeed
         unless this is done.
  e)      Rights of tribals and poorer sections on common land
         should be         protected through legal and administrative
         structures.
2.54 The entrepreneurs prefer areas which are well developed, with
good infrastructure. Such areas usually include cultivated and
productive agriculture land.     Therefore, if similar infrastructure is
developed in the wastelands/barren lands, perhaps entrepreneurs
would not have hesitation to go to those areas.
2.55 The    working    Group    of sub-committee of        the   National
Development Council on Agriculture and Related Issues on Dry
land/Rainfed farming system and Watershed Development has
recommended that efforts may be made not to allow diversion of
productive agricultural land for industrialization or urbanization.
2.56 The Ministry felt that the following aspects should be looked
into while making acquisition of land:-
  i)     India has about 18% of world’s population and 15% of
         livestock to be supported only from 2% of the world’s
         geographical area.
  ii)    Per capita availability of cultivable land declined from 0.27
         hectare in 1980 to 0.18 hectare in 2003.
  iii)   About 60 per cent of the country’s population depend on
         agriculture for their livelihood, even though the share of
         agriculture in the GDP has sharply declined.
  iv)    Diversion of agricultural land to non-agricultural activities can
         adversely affect food security, livelihood and general well
         being of those dependent on agriculture not only farmers but
         also agricultural labourers, many of whom are poor.
  v)     The value of land to a farmer has both tangible and
         intangible aspects. Even liberal amount of compensation
         does not capture the intangible aspects and also future value
         and potential. Consequently, there is a deprivation of those
         deprived of their land assets.
  vi)    Land which is uncultivable may be utilized for industrial and
         non-agricultural purposes.
2.57 Regarding acquisition of land, the Ministry of Agriculture entirely
agree that industrialisation is necessary.      We need industries for
creation of jobs. Agriculture should develop and industry should also
develop.   However, when development takes place, the share of
agriculture declines.    In the developed countries, the number of
people depending on industrial and service sectors increases, and
the number of people depending on agriculture declines. However, in
our country, sixty per cent of the people still depend on agriculture.
The creation of new jobs in industrial and service sectors is not
corresponding to the increase in the production or contribution to the
GDP. With regard to availability of uncultivable land, as per land use
classification of the country, barren and uncultivable land available is
to the extent of 18 million hectares. In many of the coastal States,
land near the coast is saline, which is not good for cultivation. This is
the area where SEZs or any other industrial enterprises can be set
up. That will not affect our food security.        China has developed
SEZs in the coastal areas. The whole concept of SEZ has come from
China. We can develop a few large SEZs in the coastal areas. The
contradictions between industry and SEZs and agriculture will be
less, if we use the coastal areas, the uncultivable areas and barren
areas, which are available, where all the infrastructure can be
provided.
2.58 The Ministry does not have the details of the land that has been
allotted to the approved SEZs, and the Ministry is not represented on
the Board of Approvals. The Board of Approvals approves the
proposal, without getting any clearance from the Ministry of
Agriculture. The Ministry should be represented at the BOA. The
land is an important natural resource and it does not pertain to
Agriculture Ministry alone, it concerns all the Ministries. On the issue
of making land a part of the Concurrent lists, the witness submitted
that they have not given a thought to it so far.
Ministry of Rural Development


2.59 Ministry of Rural Development made submissions on the
subject, particularly with reference to vital issues viz. (a) the
maximum area of land that should be acquired for SEZ; and (b) if
agricultural land is acquired, whether it should be mono-crop or multi-
crop land. The Ministry stated that:-
   (1)   SEZs should be established preferably on wastelands.
         Degraded forestlands could also be considered, but with
         higher than the usual norms for compensatory afforestation
         or reforestation.
   (2)   Where use of agricultural lands for SEZs cannot be avoided,
         single croplands in rainfed areas may be considered. Multi-
         crop lands should be avoided to the maximum extent
         possible; even incompletely unavoidable circumstances,
         multi-crop lands may be used only for strategic
         requirements.
   (3)   To the extent agricultural land is used for SEZs, there should
         be compensatory development of wastelands for the sake of
         food security of the country.
   (4)   Although it may not be possible to define quantifiable
         parameters for the size of the land to be acquired for a
         particular SEZ, since the area of land required varies from
         SEZ to SEZ, depending upon their purpose, it may be
         pointed out that only the minimum area of land necessary for
         the core functions, and a small proportion of that for allied
         functions, may be acquired. There should be a symbiotic
         relationship between the core functions and allied functions.
         Amongst the latter, there should be a list of activities that
         may not be allowed on SEZs, e.g., setting up of golf courses
         or other such recreational facilities with large land
         requirements.
   (5)   The total area of land that could be allowed to a SEZ should
         be based purely on technical requirements, and this
         determination should be done by independent assessors,
         through a transparent mechanism, applying stringent criteria.
   (6)   SEZs should be applied as instruments of distributive
         growth, so that the development of wastelands and
         backward areas could also be triggered by the roads,
         communication networks and other infrastructure to be set
         up for the SEZ sites.
   (7)   Balanced regional development of the country could also be
         promoted by maintaining a State-wise balance, while
         allowing setting up of SEZs.
2.60 Regarding the land use in the SEZs, Ministry’s interaction with
the Department of Commerce and the type of land which can be used
for an SEZ and its location, the witness replied that to the best of his
knowledge, no formal consultation had taken place between the two
Ministries. Further, as far as possible, the practice of setting up SEZs
on agricultural land should be dissuaded. The Ministry’s views are
limited to particularly those places where there is displacement of
people and acquisition of land. Every alternative should be explored
prior to displacement, and all the alternatives should be explored,
prior to taking any agricultural land for SEZ purposes. When all the
other alternatives have been explored the acquisition of agricultural
land should be considered.
2.61 Regarding the size of the land which should be given in case
agricultural land is acquired, he stated that so far the Ministry has
not taken a view on the size of acquisition, but it should be limited to
the least possible, as any acquisition of agricultural land has strong
ramifications on agricultural productivity. With regard to the issue of
maximum limit on agricultural land, and whether it should be one-crop
land or multi-crop land, it depends on case-to-case basis, depending
upon the size of the SEZ, and if there is a minimum benchmark, the
Ministry would be able to give its views. Regarding the fairness of
compensation, the amount of compensation should be fair and must
be paid in time. There are cases where amount has not been paid for
a long time. According to him, a new policy was on the anvil and the
issue would be taken into consideration.
2.62 Certain queries viz. how will the land use be reconciled,
considering that the Land Acquisition Act was a Central Act, and the
land was a State subject, whether the Ministry would be in a position
to provide any special package to farmers, and how these SEZs
would help the rural development, the witness replied that the
Ministry was working on two parameters. First, it was not in favour of
SEZs and second, land is a State subject.           The Ministry had a
Rehabilitation and Resettlement Policy since 2003, but the policy did
not have any teeth, nor it was properly implemented. In fact, it fell far
short of expectations, because it never got converted into a statute.
In the new enlarged revised policy, called the National Rehabilitation
Policy, 2007, the Ministry is planning to convert this policy into an Act.
That would foreclose some of the issues.             The consequential
changes in the Land Acquisition Act of 1894 will also be taken into
account.
2.63 Further, the Government give cash compensation, as has been
the past practice. It does not ensure any long-term increase or
betterment in the quality of life of the person who has been displaced.
The Ministry would like to look at the compensation as a package,
rather than as a lumpsum award.           The Ministry would like the
displaced persons or members of their family to be made employable
in the SEZ area itself by the industries, by ensuring a mechanism of
training and skill development in the policy. Besides, they should
also be given first preference in employment in that area. It should
be ensured that there is some living accommodation, a rural housing
facility to members of a displaced family.         In cases of large
displacement, it would be incumbent on the requiring body to set up a
displacement colony, where the basic infrastructure of health,
housing and education must be provided.
2.64 The responsibility of the acquiring body is not limited only to the
zone in which they operate. Even the periphery around which they
operate and the areas on which they will have an impact, those are
as should also come under the development responsibility of the
acquiring body.    Further, in an area in the radius of about 20
kilometres outside the Zone, the acquiring body must partner the
State Government in development of infrastructural facilities in that
area.
2.65 As to whether there should be some punitive clauses, the
witness stated that there will be punitive clauses. In fact, quite a
large part of the compensation will have to be given prior to the
displacement itself. The State Governments will need to put in place
mechanism, as per the Act, which will oversee the implementation.
There will be an oversight mechanism and implementation process in
place.
2.66 The Ministry was mooting 'land for land' policy, where land
could be provided as possible substitute for the land. But, if such
compensatory land is just not available, cash compensation will be
provided, alongwith other earlier narrated considerations.
2.67 Generally there was no consultation between Ministry of Rural
Development and Ministry of Commerce & Industry. The broad view
was that the Ministry was opposed to the acquisition of prime
agricultural land, for setting up of SEZs and as far as possible, it
should be avoided.     Commenting on the quality of the land for
acquisition and compensation aspect connected therewith, he stated
that much of the land records are very old-dated, and they do not
reflect the ground situation. Therefore, wherever acquisition is to take
place, it must be provided by a complete survey, indicating the
correct kisam of the land. Otherwise, market value is diminished, if
the kisam of the land is wrongly recorded.
2.68 The Ministry is trying to put into the Act, a State-level
monitoring Committee, where the alternatives being explored by the
district administration, are brought before the Committee. The
Committee will have not only State-level representatives, but also
representatives, who are specialists in this area, like NGOs,
academics, etc.
2.69 With respect to the recommendation of the Swaminathan
Committee to make land a Concurrent subject, the Ministry has not
taken up this matter, nor it has any view on this subject, so far.
Further the Ministry was looking at the possibility of seeing that the
affected or displaced persons have the option of preferential shares,
so that if there is an economic boom in that area, they should have a
stake in the prosperity.       With regard to the land use policy, the
Ministry would like to be a part of it, even through the subject belongs
to the Agriculture Ministry.
Ministry of Home Affairs


2.70 Ministry of Home Affairs, vide their written note, submitted that
while supporting to enact a Central Act for Special Economic Zones
(SEZs), the Ministry informed the Department of Commerce in
general terms that before creation of a new Special Economic Zone,
the Ministry of Home Affairs was needed to be consulted, to ensure
that the creation of SEZ does not belong to a sensitive industry/sector
and does not fall in a sensitive area, where presence and easy
access of foreigners may have adverse implications from the national
security point of view. The Department of Commerce has included
the representative of the Ministry of Home Affairs as well Ministry of
Defence in the Board of Approvals, to address concerns from the
security angle, while approving establishment of SEZs.
2.71 The Department of Commerce started seeking security
clearance in each and every case, from the Ministry of Home Affairs,
and this Ministry started receiving a large number of proposals for
setting up of SEZs. The Department of Commerce was then asked to
confine security vetting to only those proposals either in sensitive
sectors or sensitive areas, and was informed on 10th February, 2006
that security clearance needed to be obtained from the Ministry of
Home Affairs, only for the proposals in respect of sensitive
industries/sectors as well as for sensitive areas.

2.72 With regard to query pertaining to private ports, the Secretary,
Department of Home Affairs replied that ports are not sanctioned by
the Home Ministry. If a particular SEZ wants to have port facility, the
Ministry of Shipping will examine the whole thing.         It will take
comments of the Ministry of Home Affairs as to whether such a facility
is desirable or possible, and what can be done in this regard. In
addition to the policing of waters of both the national and the
international borders by the Navy and the Coast Guards, the
Government of India has very recently announced a scheme. This
scheme is under implementation in all the coastal States.       So, in
coastal policing, Home Ministry has expert security service, under
which over hundred kilometres, a police station has been earmarked.
Seventy-three such police stations have been created in the country
on the total coastal line. The country’s most vulnerable coastal waters
are Gujarat and Maharashtra. The Konkan belt and the rest of that is
also a matter of concern.           The total scheme which is on
Maharashtra-Gujarat border, is a Rs. 900 crore scheme. It is being
regularly monitored to see that these police stations come into
operation with full equipment, full training and water equipments like
boats, crafts and other things.
2.73 To present the country as a soft nation, the Home Secretary
clarified that there is no suggestion to that effect in his presentation.
But at the same time, it should not be such that it poses itself as if
nothing is soft out here.    Ninety-nine percent of our population is
peace loving. They want to live together and want that development
must take place.

2.74 The Department of Commerce continued to send every
proposal for security clearance. The Home Secretary, therefore, took
a meeting on 5th January, 2007, to make the procedure for grant of
security clearance expeditious and streamlined,          in respect of
proposals to set up SEZs. The Commerce Secretary and Director, IB
were also present in this meeting. At this meeting, it was, inter-alia,
decided as under: -

      (i)    The Department of Commerce will refer only such
             proposals to this Ministry for which the security clearance
             is required, as per the guidelines conveyed in the
             Ministry’s O.M. dated 10th February, 2007.
      (ii)   A realistic-time frame for expeditious grant of security
             clearance in respect of cases referred to by the
             Department of Commerce to this Ministry will be decided
             and conveyed to the Department of Commerce.
     (iii)   While granting permission to set up SEZs, the
             Department of Commerce would include a security clause
             that the developers would provide inbuilt security
             provisions ab-initio.
2.75 An Empowered Group of Ministers has been constituted to

consider issues relating to SEZs.

Ministry of Urban Development

2.76 The Secretary, Ministry of Urban Development informed that
with regard to role of the Ministry of Urban Development in the
establishment of SEZs, particularly when they are established in
highly developed places like Mumbai and Kolkata, or any other town
which is fully developed, the witness replied that urban development
and municipality are State subjects.          The 74th Constitution
Amendment stipulates that there will be Nagar Panchayats at the
lowest level, Municipal Councils and Municipal Corporations, and
wherever there are industrial townships, State Government, as may
deem proper, can declare such places as industrial townships.
However, there are certain criteria which the area needs to fulfill.
Once they fulfill them, and it is to the subjective satisfaction of the
State Government, they recommend it to the Governor of the State to
declare that area as Nagar Panchayat or a Municipality, or a
Municipal Corporation, as the case may be. There has to be an
elected body for giving assistance to the municipalities under the
Jawaharlal Nehru Renewal Mission.
2.77 There are two roles of the Ministry. One is as a Member of the
Board of Approval, which is certainly different from the Ministry's
standpoint towards an SEZ, because when an SEZ comes up within
the purview of a municipality, the Ministry comes into picture. The
responsibility starts first with the municipal body itself; then the State
Government plays its role, and the Centre's advocacy role of granting
assistance comes into play.      There is a direct involvement of the
Ministry to ensure that all the amenities within an SEZ area, coming
up in a municipality, are provided.
2.78 With regard to providing some mechanism to see that poor
workers are provided with, at least, basic amenities, they have a
mechanism to oversee it.       On the issue of effect of pressure on
amenities on SEZs set up near Urban areas, he replied that they
have launched the largest urban initiative in the country, particularly
keeping in view the appalling standards of urban infrastructure in
cities like Mumbai and Bangalore. There is a higher amount of help
coming from the Centre, to take care of infrastructure in these cities.
As to the management of areas having more than one rural body, one
part of an area falling under one village and the other part in another
village, he replied that Village Panchayats would manage it.
2.79 With regard to participation of workers, there is already a
development authority model which is available and it can be
applicable to the SEZs also. Whether the Ministry would provide a
model Act for management of the civic amenities, he replied that
there is a master plan approach paper and Development Authorities
Act. SEZs should also have a master plan on what should be the
residential space, what should be the road percentage, what should
be the commercial area, the green area, etc.
2.80 Whether the remaining 70% can be used for the real estate
purpose in the SEZs, he replied that it can be in a proportion, in a
manner where environmental concerns also are taken into account,
and guidelines would be issued shortly.
2.81 Whether the Ministry of Urban Development had pointed out
some specific inputs at the beginning to be considered in the planning
of SEZs, provision of civic amenities and facilities, and nature of
administration therein, the witness stated that the Ministry was
consulted when the legislation was being considered, and it had
provided its inputs at that stage. Its specific inputs to the Ministry of
Commerce at that stage related to provision of various amenities in
the areas where SEZs would come up. The guidelines should include
all building structures and services to be provided in the SEZ. It
should conform to the planning and other requirements, as prescribed
in the National Building Code, to justify an integrated development of
an SEZ. A provision for construction of houses for the skilled and
semi-skilled workers should be made within the SEZ area, so that
haphazard and unorganized development, including development of
slums, is prevented. The Ministry had also advised that lands, which
are not suitable for agriculture, may be acquired for SEZ purposes.
2.82 With regard to administration of civic amenities in the SEZs,
entrusting the responsibility of administration of these amenities to
the Central Government/State Governments/administration of SEZ/
builder or promoter of the SEZ, and whether it would vary from SEZ
to SEZ or be uniform throughout the country, the witness stated that
they had already started working on formulating guidelines for the
SEZ areas. There is already a provision for infrastructure in the Act.
But the governance structure as such and what form it should take, in
the light of the provisions, needs to be addressed clearly. The
Ministry of Urban Development had started drawing up these
guidelines. The Ministry will have a dialogue, in consultation with the
Commerce Ministry. These guidelines will be circulated to the States
and discussed with the States' representatives in the month of May.
2.83 Regarding proximity of SEZs to the mega towns and their effect
on the development of these mega towns, their relationship with the
administrative structure of the mega town, the witness stated that if
an SEZ is located within a municipal limit, they are governed by the
municipal regulations and requirements. If it is just located outside, or
quite close to the municipal or the city corporation limits, this is a new
kind of township, which is coming up, and it gives an entirely new
dimension. The Ministry of Urban Development was of the view that
when a township comes into existence, the related facilities should
also be there. The guidelines, which the Ministry is going to
formulate, should address all these issue, such as structure for
governance, impact of upcoming SEZs on the existing city or town,
civic amenities, etc.
2.84 To the query that in case an SEZ is developed within the
municipal limits or municipal corporation limits or mega town limits,
whether those laws will be applicable, mutatis mutandis, to the SEZs,
or there will be change because there is a new administrative
structure, the witness stated that the municipal regulations would
definitely apply to that area as well.
2.85 Regarding protecting the interests of the common people or the
employees residing therein, in the event of some clash of interests
between the existing municipal corporations or municipalities and
administration in the SEZ area, they are drawing up guidelines to
address these issue.
2.86 With regard to absence of uniformity in governing arrangements
for the SEZs, the State legislations have provided for a certain
scheme of things and the Central legislation on SEZs has provided
for a new or a different scheme of things. So, there are two regimes
in existence. As far as the State legislation is concerned, whenever
the legislation turns up for consideration, normally this type of
overlapping    would     be   addressed.     The    Ministry    of   Urban
Development      would     emphasise    on    the   urban      governance
arrangement, as envisaged in the Constitution or in the legislative
scheme of things, even if there are other authorities, created through
State legislations.
2.87 Regarding town planning in the SEZs, mechanism to ensure
actual implementation of the provisions of the Act by the developers
or the promoters, and linkage between the State and Central
Government, he stated that currently a State Government basically
approves the proposal and sends it to the Ministry of Commerce for
clearance. When the State Government approves a proposal, they
seek clearance from all the agencies of the State Government.
However, as of now, there is no linkage between State and Central
Governments, because in most of the States, they have their own
town-planning departments. But, over a period of time, the Ministry of
Urban Development will evolve a mechanism to ensure that
guidelines in the Act are actually followed. Further, there would be a
Master Plan for the entire area, and any scheme within the Master
Plan would be subservient to that Master Plan. If any approval has to
be given, that will have to be in line with the Master Plan.
2.88 On the issue of the size of the SEZs and the total land required
for a SEZ, the Ministry has not laid down any such norms. It has not
looked into specifically as to what the size for each type of unit should
be, as it varies from unit to unit.
2.89 Responding to a suggestion that before an SEZ development
plan is sent to Government, either the State Government or the
Central Government forward the same for critical examination by the
Ministry, the Ministry of Urban Development agreed to the suggestion
and was of the view that it could have various implications if the SEZ
is in a mega city or close to a mega city. Various aspects such as its
implications, town-planning requirements, etc. need to be addressed.
2.90 Drawing a parallel to the incidents wherein a portion of land
marked for residential purposes, being used for commercial
purposes, in a situation wherein a particular area to be used as
processing area is used as non-processing area, or an entertainment
area, the witness stated that if the SEZ is within a Master Plan area,
as most of the area would have a Master Plan, the authority itself will
have to make a beginning by bringing about the change in land use. If
the SEZ area is shown as agricultural also, the first step for that
authority would be to bring about that change, so that it can be
utilised for other purposes.
2.91 If the basic planning of SEZ is changed after five years, who will
permit that change and on what conditions, and if it is violative of the
Master Plan, what would the penalties, if it is done without
permission, such special area should have a sub-Master Plan, and if
the same has not been provided in the Act, rules should have a
provision for that. The approving authority should specifically lay
down that such type of requirement has to be met.
2.92 With regard to Ministry of Urban Development getting help of
the industries of the SEZs in development of its surrounding areas, if
it is an urban area, the Ministry of Urban Development comes in and
if it is in rural area, the Panchayati Raj or the Ministry of Rural
Development comes in. When an area is getting urbanised, there is a
provision in the municipal legislation to declare it as a local body. If it
is a village area, there is a provision to declare it as a local body. So,
it is for the State Governments to take steps in this regard. A good
number of States have declared an area as a development area or a
special economic area, deriving powers from the legislations. The
Central legislation on SEZ is one of its kind. But, prior to this, they
were doing it under the State legislations. If the State Government, on
one hand, provides for such new areas to be set up, on the other
hand it should also provide such areas to be upgraded, to have an
urban local body. But in some States, such areas continue for quite
sometime, without an urban local body coming into existence. The
Jawaharlal Nehru Mission has started taking note of these concerns.


Ministry of Labour and Employment


2.93 The Secretary, Ministry of Labour and Employment informed
that the SEZ Act actually does not preclude the applicability of all the
labour laws, which are applicable in the domestic tariff area. In fact,
Section 49 of the Act specifically says that such modifications, as
may be allowed in other areas, shall not apply to matters relating to
trade unions, industrial and labour disputes, welfare of labour,
including conditions of work, provident fund, employees liability,
workmen's compensation, old age pension and the maternity
benefits, which are applicable to workers in the domestic area.
2.94 Further, the State Governments have to pass their own laws
and rules that will apply in the SEZs under the State Government.
There are 43 Central laws which are exclusively applied by the
Central Government. Some laws actually fall within the purview of
both the State and the Central Government. And there are certain
laws which actually have to be implemented by the State
Governments, although they are passed by the Central Government.
2.95 So far as the applicability of laws to be exclusively administered
and monitored by the Government of India is concerned, this work is
done by the organisation of the Central Ministry. But in terms of the
laws which are concurrent, these are being done by both the
Governments. In terms of the State Governments, they are actually
vested with the responsibility. However, the Labour Ministry interacts
with the State Governments, and reviews from time to time.
Violations, if any, are brought to the notice for correction.
2.96 To the queries whether the Central Government, through some
organisation or agency, cares to know the condition of labourers in
the Special Economic Zones, the witness replied that the Labour
Ministry cannot do 100 per cent checking. But it would definitely keep
an eye on implementation of the Labour Laws. Further, in terms of
the SEZ Act itself, there is no relaxation from the labour laws of the
Central Government, as also the State Governments.              If Section
49(1) of the SEZ Act is strictly enforced, there is no question of
perception translating into reality. It is the duty of the Ministry to see
that these provisions are enforced.        The Ministry has the direct
responsibility in respect of the Employees State Insurance and the
Employees Provident Fund. With regard to laws which are to be
implemented by both the Central and the State Governments, the
Ministry has a larger responsibility, as these laws are very sensitive
and important. The Ministry has direct responsibility in so far as the
laws passed by the Central Government are concerned. The State
Government is declared to be appropriate Government under these
laws. This is to ensure that they do not shrug off their responsibility
and say that they were not supervised. This is the intention why
certain laws are to be directly implemented by the State
Governments.
2.97 However, the Labour Conciliation Machinery should be
separate. The role of the Development Commissioner should not be
dual. He should be a Development Commissioner, and he should not
take on the role of Labour Commissioner; the position can be
reconciled by ensuring that the Development Commissioner is
assisted by an officer of the Labour Department of the State
Government, who has technical expertise and the experience in
dealing with the labour issues and who, in fact, should exercise the
powers of Labour Commissioner in the SEZ.
2.98 With regard to the need for deputing many officers of the
Labour Department of the States for managing the Labour issue, he
was of the view that there was no need for one officer in every SEZ.
Requirement will depend upon the size of an SEZ.
2.99 As to whether the Ministry would like to be a member of Board
of Approval, the Labour Secretary replied that it wants to be very
careful about this and does not want to do anything that may
compromise the Ministry’s charter, which is to ensure that the labour
laws are complied with. He sought indulgence of the Committee in
the issues on which the Labour Ministry needs to work more with the
Commerce Ministry.
2.100 The Labour Ministry would put in place an Ombudsman, if
some kind of a mechanism at the field level, for ensuring close
interaction with the State Industrial Departments and State Labour
Departments. So far as the question of violation of labour laws in the
SEZs was concerned, it will be of a slightly higher level monitoring for
the Labour Ministry.
2.101 In pursuance to the direction of the Committee the Ministry of
Labour and employment took up the matter of applicability of labour
laws in SEZs in various States. The Ministry submitted the status of
labour laws applicable in SEZs in the following States: -


Gujarat:


2.102 All labour laws were applicable to all the Special Economic
Zones functioning in the State. However, the powers of State Labour
Commissioner      had    been    delegated    to   the      Development
Commissioner u/s 17(1) of the Gujarat Special Economic Zones Act,
2004. The Officers of the Commissioner of Labour had been
authorized by the Development. Commissioner of respective Special
Economic Zones to supervise the implementation of labour laws and
they were also working as Inspectors. So far 45 Inspections were
carried out during 2006 in two Special Economic Zones functioning at
Kandla and Surat. Out of 19101 workers, 3213 were permanent,
11143 were temporary and 4745 were contractual. The Employment
Register was being maintained by the respective SEZ. There was
statutory compliance of provisions related to women workers under
different labour laws, the facility of to and fro transportation was
provided to women workers. Three trade Unions were functioning in
the SEZs.
Rajasthan:
2.103        There are two Special Economic Zones functioning at
Jaipur and Jodhpur. The powers had been delegated to Joint
Labour Commissioner of the State under various labour laws as
per the provisions. 50 Workers were engaged on casual basis in
Jodhpur Special Economic Zone and in Jaipur about 23 units
mainly in Gem & Jewellery were operational and 1150 workers
were engaged. No trade union is registered in the units
operational in the Special Economic Zones in Rajasthan.
Kerala:


2.104 Kerala has one operational Special Economic Zone viz Cochin
Special Economic Zone (CSEZ). The Development Commessioner,
CSEZ also looks after five other notified Special Economic Zones. All
the labour laws were applicable in the SEZs. The powers of the
Conciliation Officer have been delegated to the Development
Commissioner under the Industrial Disputes Act. However, the units
furnish   the   prescribed   returns   and   reports   to   the   Labour
Commissioner. In the event of any complaint being received about
violation of labour laws by management of any unit, the Development
Commissioner conducts appropriate inquiries before taking further
action. The Inspections were carried out by the Labour Department of
Kerala periodically. The following facilities were provided to women
employees:
(a)   Women's Committee has been constituted in all the units to
      look into sexual harassment complaints,
(b)   Child care facilities,
(c)   ESI dispensary,
(d)   Conveyance being provided to women engaged for labour
      during night hours, and
(e) 24 hours security to prevent any untoward incidents inside
the Zone.

2.105 Of the total workers engaged, 5445 were permanent, 1552
were temporary and 825 were casual. The Units were maintaining
Registers, where it was mandatory. Five Trade Unions were
functioning in the Special Economic Zones.



Madhya Pradesh.

2.106 The Powers under various Acts have been delegated by the
State Government to the Development Commissioner. A team of
officers was constituted to ensure the implementation of labour laws
in the Indore Special Economic Zone. Out of five functional units, only
one unit has deployed 27 female workers. Separate rest room,
cafeteria, creche, etc. were maintained in the unit. Out of 1817
workers, 998 were Permanent 562 were temporary and 257 were on
Contract basis. The Units are maintaining the Muster Roll registers,
but no trade union was functioning.

Tamil Nadu

2.107 Effective implementation of labour laws was being ensured by
way of regular inspections as well as special inspections, whenever
complaints were received from workers/ Trade Unions in the 4
functional Special Economic Zones, namely, Madras SEZ, Chennai;
Nokia SEZ Sriperumbudur; Flexitronics SEZ, Sriperumbudur; and
Mahindra Industrial City -SEZ, Kancheepuram. There were 64 units in
these Special Economic Zones, where there were 12906 permanent
employees, 3650 Temporary (of which 3500 are on training) and
3389 contract employees. Registers were maintained in respect of
Adult Workers, young persons workers, Muster Roll and service card
under the provisions of the Factories Act. The Department of the
Inspectorate for the Factories was monitoring the maintenance of
these registers. The Inspections for the factories located in SEZs
were conducted once in every six months. The facilities such as
creche, conveyance, drinking water, locker, separate epclosers in
canteens, rest rooms and washing facilities with soap were provided
to women workers. Five Trade Unions were registered in these SEZs.

Ministry of Finance (Department of Revenue)

2.108 The Secretary, Department of Revenue, Ministry of Finance
and Representatives of RBI informed that regarding the view point of
the Department of Revenue on accrual from SEZs, whether there will
be greater loss of revenue due to various exemptions/incentives to
SEZs; whether the Department had calculated the estimated loss of
revenue on the basis of formally approved SEZs, the witness replied
that the extent of loss that might take place due to any exemption
activity, particularly, Special Economic Zones, would depend on a
variety of factors.   It would depend on the number of Special
Economic Zones sanctioned, the size of the Economic Zones, the
area used for processing and non-processing activities, the number
of production units, the extent of infrastructure development, the total
production and the total exports. It could vary from SEZ to SEZ,
depending upon the scale of operations. It could vary from area to
area. The precise estimation, therefore, is not possible.
2.109 The Department has not made any recent estimation of loss of
revenue. On the direct tax side, the Department has calculated loss
of revenue on the basis of growth of exports during the last three
years, which was roughly around 19 per cent.            A portion of the
incremental exports would increasingly shift to the SEZ areas over
the next three to four years, and the profits on exports would be
around 20 per cent. This is the assumption on the basis of which the
estimate has been made. The estimated revenue loss of Rs. 54,000
crore, over the period from 2006-07 and 2009-10, is in relation to
direct taxes. It does not include profit made by the developers. In the
first Board of Approvals, the total projected investment was about
Rs.1,75,000 crore. Now this is extrapolated forward, assuming that
the demand for SEZ will come down over the next four years. Over
the next four years, the total investment will be around Rs.3,60,000
crore. On indirect taxes, it was clarified that the Department has not
calculated any revenue loss arising out of the activities of the units,
because the units are given rebates. Whatever indirect taxes are
paid on exports, that will be rebated. The Parliamentary Standing
Committee on Finance made a recommendation that the Department
of Revenue should work out the cost-benefit ratio of all exemptions.
Services of external agencies, to look into this aspect, have been
engaged. The Indian Council for Research in Economic Relations
has been entrusted to do a study, not only on this exemption, but also
general exemptions. The NIPFP is also doing certain study. As soon
as their report comes, they will have a clearer idea.
2.110 On whether an interest component on the loss has been taken
into account, the witness replied that the interest component has not
been taken into account. The developer's profit will also be there.
This has also not been taken into account.
2.111 During the formulation of the Act, there was consultation with
the Department of Revenue. The Department of Revenue had
expressed its view at that point of time. Finally, a decision was taken.
It was not clear at the time of the formulation of the Act as to how
many SEZs would come up. Last year, the Department of Revenue
placed before the Parliament, for the first time, an estimate of the
total revenue loss on account of the revenue foregone, which it will be
repeating this year also. The concept of exemptions as such is under
constant review, and even recently there was a statement by Hon’ble
Prime Minister on the same issue.
2.112 The issue of the exemption from taxes was placed before the
Parliamentary Consultative Committee on Commerce and there was
a feeling that the Department of Revenue need to look at the
exemptions, because though it collects revenue, it is the Parliament
which would allocate it.
2.113 On whether the issue of revenue loss has been discussed with
the Planning Commission, and whether the Planning Commission
has given some guidelines, the witness replied that the Department of
Revenue has not received any guidelines, except on the Eleventh
Five Year Plan's Approach Paper, however, it does indicate Planning
Commission’s reservations on these things. The Department of
Commerce would have certainly discussed these issues with the
Planning Commission.
2.114 On whether the Department of Revenue had ensured that no
hawala or dirty money is invested in these SEZs, and its mechanism
to deal with such investments, the witness replied that there is
shortage of Customs Staff in the SEZs. As far as FDI is concerned,
there is no mechanism of checking it.        There is no checking of
antecedents, except when it pertains to financial sector. Therefore, it
is felt that this is a lacunae and this may need to be addressed.
However, according to the representative of Central Board of Excise
and Customs, there are two safeguards.       One is a condition that
when the investment is accepted, it is seen that for what purpose it is
coming in. There is a threshold limit for each category of SEZ, and
the balance-sheets are forwarded to the Ministry of Commerce. The
balance-sheets of developers or applicants are checked by the
Ministry of Commerce, and proposals are also placed before the
BOA. Another safeguard is that if there is any suspicion in major
transactions of money, such transactions are covered by the
Prevention of Money Laundering Act, and all such transactions will
definitely go through a scanner.
2.115 Regarding shortage of Customs staff in the SEZs, the
Committee, during its visit, had found that the customs-bonding was
very poorly attended; some of the SEZs were employing security
guards as agencies of customs. The staff is very nominal and the
area is very big. Commenting on these issues, the witness stated
that the issue of shortage of staff is very important.      So far as
administration staff is concerned, there is considerable requirement of
expansion of capacity for each SEZ. At least 17 more people on an
average are needed. Besides, things like camera, CCTV, containers,
etc are also required.   There is also a need to build an information
system, so that the Department can get information. Further, an
information system has to be linked between the port and the SEZ, to
prevent manipulations. With regard to pilferage, it had been brought
to the notice of the Empowered Group and it will be taken up to the
Cabinet also.
2.116 Regarding RBI policy on loans to SEZs, the RBI instructions to
the banks are that the development and acquisition of units in SEZ
should be treated as commercial real estate exporters.          To that
extent, it is not different from any other policy, because when SEZ is
developed or a unit is acquired, it involves real estate. This real
estate is much more risky than the commercial real estate outside,
and because of the free transfer of real estate, the banks will be put
to severe difficulties. Therefore, for the time being, the RBI has put
them apart. The representative of RBI stated that RBI does not have
any experience or database in terms of default rate and other things.
However, RBI will take necessary steps in this regard. Regarding any
suggestion of the Department of Commerce on financing of SEZs, the
representative of RBI informed that the suggestions from the Ministry
of Commerce about raising the risk factor to 150 per cent are also
received.


MINISTRY OF DEFENCE
2.117 The Director General (ACQ), Ministry of Defence submitted that
the Ministry of Defence is fully aware of the importance of the SEZs in
the economic growth of the country. These SEZs are vital, not only
for our economic growth, but also for the security of the country,
because they give strength to build up our forces, and also the
requisite resources, by which we can modernise ourselves effectively.
According to him, setting up of SEZs involves two stages. The first
stage is the location of the proposed SEZ, in relation to our existing or
certain defence installations, which may be planned in future. The
second stage is about the source and quantum of FDI.
2.118 On the query as to whether analysis of the existing SEZs has
been carried out and any of them need to be modified, changed or
shifted, the witness replied that applications for SEZs, being referred
to them, are consulted with all the three Services, and considering all
the aspects and our security, the Ministry gives its recommendations.
The Ministry has given recommendations on applications totalling
about 150. The Ministry will make certain recommendations for the
existing SEZs.
2.119 There is a representative from the Ministry of Defence on the
Board of Approvals and the concerns of the Ministry are passed on to
the Ministry of Commerce, which are taken into account, as it is a
collegiate decision. It will be useful if the Defence Ministry’s views
are taken into account seriously. However, the Ministry of Defence
does not have any veto power.
2.120 With regard to the concerns of the local population along the
border areas, he stated that the Ministry is of the view that about ten
kilometres belt on the border areas should remain SEZ free.
2.121 There are two stages for SEZs approval i.e. (i) approval to
developers for infrastructure creation; and (ii) approval to specific
companies to operate from SEZs.
2.122 Security concerns at state I are physical location of proposed
SEZs       in      relation      to         existing/planned           defence
installations/requirements,   and     critical   Vital   Areas/Vital    Points
(VAS/VPs) of national infrastructure.            The antecedents of the
developers and sensitivity of the region from internal security angle.
2.123 Security concerns at stage II are source and quantum of FDI, if
any, countries of concern and unfriendly entities to be screened out,
using appropriate screening by the Foreign Investment Promotion
Board (FIPB) and the nationality of the persons working in the SEZs,
and criticality of the sector from national security angle to be factored
in while clearing FDI.
2.124 There is a need for an effective monitoring and legal
framework, National Security Exception Clause to regulate FDI with
focus on national security and an institutionalized mechanism for
defining   and   devising   policies,   alongwith   implementation     of
appropriate feedback/control mechanism.
2.125 The following are the suggested guidelines from Armed Forces
perspective on the security concerns at stage-I and stage-II:

Stage-I

      10 km belt along the land border on both Eastern & Western
      fronts be excluded from SEZs to provide required area for
      military operations;
      SEZ proposals within 10 to 50 km belt be cleared on case by
      case basis through MoD considering depth area requirement
      for Military operations;
      As coastal areas are the source of livelihood and economic
      support to the majority population, SEZs may be planned after
      suitable coordination with short and long term plans of MoD;
      Sensitive installations like airfields and their infrastructure,
      radar, communication nodes, ammunition dumps, base repair
      and equipment depots, critical VAs/VPs of national
      infrastructure would need 10-20 km separation from the SEZs;
      Air fields may need extra separation to address flight safety
      concerns from likely bird menace from proposed industry and
      height of structures in the landing/take off funnel (min 20 km);
      The ITES sector companies need to be spaced farther to avoid
      interference with ground to air communication and radar pick
      up;
      Less sensitive installations like training institutions, repair
      depots, workshops, cantonments, military stations, etc. would
      need 1-5 km separation from the SEZs; and
     The security officers of the SEZs and sensitive installations
     should coordinate and share information to curb any inimical
     activities.
Stage-II

     Foreign participation in sensitive sectors and from countries
     and entities of concern should be subject to appropriate
     screening whether foreign investment is through automatic
     route or FIPB;
     A periodic review of list of sensitive sectors locations and
     countries/entities should be carried out;
     For security screening, threshold criteria should be followed in
     different critical sectors in respect of FDI;
     Security screening in case of merger and acquisition may also
     be enforced;
     Existing companies should also be asked to seek approval for
     new activity and investment in sensitive sectors and locations;
     and
     There should be an appropriate legal framework including
     legislation, on National Security Exception Clause implying that
     any company can be asked to suspend operation, or be taken
     over, or close in the interest of national security.
2.126 There   should   be      an   institutionalized   framework,   with
representative from MoD for devising policies and overseeing the
implementation as well as feedback and control mechanism
regarding security concerns.
                              CHAPTER III
            Written and Oral Submissions: State Governments
3.1   The Committee considered written submissions as well as oral
evidence of the following State Governments, which are summarized
as below:


      Gujarat


3.2   The Commissioner, Industries, informed that so far 33 SEZs
have been given formal or in-principle approval by the Government in
Gujarat. Out of these 33 SEZs, two formerly Free Trade Zones at
Surat and Kandla, which were converted into SEZs, are functional.
No unit is functional in the other 31 Special Economic Zones, as they
are being set up and are at different stages of being set up.    The
functional SEZs generated export of Rs. 3500 crore for the year
ending March, 2006, with employment of 17,900 people.            The
remaining 31 SEZs, as per the projections made by developers,
would generate employment for about 6.5 lakh people, when they are
fully functional.
3.3   Gujarat has not faced any opposition to the land acquisition,
because Government has adopted a practice not to acquire land of
good agricultural quality for the SEZs. The State Government had
acquired fallow land for two SEZs in Hazira and in Jamnagar twelve
years ago, as the developers were putting up very large refinery and
Steel plant at Jamnagar and Hazira, respectively.
3.4   The land use pattern of the total geographic area of1,96,11
,700 hectares in Gujarat was as below:
1      Forest Land Govt.                      9.5%
2     Under Agriculture                           57.1 %
3     Waste Land                                  9.2 %
4     Uncultivable Govt. Waste Land               7.3%
5     Other Land                                  16.9 %
      Total Geographic Area                       100.00 %


3.5   33 SEZs had been given approval by the Central Government
in the State. These are categorized as follows:




1     Earlier FTZs now converted into SEZs                   2
2     New SEZs set up: -
      Notified                                               7
      Formal Approval given                                  12
      In-principle Approval given                            12
                                                             33


3.6   In addition, 11 proposals were pending before the Board of
Approval for decision.

3.7   Out of the 33 SEZs which had received in-principle or formal
approval, nine were multi product and 24 were sector-specific. The
sector-wise break up of the sector specific SEZs is as below:
Apparel                             2
Textiles & Garments                 1
Gems & Jewellery                    1
Electronics                         1
Pharmaceuticals                     5
Petroleum & Petrochemicals          1
Chemicals                           2
Engineering                         5
Ceramic & Glass                     1
IT/TES                              3
Power                               2
Total                               24
3.8   The break up of the 11 SEZs pending before the BOA for
Approval, was as below:-
Multi-product                       1
Textiles                            1
Gems & Jewellery                    1
IT/ITES                             5
Biotechnology                       1
Alternative Energy & Energy         1
Ancillaries
Handicrafts & Artisans              1
Total                               11



3.9   The State Government has adopted a pragmatic approach for
acquisition of land for    Special Economic Zones.        The general
practice was that either the SEZs should be set up on Government
wastelands, which the State Government would allot to the
Developers after due scrutiny, or the Developers should purchase the
land directly from the landowners (farmers), willing to sell their land.
The State Government had resorted to the Land Acquisition Act,
1894 for the purpose of acquiring land for setting up SEZs only in two
instances,. In both these cases, the Developers themselves were
putting up large industrial projects inside the SEZ, which would utilize
a very substantial portion of the SEZ.
3.10 The quality of land, one crop, two crops, three crops, is decided
by the patwari. He makes entries in khasra or khatoni that this land is
one crop two crops, etc. Responding to the apprehension of the
Committee that these records are not maintained properly, and a
certificate to this effect is issued on extra meritorious considerations
and not on merits, the Commissioner clarified that the people are
well aware of the exact nature and potential of the land, and the
matter is not hidden from the Government also. Everyone knows in
Kutch what kind of land is there, whatever the patwari may write in
the records. Everyone knows that the land in Jambusar Taluk of
Bharuch district, where a company has asked for a multi-product
SEZ, is of very poor quality. Regarding possibility that there may be
places where land is of good quality and it can be so manipulated that
good quality land is first converted into poor quality land, before it is
converted into the land for non-agricultural use, the Commissioner
stated that nothing of this sort has happened in Gujarat, because all
the SEZs that are coming up, are in those districts where no
agricultural activity is done. Setting up of an SEZ on fertile land,
irrespective of what the patwari writes in the records, is not
encouraged. It would be for the Government to see and take care,
when the Collector gives permission for non-agricultural use. The
State Government will also ensure that when the District Panchayat
or the District Collector, as the case may be, gives permission for
non-agricultural use, no misuse takes place.
3.11 The mode of obtaining land by the Developers of SEZs, in
respect of the SEZs under various stages of approvals, is as below:
               Notified                         4953 hectares
Government land allotted                  2486 hectares*
Land      of     Gujarat    Industrial    1812 hectares
Development Corporation Ltd (GIDC)
Land privately owned by Developers        440 hectares
Land purchased by Developers from         48 hectares
farmers
Land acquired under Land Acquisition      167 hectares $
Act
                                          ____________
                                          4953 hectares
        *:    The allocation of Government land will increase to 3383
              hectares after completion of the setting up of the SEZs.
        $:    Land acquired under Land Acquisition Act will increase to
              3324 hectares, after the SEZs that are notified, complete
              the process of setting up the entire SEZs.
(ii)     Formal Approval-12                           3390 hectares

         Government land allotted               -     1105 hectares

         Land of Gujarat Industrial Dev.

         Corporation Ltd (GI DC)                -     404 hectares

         Land privately owned by Developers -         1125 hectares

         Land purchased by Developers from

         farmers                                -     718 hectares

         Land purchased in Court auction        -

                                                      3390 hectares

(iii)    In-principle Approval - 12                   6444 hectares

         Government land to be allotted         -     2723 hectares

         Land of Gujarat Industrial Dev.

         Corporation Ltd (GIDC)                 -     336 hectares

         Land privately owned by Developers -         640 hectares

         Land purchased to be purchased

         by Developers from farmers             -     2745 hectares

                                                      6444 hectares

(iv)     Proposals pending before BOA - 11            1766 hectares
      Government land to be allotted          -       35 hectares

      Land of Gujarat Industrial Dev.

      Corporation Ltd (GIDC)                  -        147 hectares

      Land purchased to be purchased

      by Developers from farmers              -      1584 hectares

                                                     1766 hectares


3.12 A very small portion of the total land for SEZs had been
acquired by the State Government under the Land Acquisition Act,
and that too where the Developers themselves were setting up large
industrial projects in a substantial part of the SEZ. When land was to
be acquired by the State Government, the Developer Company had
to apply for corporate acquisition to the State Government. The
Revenue Department, if satisfied about the acquisition, would initiate
the process for it under the Land Acquisition Act. The Acquiring Body
was the corporate developer, who was shown as such in the
notifications issued under the Land Acquisition Act. The total land
acquired for SEZs was 167 hectares. This would increase to 3324
hectares after the on-going land acquisition for SEZs that had already
been notified.

3.13 On the issue of using agents for land acquisition, and     use of
force to acquire land, thus giving a raw deal, it was informed that
whenever State Government receives a single complaint, either
through press or through the farmers directly, it immediately enquires
into it and takes immediate action.     All the SEZs in Gujarat are
coming up on a very poor quality of land. If land is bought voluntarily
through the process of sale in Gujarat, the State Government cannot
stop. However, when it is decided to convert agricultural land for
non-agricultural purposes, the State Government comes into picture.
Sale of agricultural land for non-agricultural purposes requires
permission from the State Government. However, if a developer is
acquiring huge land for non-agricultural purpose, he has to take prior
permission from the State Government. The land purchased by the
developers directly from the farmers is 718 hectares for 12 formally
approved SEZs. 200 hectares has been purchased by the Cadilla, a
drug manufacturing company, from big landowners. In case of Anjar
in the area of Kutch, 284 hectares of land of very poor quality was
purchased directly from the landowners. It is not difficult to get 200-
300 hectares of land directly from the owner, if they are paid good
price.   For IT SEZ, 54 hectare has been directly purchased near
Ahmedabad. For IT SEZ near Gandhi Nagar, 15 hectares of land has
been purchased.

3.14 Regarding Rehabilitation Policy of the State Government in
respect of landowners whose land had been or was being or would
be acquired for setting up SEZs, the policy of the State Government
was to ensure that the land-losers get a fair market price for their
land, in accordance with the law. The Government also tried to
ensure that the land-losers get employment, direct or indirect, in the
project that comes up on the land.
3.15 The State Government has ensured that people are trained in
newer occupations through industrial training institutes. Government
had asked the company to open the institute to train village people,
so that after the plant is set up, they find profitable employment both
direct and indirect as a result of the industrial activity.
3.16 Regarding providing other infrastructural facilities like schools
or hospitals, to improve quality of life of villagers, the Commissioner
submitted that experiences are that when large companies put up
large projects, they invest a substantial amount in the development of
the village community, by way of schools, roads and other socio-
economic infrastructure in the villages, in order to keep good relations
with the village people. The State Government has not received any
complaint that the villagers are being neglected by these companies.
However, the State Government would insist that the company, to the
extent possible, should invest more in social infrastructure, be it
education, health, etc.




3.17 There should be a uniform policy for the entire country in
respect of rehabilitation. The Government of Gujarat would welcome
any initiative by the Government of India in this respect, and would
support any policy for rehabilitation of the people, who had to
surrender their land for industrial, infrastructure or other projects.

3.18 The propriety of the acquisition, and whether a larger public
purpose exists and warrants such acquisition, is examined carefully,
before the acquisition process in initiated.
3.19 The Committee drew attention of the Commissioner to a
complaint received when the Sub-committee visited Kandla. Some
fishermen complained that they have been evicted and they have not
been given any shelter from the Government or the entrepreneur.
Agarias also complained that their land was acquired forcibly. The
Commissioner submitted that in the case of agarias, the Government
gave land on lease for 10-years and 20-years for salt making. Any
agaria has not been divested of his lease.        As far as the State
Government is concerned, there is no such issue. The problem may
be in one SEZ, set up by the Kandla Port Trust. They have a lot of
land of their own.      They have not yet approached the State
Government for approval of their SEZ. They have got approval from
the Central Government directly.     The State Government has not
received any application. There is no other case where the State
Government de-leased salt land from the farmers, and used it for
SEZ purpose. This practice is not followed at all in Gujarat.

3.20 On the issue of employment generation, except              the two
functional SEZs, none of the other notified SEZs had become
functional. Therefore, no direct employment had been generated in
the SEZs. Direct and indirect employment was being generated by
the developers while setting up the SEZs, and while building the
infrastructure within the SEZs. It was too early to comment on the
extent of employment that would be generated in the SEZs in the
next five years.
3.21 On the issue of implementation of Labour Law in SEZs of
Gujarat, it was informed that as per the figures of the Government of
India, Gujarat today accounts for 16 per cent of the country's total
industrial investment, and it has only five per cent of the country's
population. The total man days loss due to labour strikes in Gujarat
is 0.52 per cent. Gujarat has traditionally been a very peaceful State,
and as far as labour problems are concerned, Gujarat is a very
pragmatic State    to ensure that nothing, which would affect the
interests of workers, is done by the entrepreneurs. As far as two
functional SEZs are concerned, they have not reported any single
labour strike so far. The labour laws of the land apply to SEZs also.
However, as an exception, flexible labour laws as there in the SEZs.
Andhra Pradesh
3.22 In Andhra Pradesh 54 SEZs had been approved by Board of
Approvals (Formal - 45, In-Principle - 9). Out of 54 SEZs, five were
Multi-product and 49 were Sector-specific (Single-product)
3.23 There are three kinds of settlements in the revenue records.
There is State Abolition Act, Inaam Abolition Act and the Ryatwari
Settlement Act. In these three settlements, there are some lands
which go to the pattedars. There are some land where nobody has
been provided with titles, and this type of land has been considered
as Government land.      The land acquisition in Andhra Pradesh is
being done under the Land Acquisition Act, by the Andhra Pradesh
Industrial Infrastructure Corporation, which is the nodal agency for
land acquisition. The District Collectors are acquiring land under the
Land Acquisition Act of 1894.
3.24 From 1st April 2000, conversion of agricultural land to industrial
land was made automatic, and no permission was required for this
purpose. But now, the Government has enacted an Act, under which
this conversion will require permission of the Collector.     This Act
came into force three-four months back. It is in operation. The rules
are being framed and the industrial development has been regulated
by the Revenue Department.         The Andhra Pradesh Government
has acquired 6000 acre of private land for SEZs through APIIC, and
out of that, 35 acre is wetland, where theoretically two crops are
cultivable.   The Government has directed the APIIC to follow the
rehabilitation and resettlement package, which has been enacted for
irrigation, which will ipso facto be of all projects where there is
displacement of dwellers.


3.25 Out of the total extent area of 10,954 acres pertaining to SEZs,
assisted / developed by State Government / Government Agencies,
an area of 6000 acres of private land was acquired for the purpose
which was 54.77 % of the total area.
3.26 The details of the 6000 acre area was as below percentage

are:-

Total acquired land                                                6000
acres
Wet               agriculture                  land               (Irrigated)
35acres(0.58%)
Dry agriculture land (only rain fed)                    5965 acres (99.42
%)

3.27 The rehabilitation of land losers was taken up as per the
guidelines and the following facilities were being provided to the land
losers:-



        (i)     Grant for House Construction;
        (ii)    Grant for Cattle Shed to each project affected family who
                owned a cattle shed;
        (iii)   Grant of Transportation of Material;
        (iv)    625 days of minimum agriculture wages at Rs.80/- per
                day to the agriculture and non - agriculture labours;
        (v)     Subsistence allowances to displaced families equivalent
                to 240 days of minimum agriculture wages at Rs.80/- per
                day; and
        (vi)    Development of layout with infrastructure facilities.


3.28 The private developers were encouraged to purchase land from
the land owners at mutually agreed rates and Revenue Authorities
were facilitating and monitoring the process, so as to ensure fair deal
to the farmers.
3.29 The estimated generation of direct /indirect employment for the
Government SEZs in Andhra Pradesh was 6,28,500 and 9,73,500,
respectively. The following SEZs had already provided employment
as per the details given below:-
1. Foot wear SEZ (Apache Holding Pvt. Ltd)             -
1000,
2. Gems & Jewelry SEZ (Hyderabad Gems and Jewelry SEZ) - 1126
   Total                                         2126

3.30 With regard to the approach and vision of the State
Government on SEZs, the witness submitted that the State had not
been able to garner very heavy investment in the last five to six
years. Its total investment in five years was only Rs. 5000 crore. So, a
system was sought to be created by the State Government, wherein
the SEZs were engaged with the raw material linkage coming into the
State. Getting investment may be easier for more forthcoming States,
which had more liberal policies. Since the opportunity was given and
a window was opened by the Central Government, the States wanted
them in places where they could get investment. The Andhra Pradesh
Government is following this mode under the SEZ. Without
compromising labour or agricultural or agrarian interests to the extent
possible, getting quality investment, associated employment, etc.
were the broad objectives of the State Government. As per estimates
given by the APIIC and the Government, about six lakh numbers of
direct employment and around 10 lakh numbers of indirect
employment are likely to be generated.
3.31 On the quantum of FDI out of the total investment of Rs. 5000
crore, he informed that the Andhra Pradesh got some FDI. Of the
investment of Rs. 5000 crore, foreign investment is to the tune of only
Rs. 130 crore. The State did not get the kind of investment that
Gujarat had got.
Haryana
3.32 The Government of Haryana received a total of 72 proposals
for setting up Special Economic Zones in the State. However, 49 had
received in-principle or formal approval. Out of these 49 in-principle
or formal approved proposals, 12 were multi-products and 37 were
single-product SEZs. Haryana Government had not acquired land for
private developers of Special Economic Zones in the State so far,
except in one of the SEZs. HSIDC had agreed to transfer 1501 acre
of land for setting of an SEZ by an SPV, formed a joint venture
between HSIIDC and RVL. HSIIDC had entered into an Agreement
on 19th June, 2006 with Reliance Ventures Limited (a 100% owned
subsidiary of Reliance Industries Limited), for setting up of SEZ in the
Gurgaon and Jhajjar District in the State. Earlier HSIIDC was granted
in-principle approval to set up a multi-product SEZ in Gurgaon
District, over an area of 3000 acres. The land measuring 1715 acres
was notified under section 6 of Land Acquisition Act. During this
time, Reliance Industries Limited approached the State Government
for setting up an SEZ, matching the best in the world, and as per
international standards, jointly with HSIIDC.     A location Selection
Study team from Reliance and HSIIDC conducted detailed surveys,
and selected a site, contiguous to the existing 1715-acres land
notified by the Government for the SEZ.
3.33 The Director, Industries, Government of Haryana informed that
approvals for two Special Economic Zones had been notified. One is
the DLF, which is in the urban area; the second one is in an area
adjoining Mewat. It has very poor quality of land. This is also entirely
privately acquired land. There had been a persistent demand from
the Mewat area to put up industrial activities there.       People are
making representations to the State Government in this regard. But
in this area, scarcity of water exists.   The State Government has
made an assessment of all the SEZs, which will come up in the State.
The State Government believes that not only the SEZs, but the entire
industrial development potential would require an area of less than
two per cent of our total area, because the State has shortage of
water.
3.34 In terms of NCR, the State Government has taken a decision
not to increase the number from six SEZs, because it cannot
guarantee infrastructural support. In view of availability of scarcity of
water, the first priority is for drinking water. For industrial purposes,
the water which is going to be utilised in the Special Economic Zones,
the Government is asking them to go in for 100 per cent recycled
water, so that water requirement for industrial purposes is minimum.
On a rough basis, diversion of more than two per cent of total area
shall not be sustainable. It is based on this calculation for water
usage.
With regard to the size of processing and non-procesing areas in
SEZs, the Director drew attention towards the industrial area in the
entire Gurgaon-Manesar belt, the most developed industrial belt in
North India, which comes to about six thousand acres. Residential
and other areas, which are supporting this area are about ten times
bigger. That was the natural way in which habitation was going to
take place. The State Government is extremely concerned about
adequate housing for workers. Otherwise, it will put more strain on
the urban infrastructure. The State Government can go in for much
stricter laws for smaller SEZs. But for large SEZs, where huge
production facilities are going to come up, it has to keep the norms at
not more than 35 per cent.
3.35 State Government had formulated the Policy regarding
acquisition of land for private development and in public-private
partnership, for setting up of Special Economic Zones, Technology
cities, industrial parks and Industrial Model Townships. A provision
for assistance to the private sector by the State Government also
existed in section 7 (1) of the Haryana Special Economic Zones Act,
2005. Outside the NCR region, the State Government may assist the
private sector in acquisition of land even, in respect of single-product
SEZ, where the minimum area requirement was 250 acres only.
Under this policy, it had been laid down that the private developer
must purchase 75% of the land required directly from the farmers in
the NCR and Panchkula, whereas outside the NCR and Panchkula,
State Government can acquire maximum of 50% of their land
requirement. The developers were obliged to provide employment,
training, social infrastructure, to rehabilitate the displaced persons, as
per the Policy of the State Government.
3.36 The State Government has provided that the developer shall be
bound to provide all the rehabilitation of population, by providing built-
up houses or residential plots, alongwith cost of construction, in case
relocation of village abadi is necessitated. Secondly, the developer
shall undertake to provide essential services like roads, street-light,
drainage and sewerage, water supply, arrangements of schooling,
alongwith community centre in all such villages, where the village
abadi has to be relocated. Where relocation is not necessary, but
more than 25 per cent of the land of the village gets acquired, similar
social infrastructure shall be provided in the existing abadi.      The
developer shall also undertake to set up industrial training institutes,
vocational training institutes, etc., and such institutes shall be fully
developed and run by the developer.
3.37 Another condition that the State Government has laid is that the
developer shall undertake to give employment, at least to one
member of the family, whose land is acquired for setting up the
project. The nature of employment shall be to the satisfaction of the
State Government.      The developer shall also undertake to give at
least 25 per cent employment, of the total employment provided by
him, to domiciles of Haryana.      While the State Government has
provided for acquisition as a comfort, by and large it has encouraged
all the SEZs to come and buy land directly from the farmers.
Regarding rehabilitation, the State Government would try to make
sure that similar kind of rehabilitation work is done, even where land
is not acquired by the Government. Legally, the State Government
may not be able to do, but it will definitely try and convince them that
it is in the interest of the State and the population, that they should
adopt similar measures.      However, Special Economic Zones Act
does not have such a provision in this regard for the promoters and
developers, who are purchasing land privately.
3.38 Regarding direct acquisition of land by the promoters, the
Developer may acquire land independently from private parties by
purchase, lease or otherwise under        clause (2) of Section-7 of
Chapter III of Haryana SEZ Act, 2005. All the land pertaining to SEZ
was registerable by Tehsildar (Revenue). The State Government,
thus, had control over promoters/developers purchasing the land
directly from the land owners by mutual consent, to ensure good price
of their land and the people are not forced to relinquish their land
under compulsion. Regarding employment generation, no Special
Economic Zone had become operational in Haryana, hence
employment had not been generated so far.             However, SEZ
developer have proposed potential of about 34 lakh of employment to
be generated in the next five years, after setting up of 72 number of
SEZs.
3.39 On the issue of implementation of labour laws in the State, he
stated that the labour laws will be exactly the same, which are
operated in the domestic tariff area. The State Government is not
going to change the labour laws for the Special Economic Zones.
There would be the freedom to form a labour union and nobody can
prevent from doing so. It has been provided that a Labour Officer
shall be posted within the Special Economic Zone, to make sure that
the labour laws are followed therein.
3.40 On the issues of separate SEZ Act in the State, the process of
land acquisition and the quantum of compensation to the farmers
affected by acquisition of the land by the State, the State Government
had notified Haryana Special Economic Zone Act, 2005 w. e. f 1st
February, 2006.
3.41 Under clause (1) of Section-7 of Chapter-III, there was a
provision that the Government may transfer the land owned, acquired
or controlled by it to the developer, as per the provisions of the land
Acquisition Act, 1894, and the rules made thereunder, and as per
State Government Policy. The State Government had divided the
State in three regions for the purpose of compensation to the farmers
affected by acquisition of land. Minimum floor rates had been fixed
for these regions as per details give below: -


The urbansiable area as shown in      : Rs. 15.00 lakh per acre.
the Gurgaon Development Plan

Rest of the NCR Sub-Region of : Rs. 12.50 lakh per acre
Haryana including Panchkula
and periphery of Chandigarh
forming
Part of Haryana State.

Rest of the State outside Haryana     : Rs. 5. 00 lakh per acre.
Sub Region of NCR.

3.42 The above rates did not include solatium and interest as per
Land acquisition Act.    The Committee, headed by the Divisional
Commissioner, was the Competent Authority for calculating the
market price of the land under acquisition.
Maharashtra

3.43 The following number of SEZs had been approved in

Maharashtra:-

                                No.    Land in Inv.          Employme
                                       (H)      crores       nt Nos.
Before Act                             13782.01 22000.       275000
Multi product                   02              00
Formal approval                 47     9911.57   30735.   803400
Multi product                   02               16
Single product                  45

In principle                    23     18901.80 20546.    769100
Multi product                   10              21
Single product                  13




Recommended to BOA              29     6907.65   19442.   1044500
Multi product                   08               34
Single product                  21

Existing SEZ
SEEPZ, Mumbai                   01     42.49     538.69   84,600


3.44 Seven SEZs, out of the 47 formally approved SEZs, had been
notified. The details thereof are as below:-
Notified SEZs                                    Date
  1. MIDC (Additional Latur)                   15/01/07
  2. MIDC        (Khushnur,                    11/01/07
      nanded)                                  21/12/06
  3. MIDC          (Shendre,
      Aurangabad)                              19/07/06
  4. Serum Institute pune                      28/09/06
  5. Eon Khardi Pune                           11/01/07
  6. Royal Palm Mumbai                         28/12/06
  7. Wipro Pune


3.45 The State Government acquired land under Maharashtra Land
Acquisition Act. Out of these 72 SEZs, State Government was
acquiring 8257 hectares land under the said Act only for one SEZ i.e.
Maha Mumbai SEZ. However, State Government agency i.e.
Maharashtra Industrial Development Corporation, was acquiring
14538.62 hectare land for six SEZs, out of which five were being
developed by MIDC, under Joint Venture with privet developers, on
land measuring 12109 hectares.
3.46 The Developers were required to take prior permission for
bona-fide industrial use under Bombay Tenancy Agriculture Land Act,
for purchasing agriculture land. Developers were purchasing the land
by negotiations with landowners, on market-determined prices, on
voluntary basis. Most of the land purchased by the Developers was
barren   or   single-crop.     Maharashtra    Industrial    Development
Corporation had approved land-affected persons rehabilitation policy
on 11th August, 2005. According to this policy, an affected person will
get 15% of his acquisitioned land for his industrial venture, or 5% of
his acquisitioned land for his commercial venture purpose, at 50% of
prevailing premium rate.
3.47 Rehabilitation Committee in Maharashtra had already been
constituted. The Minister was the Chairman of the Committee, and
Minister (Revenue), Minister (Irrigation), Minister (State Excise %
Labour) were       members of the Committee.               The Secretary
(Industries) was the Convener of the Committee.
3.48 Enactment of the State SEZ Act was pending for concurrence
of the Government of India. Objections/suggestions received from
the Government of India were under scrutiny by the State
Government. No special provision had been made in the proposed
State SEZ Act, for special process of land acquisition and quantum of
compensation. However, Empowered Committee may facilitate
infrastructure support, including acquisition of land, if necessary, from
the State Government.
3.49 At present, one Special Economic Zone (SEEPZ) was
functioning in the State.      It had created 84,600 work force
opportunities. Development work was in planning and construction
stage in respect of other five notified SEZs, and nearly 28,92,000
persons were likely to get employment opportunities in these SEZs in
the next five years.
Tamil Nadu
3.50 The Special Secretary, Industries Department, Government of
Tamil Nadu, informed that the main focus of the SEZ Policy, as far as
Tamil Nadu was concerned, was to create more jobs and to capture a
large share of FDI. One of the key factors which had driven Tamil
Nadu to look at the SEZ quite seriously is moving up in value and
technology in general terms of manufacturing. Tamil Nadu has a very
strong manufacturing base. However, it is not at the cutting edge,
compared to many other countries. The State looks at the SEZs as
an opportunity to bring high technologies in manufacturing activities,
which will be the future of the world, as well as a method to spread
the benefits of investment, as many parts of the State are under-
developed. According to him, manufacturers are willing to set up
industries in backward areas because of the SEZs, which offer them
investment opportunities.   The State Government takes it as an
opportunity to develop skills in various high technology competencies.
3.51 Tamil Nadu had been one of the few States that had made
early initiatives in this regard. Mahindra World City and Nanguneri
SEZs were the earliest SEZs, to be promoted well before the Central
Government’s SEZ Act. Tamil Nadu had four operational SEZs.
Mahindra World City SEZ, Nokia SEZ, Flextronics SEZ and ETL IT
SEZ were the four operational SEZs in the State.
3.52 The Tamil Nadu has got an SEZ Policy and an Act, which was
enacted in 2005.     Basically, certain provisions of the Act are a
reflection of the Central SEZ Act. In Tamil Nadu, 44 SEZs have been
approved.    Out of them, 30 SEZs are near Chennai, six are in
Comibatore, three in Hosur, one in Perumbadur, one in Erode, one in
Kanyakumari, one in Tirunalveli, and one in Thiruvannamalai.     Out
of the 44 SEZs, 19 have in-principle approval and 25 have formal
approval. Nine SEZs have been notified. 19 are IT/ITES SEZs, 19
are   product-specific,   and   six   are   multi-product.   High-tech
manufacturing companies like Nokia, Flextronics, DELL, Samsung,
etc., have chosen Tamil Nadu, but for the SEZ policy.           These
manufacturers give our employees hi-tech skills, which our SMEs or
the Indian industry would never be able to impart, and the wage rates
have also gone up. Regarding lands for nine notified SEZs, some of
them are in Government industrial estates, where land has been
given on a 99-year lease. Since the ownership still rests with the
Government, the land can be reclaimed if there are violations or non-
utilisation of the said land. The rest of them have come up on private
lands, which have been acquired by them directly. The notified SEZs
are: Nokia at SriPerumbadur, TCS at Chennai, ETL Infrastructure
Services Limited at Chennai, Hexaware Technologies at Chennai,
Syntel International Limited at Chennai, Flextronics at Sriperumbudur,
DLF at Chennai, Hi-Tech at Coimbatore and Shriram at Chennai.
3.53 Government of Tamil Nadu was attracting large number of
foreign and domestic investments in general. The State had emerged
as a preferred investment destination for electronics hardware
industry, primarily because of the SEZ Policy. Mahindra World City
SEZ has three Zones for IT/ITES, auto components, fashion products
& apparel, providing employment for over 3000 persons. Large and
prestigious companies like Nokia, Motorola, Foxconn and Flextronics
were setting up facilities in Tamil Nadu. Nokia SEZ had already
commenced operations, with an employment of 3700 persons. The
Nokia SEZ was manufacturing 2.5 million handsets per month. It had
plans to employ 7000 persons directly, and about 20,000 through its
vendors, by the end of 2007. Flextronics had just commenced
commercial productions, with about 1300 employees. Each of these
anchor companies had attracted substantial investments from their
vendors and component suppliers. For example, seven of Nokia’s
vendors had started work on their projects within Nokia SEZ.
3.54 There was a notable multiplier effect arising from investments
by major companies in SEZs. With companies like Nokia, largely
employing   local   people,    there   was   substantial   employment
generation. All these MNCs had brought in state-of-the-art and high
technology in manufacturing, which was likely to attract further
investments and lead to export competitiveness. The SEZ Policy,
coupled with the proactive policy of the State Government, had led to
creation of an electronic hardware manufacturing eco-systems, that
may lead to further upstream in semiconductor fabs and downstream
investments, such as infotronics.
3.55 Another    key SEZ       was   the   SIPCOT   Hi-Tech     SEZ   at
Sriperumbudur (notified and in the process of coming into operation),
which had attracted investments from Foxconn, Motorola, Tessolve,
DELL and Samsung. A major international company, such as Feng
Tay of Taiwan, was also setting up a Footwear SEZ, with a proposed
employment of 15,000 in five years in Tamil Nadu mainly becaue of
the attractive SEZ Policy. Many other FDI investors, with SEZ
projects involving substantial employment opportunities, were in the
pipeline. As of today, 44 Special Economic Zones had been accorded
either final or in-principle approval in the State by the Government of
India, which are distributed in ten districts of the State.
3.56 The SEZs in the State would not be set up on cultivable land,
and the guidelines prescribed by the Government of India for setting
up of SEZs were being scrupulously followed by the State
Government. The State Government was not acquiring any land for
any privately promoted SEZs. Land acquisition was being considered
only for the SEZs which were promoted by State Government
agencies like SIPCOT and TIDCO. Even in these cases, purchase
through direct negotiation was resorted to, and acquisition was only a
matter of last resort.
3.57 While acquiring lands, SIPCOT pays the compensation as fixed
by the Land Acquisition Officer at the first instance and any enhanced
compensation as awarded by the Civil Courts is paid as the final
settlement.     A comprehensive Rehabilitation Policy is under
preparation by the State Government.


West Bengal
3.58 The      Resident    Commissioner,       representing       the   State
Government of West Bengal, informed that before this Act came into
being, three SEZs were already operational. Presently, seven SEZs
have been given formal approval. These seven SEZs involve around
2,000 hectares of land.       Another 14 SEZs have been given in-
principle approval, because they don't have land.             The total land,
which would go into SEZs, will be around 15,000 hectares. No land
has yet been acquired by the State Government for SEZs. As of
now, the Government does not have any plans to do that.        It will be
decided on a case-to-case basis. Regarding SEZ in Nandigram, he
submitted that it is in-principle approved SEZ, and the State
Government is still in contact with the developer, because the State
Government has joint venture with the latter. It has not yet gone into
any acquisition of the land area.    The State Government does not
have any wasteland.     68 per cent of the land is agricultural; 20 per
cent is where no agricultural activity has taken place, and 13 per cent
is forested. If one goes by that yardstick, the State won't be having
any industry at all.
3.59 On the issue of setting up SEZs on a large number of
unoperational or closed down industrial estates, he submitted that
SEZs cannot come up on those lands.          According to him,     SEZ
window has been opened by the Government of India and West
Bengal would not like to miss that opportunity, and the State is taking
best possible efforts in this regard. The State has its own sets of
problems, and it has also its own sets of solutions. The State is
devising rehabilitation policy, as well as the manner to acquire land in
a peaceful manner. According to him, Nandigram episode gave bad
publicity and it has nothing to do with the field position. The field
situation is altogether different. So far, the State Government has
been acquiring land under the Land Acquisition Act. It is trying in its
own way to sweeten the rehabilitation package.
3.60 The State Government has submitted a proposal to the Ministry
of Commerce that instead of 1,000 acres, the minimum area for an
SEZ should be 400 acres in case of West Bengal, because of acute
shortage of land. The State Government has suggested that 75 per
cent should be the processing area and only 25 per cent should be
available for commercial and residential activities. The State does
not have its own SEZ Act.
3.61 The West Bengal Government         did not furnish any general
information on the functioning of SEZs in the State.      However, it
made suggestions for changes in SEZ Rules which are appended (at
Appendix III).


Orissa


3.62 No SEZ has yet been set up in Orissa. However, there is a
proposal for setting up 13 SEZs, out of which 11 SEZs are sector-
specific and 2 are multi-product.     Orissa Industrial Infrastructure
Development Corporation (OIIDC/IDCO) has been declared as nodal
agency for acquisition of land for establishment of SEZs in the State
No land has specifically been acquired for establishment of SEZs.
However, a portion of the land acquired for establishment industries,
has subsequently been proposed for the SEZs. No Agricultural land
has been acquired so far for establishment of SEZs in the State.
Rehabilitation and Re-settlement Policy of Government of Orissa,
2006 is being scrupulously followed in respect of land acquisition for
SEZs.
3.63 As per the R&R Policy of the State Government, the project
proponent may opt for direct purchase of land on the basis of
negotiated price, after issue of notification requiring acquisition of
land under relevant Act(s).    If acquisition of land through direct
purchase fails, other provisions of the relevant Act may be invoked.
However, R&R Policy of Government of Orissa is comprehensive
enough to cater to the needs of the landowners, whose lands would
be acquired. Moreover, Rules and Regulations of the Government of
India are also being followed while acquiring land for SEZs.
Government keeps close watch not to acquire double-crop
agricultural land for the purpose.
3.64 No separate SEZ Act or Rules have been formulated by the
State Government. However, SEZ Policy of Government of Orissa is
at draft stage, awaiting Cabinet approval.
3.65 Consequent upon establishment of 13 SEZs, there is a
possibility of generation of about 2,23,500 employment potential in
the State. No litigation has been filed in the court of law for setting up
of SEZs so far in the State.
                               CHAPTER IV
      Written and Oral Submissions: Political Parties and Trade
                                     Unions
4.1    The Committee considered written submissions (Annexures I to
IX) as well as oral evidence of the following political parties and trade
unions, which are summarized below:
Shri A.B. Bardhan, General Secretary, CPI

4.2    There should be no transfer of land ownership to the private
developer. Private developers should only be allowed to take land on
lease or build the infrastructure on a BOT basis. The Board of
Approval for SEZs at the Centre should only consider those
proposals, which have been duly approved by the State Government.
4.3    The Central Government should set an appropriate ceiling on
the total land area under a SEZ, which can be developed by a private
entity. In Section 5(2) of the SEZ Rules only minimum land area
requirements for different classes of SEZs have been mentioned. The
maximum land area also needs to be specified. Private entities
should not be allowed possession or control of land beyond the
stipulated ceiling.

4.4   SEZs, whose land area exceeds the specified ceiling, should
only be developed by the States (Public Enterprises of the Central or
State Governments). The States can undertake Joint Ventures in
developing such SEZs; but in such cases majority stake should lie
with the public sector.

4.5   SEZs should be built on non-agricultural land and acquisition of
agricultural land for the purpose of SEZs should be discouraged. A
provision limiting the acquisition of agricultural land should be built
into the SEZ Act itself.

4.6   It is important to ensure the livelihood security of the displaced
families, in addition to providing adequate compensation. The
Government should frame a National Rehabilitation Policy, preferably
through a Central legislation, in order to address the issues
concerning rehabilitation of displaced families. Suitable amendments
should also be made to the Land Acquisition Act in order to address
these issues.

4.7   A model compensation and rehabilitation criteria should be
framed by the Central Government and included in the SEZ Rules,
following consultation with the State Governments. The owners of
land be awarded compensation, in line with market prices, taking into
account the expectation of future land development. Displaced
families be given minor equity stakes in the companies floated for the
purpose of building SEZs, compensate those with long-term tenancy
rights on the acquired land and farm labourers.
4.8   The Government should urgently address the issue of
unblocking and recycling of land and other assets of closed industrial
units under liquidation. A fast track mechanism should be set up, for
unblocking the land of these closed units, so that they can be made
available for building SEZs or other industries.

4.9   A cap on the total number of SEZs, irrespective of their class
and size, should be there. If several large SEZs, developed by private
entities, are allowed to come up in a few States, while many States
do not receive any proposal from private developers, this would only
aggravate regional imbalances. There was an apprehension of
existing units shifting over to SEZs, which would result in loss of
revenue that presently accrues to the Government. There should also
be separate caps for the total number of multi-product and sector
specific SEZs. The Central Government should consider setting up of
SEZs through public investment in those States, where private
investment is not forthcoming. A cap on the number of IT SEZs
should also be set, keeping in mind the revenue considerations.
4.10 The processing area of SEZs should not be less than 50%.
Further, 25% of the non-processing area should be dedicated for
infrastructure development. Building of residential and commercial
complexes should be permitted over 25% of the total land area.
4.11 The Land Use within SEZ Area should also be regulated. There
was a need to regulate real estate development within the SEZs.
4.12 The SEZ Rules should contain a Land Use Plan for the giant
SEZs. The issue of housing facilities for workers in the giant SEZs
should be concretely addressed. Wherever residential complexes
would be permitted within the SEZs, they should be built not only for
the management and the white-collared employees, but also for the
workers.
4.13 Fiscal incentives for new units should not be for more than two
years, as was done in the case of Chinese SEZs. Income tax
concessions for a period longer than two years should only be
provided for the reinvested portion of profits, and that too only for a
maximum of five years.

4.14 The developers and the entrepreneurs should not be treated on
par as far as tax exemptions and concessions are concerned. Fiscal
incentives for developers, if they have to be provided at all, should be
separately specified and should be considerably lesser than the ones
provided for the entrepreneurs for income tax as well as customs and
excise duties.

4.15 The exemptions, which are unrelated to exports, should not be
granted;

4.16 The SEZ Rules have imposed the granting of tax and duty
concessions upon the State Governments, which is not in keeping
with the spirit of the Act. Either this rule has to be amended, or the
Central Government should fully compensate the State Governments
on the loss of revenue on account of these tax and duty exemptions.

4.17 The granting of duty concessions to goods sold by a Unit to the
Domestic Tariff Area should not be permitted, This will imply major
diversion of productive activities away from the Domestic Tariff Area
to the SEZ, with substantial revenue loss for both the Central and
State Governments.
4.18 Separation of powers between the Development Commissioner
of an Export Processing Zone and the Grievance Redressal Officer
should be considered.

4.19 There was no need for providing tax breaks for the financial
entities within the SEZs. All financial activities should be within the
regulatory ambit of the RBI, and subject to the same tax provisions,
regardless of whether their offices are physically located within the
SEZ or the Domestic Tariff Area. The RBI needed to ensure that the
financial activities permitted within the SEZs are strictly related to the
economic activities within the Zone.

4.20 The Government should initiate a review of the SEZ Act at the
earliest, with a view of making appropriate amendment. The Board of
Approval should stop granting fresh approvals, until completion of the
review process. The changes suggested in the Land Acquisition Act
and the formulation of a National Rehabilitation Policy, preferably
through the passage of a Central legislation, should also be
considered on an urgent basis.


Shri Prakash Karat, General Secretary CPI (M)

4.21 It   has   become     necessary    to   bring    about   appropriate
amendments to the SEZ Act and Rules thereunder.
4.22 Granting en masse approvals for the setting up of SEZs in a
few States would eventually lead to this situation.
4.23 The apprehension of industrial projects in the pipeline being
converted into SEZ projects overnight, has actually come true. The
approval for most of these SEZs needs to be reconsidered.
4.24 Imbalances should not be allowed to develop between States in
terms of the number of SEZs permitted. The Central Government
should consider setting up of SEZs through public investment in
those States, where private investment is either not forthcoming or
demands too many subsidies and concessions.
4.25 There can be no justification for acquisition of land by the state
Governments in order to build SEZs, unless it is in keeping with a
Land-use policy and planning laws. Land acquisition by the State
Governments should be in consonance with their optimal land use
plans, based on principles of equity, sustainability, food security, and
balanced economic development. Any land acquisition by the State
must also be for public good. The land use, after acquisition must, be
equitable and plan for all sections of society. State Governments
should also be encouraged to frame/update their Land-use policy.
4.26 The Land Acquisition Act, which was enacted during the
colonial period, is a misfit in the current Indian setting and needs to
be amended, in order to make it congruent with an independent and
democratic State. This has to be done by properly defining ‘public
purpose’ and making the eminent domain accountable and open to
public scrutiny. Besides, a National Rehabilitation Act needs to be
adopted by the Central Government, so that the displaced people are
legally entitled to a share of the development,           that causes
displacement. Compensation and Rehabilitation must be integrated
into project planning and implemented in a time-bound manner, in
order to avoid the adverse socio-economic impact of land acquisition
and land use changes.
4.27 The disproportionately large number of proposals for IT SEZs
clearly shows an attempt by new IT units to avail the benefit of the ten
years’ tax break under the SEZ Act, which otherwise cannot be
availed by the IT companies beyond 2009. The idea of having small
SEZs in sectors like IT should be dropped. Projects below a minimum
land area should not be granted approval as a SEZ. A minimum land
requirement of 100 hectares for sector-specific SEZs and 400
hectares for multi-product SEZ should be considered.
4.28 The justification for having separate minimum processing area
requirements for multi product and sector specific SEZs is difficult to
understand. If both types of SEZs are primarily meant for industrial
development, they should not have separate minimum processing
area requirements. The processing area of SEZs should not be less
than 50%. Further, 25% of the non-processing area should be
dedicated for infrastructure development like roads, and for trading or
warehousing purposes. Building of residential and commercial
complexes should be permitted only within 25% of the total land area.
4.29 Tax concessions in some of the areas in Chapter VI of the SEZ
Act, under the "Special Fiscal Provisions for Special Economic
Zones" need to be reconsidered.
4.30 The SEZ Authorities should be strictly under the control of the
Government and no State Government should be allowed to deviate
from this position. Provisions for democratic representation within the
SEZ Authority should be made, especially since the Authority will also
be responsible for the provisions of civic amenities like power and
water supply within the SEZ Area. Suitable amendments have to be
made in the SEZ Act to address the concerns related to the
democratic character of the SEZ Authority, the powers and
accountability of the Development Commissioner and whether the
Central or State Governments would have the powers to exempt
SEZs from the laws of the land, especially those related to labour and
crime.


     Bhartiya Janata Party


4.31 The minimum area of the processing zone in an SEZ should be
raised from the present 35% of the total area of the SEZ to 60%.
“justification in permitting more than 40 percent of the total area for
“non-processing” utilization in any category of SEZs”.      No       fertile
and irrigated agricultural land should be acquired for SEZs.
4.32 Considerations of equity for farmers, farm workers and allied
rural workers cannot be sacrificed for the benefit of promoters of
SEZs and the businesses operating in them.

4.33 State Governments must prescribe minimum prices for land in
various areas, which should be high enough to reflect the opportunity
prices of land. Instead of the State Governments using their coercive
power of compulsory acquisition, SEZ developers should be required
to obtain land from the farmers through direct purchases, but at
prices higher than the minimum as suggested above.

4.34 The farmers should get benefit from substantial value-
appreciation of their land after it has been developed. A minimum of
15    percent   of   the     area   in   the   processing      and     the
residential/commercial parts in the non-processing zone should go
back to the farmers, on a pro-rata basis. Where feasible, farmers
should be allotted equity shares in the developer companies.

4.35 In addition to suitable financial compensation, the displaced
farm labour and allied eligible workers should be given preference in
employment either by the SEZ developer or in the business units in
the SEZ. For this, every SEZ developer must be required to set up a
training institution.

4.36 Each SEZ proposal must include a plan for rehabilitation of the
people who would be displaced from their traditional employment and
livelihoods. The Development Commissioner of the SEZ should be
enjoined to oversee implementation of the rehabilitation plan.

4.37 Every SEZ developer must be required to prepare a
redevelopment plan for the village abadis falling within the SEZ limits
and to execute that plan at his cost.

4.38 Tax incentives for business units in the processing zone of an
SEZ should not be made available in the non-processing zone.

4.39 There should be level playing field for the Domestic Trade
Areas (DTAs). Business in the DTAs should not be put to a
disadvantage because of the incentives available to those in SEZs.
There should also be no scope for abuse of benefits available in
SEZs for scale of goods and services in DTA.

4.40 There should be special incentives for SEZs established closer
to small towns.

4.41 The tax exemptions currently available to IT and ITES units
upto 2009 should be extended immediately for a further period of 10
years. This decision must be announced, so that uncertainty on this
issue, which has led many IT companies to consider relocation to
SEZs, is put to an end.

4.42 The      Union     Government,     in   collaboration   with   State
Governments, should evolve a New Township Development Policy,
with suitable rules. Stronger incentives (fiscal and non-fiscal) should
be provided for new townships located away from the existing metros
and big cities. There should be adequate provision of housing,
affordable means of mass transport, and access to basic social
infrastructure amenities for people in the low-income category.

4.43 There should be independent regulatory authority to deal with
the issues related to the SEZs.

4.44 There should be clear guidelines to protect worker’ rights and
promote their welfare, as well as for environmental protection.


All India Kisan Sabha
4.45 The proliferation of SEZ proposals. within a period of few
months, has given rise to concerns related to large-scale acquisition
of fertile farmlands, massive displacement, enormous loss of tax
revenue and gross misuse for real estate purposes. appropriate
changes have to be brought in the SEZ Act and the SEZ Rules.
4.46 Detailed land-use maps should be prepared by the State
Governments before embarking upon land acquisition. Every State
should constitute a land Zonation team, consisting of soil scientists,
agronomists and remote sensing specialists, to earmark soils with a
low biological potential for farming, such as waste lands, lands
affected by salinity, acidity, etc., for industrial activities and
construction. The impact of such activities with respect to fragile or
endangered ecological zones should be examined in detail and
adequate safeguard measures should be taken. Acquisition of land
for industrial projects should avoid fertile farmland and displacement
as far as possible. Wherever acquisition of agricultural land was
unavoidable, the responsibility of securing adequate compensation
and proper rehabilitation for people displaced by SEZs and ensuring
their livelihood security has to be shared by the Central Government.
The Land Acquisition Act, which was enacted during the colonial
period, needs to be amended in order to make it congruent with an
independent and democratic State. Besides, a National Rehabilitation
Policy needs to be adopted by the Central Government.
4.47 There should be no transfer of land ownership to the private
developer. Private developers should only be allowed to take land on
lease.
4.48 The Central Government should set an appropriate ceiling on
the total land area under a SEZ, which can be developed by a private
entity. SEZ Rules only specify minimum land area requirements for
different classes of SEZs. The maximum land area also needs to be
specified.

4.49 SEZs, whose land area exceeds the specified ceiling, should be
developed by the State only (Public Enterprises of the Central or
State Governments). The State can undertake Joint Ventures in
developing such SEZs; but in such cases majority stake should lie
with the public sector.

4.50 A provision limiting the acquisition of multi-crop agricultural land
should be built into the SEZ Act itself.

4.51 A model compensation and rehabilitation criteria should be
framed by the Central Government, and included in the SEZ Rules,
following consultations with the State Governments.

4.52 The model compensation and rehabilitation criteria for SEZs
should ensure that the current owners of land are awarded
compensation in line with market prices taking into account the
expectation of future land development.

4.53 A provision must also be made to compensate sharecroppers
as well as agricultural workers. The Central Government should
share responsibility for implementation of the model compensation
and rehabilitation criteria.
4.54 There should be separate caps for the total number of multi-
product and sector-specific SEZs. Further categorization of SEZs into
small, medium and big may also be considered with appropriate caps
for the different categories. Transparent and stringent criteria should
be set for granting approvals for SEZs. Imbalances should not be
allowed to develop between States, in terms of the number of SEZs
permitted.
4.55 A decision regarding extension of the tax or other benefits to
the IT sector, or any other sector which contributes to exports, should
be taken separately. Projects below a minimum land area should not
be granted approval as a SEZ. The minimum land requirement for a
sector-specific SEZ of 100 hectares, as specified in the SEZ Rules,
can provide an appropriate basis.
4.56 The processing area of SEZs should not be less than 50%.
Further, 25% of the non-processing area should be dedicated for
infrastructure development. Building of residential and commercial
complexes should be permitted only within 25% of the total land area.
Besides revising the minimum processing area requirement for multi-
product SEZs to 50%, there is also a need to lay down regulatory
parameters for real estate development within the SEZs. The SEZ
Rules should contain a Land Use Plan for the SEZs, which would
ensure that housing or other commercial complexes constructed
within the SEZs do not exceed the supportive infrastructural needs of
industrial units in the processing areas.
4.57 Providing 100% exemption from income tax on profits for the
first five years and 50% for the next five years which has been done
in the SEZ Act, is clearly excessive. Income tax concessions for a
period longer than two years should only be provided for the
reinvested portion of profits, and that too only for a maximum of five
years.
4.58 The SEZ Act provides for similar exemptions, drawbacks and
concessions for the entrepreneurs setting up units within the SEZ and
the developers of the SEZ. Fiscal incentives for developers, if they
have to be provided at all, should be separately specified and should
be considerably lesser than the ones provided for the entrepreneurs,
for income tax as well as customs and excise duties.

4.59 The SEZ Rules have imposed the granting of tax and duty
concessions upon the State Governments, Either this rule has to be
amended, or the Central Government should compensate the State
Governments on the loss of revenue on account of these tax and duty
exemptions.
4.60 The exemptions, which are unrelated to exports, should not be
granted.
4.61 There has been an attempt to dilute labour laws while framing
the SEZ Rules. Deviations of the SEZ Rules, as well as the Model
SEZ Act for State Governments, from the SEZ Act, have to be
corrected to ensure that no dilution of labour laws occurs. The ILO
recommendation regarding separation of powers between the
Development Commissioner of an Export Processing Zone and the
Grievance Redressal Officer should also be seriously considered.
Centre of Indian Trade Union (CITU)

4.62 Implication of some of the rules goes far beyond the concept of
a minimum regulated fiscal regime to a       self-contained Privatised
Autonomous Entity, independent of the laws of the land.
4.63 There is no ceiling, either on the land or on the number of SEZs
within a State. Rules should specify upper ceiling on the contiguous
area, based on the type of products I services intended to be
produced I carried out.

4.64 Rules should be so framed that at least 50% of the land is kept
reserved for processing zone and the remaining land to be utilized for
infrastructural development, specifically related to export production,
thereby prohibiting the Developers I Co-Developers to go in for real
estate business (also for catering to the domestic economy) in the
non-processing area.
4.65 The rules should specify that land given to the Developers will
be of lease hold nature only.

4.66 In order to avoid social unrest, there must be specific
provisions in the Rules with regard to Modalities of acquisition of
land and grant of compensation and rehabilitation package for the
land losers and agricultural workers.

4.67 The Act does not touch on the labour-related issues, which are
being governed by the existing labour laws of the land under
designated agency as per the relevant Act. Further, Rule 5(5)(e), (f)
and (g) calls upon the State Government to endeavor to delegate
power to Development Commissioner under 10 Act, 1947 (No14 of
1947) in relation to units in SEZ, workmen employed by the
Developer and declaration of SEZ as public utility service. This is
not at all consistent with the parent Act.
4.68 The aforementioned provisions in the rules, tinkering into
and/or intruding upon the normal process of labour administration,
militate against the spirit in which Parliament deliberated and
decided on the issue.

4.69 With regard to transfer of power of State Labour Commissioner
to Development Commissioner, such a rule, without a legislative
backing, is totally untenable.

4.70 No such back-door vesting of powers to Development
Commissioner through a Rule will be acceptable to the trade union
movement of the country. Clauses 5(e), (1) and (g) of Rule 5 should
be fully deleted from the Rules.

4.71 The rules should be so framed that powers of Development
Commissioner are limited to the functions, for which he is deputed
and his accountability should be clearly defined. Such unbridled
power,    without   accountability,   would   be   utilized   by   the
Developers/Management, to crush all democratic movements,
including the right to form association and union, and the right to
move freely, as mandated under Article 19 of the Constitution.

4.72 The cost-benefit analysis has to be worked out and a set
parameter 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 earnings, for an objective assessment of
the success of the SEZs, Rule 53 should be suitably amended, based
on cost-benefit analysis.
4.73 None of the labour laws, including those on formation and
activities of trade unions, are ever implemented in the industrial
units/establishments in the EPZs
4.74 There should be no difference between the SEZ and non-SEZ
areas in respect of applicability of Labour Laws. There cannot be any
special dispensation for the employers in the SEZ-based units in
respect of applicability of labour laws, as would legitimize the ongoing
labour-law violations in the EPZs/SEZs. Special measures for both
inspection (including joint inspection with Centra! Trade Union
representatives) by impartial agency and enforcement of all the
labour laws within the SEZ should be statutorily put in place.


Dr. Kirit Somaiya, Ex-M.P and Convenor, BJP Investors’ Cell

4.75 Healthy implementation of the policy needed minimum dilution,
deviation to avoid distortion.
4.76 There should be more concessions for SEZs in Backward
Areas, compared to the ones in most developed areas and metro
cities. Cost of Land should be cheaper. However, the great rush for
Mumbai-Navi Mumbai, Delhi-Gurgaon for setting up of SEZs,
suggests different trend.
4.77 There is a need for healthy, transparent and effective
implementation of SEZ concept in India. Direct/indirect taxes
provisions should be corrected, and loopholes should be plugged.
Tax benefits should be only for export activities and infrastructure
development.
4.78 Commerce Ministry and Finance Ministry should separately
study the concept, provisions, and benefits to private entrepreneurs
of different countries. It is an Illegal, non-scientific provision to have
75% area as non-processing Zone. The 75% non-processing zone
demand/idea seems to be given/promoted by the SEZ developers of
Navi Mumbai and Gurgaon, which will have negative impact on the
farmers, due to manipulative acquisition/purchase of agricultural land
for housing, hotels, medical, education, industries. Minimum 50% to
60% area should be earmarked as processing zone in a Multi-sector
SEZ. Activities in non-processing zone should be codified. No tax
benefit for non-export/service sector business activities should be
given. Strict provisions to restrict/limit housing, hotels, malls,
education, medical should be made, and no tax benefits should be
given for such activities.
4.79 National Policy on compensation and rehabilitation should be
formed, wherein provisions of annuity and share in developed land,
provision of one house and employment to one person of the project
affected family be made mandatory.
4.80 Undue benefits to SEZ developers-cum-unit holders would
affect competitiveness in the domestic industries. Tax/stamp
duty/land price shall make the project cost 40% to 50% cheaper in
SEZs, which will have negative impact on the domestic industries,
employment, etc. In future domestic industries will demand same
relaxations/benefits. There should be Level playing field for domestic
industry.
4.81 The size of mega SEZs should be curtailed and an
entrepreneur should be given permission for one or two SEZs.
4.82 The tax Exemptions should only be for Bonded Area i.e.
processing zones. Non-processing Zones are as good as DTA (no
separate boundary-fencing-gates-excise barriers/gates).
4.83 There    should    be   transparent   decision-making     process.
Ambiguity, loopholes regarding provisions for 25% to 35% processing
zones/taxes/land acquisition/compensation/market price, should be
removed. Commerce Ministry, CBDT, CBEC should review all the
provisions, correct the language, plug the loopholes and illogical
provisions.


Bhartiya Mazdoor Sangh (BMS)

4.84 Developing the SEZs was against the interest of the farmers,
labourers and the common man. The land of crisis-ridden tiller was
being sold for pittance to the industrialists, to be converted into real
Estate. The Government should establish a Regulatory Authority to
reconsider the whole issue. Moreover, waste and barren land should
be put to use for such purposes, instead of fertile and productive
farmland. The Government should permit Trade Unions to function in
SEZs, so as to prevent exploitation of labour. 75% of the land should
be used for setting up the industry, and 25% for other commercial
activities.

Hind Mazdoor Sabha (HMS)


4.85 The important areas of concern were rehabilitation of Farmers
and Agriculture Labour to be displaced from a huge mass of land.

4.86 The revenue loss due to Tax sops to these SEZs was
unimaginable and non-recoupable.           Hind Mazdoor Sabha (HMS)
was strongly opposed to exempting SEZs from the labour laws. All
the labour laws and other laws of the land, must be made applicable
and enforceable in SEZs. HMS totally rejected the idea of creating
'foreign enclaves' in the country, by exempting them from labour and
other laws of the country. It was also opposed to the transfer of
powers      of   Labour    Commissioners      to   the     Development
Commissioners of the SEZs.
4.87 AII the Trade Union rights, including Right to organise and
Collective Bargaining in SEZs, and all the legal protections viz. Job
Security;   Income    Security;   Social   Security;     Good   Working
Conditions; Medical Care; Education facilities etc., and participation
of workers in Management, should be made available to the workers
in SEZs.



All India Trade Union Congress (AITUC)

4.88 Land acquisition for setting up of Special Economic Zones
under the Special Economic Zones Act, 2005 had become a highly
controversial matter in the country. A National Commission should
be appointed by the Central Government to comprehensively review
the entire Act, and the concept behind it, in consultation with the
Central Trade Unions and other affected parties, in order to ensure
that the rights of the workers, farmers, including rural labour and
others involved, are fully protected.
4.89 AITUC was against creation of unlimited number of Special
Economic Zones. Their number should be the barest minimum, and
there should be a cap on the total number of Special Economic
Zones in a State. If all the 300 Special Economic Zones proposed to
be set up were created, it would not only affect the agriculture
adversely, but also food the security, and will undermine the
availability of resources for development. It would also result in
regional imbalance and locational disparities. It would expose the
workforce to the whims and mercies of entrepreneurs. The country
needs a balanced economic growth, social justice, for amelioration of
human distress, and not creating independent entities .of prosperity
at select places, for generating super profits for the corporates.
4.90 AITUC industrialisation should not be made contingent upon
creation of Special Economic Zones.
4.91 Land ownership should not be transferred to the corporates.
The title of the land should be in the name of the Government.
Farmers should not be compelled to surrender their land, and as far
as possible, only wasteland or fallow/barren land should be utilised
for Special Economic Zones. The land acquisition should be totally
transparent, and made public, before acquisition of the land. Private
Corporates should be given limited land for SEZs, half of which
should statutorily be used for development of Processing Area and
the other half for the development of infrastructure. AITUC was
against State Government offering land, many times more than what
was actually required, for setting up of a Processing Area. AITUC
rejected the idea that Special Economic Zones would generate
employment. The number of farmers and the rural workers, who
would get dispossessed by acquisition of land by corporates, would
be more than the number who may get employment. It demanded not
only full and generous compensation to the dispossessed, but also a
provision in the SEZ Act for providing jobs to those affected by the
acquisition, including the farm labour. Larger SEZ should be given to
public sector undertakings for development and industrialisation.
Activities connected with the development of real estate and Malls in
the SEZs should be curbed. Before acquiring agricultural land, land
belonging to closed industrial units should be used for SEZs.
4.92 The massive tax concessions to corporates for creation of
SEZs would increase the burden of taxation on the common people.
Once given the status of SEZ, private industries would simply reap
the benefits of all the leverages provided by the Government, the
most critical being land acquisition in the name of public purpose.
4.93 The definition of the economic activity in the SEZ Act was very
opaque and gives free hand to any activity - service, packaging,
entertainment, hotels, golf courses, etc. The disproportionate growth,
as a result of SEZs, would adversely hit small-scale industries,
manufactures and entrepreneurs in the long run. There was no
justification for huge and massive concessions to corporates. It will
only add to their super profit, at the cost of fulfillment of more urgent
tasks and commitments made in the National Common Minimum
Programme, like enactment of a comprehensive law for the workers
of the unorganized and agricultural sectors. The SEZs would become
foreign enclaves which would encroach upon the rights of the local
self Government like Gram Panchayats', and would be violative of the
73rd Constitutional Amendment.
4.94 SEZs would snatch the sovereignty of locals from their lands
and the natural resources, which was the backbone of local economy
and sustenance, and also their fundamental right to movement as
Indian citizens is being violated. The fact that the SEZs would have
their own regulations, the rights for environmental and labour related
clearances, security arrangements will actually mean that they would
be self-contained privatized autonomous entities. This was against
the Indian Constitution and the nationhood.
4.95 Though under Section 49 of SEZ Act, matter relating to trade
unions, industrial and labour disputes, welfare of labour, including
conditions of work, provident funds and employers liability towards
workers were applicable, handing over of powers of enforcement and
ensuring applicability to Development Commissioners negate the
same, as they are not accountable to either the appropriate
Government specified in various Acts or to the trade unions. Trade
Unions were not allowed to be formed in SEZs and no statutory
mechanism had been provided to ensure applicability of various
labour laws.
4.96 AITUC was firmly and strongly opposed to exempting SEZs
from labour laws. All labour laws and other laws of the land must be
made applicable and enforceable in SEZs. It totally rejected the idea
of creating foreign enclaves by exempting them from labour and other
laws of the country. AITUC is also opposed to the transfer of powers
of Labour Commissioners to the Development Commissioner
provided under the Rules.
4.97 A National Commission be set up to review the SEZ Act and
the concept behind it.
4.98 No transfer of land ownership to private developers. All efforts
should be made to locate and identify the barren, fallow and
wasteland, for setting up industries under the SEZ Act. The States
should help to develop infrastructure in such areas.

4.99 Appropriate ceiling on land area under a SEZ developed by
private developer, and bigger SEZ should be built by the Public
Sector. The current pattern of usage of land in SEZs needs to be
thoroughly reversed, to curb the chances of building mafias and real
estate dealers' mischief.

4.100 Limiting of acquisition of agricultural land should be ensured.
Acquisition of multi crop lands should not be allowed.

4.101 National rehabilitation policy should be formulated. SEZ should
not be allowed to become foreign enclaves. All laws, including labour
laws, be made applicable in such zones and powers given to
Development Commissioners in the matter of labour laws should be
withdrawn.

4.102 Framing a model compensation and rehabilitation policy that
should cover all affected people, including farm labour, apart from the
land-owning farmers.

4.103 Before opting for agriculture land for industrialisation, all
possibilities of recycling the land,    blocked in closed units, be
explored.
                              CHAPTER V
 Written and Oral Submissions: Developers, Entrepreneurs and
                                 NGOs
5.1   The Committee considered written submissions as well as oral
evidence of the following Developers, Entrepreneurs and NGOs,
which are summarized as below:


INFOSYS
5.2   Sec 10 AA of the Income Tax Act, has been initiated by the
SEZ Act 2005, wherein all units in SEZ are eligible for a tax
exemption based on the following formula:
Profits of the Undertaking X Export Turnover
                 Total Turnover

5.3   The Export Turnover in this formula disallows expenses, if any,
incurred in foreign exchange in rendering of specified services (
including computer software) outside India. The manner in which Sec
10AA is drafted completely dilutes the tax benefit intended to be
given for industries set up under the SEZ Act. The formula is faulty
as:
5.4   It defines Export Turnover to exclude expenses incurred in
foreign exchange. 'Turnover' refers to Gross proceeds received or
value of sales made by an exporter. Expenses being debited to P&L
account should not be normally reduced from the Export Turnover.
Though it defines Export Turnover, it does not talk about Total
Turnover. By matching Principle, if any such reduction is defined in
the numerator (export turnover), a similar reduction should be used
for the denominator (total turnover) as well.
5.5   This section primarily discriminates Manufacturing Industry with
that of Service Industry. There is no such disallowance for
Manufacturing Industry and even they do incur foreign exchange
expenses for import of raw materials. Similarly, Service Industry
spends in foreign exchange during the course of delivery of services (
or software) outside India. This is in line with the spending of foreign
exchange by the Manufacturing Industries.      Therefore, the definition
of Export Turnover in the Act be amended accordingly, and equal
treatment Service sector be given.
5.6   Section 26 (e) and Rule 31 talk about exemption from payment
of Service Tax on taxable services rendered to a Developer or a Unit,
by any service provider, provided the same is related to authorised
operations. This clause has been suitably amended at the Draft Rules
stage, to remove the doubts from the mind that irrespective of the
location where the service is rendered, so long as the relativity to
authorized operations has been established, service tax exemption is
allowed. According to the Ministry of Finance, services consumed
within the zone alone are allowed. Lack of clarity on the above is
acting as a hindrance to our day to day operations.
5.7   All Duties and Tax benefits as envisaged in Sec 26 of the SEZ
Act, apply to a Unit under construction too. However, where the Units
or the Developers get the respective approvals at a later date or
when the notification is passed with a retrospective date, there exists
no provision to claim refund of taxes or duties incurred by the
Unit/Developer from the date when the notification is passed, till the
date when the units get the actual exemption forms approved by the
authorities designated in this regard.
5.8   Under Rule 10, in relation to procurement of duty free items,
there is a proviso, which talks about giving duty benefits to the
Developer or Co-developer and also to the contractor, appointed by
such Developer or Co-developer. There are no forms prescribed for
passing on the benefits to the contractor and the field officers are not
accepting for giving the tax benefits to the contractor. In effect, the
Contractor has to incur out of his pocket and then claim refund or
adjust with his payables to the Department.
5.9 Procedure and treatment relating to scrap emanating out of
construction materials procured duty free may be clearly explained
by the Rules.
5.10 The main objective of SEZ being employment generation, the
Centre and the States should enable units to achieve this objective by
relaxing the stringent labour laws of the country. Tedious ledgers and
minimum wages requirements act as an hindrance in achieving the
objective. Moreover, The SEZ Rules, 2006 envisage delegation of
powers to the Jurisdictional Development Commissioner of the Zone.
This would ease out the impediments and ensure a smooth
functioning of SEZs.
5.11 Private SEZs in Tamil Nadu were suffering for want of an In-
house Customs, in charge at the Gate round the clock. The Zone has
become operational more than a year but without the Customs Staff
at the Gate.
Once the Zone gets notified, adequate powers to be given to the
Board of Approval to sanction necessary Budgets, for successful
operation of the Zones.
WIPRO
5.12 The representatives of WIPRO Ltd. informed that WIPRO, an IT
company, has so far done quite well in the SEZ.           It is already
operating in about five SEZs, situated in Bangalore, Pune, Kolkata,
and Hyderabad. It has one approval pending with the Department for
an SEZ at Greater Noida.
5.13 With regard to a query as to why the IT sector needed an SEZ,
since that Sector had all the benefits and all the exemptions, even
when there was no SEZ, he replied that the STPI has given
opportunity for making good export turnover for the country. But the
STPI tenure is getting over in 2009. Presently, Indian IT industry is in
the midst of capturing bigger market in the world. So far, the Indian
IT industry is US-driven; though some European companies are also
there. SEZs will certainly provide a competitive edge in high value
bid in the world. There are some procedural issues in STPI and SEZ.
In terms of administration and procedural points of view, it proved
quite a support to the industry. But the procedural issue is in terms of
taxation, where the industry often seeks refund after having paid the
duty. It is not there at all in SEZs. Hence, procedures are more
simplified. The SEZ Act is quite comprehensive. It is not sector-
specific. It gives weightage to all, whether it is industry, service and
manufacturing. So, it makes sense to go alongwith the global trade
policy.
5.14 On a query on opting for the SEZ, instead of STPI, by the IT
industry he stated that it is going over by 2009, and if it is extended,
the IT industry will be happy to continue with it. As regards how
much land was required for a viable unit, he stated that it depends on
certain parameters. Going by the international standard of IT
services, space requirement for one person is about 100 sq. feet of
area, which includes all the ancillary units, processing as well as non-
processing. Going by that parameter, we will generally employ 5000-
10,000 people in the next five years. Therefore, ten to fifteen acres of
area is required.
5.15 With regard to the query as to whether WIPRO had any
problems with the Act or the Rules, he stated that it is quite a
comprehensive Act and they were quite happy with it. For ensuring
security and whether the SEZ complex was secured enough, he
stated that in Kolkata, the Company had employed about three
thousand people. So far, it has not come across any incident which
could be alarming or which could have posed a problem. The State
Government has been able to provide extra support, as far as
security is concerned.
5.16 With regard to recruitment policy he submitted that there are
certain lapses. For recruitment, campus interviews is the norm. The
Company has started to accommodate people who are not
engineers, like people from ITIs and others, so that those people
come forward and participate in the IT development of the country.
Training is predominant and a key part, and the company is working
in league with the universities.
5.17 With regard to work done in the field of social responsibility
clause, he submitted that the Company has started many initiatives in
education, especially for the primary schools, in villages. It has set up
a Foundation called Azim Premji Foundation for Education, which is
not a part of WIPRO. It was a personal initiative of Mr. Premji, where
about 200 plus people from WIPRO are working, to promote the
cause of primary education in 14 States.
5.18 There was no union of employees. Employees were quite
happy and the issues of unsatisfactory attitude and growth of an
employee come from their perks. It is a specialised industry and we
have lot of exposure. There is a need to keep training these people,
almost on a quarterly basis. No employee in WIPRO today gets the
benefit of growth or promotion, unless he attends some training
programme.        No employee is also eligible for further projects,
travelling, etc., unless he has accomplished certain targets and
acquired certain skills. We do not want a person to stick to one task.
We move people across various tasks. With regard to the working-
hours schedule in the BPO industry, he informed that it is a 24Χ7 job.
Generally, when America wakes, we sleep and when we are working,
they are sleeping. However, there is eight hours’ working shift in the
BPO sector, depending upon the State laws. The laws vary from
State to State. All State laws, including labour laws, are followed.


Reliance Industries Ltd.
5.19 The SEZ Act- 2005 is visionary and is focused on India’s strong
integration into the global economy, and it is visible by the large
serious investments into SEZ development. It is important to maintain
the SEZ Act’s global manufacturing services objectives. Government
have    several     other        policies/instruments   for   other   types   of
industrialization           in         backward         areas,        domestic
manufacturing/services/development, etc., which should not be
confused with SEZs.      Pragmatic SEZ Rules regime towards that
focus is needed.
5.20 The infrastructures, not the real estate size/acrages, should be
the defining features of SEZs. Besides infrastructures, SEZs also
generate long-term higher unskilled employment. RIL’s multi-product
SEZs go well beyond Utilities, with additional mega-infrastructures for
the entire Region’s overall development.
5.21 SEZ land acquisition privately, at market prices, optimizes
returns At least the transaction cost goes directly to the farmers.
State acquisition can be for only the balance contiguity areas, as in
Haryana. Further, early R&R clarity will ease land consolidation
processes for all stakeholders, eg. Gujarat has a Rehab cess, even
on barren land without any habitation. Developers value local support
and want proper R&R.
5.22 Quality world-class workplaces, instead of industrial ghettos,
should be encouraged at the SEZs. Over-large processing areas,
beyond the present 35% limit, is counter-productive, as 65% non-
processing areas are essential to provide matching housing and other
living services, to make Indian SEZs globally successful.
5.23 Current SEZ contiguity rules insist on the physical land
integration.   It is more pragmatic to have a operating contiguity,
without disturbing the existing connectivity of roads, rail, power lines,
etc.    An operating contiguity is then possible with secured
bridges/flyovers/ underpasses, etc., which SEZs Developers will
execute, to integrate their area.
5.24 Reliance Stands committed to rehabilitation as per the existing
and the applicable State R&R policy, parallel to land acquisition at all
three locations.   The early initiatives of the company target specific
schemes to strengthen school education, women-child health and
skills-training towards full employment.
5.25 The representative of the Reliance Industries informed that the
Reliance Group has got four SEZs, which were at land acquisition
and planning stage. Whether any formal or in-principle approval for
SEZs under the Group had been given, he stated that Jamnagar is at
the additional notification stage, where they have been given
notification for 1100 acres, and are awaiting notification for the
balance 1924 acres. This is an SEZ which is being planned with a
major infrastructure of the port expansion. It is planned to have
almost three single bio jets, a cargo terminal, a container terminal,
and a solid cargo container also. With regard to Navi Mumbai SEZ,
1100 acres had been transferred in a joint venture, and the balance
was being processed through private acquisition. At Jamnagar SEZ,
the entire land is barren area, and almost 70 per cent of it is privately
acquired. Acquisition of land for Maha Mumbai SEZ is being done by
a private channel. A major port is being planned. A minor port has
been allotted to the company, to develop it as a major port. There is
also a major transharbour road link, which is coming across Bombay.
All SEZs are inclusive of infrastructure.
5.26 With regard to the Jamnagar unit he informed that 1100 acres
had already been acquired, and 1900 acres would be applied for.
With regard to the type of land, i.e. whether it was Government land
or farmers' land, the representative replied that the entire area in
Jamnagar is barren. Thirty per cent land has come through
Government, and the balance 70 per cent through private
acquisitions. The SEZ at Haryana was at the in-principle stage.
Jhajjhar district is quite a backward area. The SEZ will spread over
an area of 20,000 acres. This will include a cargo airport. It is still at
the planning stage.
5.27 With regard to processing and non-processing area in these
SEZs, the representative replied that 35 per cent area should be for
processing and 65 per cent for non-processing. This is a fair enough
formula, as nobody wants an industrial ghetto, as we see in some of
the industrial estates. He endorsed the view of the Committee that
there is a need to develop Indian models, instead of having Hong
Kong and Dubai models of SEZs.
5.28 With regard to rehabilitation, consequent upon acquisition of
land, the representative replied that the Company is at the stage of
acquiring land.   People have not moved yet.         The Company has
established a health camp with a couple of NGOs. As to whether
some part of wealth generation, consonant to setting up of SEZs, is
percolating down to those who have been displaced or who have
been permanently alienated from their land, the representative replied
that they have already committed full employment.            To make it
possible, they are planning ITIs. Also 80 per cent of the farmers who
sold their land to them, went and bought land in Rajasthan and in
other areas. So, the land alienation did not happen with many of
them.   Further, Reliance persuaded the ICICI people to open a
branch in Jhajjar district, and asked them to advise people who were
flush with funds, and they are today advising people how to invest
their money. It is also felt that since all are not farmers, people will
stay back also, and Reliance would train these youths with the help of
the ITI.
5.29 With regard to the experience with the Ministry and with the Act
he stated that the Act is pragmatic, especially with the WTO scenario.
The policy mentions about the infrastructure character of SEZs.
Besides export earnings, infrastructure part is also an important key
element.      It is felt that addition in the rules of a simple thing like if we
are going to build an SEZ, it should not be overloading the existing
ones       like water, bijli, road connectivity.    It should be adding to
whatever is available in the region. From that point of view, the Rules
should be strengthened to build environment, to build the process,
where the infrastructure is encouraged. This is one aspect of the
Rules which we are adding to the infrastructure part of it.


DLF


5.30 The representative of DLF stated that DLF has two types of
SEZ business.        One is IT-SEZ business, and the other is multi-
product SEZ business. The Company has got in-principle approval
for nine IT-SEZs, covering all the important cities or major towns of
the country. Its SEZs are in Chennai and Gurgaon. In Gurgaon the
Company has about six million square feet of IT space, operational
and functional, and eleven million square feet of space is already
contracted and under construction.          After the STPI, IT companies
have shown keener preference to go to the ecology of the SEZ type
of environment.
5.31 With regard to export out of the IT SEZs of the Company, the
representative informed that they were only providing infrastructure
and contracting with IT companies.        These major IT companies
operate from the infrastructure and the space provided by DLF.
5.32 The Company is not exporting anything. On a query that DLF
was getting all the facilities which one would receive as an exporter in
any other area,      alongwith some tax benefits, some duty-free
benefits, steel, cement, but nothing was being exported, the witness
replied that they are part of the supply chain of the exporters, by
providing space, power, an integrated infrastructure to the person,
who wants to operate from there. There are large companies who
can build infrastructure on their own. But there are small companies
which want to share infrastructure. DLF was filling that gap as a
shared infrastructure provider.    Even before the SEZ Policy, the
business of IT was just part of the service providers like DLF.
5.33 As to why DLF should be treated at par, the representative
replied that in terms of building the SEZ, all the materials like steel,
cement or equipment that go into power generation or air-
conditioning, fire-safety, security systems, etc., are being provided. If
a person were to do it on his own, he would have also got some
concessions as an SEZ company, or unit. The only thing that they are
doing is to reduce the cost, by giving a comparative space by import-
free materials.   Thus, the cost of space and services is reduced.
Every other major players in India, like IBM, come to the service
providers. With regard to a query if after five years, these units wind
up and go away, what will happen to the infrastructure, the witness
replied that they would give it to other units as per the SEZ Act.
5.34 Regarding the query that DLF was only selling space and how
can they be treated as an export-oriented unit, the witness stated that
they are not treated as a unit. They are treated as a developer.     It is
distinctly defined who is a builder or developer, and who is an
operator.
5.35 When the Act came into existence, the basic concept was that
duties and taxes should not be exported.            There are various
infrastructure schemes where benefit is being provided. This was the
Government scheme, which came from the perspective where
employment generation is talked about.          There are four mega
players, who are making their own SEZs.             There are various
companies from outside, which are coming up with 500 employees or
2,000 employees. They don't want to land up into the land business.
They don't want to acquire land.        They say that we are in the
business of telecommunications, we are not interested in real estate.
They want some kind of a service provider or infrastructure service
provider. There are clients who are coming today. They want to get
their places booked. That is the reason why in the policy, it was
being put at par.
5.36 With regard to a query about estimate of foreign companies
utilising their infrastructure facilities and the likely total quantum of
investment in the country, the representative replied by illustrations
that the Chennai SEZ, which is in four million square feet, will employ
about 40,000 people, besides 10,000 people in indirect jobs. 50,000
people would be working there. It will cost Rs. 840 crore. Every
developer or business house or industry has its own segment, which
it operates or specialises. More than 80 per cent of the space is let
out to multinational companies who come to India. With regard to
query that whatever Telecom Companies will be bringing to this
country would be a third generation technology, the representative
stated that it is in their self-interest that they produce a product for
exporting competitively in their markets and they cannot use lower
technology. Otherwise, their business will fail, they have to bring
equipment and technology because they have to compete.
5.37 Regarding employment generation, the representative stated
that an SEZ will involve a minimum investment of Rs. 4,000 crore,
including cost of grid infrastructure like roads, services, built up area,
social   and   logistic   infrastructure,   warehousing    infrastructure,
transportation and other facilities. An investment of Rs. 4,000 crore
would generate an export value of 1.25 billion dollars. Further, there
are two great objectives and challenges before the policy makers of
the country; economic growth and employment and poverty
alleviation is possible only through industrialisation.       Agriculture
contributes to only 20 to 30 per cent of GDP. Industry and services
have to be developed.


Mundra Port and Special Economic Zone Ltd.
5.38 Regarding the security management in its SEZ, the Company
submitted that its port is under the continuous vigilance of two
security companies, guarding the different areas.         Whilst one is
responsible for the security of the whole port, the other is entrusted
with the responsibility of guarding the marine facilities. The port is an
International Ship and Port Security (ISPS) compliant, port certified
by Indian Registrar of Shipping (IRS).        Their port facility is also
certified to ISO 9001:2000 Quality Management systems since the
last four years.
5.39 The company has started installing Video Surveillance System
across the key locations of the port, for ensuring online security
vigilance and quality services to the customers. The company have
also Access Control Systems at their Main Gate, to ensure that only
the personnel having the permission to work enter the port.        The
security department carries out scheduled security vigilance rounds in
the port, round the clock.
5.40 The entire port area is under the control of the Customs. The
company is maintaining a close co-ordination with the Indian Navy
and Coast Guard, and their vessels keep on calling their port
frequently. Majority of the cargo which comes in and goes out, is the
dry Bulk & Break Bulk and Liquid Cargo. All the gates through which
the cargo trucks, trailers and tank lorries enter or leave the port, are
manned by their security and the customs. Similarly, all the loaded
containers, coming in and going out, are checked, to ensure that their
seals are intact. All empty containers coming in and going out of the
port are physically checked, to ensure that nothing undesirable
comes in or goes out.
Celebrity Fashions

5.41 M/s. Celebrity Fashions highlighted the following points:

    (i)     SEZ units have been paying Excise Duty and Cess for
            High Speed Diesel and Furnace Oil, since September,
            2004. As the High Speed Diesel and Furnace Oil are
            used for production purposes, the same should be
            exempted from payment of Excise Duty and Cess.
    (ii)    Service Tax for services rendered to SEZ units outside
            the SEZ premises is not exempted, though the services
            are availed during the export process, like service tax for
            Ports charges, Air & Sea.
    (iii)   Exemption of profits under See 10(a) & 10(b) of the
            Income Tax Act is available only up to the Financial Year
            2008/2009. An extension of exemption of profits for
            another five years, from the financial year 2009/2010,
            may be given.
    (iv)    Infrastructure like roads needs to be strengthened, for
            better projection of the Zone.
5.42 The container and the heavy vehicles movements were
restricted between the Zone and Tambaram during day time,
resulting in hardships for sending export consignments outward from
the Zone, and raw materials inward to the Zone, particularly in MEPZ-
SEZ, Chennai.
Campaign for Survival and Dignity


5.43 Campaign for Survival and Dignity, a federation of tribal and
forest dwellers’ groups working in eleven states, in their written note
submitted that there were some potentially problematic issues around
SEZs. The current frame of the law will make SEZs into zones where
companies have effective power over all aspects of peoples’ lives and
their rights like labour rights, infrastructure rights and the right to
freedom of speech and assembly - will be badly curtailed.
5.44 While no specific reference is made to local institutions in the
SEZ Act or Rules thereunder, the Model SEZ Policy states that "The
State Government will declare SEZ as Industrial Township and if
necessary, relevant Act would be amended so that SEZ can function
as a governing and autonomous body as provided under Article
243(Q) of the Constitution."
5.45 All States with public policies on SEZ's have adopted this
position. Industrial townships do not have municipalities, but are
generally run by a planning authority. This planning authority have
equivalent powers to an elected municipal body, such as planning
powers,    licensing    powers,    responsibilities    for   provision   of
infrastructure, etc.
5.46 Thus, in "multi-product" SEZs, huge areas are going to be
brought under authorities with no democratic institutions whatsoever.
There is no reason to suspend the operation of local government
inside SEZ's.
5.47 No provision of infrastructure in an SEZ is possible without the
agreement of the Developer (section 3(11) of the SEZ Act) and the
approval of the Board of Approvals. Moreover, the Model SEZ
Policies for States that were issued by the Centre further state that
within an SEZ, "Distribution Company shall have freedom to fix tariff
for consumers" (5(b)). This provision has also been adopted by a
number of States.        Given that the SEZ Developer and/or the
Development Commissioner of the SEZ are effectively going to be in
control of local government within the Zone, the result will be that
infrastructure and tariffs will essentially be under the control of these
institutions with no democratic accountability at all. Developers can fix
prices for electricity, tolls for road use, etc., entirely at their will and
fancy.
5.48 Serious moves have also been made to modify the operation of
criminal law and to create what can only be seen as a special
mechanism of maintaining law and order in an SEZ. Section 22 of the
SEZ Act specifies that no investigation, search or seizure within an
SEZ can be undertaken without the permission of the Development
Commissioner, except in the case of an agency authorised by the
Central Government to investigate "notified offences" (to be notified
by the Centre).
5.49 The Central Government has been given a large number of
powers under the Act, including the power to declare "notified
offences", exempt application of laws, etc. A highly unclear section in
the SEZ Act (section 31(1)) would seem to imply that these powers
can be delegated to the SEZ Authority, to exercise the powers
conferred on, and discharge the functions assigned to it, under the
Act." This Authority, in turn, consists of four Central officers, including
the Development Commissioner, all from Departments associated
with SEZs, and two representatives of entrepreneurs. These officials
and entrepreneurs could then exercise the sweeping powers of the
Central government under the Act. This section should be removed.

5.50 Further, the Model State SEZ Policy and the policies of several
States - state that separate and exclusive arrangements will be made
for law and order and control of crime within SEZs.
5.51 Section 46 of the SEZ Act provides that every person whether
employed or residing or required to be present in an SEZ, will be
provided with an identity card. Rule 70 of the SEZ Rules goes on to
state that the entry of persons to the processing area of the Special
Economic Zone shall be regulated through issue of identity cards,
while Rules 11 (1) and 11 (2) of the SEZ rules require a two meter
high wall, with barbed wire fencing, around the processing area of the
SEZ.        Reading between the lines, there is a clear attempt to
suppress both labour monitoring and labour organizing. Insistence
on walling off zones, as well as a separate police force, will make it
easier to target and repress union organizing in these Zones, as has
been done in Export Processing Zones around the world. If the aim is
to prevent smuggling of goods, etc., there is no reason to apply such
measures to the processing area alone.
5.52 There appears to be no conceivable economic or regulatory
benefit from the provisions on criminal law, law enforcement and
security and the same should be removed from the Act, Rules and
the Model Policy forthwith. Undoubtedly many Zones will, in any
case, use such methods to repress workers' struggles, but there is no
reason that there should be a legislative and policy mandate for them
to do so.

5.53 While section 49 of the SEZ Act blocks the Central government
from relaxing labour laws, there is a clear effort to use every possible
opportunity to weaken labour laws in the SEZs. Rules 5(e) and 5(t)
insist that SEZ'S must be declared to be "public utility services" and
the powers under the Industrial Disputes Act delegated to the
Development Commissioner. The Model Policy advocated by the
Central Government contains a long list of exemption clauses in
labour laws, including in the Minimum Wages Act and the Contract
Labour Regulation and Abolition) Act, that the States are advised to
invoke.
5.54 Section 49 of the SEZ Act further provides that the Central
Government can, by notification, direct that "any provisions of this
Act... or any other Central Act or any rules or regulations made
thereunder or any notification or order issued or direction given
thereunder" will not apply to a specific SEZ or all SEZs. The only
exemption is "matters relating to trade unions, industrial and labour
disputes, [and] welfare of labour." However, even with such an
exemption, this section amounts to allowing the Central government
to de facto repeal a law (in so far as its application to Special
Economic Zones is concerned) and thus to override Parliament and
the State Governments with the issuance of a notification. Section 49
is unconstitutional and violates basic democratic and federal
principles. Any exemptions to laws should be provided within the SEZ
Act itself and such undemocratic powers should not be conferred on
the Centre.


Hyderabad Gems Ltd.


5.55 The Committee heard the views of promoters/Developers and
units of SEZs. Shri Srikanth Badiga, Vice President, informed that
Hyderabad Gems and Jewellery is the 100 per cent subsidiary of
Geetanjali Group. The Government of Andhra Pradesh allocated 200
acres of Government land, which was meant for hardware
development park, at the rate of Rs. five lakh per acre, around 2-2.5
years back. The present market rate is close to Rs. 15 lakh per acre.
The SEZ is expecting investment of Rs. 500 crore by 40 big units,
and with employment of about 5,000 people by each unit. Within
three years, the SEZ will be employing not less than 50,000 people.
Geetanjali Group would be having its own units, spread over a land of
10 acres, and it will give employment to about 7,500 to 10,000
people. With regard to exports, the SEZ is looking at close to Rs.
75,000 crore, by the end of the financial year.
5.56 Regarding land requirement for a vital gems and jewellery unit,
he submitted that there could be large units of one lakh square feet or
two lakh square feet for each factory. Gitanjali, in its SEZ, is putting
up two factories, each of one lakh square feet, one for diamond
cutting and the other for jewellery manufacturing.       The Company is
having main unit for diamond cutting in Borivali and jewellery
manufacturing facilities at SEEPZ.
5.57 In Hyderabad, this SEZ is very near the new airport, which is
coming up. It is a very ideal situation for a gems industry. Demand
for an SEZ for the gems and jewellery is much higher, because its
export is around 17 billion dollars and it is expected to reach 45 billion
dollars in the next 3-5 years. Looking at the growth in the jewellery, it
is felt that there is going to be a great demand and not only one SEZ,
but a number of SEZs can come up, which can give large
employment generation and add foreign exchange to the exchequer.
5.58 With regard to facility to train people, the training centre is
already working. The Company has already given employment to
1128 people. The training centre has been set up outside the SEZ, to
train people on an on-going basis, so that these trained manpower
can be used by the factories and the manufacturers, who are going to
set up their units in the Zone. In fact, the Company has got a lot of
enquiries,   not   only   from   India,   but   also   from   international
manufacturers, to set up units in the SEZ. The Company is looking
forward to make it a world class SEZ.
5.59 With regard to the adequacy of Customs or Excise personnel,
he submitted that they do not have any problem and hoped that the
same kind of facility will be provided in Hyderabad.      On a query
regarding problem with the SEZ Act or Rules, it was stated that the
SEZ Act is very self-sufficient and compact. However, there is scope
for improvement.
5.60 With regard to sale of their products in DTA, he informed that it
is very negligible. But in Hyderabad SEZ, it will be going up to 50 per
cent                   in                  the                   DTA.
                                  Chapter-VI

                    Observations and Recommendations



6.1     Special Economic Zones are the dream projects of the
Government, aimed at GDP growth, infrastructure development,
increase in Foreign Direct Investment and generation of direct and
indirect employment. The SEZ Policy was launched by the
Government of India, with great fanfare, as a growth catalyst, on the
model of the Special Economic Zones in China, in the fond hope that
they would help India replicate the Chinese success story of rapid
industrialization. SEZs are being developed, along the lines of some
of the internationally known SEZs such as Shenzhen in China, Jabel
Ali in Dubai, and Europark Mielic in Poland. But the reception to SEZs
amongst various Indian stakeholders has not been on the expected
lines. There have been voices of dissent, and at some places violent
protests. A section of the farmer community, whose lands are being
acquired for setting up SEZs, is particularly agitated and aggrieved
with the policy. There is an imperative need to understand the
cause of the farmers’ agitation and grievance.


6.2   Soon after the coming into force of the SEZ Act, 2005 in
February, 2006 the policy got mired into a deep controversy. India is
not the only country to have set up Special Economic Zones. China,
Indonesia,   the   Phillipines,   Iran,   Jordan,   Poland,   Pakistan,
Bangladesh, South Korea, Thailand, Russia, Kazakhstan, Ukraine,
etc. also have SEZs. Even the USA is known to have 285 Free Trade
Zones.     The total number of SEZs in the world is around 3000,
though China has only 6 of them. The avalanche of 401 proposals
being cleared (237 “formal” approvals and 164 “in-principle”
approvals) within a few months of the promulgation of SEZ Act and
SEZ Rules, seems to have generated a fierce debate in India about
the “real” objectives of the SEZ concept. Several political parties,
mass organizations, civil society groups, academics and experts, and
even some corporate groups began to view the entire SEZ policy
framework with suspicion.


6.3      The proliferation of SEZ proposals has given rise to concerns
about unplanned and unbalanced regional development, large scale
acquisition of fertile farmlands, massive displacement of people,
enormous loss of tax revenue, needless Government subsidies to
corporates, questionable implementation of labour laws in SEZs and
gross misuse of SEZs for real estate purposes.       There are fears
about the likelihood of unrestricted movement of contraband and
national security.   There are also allegations that the Commerce
Ministry is approving SEZs in haste, without examining the proposals
in detail or receiving recommendations/observations from States. In
some cases, even objections and reservations of State Governments
have been reportedly bypassed. The Committee feel that the
undue haste in approving SEZ proposals and the consequent
proliferation of SEZs have contributed to the development of
resistance against the SEZ policy.
6.4   SEZs were meant to be engines of growth, both for
industry and exports. However, the opposition with which it has
met during the last one year must make the Government take a
fresh look at the policy as a whole and to re-frame it in such a
manner that would make it people-friendly, besides achieving
the objective of export-led industrial growth.


6.5   The Committee recommend that no further SEZs should be
notified till the SEZ Act and the Rules made thereunder have
been amended to meet the public concerns with regard to
various provisions contained in the said Act and Rules.


6.6   Secretary, Ministry of Agriculture, mentioned in his submissions
before the Committee that the total cultivable land in the country
decreased from 185 million hectares in 1980, to 183 million hectares
in 2003. The per capita availability of cultivable land declined from
0.27 hectare to 0.18 hectare and non-agricultural use of land
increased from 19.66 million hectares to 24.48 million hectares during
the same period. During the period between 1980-81 and 1990-91,
the annual average increase in non-agricultural use of land was 1.68
lakh hectares, whereas during the five years from 1999-2000 to 2003-
04, the annual average increase in non-agricultural use became 2.25
lakh hectares. The satellite imageries and space research analysis
have found a drastic reduction in agriculture land.   The Committee
feel that diverting land from agriculture does not merely mean
reduction in production or income to farmers, it affects the
entire gamut of social and cultural life of the farmers,
agricultural labourers and others connected with the agricultural
activities.


6.7   There is a concern for sustaining agricultural production, to
meet the requirements of an increasing population in the country.
The net sown area in the country is about 141 million hectares, of
which 55 million hectares is irrigated and 86 million hectares is
unirrigated. The overall productivity of agricultural crops, especially
the cereals, coarse grains, pulses, etc. has been stagnant. About 127
million cultivators, 107 million agricultural labourers and others
depend upon farm income.       Diversion of agricultural land to non-
agricultural purposes could be detrimental to the food output of the
country. It is estimated that diversion of 1000 hectares of cultivated
land to non-agricultural uses can deprive about 900 cultivators and
760 agricultural labourers of their livelihoods. The diversion of land
used for grazing can also have adverse implications.


6.8   Expansion of housing and related infrastructure and
widening of roads in the countryside have resulted in fast
depletion of land under cultivation. Emergence of townships
near big cities is also eating up considerable land under
cultivation.


6.9   It takes huge investment and time to develop land for
intensive cultivation and to provide it with irrigation.       If such
highly productive lands are consumed by urbanization, big
housing complexes and industrialization, including for Special
Economic Zones, it will be hard to compensate their loss
through development of equally productive new lands. If this
process is not controlled, it may cause threat to our food
security.     The Committee recommend that the Government
should take all necessary measures to ensure that the food
security of the country does not get jeopardized at any cost.


6.10      There is a hue and cry by many farmers whose lands have
been acquired.     If such acquisition continues, it can ignite social
unrest.     The SEZ policy, in its present form, seems to pitch the
Government’s industrial priorities against agricultural priorities, which
is not a correct signal. Globalisation and liberalization do not
imply that all the attractive ideas from outside should be
transplanted in our country, without evaluating their suitability
and efficacy in our own socio-cultural and economic context. It
would be equally wrong to promote industrial growth at the cost
of agricultural growth. In a predominantly agricultural country
like India, even an impression that the interests of agriculture or
of farmers are being sacrificed at the altar of industrial growth,
could be ruinous. SEZs, therefore, should not be allowed to
come up at the cost of farmers. The country should develop its
own    model     for   industrial   growth   and    expansion,     while
safeguarding the interests of the farmers.


6.11 The Ministry of Agriculture is known to have expressed concern
over the transfer of agricultural land to SEZs. The Regional Plan,
2021 for the National Capital Region emphasizes that good
agricultural land should be protected and conserved. The National
Commission of Farmers has also emphasized the importance of
conserving agricultural land in the following terms:
       “Prime farm-land must be conserved for agriculture and should
       not be diverted for non-agricultural purposes and for
       programmes like the Special Economic Zone. Such special
       programmes should be assigned on wastelands and/or land
       affected by salinity and other abiotic stresses that reduce the
       biological potential of land for the purpose of farming. Every
       State should constitute a Land Zonation Team consisting of soil
       scientists, agronomists and remote sensing specialists to
       earmark soils with a low biological potential for farming such as
       wastelands, lands affected by salinity, acidity, etc., for industrial
       activities and construction. It is in our national interest that
       agriculture and industry both prosper in a mutually reinforcing
       manner.”


6.12       The Committee, therefore, recommend that the existing
cultivated land should be conserved for agricultural purposes
and should not be diverted for non-agricultural purposes.                 It
should not be used even for extension of urbanization and
industrialization. In the long term, the Regional Master Plans and
Development Plans should incorporate land suitability analysis
for the land use allocations, to identify the areas, intrinsically
suitable     for    settlement,     agriculture,    industry,     forestry,
recreational uses, etc. While preparing such Master Plans and
Development Plans, it should be ensured that industrial
development is not permitted in the Natural Conservation Zones,
planned     green     areas,    agricultural    areas,    ground     water
recharging areas and water bodies. Instead, industries should
be set up on wastelands, thereby putting a vast unutilized
natural resource to a productive use. The Committee further
recommend that town planning should provide for green belts.
Heavy penalties should be imposed against those who interfere
with land resource and its productivity.               Environmental
protection cannot succeed unless these measures are taken.
The rights of tribals and poorer sections on common land
should also be protected through legal and administrative
structures.


6.13 Left to Developers and Entrepreneurs, they would like SEZs to
come up in areas which are infrastructurally developed, so that the
amount of investment required is minimal and the returns are very
fast. The Developers would, therefore, try to acquire land in already
developed areas or very close to such areas without regard to the
agricultural worth and value of that area. If they are allowed to do so
in an unrestricted manner, there would indeed be benefits to industry,
besides huge profits to the Developers. However, the country would
lose in the process precious agricultural land, which would be
irreplaceable and irrecoverable in all times to come. Long-term
casualty of this would be a fall in the agricultural produce and the
food security of the country.


6.14 The Committee were informed that the land area involved
under 237 “formal” approvals was 34510 hectares and under 164 “in-
principle” approvals, 134587 hectares. The Committee were further
informed that availability of barren and uncultivable land in the
country was to the extent of 18 million hectares.        If SEZs are
developed on wastelands, it would serve a double purpose of
expanding industrial space in the country and, at the same time, bring
uncultivable and unutilized lands into mainstream use.


6.15 SEZ Act and Rules do not put any restriction on the use of
cultivable land for setting up SEZs.      So much so that Form-A
(Application for setting up SEZs) appended to the SEZ Rules does
not have any column for the quality or “kisam” of land being used for
a prospective SEZ. Responding to concerns about diversion of prime
agricultural land for industrial use, the Union Commerce Minister
wrote thus to the State Chief Ministers in September, 2006:
     “The issue was discussed in the SEZ Board of Approval
     meeting held on 21st September, 2006 and the general
     consensus emerged that mainly waste and barren land and if
     necessary single crop agricultural land alone should be
     acquired for the SEZs. It was discussed with the State
     Government representatives that if perforce a portion of double
     cropped agricultural land has to be acquired to meet the
     minimum area requirements, the same should not exceed 10%
     of the total land required for the SEZs.”
     "I would, therefore, request you to ensure that the land acquired
     for the purposes of SEZs in your state is primarily waste or
     barren land.      Agricultural land may be acquired only if
     necessary to meet the minimum area requirements.”

6.16 The Committee feel that restriction on use of agricultural
land for SEZ purposes should not be a matter of administrative
advice or guideline. Rather, it should be clearly reflected in the
SEZ Act and rules made thereunder. The Committee are also not
in favour of double-crop/multi-crop/irrigated land being used for
SEZs. The Committee, therefore, urge upon the Government to
build unambiguous provisions in the SEZ Act, regarding the
land to be utilized for setting up SEZs, on the following lines:
      i)     There should preferably be a ban on the use of
             irrigated double-crop or multi-crop land for setting up
             SEZs.

      ii)    Normally, only waste and barren lands should be
             used for setting up SEZs.

      iii)   If it becomes unavoidable to make use of cultivable
             land, only single-crop, rain-fed land should be used.
             The percentage of such land should not exceed 20 %
             of the total area of a multi-product SEZ. In respect of
             SEZs other than multi-product ones, this ceiling
             could be 40%. These ceilings are with reference to
             the minimum and maximum areas proposed in paras
             6.23 and 6.24.

      iv)    It should be mandatory for the Developer to obtain
             permission of the State Government for purchasing
             single crop cultivable land for SEZ use.


6.17 There have been complaints that the land being alienated was
agricultural land and, in some cases, farmers were not even informed
of the purpose for which their land was being acquired. Cases were
brought to the Committee’s notice where the records in possession of
the farmers showed the land as agricultural and cultivated, whereas
the Developer was projecting the same land as non-agricultural,
fallow land, without any crop, or only a single-crop land. This was
perhaps done through manipulation of records, with the connivance
of revenue officials.
6.18 Perturbed over the increasing discontent among the farmers
over the alleged forcible acquisition of their cultivable agricultural
land, the Committee decided to constitute a Sub – committee, to
interact with the affected farmers so as to get to the crux of the
problem. The Sub-committee visited Jhajjar (Haryana), Hyderabad,
Bangalore, Jamnagar and Mumbai for the purpose. The Committee
are pained to note that at some places, the farmers were not allowed
to meet Members of Parliament. The role of the State Government
or the local administration should have been to facilitate the
Sub-committee to meet the affected people, especially the
farmers, who had come to express their grievances before the
Sub-committee. However, they were prevented from meeting the
Sub-committee by the administration itself. It created the
impression that the local administration at those places did not
want the Sub-committee to meet the farmers and to go into the
question of land use, land sale and rehabilitation.                The
Committee expect the State Governments to ensure that in such
cases    co-operation     from    their   local   administration     is
forthcoming.
6.19 It would be necessary to enforce restrictions with regard to the
‘kisam’-type and quality of land so that fertile land is not recklessly
alienated. To ensure this, it would be necessary to put in place an
efficient mechanism to screen applications for setting up SEZs. The
onus of verifying the quality of land should lie with the State
Government concerned. The Gram Panchayats should also be
involved in this process. When the land for SEZs is proposed to
be purchased by the private developers, the process should be
preceded by a public notice inviting objections to the stated
‘kisam’ of land. Response to such a notice could alert the State
Governments to the possibility of manipulation of records. The
Committee recommend that the Government should specify a
mechanism for this purpose in the SEZ Rules, besides
introducing a column for the ‘type and quality of land’ in Form-A
(application for setting up of SEZ).
6.20 The Committee also recommend that the Board of
Approval should not entertain any application directly from a
Developer and the system of giving “in-principle” approvals
should be discontinued forthwith. Applications should be
considered by the Board of Approval only after obtaining the
inputs of the State Governments, including those with regard to
the type and quality of land.
6.21 At    present,    the    following     Ministries/   Departments   are
represented on the Board of Approval (besides the DGFT, the State
Government concerned, the Development Commissioner concerned
and a Professor of IIM/IIFT):-
(1)   Department of Commerce
(2)   Department of Revenue

(3)   Department of Economic Affairs,

(4)   Department      of   Industrial     Policy   &
      Promotion

(5)   Ministry of Science and Technology
(6)   Ministry of Small Scale Industries and
      Agro & Rural Industries
(7)    Ministry of Home Affairs
(8)    Ministry of Defence
(9)    Ministry of Environment and Forests
(10 Ministry of Law and Justice
)
(11 Ministry of Overseas Indian Affairs
)
(12 Ministry of Urban Development
)


      The Committee are surprised to note that the Ministry of
Agriculture is not represented on the Board. Being an important
stakeholder as well as an affected party, the Ministry of
Agriculture must be represented on the Board of Approval.


6.22 The Committee were informed that recommendations for
liquidation of 1254 private sector units, 31 Central PSUs and 41 State
PSUs were pending in various High Courts. The Government may
consider unlocking and recycling of land and assets of the
closed industrial units under liquidation. A mechanism should
be set up, to make available unlocked land of the closed units
for setting up SEZs. Similarly, land acquired for Growth Centres
and other schemes, which have not been found sustainable,
may be diverted for SEZs.


6.23 The SEZ Act and Rules prescribe a minimum area for various
types of SEZs, viz.
Type                     Minimum Area          Minimum Area For
                                               Special States/UTs
Multi-product          1000 hectares             200 hectares
Multi-Services         100 hectares              100 hectares
Sector specific        100 hectares              50 hectares
IT                     10 hectares & min.        10 hectares & min.
                       built up area of 1 lakh   built up area of 1 lakh
                       sq. mtrs.                 sq. mtrs.
Gems and Jewellery 10 hectares & min.             10 hectares & min.
                       built up area of 50       built up area of 50
                       thousand sq. mtrs         thousand sq. mtrs.
Bio-tech and Non- 10 hectares & min.             10 hectares & min.
conventional energy built up area of 40          built up area of 40
(including       solar thousand sq. mtrs.        thousand sq. mtrs
energy
equipments/cell but
excluding SEZs for
non-conventional
energy      production
and manufacturing)
Free     Trade    and 40 hectares & min.         40 hectares & min.
Warehousing      Zone built up area of 1 lakh    built up area of 1 lakh
(FTWZ)                 sq. mtrs.                 sq. mtrs.

6.24 The Committee feel that, under the present system, the
Developers may be tempted to acquire more area than is
necessary,    particularly    for   developing   profitable    support
activities in the non-processing area. It may, therefore, be
necessary to prescribe a maximum area also for various types of
SEZs, with the stipulation that at least 50 per cent of the area of
the SEZs would be used as “processing area”. This stipulation
should not be relaxable.       The proposed upper limits are as
follows:
   Type                      Maximum Area              Maximum
                                                       Area       for
                  With          an Only                Special
                  element       of                     States/UTs
                  Cultivable       Wasteland
                  Land
Multi-product     2000 hectares    5000 hectares      500 hectares

Multi-Services    200 hectares     500 hectares      200 hectares

Sector specific   200 hectares     500 hectares      200 hectares

IT                20 hectares      50 hectares       20 hectares

Gems        and 20 hectares        50 hectares       20 hectares
Jewellery
Bio-tech    and 20 hectares        50 hectares       20 hectares
Non-
conventional
energy
(including solar
energy
equipments/cell
but    excluding
SEZs for non-
conventional
energy
production and
manufacturing)
FTWZ             100 hectares      200 hectares      100 hectares



6.25 The Committee note that 148 out of the 237 SEZs approved so
far are IT SEZs. This disproportionately large number of proposals for
IT SEZs may not be a sheer coincidence.        Rather, it may be an
attempt by the new IT units to avail the benefit of ten-year tax-break
under the SEZ Act, which otherwise cannot be availed by the IT
companies beyond 2009. In fact, demands for further extending the
tax holiday for the IT companies for ten more years have already
been voiced by a section of the IT industry, in order to ensure a level
playing field. The Committee feel that if the existing tax benefits
to the IT sector are extended for ten more years, the mad rush
for SEZs in IT sector would automatically stop. The Committee,
therefore, recommend that the Government should take a
decision on extending the tax holiday to IT sector for a further
period in the light of this analysis.
6.26 Different   countries   have       followed   varying   norms   for
development of SEZs. As already mentioned, China has six large
SEZs: Shenzhen, Zhuai and Shantou in Guangdong province;
Xiamen in Fujiyan province; the whole of Hainan province; and
Pudong in Shanghai. Poland, a much smaller country, has 14 SEZs.
Iran has 5 SEZs, Kazakhstan and Ukraine have one each.


6.27 It has been recommended in para 3.10 that India should
develop its own model of SEZ, keeping in view its own socio-
cultural and economic imperatives. While doing so, it should be
seen whether the SEZs are expected to be instruments of
export-led industrial growth or should also ensure, at the same
time, a balanced industrial growth in all regions of the country.
The compatibility of these two objectives will also have to be
examined. The Committee recommend that the much discussed
issue of putting over-all and region-wise caps on the number of
SEZs should be decided in the context of the scope, dimensions
and objectives of the scheme. The caps can be revised after a
few years, considering the experience of the functioning SEZs.
6.28 Acquisition of land is being done in the country for various
reasons, all of them being labelled as “public purpose”. SEZs are the
latest addition to the growing list of public purposes. Be that as it
may,it is equally important to adequately compensate the land –
owner whose land has been acquired. Even before the SEZs came
on the land acquisition radar, monetary compensation was being paid
to the farmers/land-owners at a notoriously low rate, based on the
sales statistics of the past which do not always represent the actual
value of land, with the result that litigation with regard to land
acquisition has been on the increase. There is a growing realization
that change of use of a piece of agricultural land affects the farmer,
the agricultural labourer and many more connected with land, in more
ways than one, both tangible and intangible. For the progeny of the
farmers, their source of livelihood gets extinguished for all times to
come. The land owner, his family and other connected persons, like
share-croppers, farm laborers and rural artisans are forced to take up
other professions, thereby affecting their life styles, sometimes to
their grave detriment.
6. 29 The Committee feel that the Land Acquisition Act, 1894
should be replaced by a modern legislation, which is relevant to
the needs of the time. The new land acquisition law should,
inter-alia, be transparent in that it should inform the affected
persons the purpose of acquisition, its implications for them and
the resettlement package that would be offered to them. Unless
the public purpose for which the land is being acquired involves
an over-riding national interest like defence/national security,
the acquisition should take place with the consent of the
affected parties.    Further, a National Relief and Rehabilitation
Act   should    be    enacted    to    provide   a   comprehensive
compensation package to those deprived of their lands. The
Committee understand that Ministry of Rural Development is
already seized of the matter and is in the process of formulating
a new policy regarding relief and rehabilitation. While the
Committee recommend that the new policy and legislation
should    be   finalized   expeditiously,   in   tandem   with   the
amendments to be made in the SEZ Act and Rules, the following
may be kept in view while deciding the new paradigm for relief
and rehabilitation, in lieu of land:
      -    Monetary compensation should be only a part of the
           compensation package and should be calculated on
           the basis of the prevailing market rates. To ensure
           this, the State Governments should prescribe
           minimum prices for land in various areas, which
           should reflect the market rate, and review/revise
           these prices periodically. Thereupon, whether the
           land is acquired by the Government or the SEZ
           Developer, the acquisition/purchase price should be
           higher than the minimum price fixed by the
           Government.

      -    It should be ascertained from the land-owner and his
           co-workers, including share-croppers and agricultural
           labourers, as to how they proposed to re-
           settle/rehabilitate themselves. The Government
           should provide assistance to the affected persons,
           accordingly, by way of an adequate resettlement
           allowance, employment, training, bank loans, etc.
      -    Where the impact of acquisition is felt beyond the
           pale of land-owners and their co-workers, provision
           should be made to rehabilitate the affected
           community as a whole.
6.30 Multi-product SEZs, to be viable, would be in the nature of
industrial townships and may lead to massive displacement of
people, off the land on which an SEZ is being set up. It may,
therefore, be of advantage if these people, instead of being
displaced and compensated, become a part of the development
process of the SEZ. This could be done in the following manner:
     -     Land should be taken from the land-owners on lease
           so that they get a one-time lump-sum premium,
           followed by periodic rentals for sustenance. If the
           land is on lease, it would revert to the lessor in case
           the SEZ fails or is dissolved for any reason.

     -     At least one family member of the land-owner should
           be offered a suitable employment in the SEZ venture.
           It should be the responsibility of the developer to
           arrange necessary training of that person in skill
           acquisition/upgradation.

     -     Similarly, the whole range of agricultural workers,
           rural artisans, etc., depending upon farming activities
           and connected with the acquired land as well as other
           persons supporting and sustaining farming, should
           be given suitable employment in the “processing” or
           “non-processing” areas, in keeping with their skills.
           They should also be imparted requisite training, as
           necessary.

     -     The feasibility of allotting equity shares to the land-
           owners in the Developer’s Company should also be
           considered.

6.31 Two modes for acquisition of land from farmers are followed.
The first is the compulsory acquisition under the Land Acquisition Act,
the other is to let the SEZ developers purchase land directly from the
farmers. In either of the modes, the farmer stands at a disadvantage.
In the compulsory acquisition mode, the recorded sales do not
disclose the real market price. In the other mode, the farmer is the
weaker bargaining party. The State Governments must devise a
system of periodic market surveys, to elicit the prevailing market
rates for land in different areas. They should fix minimum land
rates based on such market surveys to strengthen the land-
owners’ bargaining position vis-a-vis the SEZ developer. This
will not only secure the interest of the farmers, but also result in
reducing the element of black money in land deals, higher
realization of stamp duty, and more economical use of land for
Urban and Industrial purposes.


6.32 The Department of Commerce had informed that out of the
34510 hectares of land required for 237 “formal” SEZ approvals,
17800 hectares were already available with the State Industrial
Development Corporations, etc. Apparently, this land was not
necessarily acquired for SEZ purposes. Further, in a written reply to a
question posed to the Department of Commerce, the Department had
stated as follows:
      “The developer can acquire the land by direct purchase for
      establishing a SEZ. In cases where State Government acquires
      the land or the land is in the ownership and possession of the
      State Government or a State Government Undertaking, the
      State Government may either transfer on ownership basis or on
      lease to the developer, depending on the terms and conditions
      under which the land is acquired, and on the policies and
      procedures adopted in the particular State. However, as per the
      SEZ Rules 2006, the developer cannot sell the land in a SEZ
     and the land in the processing and non-processing area can be
     allotted only on lease basis.”

     The Committee are of the view that the ownership of land
acquired by the State Government, even for a SEZ, should not
be transferred to the Developer. Instead, the land should be
leased out to the Developer on a long-term basis, with the
provisions of extension duly built into the lease deed.
6.33 The State-wise distribution of the 237 approved SEZ proposals
shows that only four States taken together, namely Maharashtra,
Andhra Pradesh, Karnataka and Tamil Nadu, account for 146 SEZs,
i.e. over 60% of the total approvals. On the other hand, the States like
Bihar or the North Eastern States have not received any such
proposal. The SEZ is construed as an engine of growth. This trend
indicates concentration of SEZs in a few States, which could
aggravate already existing regional imbalances. The Reserve Bank of
India is also reported to have warned against uneven development
among different regions. The Committee are of the view that if the
SEZs are a vehicle of development and an instrument of growth,
then less-developed and low-productivity areas also have an
equal right to development, rather a better claim, because of
being under-developed, and they should be encouraged to come
into the mainstream of development, by making use of the SEZ
Scheme. The Central Government should take suitable initiatives
in this regard.
6.34 When an area gets urbanised, it is to be accorded an
appropriate local body status. This is now a Constitutional
requirement and it is normally for the State Governments to take
necessary steps in this regard. Barring some exceptions, every
part of the country has to be a constituent of a Panchayat or a
Municipality for the purposes of local administration. Likewise,
each SEZ should get the cover of a representative local self-
government. The Government should make the status of the
SEZs clear from the angle of local administration and
incorporate it suitably in the SEZ Act/Rules.
6.35 The SEZs should have a Master Plan for management of
the civic amenities, which would determine the areas for the
residential space, the commercial area, the green area, roads
and pathways, etc. for an integrated development of an SEZ. The
guidelines in that regard should include all the building
structures and the services to be provided in SEZs, conforming
to the planning and other requirements, as prescribed in the
National Building Code.
6.36 When a township comes into existence, the related facilities
need to be provided. Presently, there are no guidelines as to who
would provide the civic amenities in the immediate vicinity of a SEZ;
whether   it   would   be   with   the   Central   Government,   State
Governments, the SEZ administration, or the Developer of the SEZ. It
is also not clear whether civic amenities to be provided would be
uniform throughout the country or vary from SEZ to SEZ.           The
significance of urban planning and civic amenities increases manifold
when the SEZ is coming up in or close to a mega city. There is also
the aspect of future expansion of a SEZ, which is linked to its
potential and performance. The Indian planners of SEZs must take
note of the fact that one of the earliest Chinese SEZs at Shenzhen
used to be small village and it grew into a city of 10 millions within a
short span of 20 years. The Government should, therefore,
enunciate a clear policy with regard to governance issues
emerging as a result of setting up of SEZs in relation to areas
surrounding SEZs.
6.37      Apprehensions have been expressed that large SEZs are
being planned by various Developers, mainly for real estate
exploitation, particularly when the location of SEZs is in the vicinity of
cities like Delhi and Mumbai. There is need to put such fears at rest.
The Committee recommend that provisions should be made in
the SEZ Act/Rules that all assets, including housing, created in
the non-processing area would meet and subserve the
requirements of those working in the processing area only and
not for anyone else.


6.38 The issue of housing facilities for the workers in the giant
SEZs    should     be   concretely     addressed.      The   residential
complexes within the SEZs should be built, not only for the
management and office staff, but also for the workers. If the
workers of the SEZ units are forced to stay outside the SEZ area,
it would lead to a proliferation of shantytowns in the
neighbouring areas.
6.39 The Development of housing and other social infrastructure in
the non-processing areas would enjoy the same incentives, as the
business units in the processing areas.    While the need for well
planned habitats, with modern amenities, for various sections of the
employees and stake-holders in SEZs is undeniable, the unplanned
construction of housing and non-housing structures, within and
around the SEZs, would be a bane of urban development.          The
Central Government, in collaboration with State Governments,
should evolve a new Townships Development Policy, so as to
attract investments and right kind of developers. The incentives
for the townships, farther from the existing Metros and big
cities, should be stronger.    These new townships should be
used for the benefit of the employees , workers and other
stakeholders in the SEZs.

6.40 Section 50 of the SEZ Act empowers the State Governments to
take decisions related to exemptions from State taxes. However, Rule
5(5) of the SEZ Rules states that before recommending any proposal
for setting up of a SEZ, the State Government shall endeavour that
the following are, inter-alia, made available in the State to the
proposed Special Economic Zone Units and the Developer:
    (a)    exemption from the State and local taxes, levies and
           duties, including stamp duty, and taxes levied by local
           bodies on goods required for authorized operations by a
           Unit or Developer, and the goods sold by a Unit in the
           Domestic Tariff Area, except the goods procured from
           domestic tariff area and sold as it is;
    (b)    exemption from electricity duty or taxes on sale of self-
           generated or purchased electric power, for use in the
           processing area of a Special Economic Zone”.
     The Committee feel that SEZ Rules seem to have gone
farther than the enabling provision under the SEZ Act, which
needs to be looked into. An assessment also needs to be made
of the loss of revenue that the States would suffer in
consequence of extending such tax exemptions to SEZ
Developers and Units and whether such loss would or would not
be offset by the gains accruing to the State Governments.


6.41 Chapter VI of the SEZ Act provides for exemptions, drawbacks
and concessions for the entrepreneurs setting up units within the
SEZ, as well as for the developers of the SEZs. The private
developers will be able to derive tax benefits, without contributing to
exports. Developers will have 10 years’ exemptions from direct taxes,
which would be applicable to all authorized activities and operations
in the non -processing area also. The purpose of tax and duty
exemptions and concessions to Units is to ensure that taxes and
duties do not enhance the export cost. It is not clear as to how the
tax and duty concessions given to a Developer will keep the exports
cost competitive. There is no mechanism in the Act/Rules whereby
the fiscal benefits given to the Developer will get passed on to the
Units and exports. The Committee, therefore, recommend that the
fiscal incentives for the Developers should be specified
separately and only such incentives should be given as are
conducive to attracting FDI and promoting exports.
6.42 Exemption from Service Tax has been given to the developers
in a Special Economic Zone. The units in the International Financial
Services Centre and Offshore Banking Units have also been given
income tax exemptions, equivalent to those for other units in the
SEZs.   Securities   transactions   by   non-residents   through   the
International Financial Services Centre in a SEZ have been
exempted from the Securities Transaction Tax. These exemptions will
simply encourage investors, including those in financial services, to
move from other locations into SEZ areas, with no benefit to the
economy and substantial revenue loss. The Committee recommend
that fiscal exemptions, which are unrelated to exports, should
not be granted. The provisions regarding direct/indirect taxes
should be corrected, and loopholes should be plugged. Tax
benefits should be granted only for export activities and
infrastructure development.


6.43 Section 30 of the SEZ Act stipulates that customs duties shall
be charged on any goods removed from a SEZ to the DTA. It is not
clear in the Act/Rules whether or not the non-processing area of a
SEZ would be treated, for the purposes of the Section, as a part of
the DTA.    The Committee recommend that ambiguity in this
regard should be removed in the SEZ Act and Rules.

6.44 The Finance Ministry is reported to have made an estimate,
based upon the first 70 SEZ approvals, showing a loss of total tax
revenue worth Rs 102621 crore from 2006-07 to 2009-10, on account
of the tax incentives provided under the SEZ Act. Out of this, loss of
direct tax revenue is estimated to be Rs 53740 crore, and loss of
indirect tax revenue, Rs 48881 crore. The Ministry of Commerce
feels that these figures are notional and do not take into account all
the relevant factors. Quite interestingly, both the Ministry of Finance
and the Ministry of Commerce have commissioned separate expert
agencies to make a cost-benefit analysis with regard to the Special
Fiscal Provisions made for SEZs. The reports of these agencies are
awaited. The Committee recommend that the whole gamut of
fiscal incentives given to SEZ Developers and Entrepreneurs
should be reviewed and so revised that the purpose, for which
these concessions are being granted, is fully achieved.


6.45 It is often argued that the tax incentives provided in the SEZ
Act and the consequent revenue loss will be more than compensated
by the gains in terms of additional exports and employment
generation. Equivalent tax concessions for the SEZ developers are
also justified in terms of the extant income tax concessions provided
for investment in infrastructure. However, the RBI has recently raised
the interest cost of credit for SEZ developers, which shows that the
Central Bank is unwilling to view SEZs as instruments of
infrastructure development. Besides, the Finance Ministry has
already initiated an exercise of rationalizing tax concessions, in
keeping with the recommendations of the Kelkar Committee. The tax
incentives and concessions provided in the SEZ Act would need
to be reconsidered in the light of these facts. For instance, there
appears no justification for extending tax benefits given to the
units in the processing area to the business activity in the non-
processing area. The Committee strongly recommend that the
revenue implications of the tax holiday under the SEZ Policy
should be seriously considered.


6.46 Fears have been expressed in many quarters that fiscal
benefits   to   SEZ   developers-cum-unit     holders   would   affect
competitiveness in the domestic industries. The said benefits have
the potential of rendering the project cost cheaper in SEZs by 40% to
50%, which could have negative impact on the domestic industry.
The SEZs could, thus, act as a disincentive and a dampener for DTA
business. The Committee are of the view that a level playing field
should be provided to the domestic industry vis-a-vis SEZs.


6.47 The provision for setting up Offshore Banking Units and
International Financial Services Centres within the SEZs needs to be
re-considered. While the need for efficient financial intermediation
and credit delivery for the purpose of industrial and export promotion
within the SEZs is understandable, utmost care should be taken to
ensure that these financial entities do not develop as tax havens for
speculative finance capital. The Committee recommend that all
financial activities should be within the regulatory ambit of the
RBI and subject to the same tax provisions, regardless of
whether their offices are located within the SEZ or in the
Domestic Tariff Area. Moreover, the RBI should ensure that the
financial activities permitted within the SEZs are strictly related
to the economic activities within the Zone.
6.48 According to Rule 54 of SEZ Rules, read with Rule 53, the
performance of a SEZ Unit is to be measured, based on Net Foreign
Exchange Earnings only. This method of evaluating the performance
of a Unit is not comprehensive enough to cover the avowed
objectives of setting up SEZs, namely:
     (a)   generation of additional economic activity;
     (b)   promotion of exports of goods and services;
     (c)   promotion of investment from domestic and foreign
           sources;
     (d)   creation of employment opportunities; and
     (e)   development of infrastructure facilities.

Moreover, no yardstick has been laid down to evaluate the
performance of a Developer.
6.49 The Department of Commerce has informed that in the SEZs
notified after 10th February, 2006, an investment of Rs. 13500 crore
approximately has been made. These SEZs have provided direct
employment to 18,457 persons. The Department has projected that
an investment of Rs. 53,561 crore and creation of 15,75,450
additional jobs are expected from these notified SEZs by December,
2009. In fact, the Department expects an investment of Rs. 3,00,000
crore and creation of four million additional jobs if all the “formally
approved” SEZs become operational. On the exports front, the
Department has informed that the level of exports was Rs. 13,854
crore during 2003-04 and Rs. 22,840 crore during 2005-06.          The
Department has projected the exports to grow to a level of Rs. 67,300
crore during 2007-08 and to cross the Rs. 1,00,000 crore mark by
2008-09. In the light of these statistics the Committee feel that a
holistic Performance Evaluation Approach should be developed
to measure the performance of the Developer as well as the
Entrepreneur, with specific reference to the stated objectives
and the projected targets of the SEZ scheme.


6.50 At present, there is no specific mechanism to check the flow of
hawala or dirty money as well as the antecedents of the FDI in the
SEZs. There is shortage of Customs Staff in the SEZs. Some of the
SEZs are employing security guards as agencies of customs. There
is an urgent need to augment the Customs staff of SEZs.
Besides, equipment like cameras, CCTV, containers, etc., are
also required.    There is also a need to build an information
system to link the ports and the SEZs, to improve connectivity
and vigilance.


6.51 There is a need to counter the threat perception of anti – social
elements causing law & order problem, in the context of deteriorating
security scenario in the country. Greater vigil would be needed if an
SEZ is located in a sensitive or hyper-sensitive security area. The
Ministry of Home Affairs has issued guidelines requiring that the
Department of Commerce, while granting permission to set up an
SEZ, would include a security clause that the Developer would be
responsible for providing security. However, it is not known whether
the configuration and standards of the security to be provided by the
developer have been laid down. The Committee recommend that
the Government should ensure standardization with regard to
security to be provided by the Developers in SEZs.           Specific
security measures should be prescribed for the SEZs located in
sensitive and hyper-sensitive areas.           The Ministry of Home
Affairs should devise a mechanism to monitor and evaluate the
quality of security provided in the SEZs by their respective
Developers.    That Ministry should also permit deployment of
CISF for the security of SEZs, on payment basis.


6.52 Sub-section (1) of Section 49 of the SEZ Act empowers the
Central Government to decide if any of the provisions of the SEZ Act
(other than Sections 54 and 56) or any other Central Act or any rules
or regulations made thereunder or any notification or order issued or
direction given thereunder (other than the provisions relating to
making of the rules or regulations) shall or shall not apply to SEZs.
However, the proviso to this Sub-section restricts this power of the
Central Government to laws, rules, regulations, notifications, orders
and directions relating to matters other than those 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
applicable in any Special Economic Zone. It had been represented to
the Committee that there has been an attempt to dilute the said
Section 49 (1) through the instrumentality of Rules 5 (5) (e), (f) and
(g) of the SEZ Rules, which requires the State Governments to
delegate   powers   under   the   Industrial    Disputes   Act   to   the
Development Commissioner, and to declare SEZs as Public Utility
Services. Moreover, the Model SEZ Act for the State Governments,
framed by the Centre, contains a list of exemption clauses in labour
laws, including in the Minimum Wages Act and the Contract Labour
(Regulation and Abolition) Act. The Committee recommend that the
deviations from the SEZ Act in the SEZ Rules, as well as the
Model SEZ Act for State Governments should be corrected, to
ensure that no dilution of labour laws occurs.


6.53 It was pointed out to the Committee that the function of
Grievance Redressal Officer (GRO) in a SEZ should not be
performed by the Development Commissioner or any officer under
him. It was also represented that the GRO should be an independent
person or body, having the confidence of all the parties. The
Committee feel that nobody should be allowed to be a judge in
his own cause and, therefore, the functions of the GRO should
be taken away from the Development Commissionerate, by
making suitable changes in the SEZ Act.


6.54 The Labour Conciliation Machinery should be separate.
The Development Commissioner should not take on the role of
Labour Commissioner. He may be assisted by an officer of the
Labour Department of the State Government, who has the
experience in dealing with the labour issues. The idea should be
to make applicable effectively the labour law of the land in each
SEZ.


6.55 Section 31 of the SEZ Act provides for the constitution of a
Special Economic Zone Authority (SEZA) in respect of each SEZ.
The functions of the said Authority, listed in Section 34 of the said
Act, are as follows:
     (a)   the development of infrastructure in the Special Economic
           Zone;
     (b)   promoting exports from the Special Economic Zone;
     (c)   Reviewing the functioning and performance of the Special
           Economic Zone;
     (d)   Levy user or service charges or fees or rent for the use of
           properties belonging to the Authority; and
     (e)   Performing such other functions as may be prescribed.


     Presently,   SEZA     comprises    six   members,     with   the
Development Commissioner, as its Chairperson. Other five members
include three officers    of   the Central    Government    and two
entrepreneurs or their nominees, all to be nominated by the Central
Government. The composition of the Special Economic Zone
Authority seems to be narrow, in as much as it does not appropriately
represent different constituents involved in the functioning of SEZs.
Moreover, the provision of 1/3rd Members forming the quorum which
is equal to two members, including the Chairman, also seems to be
inadequate. The Committee feel that the composition of the
authority should be expanded to represent some more stake-
holders. At least one nominee of the Developer, two nominees of
the concerned State Government, one nominee of the resident
workers, one financial expert and one security expert may be
included in the composition of the Authority. One half of the
total members may form the quorum for its meetings.
6.56 The Committee found during its visits, including at Chennai,
about the shortage of staff in the Development Commissionerates,
particularly on the Customs and Central Excise side. The Department
of Commerce has been sending proposals for the creation of posts to
the Ministry of Finance, after obtaining Cabinet approval for the
staffing pattern of multi-product SEZs, with 23 numbers of staff,
including the Development Commissioner, Joint Development
Commissioner, Customs officials, etc. Despite having the Cabinet
approval, the proposals of the Department of Commerce for creation
of posts got stuck with the Ministry of Finance. After considerable
time and effort, the Ministry of Finance is reported to have sanctioned
698 posts for 63 notified Zones. The Committee observe that
development pursuit of such gigantic proportions should not be
left to the whims and fancies of the Ministry of Finance and
miniscule financial considerations should not come in the way
of creating posts in the SEZs. In future, creation of posts and
posting of officials may be done alongwith the notification of a
SEZ. For an effective administrative monitoring of SEZs, a single
Development Commissioner should not be made to look after
more than one SEZ and no time should be wasted in creating the
remaining required posts.
6.57 The SEZ concept in India is still in its infancy.    Much more
would need to be done, to make the scheme an epitome of success.
The fate of schemes like the Growth Centre Scheme is well known.
The Government should, at some stage, pause and ponder, to
evaluate the efficacy of the SEZ policy.        It should, therefore,
consider to put in place a system for appraisal of the scheme,
after a particular number of SEZs have been set up and after
these SEZs have functioned for five years.
     OBSERVATIONS AND RECOMMENDATIONS AT A GLANCE



1.   There is an imperative need to understand the cause of the
     farmers’ agitation and grievance. (Para 6.1)
2.   The Committee feel that the undue haste in approving SEZ
     proposals and the consequent proliferation of SEZs have
     contributed to the development of resistance against the
     SEZ policy. (Para 6.3)
3.   SEZs were meant to be engines of growth, both for
     industry and exports. However, the opposition with which
     it has met during the last one year must make the
     Government take a fresh look at the policy as a whole and
     to re-frame it in such a manner that would make it people-
     friendly, besides achieving the objective of export-led
     industrial growth. (Para 6.4)
4.   The Committee recommend that no further SEZs should be
     notified till the SEZ Act and the Rules made thereunder
     have been amended to meet the public concerns with
     regard to various provisions contained in the said Act and
     Rules. (Para 6.5)
5.   The Committee feel that diverting land from agriculture
     does not merely mean reduction in production or income
     to farmers, it affects the entire gamut of social and cultural
     life of the farmers, agricultural labourers and others
     connected with the agricultural activities. (Para 6.6)
6.   Expansion of housing and related infrastructure and
     widening of roads in the countryside have resulted in fast
     depletion of land under cultivation. Emergence of
     townships near big cities is also eating up considerable
     land under cultivation. (Para 6.8)
7.   It takes huge investment and time to develop land for
     intensive cultivation and to provide it with irrigation. If
     such highly productive lands are consumed by
     urbanization, big housing complexes and industrialization,
     including for Special Economic Zones, it will be hard to
     compensate their loss through development of equally
     productive new lands. If this process is not controlled, it
     may cause threat to our food security. The Committee
     recommend that the Government should take all necessary
     measures to ensure that the food security of the country
     does not get jeopardized at any cost. (Para 6.9)
8.   Globalisation and liberalization do not imply that all the
     attractive ideas from outside should be transplanted in our
     country, without evaluating their suitability and efficacy in
     our own socio-cultural and economic context. It would be
     equally wrong to promote industrial growth at the cost of
     agricultural growth. In a predominantly agricultural country
     like India, even an impression that the interests of
     agriculture or of farmers are being sacrificed at the altar of
     industrial growth, could be ruinous. SEZs, therefore,
     should not be allowed to come up at the cost of farmers.
     The country should develop its own model for industrial
     growth and expansion, while safeguarding the interests of
     the farmers. (Para 6.10)
9.   The Committee, therefore, recommend that the existing
     cultivated land should be conserved for agricultural
     purposes and should not be diverted for non-agricultural
     purposes. It should not be used even for extension of
     urbanization and industrialization. In the long term, the
     Regional Master Plans and Development Plans should
     incorporate land suitability analysis for the land use
     allocations, to identify the areas, intrinsically suitable for
     settlement, agriculture, industry, forestry, recreational
     uses, etc.     While preparing such Master Plans and
     Development Plans, it should be ensured that industrial
     development is not permitted in the Natural Conservation
     Zones, planned green areas, agricultural areas, ground
     water recharging areas and water bodies.              Instead,
     industries should be set up on wastelands, thereby putting
     a vast unutilized natural resource to a productive use. The
     Committee further recommend that town planning should
     provide for green belts. Heavy penalties should be
     imposed against those who interfere with land resource
     and its productivity. Environmental protection cannot
      succeed unless these measures are taken. The rights of
      tribals and poorer sections on common land should also
      be protected through legal and administrative structures.
      (Para 6.12)
10.   The Committee feel that restriction on use of agricultural
      land for SEZ purposes should not be a matter of
      administrative advice or guideline. Rather, it should be
      clearly reflected in the SEZ Act and rules made thereunder.
      The Committee are also not in favour of double-crop/multi-
      crop/irrigated land being used for SEZs. The Committee,
      therefore, urge upon the Government to build
      unambiguous provisions in the SEZ Act, regarding the land
      to be utilized for setting up SEZs, on the following lines:
       i)    There should preferably be a ban on the use of
             irrigated double-crop or multi-crop land for setting up
             SEZs.
       ii)   Normally, only waste and barren lands should be
             used for setting up SEZs.
       iii) If it becomes unavoidable to make use of cultivable
            land, only single-crop, rain-fed land should be used.
            The percentage of such land should not exceed 20 %
            of the total area of a multi-product SEZ. In respect of
            SEZs other than multi-product ones, this ceiling
            could be 40%. These ceilings are with reference to
            the minimum and maximum areas proposed in paras
            6.23 and 6.24.
       iv) It should be mandatory for the Developer to obtain
           permission of the State Government for purchasing
           single crop cultivable land for SEZ use. (Para 6.16)
11.   The role of the State Government or the local
      administration should have been to facilitate the Sub-
      committee to meet the affected people, especially the
      farmers, who had come to express their grievances before
      the Sub-committee. However, they were prevented from
      meeting the Sub-committee by the administration itself. It
      created the impression that the local administration at
      those places did not want the Sub-Committee to meet the
      farmers and to go into the question of land use, land sale
      and rehabilitation.    The Committee expect the State
      Governments to ensure that in such cases co-operation
      from their local administration is forthcoming. (Para 6.18)
12.   The onus of verifying the quality of land should lie with the
      State Government concerned.         The Gram Panchayats
      should also be involved in this process. When the land for
      SEZs is proposed to be purchased by the private
      developers, the process should be preceded by a public
      notice inviting objections to the stated ‘kisam’ of land.
      Response to such a notice could alert the State
      Governments to the possibility of manipulation of records.
      The Committee recommend that the Government should
      specify a mechanism for this purpose in the SEZ Rules,
      besides introducing a column for the ‘type and quality of
      land’ in Form-A (application for setting up of SEZ). (Para
      6.19)
13.   The Committee also recommend that the Board of
      Approval should not entertain any application directly from
      a Developer and the system of giving “in-principle”
      approvals should be discontinued forthwith. Applications
      should be considered by the Board of Approval only after
      obtaining the inputs of the State Governments, including
      those with regard to the type and quality of land. (Para
      6.20)
14.   The Committee are surprised to note that the Ministry of
      Agriculture is not represented on the Board. Being an
      important stakeholder as well as an affected party, the
      Ministry of Agriculture must be represented on the Board
      of Approval. (Para 6.21)
15.   The Government may consider unlocking and recycling of
      land and assets of the closed industrial units under
      liquidation. A mechanism should be set up, to make
      available unlocked land of the closed units for setting up
      SEZs. Similarly, land acquired for Growth Centres and
      other schemes, which have not been found sustainable,
      may be diverted for SEZs. (Para 6.22)
16.   The Committee feel that, under the present system, the
      Developers may be tempted to acquire more area than is
      necessary, particularly for developing profitable support
      activities in the non-processing area. It may, therefore, be
      necessary to prescribe a maximum area also for various
      types of SEZs, with the stipulation that at least 50 per cent
      of the area of the SEZs would be used as “processing
      area”.     This stipulation should not be relaxable. The
      proposed upper limits are as follows:
  Type                      Maximum Area             Maximum
                                                    Area        for
                   With        an Only              Special
                   element      of                  States/UTs
                   Cultivable      Wasteland
                   Land
Multi-product      2000            5000 hectares     500 hectares

                 hectares

Multi-Services   200 hectares     500 hectares     200 hectares

Sector specific 200 hectares      500 hectares     200 hectares

IT               20 hectares      50 hectares      20 hectares

Gems       and 20 hectares        50 hectares      20 hectares
Jewellery
Bio-tech and 20 hectares          50 hectares      20 hectares
Non-
conventional
energy
(including
solar energy
equipments/ce
ll         but
excluding
SEZs for non-
conventional
energy
production
and
manufacturing
)
FTWZ          100 hectares         200 hectares     100 hectares

                                                        (Para 6.24)

17.   The Committee feel that if the existing tax benefits to the IT
      sector are extended for ten more years, the mad rush for
      SEZs in IT sector would automatically stop.               The
      Committee, therefore, recommend that the Government
      should take a decision on extending the tax holiday to IT
      sector for a further period, in the light of this analysis.
      (Para 6.25)

18.   It has been recommended in para 3.10 that India should
      develop its own model of SEZ, keeping in view its own
      socio-cultural and economic imperatives. While doing so, it
      should be seen whether the SEZs are expected to be
      instruments of export-led industrial growth or should also
      ensure, at the same time, a balanced industrial growth in
      all regions of the country. The compatibility of these two
      objectives will also have to be examined. The Committee
      recommend that the much discussed issue of putting over-
      all and region-wise caps on the number of SEZs should be
      decided in the context of the scope, dimensions and
      objectives of the scheme. The caps can be revised after a
      few years, considering the experience of the functioning
      SEZs. (Para 6.27)

19.   The Committee feel that the Land Acquisition Act, 1894
      should be replaced by a modern legislation, which is
      relevant to the needs of the time. The new land acquisition
      law should, inter-alia, be transparent in that it should
      inform the affected persons the purpose of acquisition, its
      implications for them and the resettlement package that
      would be offered to them. Unless the public purpose for
      which the land is being acquired involves an over-riding
      national interest like defence/national security, the
      acquisition should take place with the consent of the
      affected parties.         Further, a National Relief and
      Rehabilitation Act should be enacted to provide a
      comprehensive compensation package to those deprived
      of their lands. The Committee understand that Ministry of
      Rural Development is already seized of the matter and is in
      the process of formulating a new policy regarding relief
      and rehabilitation. While the Committee recommend that
      the new policy and legislation should be finalized
      expeditiously, in tandem with the amendments to be made
      in the SEZ Act and Rules, the following may be kept in view
      while deciding the new paradigm for relief and
      rehabilitation, in lieu of land:
      -    Monetary compensation should be only a part of the
           compensation package and should be calculated on
           the basis of the prevailing market rates. To ensure
           this, the State Governments should prescribe
           minimum prices for land in various areas, which
           should reflect the market rate, and review/revise
           these prices periodically. Thereupon, whether the
           land is acquired by the Government or the SEZ
           Developer, the acquisition/purchase price should be
           higher than the minimum price fixed by the
           Government.
      -    It should be ascertained from the land-owner and his
           co-workers, including share-croppers and agricultural
           labourers, as to how they proposed to re-
           settle/rehabilitate themselves. The Government
           should provide assistance to the affected persons,
           accordingly, by way of an adequate resettlement
           allowance, employment, training, bank loans, etc.
      -    Where the impact of acquisition is felt beyond the
           pale of land-owners and their co-workers, provision
           should be made to rehabilitate the affected
           community as a whole. (Para 6.29)

20.   It may, therefore, be of advantage if these people, instead
      of being displaced and compensated, become a part of the
      development process of the SEZ. This could be done in the
      following manner:
      -    Land should be taken from the land-owners on lease
           so that they get a one-time lump-sum premium,
           followed by periodic rentals for sustenance. If the
           land is on lease, it would revert to the lessor in case
           the SEZ fails or is dissolved for any reason.
      -    At least one family member of the land-owner should
           be offered a suitable employment in the SEZ venture.
           It should be the responsibility of the developer to
           arrange necessary training of that person in skill
           acquisition/upgradation.
      -     Similarly, the whole range of agricultural workers,
           rural artisans, etc., depending upon farming activities
           and connected with the acquired land as well as other
           persons supporting and sustaining farming, should
           be given suitable employment in the “processing” or
           “non-processing” areas, in keeping with their skills.
           They should also be imparted requisite training, as
           necessary.
      -    The feasibility of allotting equity shares to the land-
           owners in the Developer’s Company should also be
           considered. (Para 6.30)

21.   The State Governments must devise a system of periodic
      market surveys, to elicit the prevailing market rates for
      land in different areas. They should fix minimum land rates
      based on such market surveys to strengthen the land-
      owners’ bargaining position vis-a-vis the SEZ developer.
      This will not only secure the interest of the farmers, but
      also result in reducing the element of black money in land
      deals, higher realization of stamp duty, and more
      economical use of land for Urban and Industrial purposes.
      (Para 6.31)
22. The Committee are of the view that the ownership of land
    acquired by the State Government, even for a SEZ, should
    not be transferred to the Developer. Instead, the land
    should be leased out to the Developer on a long-term
      basis, with the provisions of extension duly built into the
      lease deed. (Para 6.32)
23.   The Committee are of the view that if the SEZs are a
      vehicle of development and an instrument of growth, then
      less-developed and low-productivity areas also have an
      equal right to development, rather a better claim, because
      of being under-developed, and they should be encouraged
      to come into the mainstream of development, by making
      use of the SEZ Scheme. The Central Government should
      take suitable initiatives in this regard. (Para 6.33)
24.   Barring some exceptions, every part of the country has to
      be a constituent of a Panchayat or a Municipality for the
      purposes of local administration. Likewise, each SEZ
      should get the cover of a representative local self-
      government. The Government should make the status of
      the SEZs clear from the angle of local administration and
      incorporate it suitably in the SEZ Act/Rules. (Para 6.34)
25.   The SEZs should have a Master Plan for management of
      the civic amenities, which would determine the areas for
      the residential space, the commercial area, the green area,
      roads and pathways, etc. for an integrated development of
      an SEZ. The guidelines in that regard should include all the
      building structures and the services to be provided in
      SEZs, conforming to the planning and other requirements,
      as prescribed in the National Building Code. (Para 6.35)
26.   The Government should, therefore, enunciate a clear policy
      with regard to governance issues emerging as a result of
      setting up of SEZs in relation to areas surrounding SEZs.
      (Para 6.36)
27.     The Committee recommend that provisions should be
      made in the SEZ Act/Rules that all assets, including
      housing, created in the non-processing area would meet
      and subserve the requirements of those working in the
      processing area only and not for anyone else. (Para 6.37)
28.   The issue of housing facilities for the workers in the giant
      SEZs should be concretely addressed. The residential
      complexes within the SEZs should be built, not only for the
      management and office staff, but also for the workers. If
      the workers of the SEZ units are forced to stay outside the
      SEZ area, it would lead to a proliferation of shantytowns in
      the neighbouring areas. (Para 6.38)
29.   The Central Government, in collaboration with State
      Governments, should evolve a new                Townships
      Development Policy, so as to attract investments and right
      kind of developers. The incentives for the townships,
      farther from the existing Metros and big cities, should be
      stronger. These new townships should be used for the
      benefit of the employees , workers and other stakeholders
      in the SEZs. (Para 6.39)
30.   The Committee feel that SEZ Rules seem to have gone
      farther than the enabling provision under the SEZ Act,
      which needs to be looked into. An assessment also needs
      to be made of the loss of revenue that the States would
      suffer in consequence of extending such tax exemptions to
      SEZ Developers and Units and whether such loss would or
      would not be offset by the gains accruing to the State
      Governments. (Para 6.40)
31.   The Committee, therefore, recommend that the fiscal
      incentives for the Developers should be specified
      separately and only such incentives should be given as are
      conducive to attracting FDI and promoting exports. (Para
      6.41)
32.   The Committee recommend that fiscal exemptions, which
      are unrelated to exports, should not be granted. The
      provisions regarding direct/indirect taxes should be
      corrected, and loopholes should be plugged. Tax benefits
      should be granted only for export activities and
      infrastructure development. (Para 6.42)
33.   The Committee recommend that ambiguity in this regard
      should be removed in the SEZ Act and Rules. (Para 6.43)
34.   The Committee recommend that the whole gamut of fiscal
      incentives given to SEZ Developers and Entrepreneurs
      should be reviewed and so revised that the purpose, for
      which these concessions are being granted, is fully
      achieved. (Para 6.44)
36.    The tax incentives and concessions provided in the SEZ
      Act would need to be reconsidered in the light of these
      facts. For instance, there appears no justification for
      extending tax benefits given to the units in the processing
      area to the business activity in the non-processing area.
      The Committee strongly recommend that the revenue
      implications of the tax holiday under the SEZ Policy should
      be seriously considered. (Para 6.45)
37.   The Committee are of the view that a level playing field
      should be provided to the domestic industry vis-a-vis
      SEZs. (Para 6.46)
38.   The Committee recommend that all financial activities
      should be within the regulatory ambit of the RBI and
      subject to the same tax provisions, regardless of whether
      their offices are located within the SEZ or in the Domestic
      Tariff Area. Moreover, the RBI should ensure that the
      financial activities permitted within the SEZs are strictly
      related to the economic activities within the Zone. (Para
      6.47)
39.   In the light of these statistics the Committee feel that a
      holistic Performance Evaluation Approach should be
      developed to measure the performance of the Developer as
      well as the Entrepreneur, with specific reference to the
      stated objectives and the projected targets of the SEZ
      scheme. (Para 6.49)

40.   There is an urgent need to augment the Customs staff of
      SEZs.        Besides, equipment like cameras, CCTV,
      containers, etc., are also required. There is also a need to
      build an information system to link the ports and the SEZs,
      to improve connectivity and vigilance. (Para 6.50)
41.   The Committee recommend that the Government should
      ensure standardization with regard to security to be
      provided by the Developers in SEZs. Specific security
      measures should be prescribed for the SEZs located in
      sensitive and hyper-sensitive areas. The Ministry of Home
      Affairs should devise a mechanism to monitor and evaluate
      the quality of security provided in the SEZs by their
      respective Developers. That Ministry should also permit
      deployment of CISF for the security of SEZs, on payment
      basis. (Para 6.51)
42.   The Committee recommend that the deviations from the
      SEZ Act in the SEZ Rules, as well as the Model SEZ Act for
      State Governments should be corrected, to ensure that no
      dilution of labour laws occurs. (Para 6.52)
43.   The Committee feel that nobody should be allowed to be a
      judge in his own cause and, therefore, the functions of the
      GRO should be taken away from the Development
      Commissionerate, by making suitable changes in the SEZ
      Act. (Para 6.53)
44.   The Labour Conciliation Machinery should be separate.
      The Development Commissioner should not take on the
      role of Labour Commissioner. He may be assisted by an
      officer of the Labour Department of the State Government,
      who has the experience in dealing with the labour issues.
      The idea should be to make applicable effectively the
      labour law of the land in each SEZ. (Para 6.54)
45.   The Committee feel that the composition of the SEZ
      authority should be expanded to represent some more
      stake-holders. At least one nominee of the Developer, two
      nominees of the concerned State Government, one
      nominee of the resident workers, one financial expert and
      one security expert may be included in the composition of
      the Authority. One half of the total members may form the
      quorum for its meetings. (Para 6.55)
46.   The Committee observe that development pursuit of such
      gigantic proportions should not be left to the whims and
      fancies of the Ministry of Finance and miniscule financial
      considerations should not come in the way of creating
      posts in the SEZs. In future, creation of posts and posting
      of officials may be done alongwith the notification of a
      SEZ. For an effective administrative monitoring of SEZs, a
      single Development Commissioner should not be made to
      look after more than one SEZ and no time should be
      wasted in creating the remaining required posts. (Para
      6.56)
47.   The Government should, at some stage, pause and ponder,
      to evaluate the efficacy of the SEZ policy. It should,
      therefore, consider to put in place a system for appraisal of
      the scheme, after a particular number of SEZs have been
      set up and after these SEZs have functioned for five years.
      (Para 6.57)
                          APPENDICES



                            APPENDIX - I
                       List of approved SEZs
                    (Vide para 1.46 of the Report)

Sl. Statewise Name of the Location        Stat Type of   Area
No.    No.      developer                  e      SEZ   Hectares
    Andhra
    Pradesh
 1      1    M/s. Divi’s     Chippada,    AP Pharmaceu 101
             Laboratories    Visakhapatna     ticals
             Ltd             m, A.P.
 2      2    WIPRO           Hyderabad,   AP IT            6
             Limited         A.P.
 3      3    Apache          Hyderabad    AP Footwear     101
             Investment
             Holdings Pvt.
             Ltd.
 4      4    M/s. Hyderabad Hyderabad     AP Gems and 80.93
             Gems SEZ Ltd.                    Jewellery
 5      5    M/s. Ramky Village           AP Pharmaceu 243
             Pharma city     Lemarthi,        itacals
             (India) Limited Visakhapatna
                             m District,
                             Andhra
                             Pradesh
 6      6    M/s. K. Raheja Madhapur,     AP IT/ITES     16.29
             IT Park         Ranga Reddy
             (Hyderabad)     District,
             Pvt. Ltd.       Andhra
                             Pradesh
7    7    Information     Village          AP IT/ITES    16
          Technology and Madhurawada,
          Communication Visakhapatna
          s Department, m, A.P.
          Government of
          A.P. and APIIC
8    8    M/s. Satyam     Thotlakonda,     AP IT/ITES   20.23
          Computer        Visakhapatna
          Services Ltd. m
9    9    M/s. Satyam     Bahadurpalli,    AP IT/ITES   10.52
          Computer        Hyderabad
          Services Ltd.
10   10   M/s. Satyam     Hyderabad        AP IT/ITES   12.14
          Computer
          Services Ltd.
11   11   M/s. A.P.       Madhupur,        AP IT/ITES    10
          Techno Projects Hyderabad
          Pvt. Ltd.
12   12   M/s. C.A.       Nanakramgud      AP IT/ITES   12.14
          Computer        a Village,
          Associates      Ranga Reddy
          India Private District, A.P.
          Ltd. (since
          withdrawn)
13   12   Information     Village          AP IT/ITES    36
          Technology and Madhurawada,
          Communication Visakhapatna
          s Department, m, A.P.
          Government of
          A.P. and APIIC
14   13   Information     Village          AP IT/ITES    12
          Technology and Kesarapally
          Communication Village,
          s Department, Krishna
          Government of District, A.P.
          A.P. and APIIC
15   14   M/s. Andhra     Nanakramgud      AP IT/ITES   20.53
          Pradesh         a Village,
          Industrial      Serilingampall
          Infrastructure    y Mandal,
          Corporation       Ranga Reddy
          Ltd.              District, A.P.
16   15   Hetero            N.Narsapuram        AP Pharmaceu     100
          Infrastructure    ,                        ticals –
          SEZ Limited       Nallamattipale             Bulk
                            m,                       Drugs /
                            Rajayyapeta,               Drug
                            Ch.                    intermedia
                            Lakshmipuram               tes /
                            ,      Tennerla        Formulatio
                            Villages,                  ns /
                            Nakkapalli             Chemicals
                            Mandal,                  / Allied
                            Visakhapatna            Chemical
                            m      District,       engineerin
                            Andhra                       g
                            Pradesh                ancillaries
17   16   CMC Ltd.          CMC Centre,         AP IT/ITES       20.59
                            Gachibowli,
                            Hyderabad
18   17   Sanghi SEZ        Rangareddy          AP IT/ITES       202.4
          Private Limited Distt., AP
19   18   Kakinada SEZ East Godavari,           AP Port based    4134
          Pvt. Ltd.         District       in        Multi-
                            Kakinada                product
20   19   FAB City SPV Hyderabad                AP FTWZ          486
          (India) Pvt. Ltd.
21   20   APIIC             Visakhapatna        AP Multi-        2309
                            m,       Andhra        product
                            Pradesh
22   21   Bavana        Sai Uppaluru,           AP Software       25
          Associates        Manthana,              Developm
                            Kesarapalli            ent/ ITES
                            Village,
                            Andhra
                            Pradesh
23   22   M/s.Whitefield West Godavari          AP Writing &     121.4
          Paper Mills Ltd District,      Nr        Printing
                          Kovvur, AP            Paper Mill

24   23   Brandix India Visakhapatna         AP Textile       404.7
          Apparel      City m,      Andhra
          Private Limited Pradesh
          (BIAC)
25   24   Andhra Pradesh Maheswaram              Electronic    111
          Industrial        village, Ranga       Hardware
          Infrastructure Reddy Dist.,
          Corporation       Andhra
          Limited           Pradesh
          (APIIC)
26   25   Divyasree NSL Raidurga             AP IT/ ITES      15.175
          Infrastructure Village, Ranga
          Ltd               Reddy
                            District, AP
27   26   Lanco       Hills Ranga Reddy      AP IT /ITES      11.77
          Technology        District, A.P
          Park      Private
          Limited
28   27   DLF               Ranga Reddy      AP IT/ITES       10.617
          Commercial        District,
          Developers        Hyderabad,
          Limited           Andhra
                            Pradesh
29   28   Information       Sy. No.          AP IT/ITES        47.6
          Technology and 239/240 (P),
          Communication Kokapet
          s (IT&C)          Village,
          Department - Serilingampall
          Hyderabad         i Mandal, RR
          Urban             District,
          Development Andhra
          Authority         Pradesh
          (HUDA)
30   29   Neogen            Thumkunta        AP Apparel       141.64
          Properties Pvt. and                   Park
          Ltd.              Gollapuram
                            Village,
                          Hindupur
                          Mandal,
                          Anantpur
                          District,
                          Andhra
                          Pradesh.
31   30   Andhra Pradesh Mulugu           AP Biotech   40.47
          Industrial      Mandal Taluk,
          Infrastructure Karakpatla
          Corporation     vill. Medak
          Limited         District,
          (APIIC)         Andhra
                          Pradesh
32   31   Brahmani        Mamidipalli     AP IT/ITES    60.7
          Infratech       Village,
          Private Limited Sarrornagar,
                          Mandal,
                          Ranga Reddy
                          District,
                          Andhra
                          Pradesh
33   32   Indu Techzone Kanch Imarat      AP IT/ITES    60.7
          Private Limited Raviryal
                          Village,
                          Maheshwaram
                          Mandal,
                          Ranga Reddy
                          District,
                          Andhra
                          Pradesh
34   33   Topnotch        Uppal           AP IT/ITES   11.735
          Infrastructure Industrial
          Limited         Development
                          Area,
                          Hyderabad,
                          Andhra
                          Pradesh
35   34   Emaar Hills     Ranga Reddy     AP IT/ITES   10.33
          Township        District,
          Private Limited Andhra
                          Pradesh

36   35   J.T. Holdings    Imarat           AP IT/ITES      28.33
          Pvt. Ltd.        Kancha,
                           Raviriyal
                           Village,
                           Himarath
                           Taluka,
                           Maheshwaram
                           Mandal,
                           Ranga Reddy
                           District,
                           Andhra
                           Pradesh.
37   36   Rudradev         Kistapur         AP IT/ITES      12.42
          Infopark Private Village,
          Limited (RIPL) Chevella
                           Mandal Ranga
                           Reddy
                           District,
                           Andhra
                           Pradesh
38   37   Mahaveer         Chevella,        AP IT/ITES      40.47
          Skyscrapers      Besides Faraha
          Limited          Engineering
                           College,
                           Ranga Reddy,
                           Andhra
                           Pradesh
39   38   Stargaze         Kancha           AP IT/ITES/     68.96
          Properties       Imarath,            Electronic
          Private Limited. Maheswaram          Hardware
                           (M), District
                           Ranga Reddy,
                           Andhra
                           Pradesh.
40   39   Lahari          Kondakkal,       AP Services   100
          Infrastructure  Bulkapur            Sector
          Limited         Village,
                          Sankarpalli
                          Mandal,
                          Ranga Reddy
                          District,
                          Andhra
                          Pradesh
41   40   Maytas          Bachupally       AP IT/ITES    29.85
          Properties      Village,
          Private Limited Quthbullapur
                          Mandal,
                          Ranga Reddy
                          District,
                          Andhra
                          Pradesh
42   41   Maytas          Gundla           AP IT/ITES    14.16
          Properties      Pochampalli
          Private Limited Village,
                          Medchal
                          Mandal,
                          Ranga Reddy
                          District,
                          Andhra
                          Pradesh
43   42   Andhra Pradesh Rajapur and       AP Pharmaceu 101.17
          Industrial      Pollepally          tical
          Infrastructure Village,             (formulati
          Corporation     Balangar and        ons)
          Limited         Jedcharla
          (APIIC)         Mandal,
                          Mahaboobnag
                          ar District,
                          Andhra
                          Pradesh
44   43   Maytas          Gopanpally       AP IT/ITES    15.92
          Properties      village,
          Private Limited Serilingampall
                          y Mandal,
                         Ranga Reddy
                         District,
                         Andhra
                         Pradesh
45   44   K. Raheja      Pocharam,      AP IT/ITES      26.91
          Corporation    Hyderabad
          Private Limited
          Chandigarh
46   1    Chandigarh      Chandigarh   CH Electronic      45
          Administration                  s and
                                          IT/ITES
47   2    Chandigarh       Chandigarh  CH IT/ITES        42.49
          Administration
          Delhi
48   1    M/s.       Delhi Shastri Park, DL       IT       6
          Metro            Delhi
          Corporation
          Goa
49   1    Meditab          Bhut-Khamb, GO Pharmaceu 123.2
          Specialities Pvt Kerim,     Tal- A ticals and
          Ltd              Ponda, Goa         Chemical
                                              Products
50   2    Paradigm         Phase IV -     GA IT/ITES     40.25
          Logistics and Verna
          Distribution     Industrial
          Private Limited Estate, Goa.
51   3    K. Raheja Corp. Phase IV -      GA Services 107.17
          Pvt. Ltd.        Verna
                           Industrial
                           Estate, Goa.
52   4    Peninsula        Sancoale in    GA Biotech     20.36
          Pharma           Goa
          Research
          Centre Private
          Limited
          Gujarat
53   1    M/s. Reliance Jamnagar,          GJ Multi     1224.08
          Infrastructure Gujarat              product
          Ltd.
54   2    M/s. Gujarat     Dahej, Gujarat   GJ Multi-        1768
          Industrial                           product
          Development
          Corpn.
55   3    Mundra Special *Mundra            GJ Multi-       1081.91
          Economic Zone (Gujarat)              product
          Ltd.
56   4    Gujarat Adani *Mundra             GJ Multi-    2658.19
          Port Limited     (Gujarat)           product
57   5    Gujarat Hira     Ishhapor,        GJ Gems and    100
          Bourse           Surat               Jewellery
58   6    Zydus Finance Ahmedabad.          GJ Pharmaceu   48
          Ltd.                                 ticals
59   7    Gujarat          Ahmedabad        GJ Apparel     38
          Industrial
          Development
          Corporation
          Ltd.
60   8    GIDC             Gandhinagar      GJ Electronic     28
                           Electronic          s Products
                           Estate,
                           Gandhinagar,
                           Gujarat
61   9    Choryasi, Distt, M/s. Essar       GJ Engineerin 247.5222
          Hazira, Gujarat Hazira SEZ.          g
62   10   CPL              Moujhe           GJ Pharmaceu 200
          Infrastructure Haripura,             ticals
          pvt. Ltd.        Taluka:
                           Dhandhuka,
                           District:
                           Ahmedabad
63   11   Essar Jamnagar Jamnagar,          GJ Multi-        1125
          SEZ Developer Gujarat                product
          Ltd
64   12   Gujarat          Jhagadia,        GJ Ceramic       170.7
          Industrial       Bharuch             and glass
          Development District,
          Corporation      Gujarat
65   13   Jubilant         Bharuch,         GJ Chemical      160
          Infrastructure    Gujarat
          Ltd
66   14   Aqualine        Mouje Koba,    GJ   IT/ITES   27.85
          Properties      Taluka
          Private Limited Gandhinagar,
                          Distirct
                          Gandhinagar,
                          Gujarat
67   15   Calica          Village        GJ   IT/ITES    16
          Constructions Khoraj,
          and Impex       District
          Private Limited Gandhinagar,
                          Gujarat
68   16   Kandla Port     Kandla,         GJ Port based  640
          Trust           Gujarat               Multi
                                               product
69   17   Adani Power Village Tunda GJ Power            293.88
          Private Limited and Sircha,           sector
                          Taluka               specific
                          Mundra,                SEZ
                          District Kutch,
                          Gujarat
70   18   Mugdha          Village         GJ IT/ITES     10.2
          (Thaltej)       Chharodi and
          Complex         Tragad,
          Private Limited Taluka
                          Dascroi,
                          District
                          Ahmedabad,
                          Gujarat
71   19   Welspun Anjar Taluka Anjar, GJ Textile         284
          SEZ Limited Village                    and
                          Varshamedi,         Garment
                          Gujarat               Sector
          Haryana
72   1    Haryana         Faridabad,      HR IT           3
          Technology      Haryana
          Park
73   2    M/s. Uppal      Rathiwas        HR Multi-     108.86
          Housing Ltd.      Village,            services
                            Gurgaon
74   3    M/s. Luxor        Village          HR IT/ITES       28
          Cyber City Pvt. Sikohpur,
          Ltd.              District
                            Gurgaon
75   4    M/s. Sunwise Gurgaon               HR IT/ITES      10.12
          Properties Pvt.
          Ltd
76   5    Dr. Fresh         Gurgaon          HR IT/ITES      30.35
          Healthcare
          Pvt.Ltd.
77   6    Orient      Craft Gurgaon,         HR Textile      113.35
          Infrastructure Haryana
          Ltd
78   7    Ansal             Village Bhigan   HR Engineerin    100
          Properties and and         Kurad      g goods
          Infrastructure Ibrahimpur,
          Ltd               near Murthal,
                            Dist. Sonepat,
                            Haryana
79   8    Assotech Realty Gurgaon,           HR IT/ ITES     10.62
          Pvt Ltd           Haryana
80   9    DLF Limited Sector 30,             HR IT/ITES      12.14
                            DLF City,
                            Gurgaon,
                            Haryana
81   10   Pioneer Urban Village Ghata,       HR IT/ITES      40.48
          Land and          Gurgaon,
          Infrastructure Haryana, very
          Limited           close to NH-8
82   11   DLF Cyber         Sector No. 24    HR IT/ITES      12.54
          City Developers & 25A, DLF
          Limited           Cyber City,
                            DLF City,
                            Gurgaon,
                            Haryana
83   12   Global Health MediCity,            HR Biotechnol   17.41
          Private Limited Sector 38,               ogy
                           Gurgaon,
                           Haryana
84   13   Suncity          Jhund Sarai,     HR     IT       41.278
          Haryana SEZ Gurgaon,
          Developer Pvt. Haryana
          Ltd.
85   14   Metro Valley 5th Mile stone,      HR     IT        10
          Business Park on Gurgaon -
          Private Limited Faridabad
                           Road, Opp.
                           Ansals Valley
                           View
                           Apartments,
                           Gurgaon,
                           Haryana
86   15   M/s. Parsvnath Gurgaon-           HR IT/ITES      46.13
          Developers       Sohna Road,
          Limited          Gurgaon,
                           Haryana
                           (earlier at
                           Delhi Jaipur
                           National
                           Highway)
87   16   Ansal            Village          HR IT/ITES      10.93
          Properties and Badshapur,
          Infrastructure Gurgaon,
          Limited          Haryana
88   17   Ascendant        Gurgaon,         HR IT/ITES       15.2
          Estates Private Haryana
          Limited
89   18   Bentex Towers Roje Ka             HR    Multi-     168
          Pvt. Ltd         Gujjar, Distt.        Services
                           Gurgaon
                           (Gurgaon)
90   19   Ireo Investment Ghata,            HR Electronic    40
          Holding III Ltd. Behrampur           Hardware,
                           and Balola in        IT/ITES
                           District
                           Gurgaon,Hary
                           ana
           Jharkhand
91    1    Adityapur        Adityapur         JH Automobil     36
           Industrial Area (Jharkhand)           es and
           Development                           component
           Authority.                            s
           Karnataka
92    1    M/s. Biocon      Bangalore         KN Bio-          36
           Ltd.                                  technology
93    2    Shyamaraju and Krishnarajapur      KN IT/ITES       30
           Company          am, Bangalore
           Private Ltd.
94    3    Manyata          Bangalore         KN IT/ITES       22
           Promoters Pvt. (Karnataka)
           Ltd. and DSRK
           Holdings
           Private Ltd.
95    4    Hewlett          Bangalore         KN IT            7
           Packard (Since
           withdrawn)
96    5    WIPRO            Bangalore,        KN IT            6
           Limited          Sarjapur
97    6    WIPRO            Bangalore         KN IT            5
           Limited          Electronic city
98    7    M/s. Vikas       Bangalore East    KN IT/ITES       36
           Telecom          Taluk
           Limited
99    8    M/s. Adarsh      Village           KN IT/ITES      24.51
           Prime Projects Varthur,
           Pvt. Ltd.        Hubli,
                            Karnataka
100   9    Karnataka        Mangalore,        KN IT/ITES      203
           Industrial Areas Karnataka
           Development
           Board
101   10   Cessna Garden Bangalore,           KN IT/ITES      19.22
           Developers Pvt. Karnataka
           Ltd.
102   11   Tanglin          Banglore-         KN IT/ITES      27.16
           Developments Mysore
           Limited          highway
                            Bangalore
103   12   Infosys          Pajeeru,           KN IT / ITES     125
           Technologies Kairangala,
           Limited          Kurunadu
                            Village of
                            Bantwal
                            Taluk,
                            Dakshina
                            Kannada
                            District,
                            Karnataka.
104   13   Information      Whitefield         KN IT/ITES      10.879
           Technology       Road,
           Park Ltd.        Bangalore.
105   14   Karnataka        Shimoga,           KN Engineerin   169.6
           Industrial Areas Karnataka             g&
           Development                            related
           Board                                  Industires
106   15   KIADB            Hassan,            KN Textiles      202
                            Karnataka
107   16   Infosys          Hebbal             KN IT/ITES      30.99
           Technologies Industrial
           Ltd              Area, Mysore,
                            Karnataka
108   17   San              Whitefield,        KN IT/ ITES      10
           Engineering & Bangalore
           Locomotive Co.
           Ltd
109   18   HCL              Jigani             KN IT/ ITES     11.05
           Technopark Ltd Industrial
                            Area,
                            Bangalore
110   19   Golden      Gate Jala      Hobli,   KN IT/ ITES     26.304
           Developers Pvt Bangalore
           Ltd
111   20   Primal Projects Banglore,           KN IT/ITES      10.36
           Private Limited Karnataka
112   21   Concord          Banglore,          KN IT/ITES      13.44
           Investments       Karnataka
           (Banglore)
113   22   Ittina Properties Bangalore,    KN Electronic 15.732
           Private Limited Karnataka          Hardware
                                              and
                                              Software
                                              including
                                              IT/ITES
114   23   Karnataka        Hassan,        KN Food        157.91
           Industrial Areas Hassan            processing
           Development District,              and related
           Board            Kernataka         services
115   24   Bagmane          Raman Nagar, KN IT/ITES        15.5
           Developers Pvt. KR       Puram,
           Ltd.             Bangalore
                            North,
                            Karnataka
116   25   Divyasree        Bellandur      KN IT/ITES     20.234
           Infrastructure Amani Kane,
                            Off    Airport
                            Road,
                            Bangalore,
                            Karnataka
117   26   Chaitanaya       Whitefield     KN IT/ITES     20.24
           Infrastructure Main       Road,
           Private Limited Bangalore,
                            Karnataka
118   27   Karnataka        Hassan,        KN Pharmaceu 281.21
           Industrial Areas Hassan            ticals
           Development District,
           Board            Kernataka
119   28   Karnataka        Electronics    KN Biotechnol    37
           Biotechnology City, Phase III      ogy
           and Information Bangalore,
           Technology       Karnataka
           Services
           (KBITS)
120   29   Shree Renuka Village            KN Integrate     100
           Sugars Ltd.  Burlatti,             d
                        Athani                Sugarcan
                        Taluka,               e
                        Belgaum               Processin
                        District,             g
                        Karnataka             complex
                                              with      a
                                              Sugar
                                              Plant,
                                              Power &
                                              Distillery
           Kerala
121   1    Cochin Port      Vallarpadam    KL Port Based    115
           Trust            Puthuvypeen                     285
122   2    M/s. Infopark,   Kusumagiri,    KL IT/ITES       37
           Kochi            Village
                            Kakkanad,
                            Ernakulam
                            District
                            (Kerala)
123   3    M/s.             Trivandrum,    KL IT/ITES        34
           Electronics      Kerala
           Technology
           Park
124   4    Kerala           Kizhakuttom,   KL IT             9.2
           Industrial       Trivandrum        (Animatio
           Infrastructure   (Kerala)          n and
           Dev. Corpn.                        gaming).
           (KINFRA)
125   5    Kerala           Kakkancherry KL Food             12
           Industrial       near Calicut,   Processing
           Infrastructure   Kerala
           Dev. Corpn.
           (KINFRA)
126   6    Technology       Adjacent to    KL IT/ITES       12.55
           Parks – Kerala   Technopark
                            Campus,
                            TVPM
127   7    Kerala           Cochin, Kerala    KL Electronic   12.141
           Industrial                            s
           Infrastructure                        Industries
           Dev.      Corpn.
           (KINFRA)
128   8    Unitech Real Village               KL IT/ITES       10
           Estate Project Kunnathunadu
           Ltd.             ,         Taluk
                            Morkala
                            Desam,
                            Ernakulam,
                            Kerala
129   9    Parsvnath        Nedumbassery      KL IT/ITES      30.76
           Developers       and
           Limited,         Chengamanad
                            u Villages of
                            Aluva Taluk in
                            Ernakulam
                            District,
                            Kerala.
130   10   TCG Urban        Cochin, Kerala    KL Biotecholo    12
           Infrastructure                        gy
           Holdings
           Limited
           Madhya
           Pradesh
131   1    Madhya           Indore,           MP IT             8
           Pradesh State Madhya
           Industrial Dev. Pradesh
           Corpn.
132   2    M/s. Medicaps Indore, M.P          MP IT Park      12.25
           IT Park Pvt.
           Ltd.
133   3    Parsvnath        Indore,           MP IT/ITES      30.76
           Developers       Madhya
           Limited          Pradesh
134   4    Madhya           Ganga             MP IT/ITES      20.24
           Pradesh State Malanpur,
           Electronics      Near IIITM
           Development     Gwalior,
           Corporation     Madhya
           Limited         Pradesh
           (MPSEDC)
           Maharashtra
135   1    Maharashtra     Rajiv Gandhi MH IT/ITES         229.3
           Industrial      Infotech Park,
           Development     Phase III,
           Corporation     Hinjawadi,
           Ltd.            Pune
136   2    M/s. Syntel     Talawade        MH IT/ITES       16
           International   Software Park,
           Pvt. Ltd.       Pune,Maharas
                           htra
137   3    Serum Institute Pune,           MH Pharma &      21
           of India        Maharashtra        Biotech
           Limited
138   4    MIDC            Nandgaon        MH Multi-       1010
                           Peth, Distt.       Product
                           Amravati,
                           Maharashtra
139   5    MIDC            Jalna, Dist.    MH Bio-         40.33
                           Jalna,             technology
                           Maharashtra
140   6    M/s.            Kagal,          MH Textile      104
           Maharashtra     Maharashtra
           Industrial Dev.
           Corpn.
141   7    MIDC            Krushnoor,      MH Pharmaceu    150
                           Dist. Nanded,      ticals
                           Maharashtra
142   8    MIDC            Latur,          MH Agro         200
                           Maharashtra
143   9    MIDC            Shendre, Dist. MH Alumium       210
                           Aurangabad,        and
                           Maharashtra        Aluminiu
                                              m related
                                              industries
144   10   MIDC            Butibori, Dist. MH Textile      383
                           Nagpur,
                           Maharashtra
145   11   Wockhardt       Shendre,        MH Pharmaceu       107
           Infrastructure Aurangabad          tical
           Development Distt,
           Limited         Maharashtra
146   12   M/s. Bajaj Auto Waluj,          MH Automobil       100
           Limited         Aurangabad         e and
                                              Automobil
                                              e
                                              component
                                              s
147   13   M/s.             Powai,         MH IT/ITES         12.57
           Hiranandani      Mumbai
           Builders
148   14   Zeus             Village Kopri, MH IT/ITES         54.22
           Infrastructure   Taluka Thane,
           Pvt. Ltd.        District Thane,
                            Maharashtra
149   15   MIDC             Distt Solapur, MH Textile         195
                            Maharashtra          Industry
150   16   MIDC             District        MH Textile        208
                            Yavatymal,           Industry
                            Maharashtra
151   17   Claridges        Chawk in        MH Multi-         242
           Hotels Pvt. Ltd. Khalapur             Services
                            Taluka of
                            Raigad Distt.
152   18   New Found        Juinagar,       IT/I MH           21.41
           Properties and Thane,            TES
           Leasing Private Maharashtra
           Limited
153   19   Magarpatta       Magarpatta      MH Electronic     11.98
           Township         City,                s hardware
           Development & Hadapsar,               and
           Construction Pune                     software
           Co. Ltd                               including
                                                 ITES
154   20   M/s.EON          Kharadi, Pune, MH IT/ITES          18
           Kharadi          Maharashtra
           Infrastructure
           Pvt Ltd
155   21   Wipro Ltd        Pune             MH IT/ ITES      20.23
156   22   Viraj Profiles Village Aam MH Stainless             235
           Ltd              Wada Tehsil,        Steel
                            Distt Thane,        Engineerin
                            Maharashtra         g Products
157   23   Mahindra         Village Owale, MH Bio-             28
           Gesco            Ghodbunder          technology
           Developers Ltd Road, Thane,
                            Maharashtra
158   24   Infosys Ltd      Pune,            MH IT/ ITES      79.8
                            Maharashtra
159   25   Kumar Builders Hinjawadi and MH Electronic         49.1
           Township         Mann, Pune,         s
           Ventures     Pvt Maharashtra         Hardware
           Ltd                                  and
                                                Software
                                                including
                                                IT/ ITES
160   26   Flagship         Hinjwadi,        MH IT             28
           Infrastructure Pune
           Pvt Ltd
161   27   Serene           Airoli, District MH IT/ITES       14.07
           Properties       Thane,
           Private Limited Maharashtra
162   28   Maharashtra      Mihan,           MH Multi         2086
           Airport          Nagpur,             product
           Development Maharashtra
           Company
           Limited
           (MADC)
163   29   Balaji Infra     Dighi Port,      MH Port based    100
           Projects         District               SEZ for
           Limited          Raigadh,                multi
                            Maharashtra            product
                                                  inclusive
                                                 of FTWZ
164   30   International    Hinjawadi,   MH Biotech          13
           Biotech Park     Pune
           Ltd.
165   31   Gitanjali Gems   Panvel         MH   Gems and     10.2
           Limted           Village,            Jewellery
                            Chiravat,
                            District
                            Raigad,
                            Maharashtra
166   32   MIDC             Ambernath,     MH   IT / ITES    16.5
                            Distt Thane,
                            Maharashtra
167   33   MIDC             District Pune, MH     Textile    101
                            Maharashtra          Industry
168   34   Royal Palms      169, Aarey     MH    IT/ITES     10.1
           India Private    Milk Colony,
           Limited          Goregaon (E),
                            Mumbai
169   35   Maharashtra      Lote,          MH    Pharma      200
           Industrial       Parshuram,
           Development      District
           Corporation      Ratnagiri,
           (MIDC)           Maharashtra
170   36   MIDC             Bhadravati     MH     Power      1100
                            Chandrapur          generation
                            District,
                            Maharashtra
171   37   MIDC             Usar, Raigarh MH      Power      103
                            Dist.,              generation
                            Maharashtra
172   38   Chiplun          Mumbai         MH  FTWZ          40
           Infrastructure
           Private Limited
           (formerly M/s
           FTWZ Ltd.)
173   39   City Parks Pvt. Gahunje,       MH Electronic      30
           Ltd.            Taluka Haveli,    s, IT/ITES
                           District Pune
174   40   Broadway        Village         MH   IT/ITES     10.55
           Integrated Park Tathawade,
           Pvt. Ltd.       Taluka
                           Mulshi,
                           District Pune,
                           Maharashtra
175   41   Muttha Realty Village           MH   IT/ITES    10..27
           Private Limited Lohagaon,
                           Taluka Haveli,
                           District Pune,
                           Maharashtra
176   42   Cornell         Khari Village, MH    IT/ITES      41
           Housing and     Thane District,
           Infrastructure Maharashtra
           Private Limited
177   43   Lodha           Thane,          MH   IT/ITES      32
           Developers Pvt. Maharashtra
           Ltd.
178   44   Manjari Stud Pune               MH   IT/ITES     15.79
           Farm Private Maharashtra
           Limited
179   45   K. Raheja       Navi Mumbai MH       IT/ITES     20.64
           Universal
180   46   K. Raheja       Navi Mumbai MH       IT/ITES      13
           Universal
           (Infocity II)
181   47   Marathon        Raigad,         MH    Multi      400
           Pachin          Maharashtra          services
           Infrastructure
           Orissa                                          8130.79
182   1    Orissa          Chandaka        OR     IT        69.96
           Industrial      Industrial
           Infrastructure Estate, P.S. -
           Development Chandrasekhar
           Corporation     pur, Tehsil -
           (IDCO)          Bhubaneswar,
                           District
                           Khurda, Orissa
183   2   Orissa           Village         OR     IT      101.8
          Industrial       Gaudakahipur       (Knowled
          Infrastructure   and Arisal,         ge Park)
          Development      P.S. - Jatni,
          Corporation      Tehsil - Jatni,
          (IDCO)           District
                           Khurda,
                           Orissa.
184   3   Orissa           Bhubasnewar, OR IT/ITES         26.7
          Industrial       P.S.-
          Infrastructure   Chandrasekhar
          Development      pur, District-
          Corporation      Khurda, Orissa
          (IDCO)
185   4   Orissa           Village           OR Metallurgi 101.15
          Industrial       Manoharpur            cal based
          Infrastructure   (Kalinganagar        engineerin
          Development      Industrial                 g,
          Corporation      Complex),              ancillary
          (IDCO)           P.S. - Duburi,           and
                           Tehsil -              downstrea
                           Sukinda,                   m
                           District Jajpur,      indistries.
                           Orissa.
186   5   Jindal Stainless Kalinga           OR Stainless    446
          Limited          Nagar, Orissa         Steel and
                                                 Ancillary/
                                                   Down
                                                   Stream
                                                  Industry
          Pondicherry
187   1   Pondicherry      Sedarpet,        PON Multi-       346
          Special          Karasur,             product
          Economic Zone Pondicherry
          Company Ltd
          Punjab
188   1   M/s. Quarkcity Mohali,             PB IT           20
          India Pvt. Ltd. Punjab
189   2   Ranbaxy          Mohali,           PB Pharmaceu    32
          Laboratories      Punjab             ticals
          Ltd.
190   3   Vividha           Rajpura,        PB Engineerin   100
          Infrastructure    Patiala, Punjab    g Sector
          Pvt Ltd
191   4   Mridul            Rajpura,        PB Textiles     100
          Infrastructures   Patiala, Punjab
          Pvt Ltd
          Rajasthan
192   1   Mahindra          Jaipur         RJ IT/ITES        49
          Gesco
193   2   M/s. Vatika       Jaipur         RJ IT/ITES       20.23
          Jaipur SEZ
          Developers
          Ltd.
194   3   Somani            Khushkera      RJ Electronic     20
          Worsted           Industrial        s
          Limited           Area, Bhiwadi,    Hardware
                            Rajasthan         and
                                              Software/
                                              ITES
          Tamil Nadu
195   1   M/s.              Sriperumbudur TN Electronic     101
          Flextronics       , Chennai,       s
          Technology        Tamil Nadu       Hardware
          (India) Pvt. Ltd.                  and related
                                             services
196   2   M/s. Tata         Siruseri,     TN IT/ITES        70.5
          Consultancy       Chennai
          Services Ltd.
197   3   M/s. ETL          Pallikarnai,  TN IT/ITES        10.5
          Infrastructure Chennai
          Services Ltd.
198   4   M/s. Hexaware Siruseri,         TN IT/ITES         11
          Technologies Chennai.
          Ltd.
199   5   M/s. Syntel       Siruseri,     TN IT/ITES         11
          International Chennai,
          Pvt. Ltd.         Tamil Nadu
200   6    DLF Info City    Chennai,          TN IT/ITES     15
           Developers       Tamil Nadu
           (Chennai) Ltd.
201   7    M/s. Xansa       Chennai,          TN IT/ITES     10
           India Ltd.       Tamil Nadu
202   8    Electronics      Sholinganallur    TN IT/ITES    159.04
           Corporation of   village,
           Tamil Nadu       Tambaram
           Ltd.             Taluk,
                            Chennai,
                            Tamil Nadu
203   9    Electronics      Vilankurichi,     TN IT/ITES    11.76
           Corporation of Coimbatore
           Tamil Nadu       North Taluk,
           Ltd.             Coimbatore
                            District, Tamil
                            Nadu
204   10   ETL              Uthukuli          TN Textiles   101.62
           Infrastructure Village, Erode
           Services Ltd. Distt., Tamil
                            Nadu
205   11   ETL              Chinglepet,       TN IT/ITES     105
           Infrastructure Kanchipuram
           Services Ltd. District, Tamil
                            Nadu
206   12   Shriram          Sriperumbudur     TN IT/ITES     10
           Properties and near Chennai
           Infrastructure
           Pvt. Ltd
207   13   State Industries Chennai           TN Footwear    60
           Promotion
           Corporation of
           Tamil Nadu
           (SIPCOT)-
           [earlier
           approval to
           Consortium of
           Shoe
           Manufacturers
           Pvt. Ltd.]
208   14   State IndustriesSIPCOT          TN Electronic 190.42
           Promotion       Industrial Area    s/
           Corporation of  Sriperumbudur      Telecom
           Tamilnadu       e, Tamil Nadu      hardware
           Limited                            and
                                              support
                                              services,
                                              including
                                              trading
                                              and
                                              logistics
                                              activities
209   15   Coimbatore Hi- Coimbatore,      TN IT/ITES    60.73
           tech            Tamil Nadu
           Infrastructure
           Pvt Ltd.
210   16   M/s. Cognizant Siruseri,        TN IT/ ITES     11
           Technology      Chennai
           Solutions India
           Pvt Ltd.
211   17   Nuziveedu       Sholinganallur TN IT/ ITES    17.32
           Seeds Ltd       , Tambaram
                           Taluk,
                           Kanchipuram
                           District, Tamil
                           Nadu
212   18   Arun Excello Kancheepuram TN Electronic 10.93
           Infra Pvt. Ltd. , Tamil Nadu        Hardware
                                              & software
                                               including
                                                 ITES
213   19   Span Ventures Eachanari,        TN IT/ITES 10.441
           Pvt. Ltd.       Coimbatore
214   20   Anush           Paiyanur,       TN IT/ITES    40.56
           Infrastructure Tamil Nadu
215   21   Haaciendaa       No. 51,           TN IT/ITES      26.62
           Infotech and     Sholinganallur
           Realtors Private Village, Old
           Limited          Mahabalipura
                            m Highway,
                            Tambaram
                            Taluk,
                            Kancheepuram
                            District, Tamil
                            Nadu
216   22   Bannari Techno Kalapatty           TN IT/ITES      26.94
           Park Limited Village,
                            Coimbatore,
                            Tamil Nadu
217   23   Lotus Footwear SIPCOT              TN Footwear     111.34
           Enterprises Ltd. Cheyyar
                            Industrial Park
                            in Mathur,
                            Mangal
                            Villages,
                            Thiruvannama
                            lai District,
                            Tamil Nadu
218   24   Suzlon           Coimbtore         TN High tech.   107.28
           Infrasstructure Tamilnadu             Engg.
           Limited
219   25   Platinum         Navallur,         TN Hardware     10.57
           Holdings         Chennai,               and
           Private Limited Tamil Nadu            Software
           Uttaranchal
220   1    State Industrial Sitarganj,        UA Multi-        440
           Development Udham Singh               product
           Corporation of Nagar,
           Uttaranchal Ltd Uttaranchal
221   2    State Industrial Dehradun,         UA IT/ ITES      14.2
           Development Uttaranchal
           Corporation of
           Uttaranchal Ltd
222   3   Parsvnath      Sahastra Dhara UR IT/ITES          14
          Developers     Road,
          Limited        Dehradun,
                         Uttranchal
          Uttar Pradesh
223   1   Wipro Ltd.       Greater Noida UP IT/ITES         20
224   2   M/s. Moser       Greater Noida UP Non-           11.9
          Bear India Litd.                    Conventio
                                              nal Energy
                                              including
                                              Solar
                                              Energy
                                              equipment
225   3   M/s. Ansal IT Greater Noida UP IT/ITES           30.41
          City and Parks
          Ltd.
226   4   M/s. Seaview Noida               UP IT/ITES      12.15
          Develpers Ltd.
227   5   HCL              Noida, UP       UP IT/ ITES     16.91
          Technologies
228   6   NIIT             Plot No.TZ- UP IT/ ITES         10.12
          Technologies 02,         Sector-
          Limited SEZ Tech          Zone,
                           ITES      Park,
                           Greater Noida,
                           UP
229   7   OSE              Plot No. 001, UP        IT      10.12
          Infrastructure Block C,
          Limited          Sector 67,
                           Noida, Uttar
                           Pradesh
230   8   Pavitradham      Noida, U.P.     UP IT/ITES      22.22
          Constructions
          Private Limited
          West Bengal
231   1   M/s. M.L.        Kolkata, West WB IT/ITES         48
          Dalmiya and Bengal
          Company Ltd.
232   2   M/s         M.L Kolkata (West WB Leather          44
                Dalmiya & Co. Bengal)               Products
                Ltd
 233       3    DLF Info City Rajarath,          WB IT/ITES      10.12
                Developers       Kolkata
                (Kolkata) Ltd.
 234       4    Oval             Mouza-          WB Electronic   12.14
                Developers       Banagram,          Hardware
                Private Ltd      District    24     and
                                 Pargana            Software
                                 (South), West
                                 Bengal
 235       5    Riverbank        Bata Nagar, 24 WB IT Sector      10
                Holdings     Pvt South Pargana,
                Ltd (Bata India) West Bengal.
 236       6    Enfield Exports Panagarh         WB IT/ ITES      26
                Limited          Bazar, District
                                 Burdwan,
                                 West Bengal
 237       7    Shapoorji        A-III,    New WB IT/ ITES        20
                Pallonji andCo. Town,
                Ltd              Rajarhat,
                                 Kolkata, West
                                 Bengal

                              APPENDIX - II
                         Checklist of land issues
                        (Vide para 2.53 of the Report)


1.     Land Profile:
           Area proposed for acquisition
           Percentage of cultivated and cultivable land
           Area under plantation
           Extent of grazing/pasture – common land


2.     Crop Profile/Plantation:
           Main crops grown
          Production and productivity
          Integrated farming including dairy/livestock


3.   Irrigation Profile:
          Percentage of area irrigated
          Main sources of irrigation (Canal, Tanks, Tubewells)
          Investment on assured/secondary irrigation


4.   Livelihood Profile:
          Number of farm families dependent on agriculture
           including livestock
          Income from farming and allied activities
          Compensation payable to farmers and scheme for
           rehabilitation.


                          APPENDIX - III
     Suggestion of the Government of West Bengal for changes
                        in SEZ Rules.
                 (Vide para 3.61 of the Report)

1)   Rule 5 (2)(a) - First Proviso:

     "A Special Economic Zone (SEZ) for multi-product shall have a
     contiguous area of 1 000 hectares or more".

     Suggested Amendment:

     "A SEZ for multi-product shall have a contiguous area of 400
     hectares or more.

     Justification:

     In view the difficulties and controversy attached with acquisition
     of land for SEZ it is felt by the State Government that the
     minimum requirement of land for multi-product SEZs should be
     reduced to 400 hectares or 1000 acres. This will enable the
     State Governments as well as the developers to locate
     available land without too much infringement of agricultural
     land. From the point of view of actual requirement also the
     State Government is of the view that the minimum area of 1000
     acres will be quiet sufficient for the purpose of meeting the
     requirement of a multi-product SEZ.

2)   Rule 5 (2)(a) - Third Proviso

     Existing Proviso: "Provided also that at least thirty five per cent
     of the area shall be earmarked for developing the processing
     area, which may be relaxed upto twenty five per cent by the
     Central Government on recommendations of the Board for the
     reasons to be recorded in writing".

     Suggested Amendment:

     "Provided also that at least fifty per cent of the area shall be
     earmarked for developing manufacturing and/or processing
     area which may be relaxed upto forty per cent by the Central
     Government on recommendations of the concerned State
     Government for encouraging development of such SEZ in
     backward areas within the State.
     "And also provided that out of the remaining area at least
     twenty five per cent shall be earmarked for infrastructure
     facilities in support of manufacturing and/or processing
     activities put of a list to be duly notified".
     Justification:

     The State Government feels' that one of the major attractions
     for the flurry of SEZ applications have been the tendency to use
     SEZ area for development of real estate or promoting activities.
     The State Government feels that there is a need to restrict such
     promoting activities within the SEZ area which should be
     basically to set up export oriented manufacturing or processing
     units. Thus it is felt by the State Government that the SEZ
     developer should provide various supporting infrastructure
       facilities which will be required by the manufacturing/processing
       units within the SEZ area. A probable list of such activities is
       given below:

     i)    Adequate internal roads with street lighting, signals,
signage etc.
       ii)     Water reservoir, water treatment plant, water supply lines
               and water channels of appropriate capacity
       iii)    Drainage and sewage lines, storm water drains, sewage
               and garbage disposal plant, pipelines and other
               necessary infrastructure for, drainage sewage and
               garbage disposal, facilities for treatment and final
               disposal of industrial and municipal solid and liquid waste
               including disposal of hazardous waste where necessary.
       iv)     Power supply, electrical, gas and PNG distribution
               network including provisions for sub-stations of
               appropriate capacity, pipeline network etc.
       v)      Affluent treatment plant and pipeline           and   other
               infrastructure for affluent treatment
       vi)     Administrative building, Training and Conference facilities
               for workers and organizations situated in the SEZ area.
       vii)    Security office, police posts etc. at the entry and exit
               points and along the periphery of the SEZ site.
       viii)   Telecom, post office or other communication facilities.
       ix)     Clinic, medical centre and hospital up to 100 bed capacity
               for workers and their family members.
       x)      Creche, school and other educational facilities for workers
               and their
               family members.
       xi)     Multilevel car parking (automatic and manual) and bus-
bay.
       xii)    Canteen and other catering facilities for workers.
       xiii)   Rain water harvesting plant.
       xiv)    Banking', ATM and insurance facilities for workers and
               organizations in the SEZ
xv)    Fire brigade, fire protection system, water storage for fire
       fighting, fire sprinklers etc.
xvi) Recreational facilities, play grounds etc. for the workers.
xvii) Beautification, gardening, landscaping, water bodies etc.
      without any commercial interest.
xviii) Storage and warehousing facilities for organizations under
       the SEZ
xix)   Any        other    infrastructure     supportive      of
       manufacturing/processing activities with prior permission
       of the State Government in the Commerce and Industries
       Department. However, a Master Land Use Plan has to be
       prepared by the Developer in accordance with this Policy
       and has to be submitted before the Government of India
       for final approval.

3)     Rule 5 (2)(b ) - Fourth Proviso
       "Provided also that" at least fifty per cent of the area shall
       be earmarked for developing processing area".
       Suggested Amendment:

       "Provided also that at least sixty per cent of the area shall
       be earmarked for developing manufacturing and/or
       processing activities which can be relaxed to :fifty per
       cent by Government of India on recommendations of the
       concerned State Government in order to encourage
       setting up SEZ in backward areas within the State."
       "Also provided that out of the remaining area at least
       fifteen per cent shall be earmarked for infrastructure
       facilities supporting, manufacturing and/or processing
       activities out of a list to be duly notified."
       Justification:
       In case of sector specific SEZ also the State Government
       feels that instead of existing fifty per cent lower limits
       should be increased to sixty per cent in order to
       encourage more manufacturing and processing activities
       within the SEZ area This can; however, be relaxed to fifty
        per cent in case of backward areas on the
        recommendations of the concerned State Government.
        State Government also feels that there is a need to
        specify      the    activities  in     support       of
        manufacturing/processing and a suggested list is noted
        below:
i)      Adequate internal roads with street lighting signals,
        signage etc.
ii)     Water reservoir, water treatment plant, water supply lines
        and water channels of appropriate capacity.
iii)    Drainage and sewage lines, storm water drains, sewage
        and garbage disposal plant, pipelines and other necessary
        infrastructure for drainage, sewage and garbage disposal.
iv)     Power supply, electrical, gas and PNG distribution network
        including provisions for sub-stations of appropriate
        capacity, pipeline network etc.
v)      Affluent treatment plant and pipeline           and    other
        infrastructure for affluent treatment.
vi)     Administrative building, Training and Conference facilities
        for workers and organizations situated in the SEZ area.
vii) Security office, police posts etc. at the entry and exit
     points and along the periphery of the SEZ site.
viii) Clinic, medical centre and hospital for workers and their
      family members.
ix)      Multilevel car parking and bus bay.
x)       Canteen and other catering facilities for workers.
xi)     Banking, A TM and insurance facilities for workers and
        organizations . in the SEZ
xii) Fire brigade, fire protection system, water storage for fire
     fighting, fire sprinklers etc..
xiii)   Recreational facilities, play grounds etc. for the workers.
xiv)    Beautification, gardening, landscaping, water bodies' etc.
        without any commercial interest.
xv)     Storage and warehousing facilities for organizations
        under the SEZ.
xvi)   Multilevel car parking and bus bay.
xvii) Any      other     infrastructure      supportive      of
      manufacturing/processing activities with prior permission
      of the Government of India.
4)     Rule 5(2)(b) - Fourth Proviso:

       After the suggested amendment as at S1. No. (3) above
       the following amendments may be included as a Fifth
       Proviso.

       Suggested Amendment:

       "Provided also that in case of a SEZ is proposed to be
       set up exclusively for electronics hardware and software
       including IT enable services or exclusively for bio-
       technology, non-conventional energy including solar
       energy equipment/cell or Gem and Jewellery sectors at
       least seventy per cent of the SEZ area shall be
       earmarked for developing manufacturing and/or
       processing activities which can be reduced to sixty per
       cent by Government of India on recommendations of the
       concerned     State    Government      for   encouraging
             development of such SEZ in backward areas within
       the State."

       "Also provided that out of the remaining area at least ten
       per cent shall be earmarked for manufacturing and/or
       processing activities out the a list to be duly notified."

       Justification:

       As in case of earlier suggestions the State Government
       feels that there is a requirement also to increase the
       minimum area for manufacturing/processing activities in
       case of IT and Jewellery SEZs. However, some
       relaxation can be given as· in the earlier two cases for
       encouraging setting up of SEZ in backward areas of any'
       State on the recommendations of the concerned State
       Government. Similarly, the State Government feels that
        there is a need to specify the infrastructure activities in
        support of manufacturing/processing. A suggested list of
        such activities is given below:

i)      Adequate internal roads with street lighting signals,
        signage etc.
ii)     Water reservoir, water treatment plant, water supply lines
        and water channels of appropriate capacity.
iii)    Drainage and sewage lines, storm water drains, sewage
        and garbage disposal plant, pipelines and other
        necessary infrastructure for drainage, sewage and
        garbage disposal.
iv)     Power supply, electrical, gas and PNG distribution
        network including provisions for sub-stations of
        appropriate capacity, pipeline network etc.
v)      Banking, ATM and insurance facilities for workers and
        organizations in the SEZ.
vi)     Fire brigade, fire protection system, water storage for fire
        fighting, fire sprinklers etc.
vii)    Security office, police posts etc. at the entry and exit
        points and along the periphery of the SEZ site.
viii)   First aid and medical treatment centre.
ix)     Multilevel car parking and bus bay.
 x)            Any      other     infrastructure       supporting
        manufacturing/processing activities with prior permission
        of Government of India.
5)       Rule 4 - First Proviso:

         “Provided that where the Board approves of proposal
         received under Sub-Section (3) of Section (3) the
         person shall obtain concurrence of the State
         Government within six months from the date of such
         approval."

         Suggested Amendment:
      "Provided that where the Board approves of proposal
     received under Sub-Section (3) of Section (3) the
     person shall obtain concurrence of the State
     Government within six months from the date of such
     approval."
     "Also provided that the Board will not issue formal
     approval without the recommendation of the concerned
     State Government."
     Justification:

     It has been observed in the past that often formal
     approval issued by the Board of approval for SEZ cases
     have been approved by the Board without any
     recommendation from the State Government and
     without proper acquisition of the concerned. land in
     favour of the developer. This results in delays in
     notification of the SEZ cases as the State Government
     has to certify the land being re90rded in the name of the
     developer company and unless such land records are
     properly muted, State Government cannot certify to this
     effect. Another point of consideration is that often the
     State Governments under their policy of SEZ proposes
     resettlement package for the land loosers and the State
     Government expects to have written and formal
     commitment for implementation of such rehabilitation
     package from the developer. In case formal approval is
     received from BoA before the recommendation of the
     State Government the developer may subsequently be
     reluctant to implement the rehabilitation package
     suggested by the State Government.
6)   Rehabilitation Package:
     It is suggested that after Rule 5 there should be a new
     provision as 5(a)
     5 (a) Proposed Amendment:
     "In case of multi product and sector specific SEZ the
     developer will have to implement a rehabilitation
     package for the land loosers whose land is
     acquired/purchased for the purpose of the SEZ project.
     Such rehabilitation package will have to include facilities
     for free vocational training, economic development
     programmes for Women Self-Help Groups, area
     development programmes like building of rural roads
     and communications facilities outside the SEZ area as
     well as social welfare measures like educational
     facilities, provision for drinking water, health care and
     recreational facilities outside the SEZ area. The
     developer will have to submit a development package
     to the State Government proposed to be implemented
     by him along with development of the SEZ area and on
     approval of the package by the concerned State
     Government will have to enter into an agreement with
     the concerned State Government specifying modalities
     for implementation of the same."
     Justification:
     The State Government has all along been insisting that
     the SEZ developer should implement a development
     package for the benefit of the land loosers whose lands
     are either acquired or purchased in connection with the
     development of SEZ area. Unless such rehabilitation
     package is made a part of the statutory obligations the
     developer will be reluctant to implement such a
     package and therefore there is a necessity for inclusion
     of the same under SEZ Rules.
7)   General:

     The State Government is of the view that at least fifteen
     per cent of the fiscal relief obtained by the SEZ
     developer is to be annually paid into a Development
     Fund to be administered by the Development
     Commissioner in consultation with the State
     Government and proceeds of this fund is to be utilized
     for local area development around the SEZ.
     Accordingly, the State Government would request you
     to kindly consider the above amendments to the
     existing SEZ Rules so that the entire propose of SEZ
     can be oriented towards manufacturing/processing
              activities.
                                  APPENDIX IV
                         (Vide para 2 of the Preface)
   STUDY NOTE ON THE VISIT OF THE SUB-COMMITTEE FOR
    SEZs TO HARYANA, ANDHRA PRADESH, KARNATAKA,
      GUJARAT AND MAHARASHTRA FROM 11TH TO 16TH
                   FEBRUARY, 2007
                   Jhajjar (Haryana)

      The Sub-committee of the Committee on Commerce for SEZs
visited   Jhajjar   in      Haryana   on   11th   February,   2007.   The
representatives of Government made a presentation before the Sub-
committee on the proposed Reliance HSIDC Joint Venture SEZ.
According to them, Jhajjar had a total area of 1834 sq. kms and the
total population, as per 2001 census, was 880072. The district
produced Bajra in the Kharif season and the yield per Acre was 2.5
quintals. Similarly, in the Rabi season, wheat and mustard were the
main agricultural produce. The yield per hectare of both the above
crops was 14 and 6 quintals, respectively. As per figures provided by
NABARD, productivity of the district in 2005-06 was Rs 23,346 per
hectare, while the productivity of the State was Rs. 24,986 per
hectare. The total land under cultivation was 1,64,390 hectares. The
northern part of the district was a water logged area, whereas the
Southern part was an arid area. There was hardly any industrial
activity in the area and mostly the people were employed in defence
services. The requirement of 25,000 hectares of land for SEZs was
scrutinized by the State Government. The Reliance Industries Limited
was in the process of acquiring land for Rs 22 lakh per acre Out of
the total requirement of 1976 acres of land for the SEZ, the process
for acquiring 1500 acres was under progress.
         The State Government had, in place, a policy for rehabilitation
for persons/farmers displaced due to acquisition of their land.
According to the Haryana State Rehabilitation Policy, the Developer
Shall Provide:-
  (i)      Built up houses or residental plots, alongwith cost of
           construction, in case of relocation of village abadi;
  (ii)     Essential services like roads, lights, drainage, drinking,
           water, medical care, 2005schooling, community centers, etc;
  (iii)    Where relocation is not necessary but more than 25% land
           gets acquired, social infrastructure as at (ii) above;
  (iv)     Set up industrial training institutes, vocational training
           institutes and polytechnics, to provide training to wards of
           persons whose land is acquired;
  (v)      Provide right of way and develop such infrastructure like
           roads and bridges, for convenience of general public within
           project area;
  (vi)     Provide independent power plant or purchase power from
           plant outside the State;
  (vii) Pay for water supply schemes within the area;
  (viii) Provide employment to at least one member of the family
           whose land is acquired; and
  (ix)     Shall undertake to provide at least 25% of employment to
           Haryana domicile in all categories, except technical posts,
           where preference shall also be given to Haryana domicile.
      The Sub-committee held discussions with the farmers of the

villages where lands were being acquired for setting up of SEZ. The

Sub-committee was informed by farmers that they all were happy with

the prices offered for acquisition of their lands. They had been given

Rs. 22 lakh per acre for their land, and it had come to them as

windfall. They had invested the money in fixed deposits, real estate in

other parts of Haryana like Sirsa, Bhiwani, Sonipat. Some farmers

had bought lands of bigger sizes in Rajasthan also. However, a

peculiar case was brought to the notice of the Sub-committee. A

farmer, who was first to offer his land, was paid at the rate of Rs. 18

lakh per acre. He requested that being leader in the process of land

acquisition, he should not be allowed to suffer. The local authorities

assured to look into this case sympathetically. The farmers

demanded that they should be informed of the likely benefits of

setting up of the SEZ, rehabilitation and employment. They should be

given employment in the units proposed to be set up in SEZ. Some

farmers were of the view that provision of Lal Dora should also be

retained there, to maintain their identity. Some small farmers were,

however, indecisive in selling their land, because of the fear that they

might not be able to purchase land, as they did not have the
bargaining power. No farmer complained of forcible sale of his land.

Some farmer had sold their lands partly, awaiting for increase in

prices. They stated that they would not hesitate to sell the remaining

piece of their land at increased rates. The Sub-committee were

however, given to understand that the local authorities had not

informed   all   the   affected   farmers,   as   the   meeting   was

arranged/manipulated one.

     The Director, Industries, State Government of Haryana
informed that suitable measure have already been planned to take
care of the Rehabilitation and employment of the population likely to
be displaced. Employment will be given to a member of family, whose
land is acquired. Before giving employment, local youth would be
given training in the proposed ITI, which would give training to them
in contemporary and useful courses. As per the rates approved by
the State Government, a farmer could have received Rs. 18 Lakh per
acre as compensation for acquisition of their land, whereas they had
received Rs. 22 lakh per acre from M/s Reliance India Ltd, and that
too when their lands were mainly dry or water logged.


Hyderabad (Andhra Pradesh)

     The Sub-committee visited Hyderabad on the 12th February,
2007, and interacted with the farmers, whose land had been acquired
for SEZs. In their written note, officials of the Government of A.P
informed that 54 SEZs had been approved in that State by the Board
of Approvals. Out of which, 45 had been given formal approval and
nine had been given in-principle approval.      Five SEZs were Multi
Product, while 49 were Sector Specific (Single Product). Acquisition
of private land, wherever necessary, was being done as per the Land
Acquisition Act, 1894.    In most of the cases, the provisions of
Consent Award were being followed. Out of the total area of 10,954
acres, pertaining to SEZs, assisted / developed by the State
Government / Government Agencies, an area to the extent of 6000
acres (54.77 %) of private land was acquired for the purpose. Wet
agriculture land (Irrigated) was only 35 acres(0.58%) and dry
agriculture land (only rain fed) was 5965 acres (99.42 %)
     The rehabilitation of land losers is taken up as per the
guidelines. The following facilities were being provided to the land
losers, as per the guidelines


1.   Grant for House Construction;
2.   Grant for Cattle Shed to each project affected family who owns
     a cattle shed;
3.   Grant for Transportation of Material;
4.   625 days of minimum agriculture wages at Rs.80/- per day to
     the agricultural and non - agricultural labours;
5.   Subsistence allowances to displaced families equivalent to 240
     days of minimum agricultural wages at Rs.80/- per day; and
6.   Development of layout with infrastructure facilities;

     The State had passed the "Andhra Pradesh SEZ Act, 2005"

during the Legislative Assembly Session in December, 2005 and the

ascent of President of India was awaited. On passing of the Bill,
Rules would be framed. Since the Land Acquisition Act is a Central

Act, no such amendments / additions to the Act are proposed in the

Andhra Pradesh SEZ Act, 2005.



      With regard to the method adopted for acquisition of land, it
was submitted that the private developers were being encouraged to
purchase land from the land owners at mutually agreed rates. The
Revenue Authorities were facilitating and monitoring the process, so
as to ensure a fare deal to the farmers. The land had been given to
the entrepreneurs on lease, with an upfront payment of Rs seven lakh
per acre, to cover the development expenditure.
      The Sub Committee was informed 224.18 acres of patta land
had   been   acquired    at   Rajapur      village,    Balanagar    Mandal,
Mahbubnagar District out of which the extent of Government land
alienated/taken possession was 32.23 acres.             Similarly for Rajiv
Gems Park at Kancha Imarat village, Raviryala             RR District, the
extent of Government land alienated was 200 acres and for Indu
Tech SEZ at Mamidipalli village, Saroornagar mandal RR district, the
extent of Government land alienated was 150 acres and for Raheja
IT/ITES   SEZ    at   Kancha      Imarat    village,    Raviryala   village,
Maheswaram mandal RR district 170 acres of Government land had
been alienated for the purpose.
      The Sub-committee visited Jadchelra village, where a SEZ was
proposed to be set up, and interacted with the villagers. The villagers
complained of forcible acquisition of their lands. According to them,
Government acquired their lands for setting up of Growth Centre 7-8
years back, and they were given compensation at much lowers rates,
as prevailing at that time. Now, with the setting up of SEZ, the prices
of   lands   had   sky-rocketed.     They   demanded      that   in   the
circumstances, they should be given compensation, at higher rates.
The amount of compensation should commensurate with the
prevailing market rates.
      According to them, maximum amount of compensation had
been given for the land adjacent to main road. They demanded that
there should not any discrimination in the matter of compensation, on
account of location of the land.
      It was brought to the notice of the Sub-committee that some
people, who had been given patta for Government lands, had also
been displaced and had become landless. They mainly belonged to
Scheduled Castes/weaker sections. They requested that they may
also be suitably compensated for loss of their shelter and livelihood.


                       Bangalore (Karnataka)


      During its visit to Bangalore on 13th February, 2007, the Sub-
committee held discussions with the farmers of Karnataka, whose
land had been or was being acquired for selling up of SEZs. Farmers
from villages around Mangalore stated that people of Karnataka
generally welcome the SEZ Scheme. However, they had some
grievances in respect of land acquisition. There was some element of
force/compulsion on farmers to give up their land for SEZs. The
compensation given to them was not justified. Land Acquisition Act
had become very old and needed to be amended, to ensure better
price/existing market value of lands. They informed that they were
offered Rs 8.5 lakh per acre, while the market rate was at about Rs.
80 lakh per acre just three months back, after issue of notification for
SEZs at Mangalore. They also informed that three years back, some
lands were acquired at the rate of Rs 2.00 lakh only. Some farmers
submitted that it would have been better if they had been given
compensation at the rate of Rs 20 lakh per acre. They would have
accepted the same in the interest of industrialization of the State.
Also, the compensation amount had been subjected to deduction on
account of Capital Gains Tax and Income Tax, in case their lands
were situated in the city municipal corporation limit. The charges for
stamp duty were also taken from them. They stated that it was unfair
to tax land owners, who were parting away their lands in the interest
of   industrialization   of    State,    while    extending     various
concessions/exemptions to developers of SEZs. They requested that
farmers should be exempted for paying such taxes.
      One farmer informed the Sub-committee that O.N.G.C. was

offering Rs. eight lakh for his one acre of land. He had already given

seven acres of land earlier to O.N.G.C, for setting up of MRPL Plant.

Accordingly to him, the prevailing market rate was one crore per acre,

and no land can be purchased at the rate of Rs. 15-20 lakh per acre,

leave alone Rs. eight lakh. The land was first acquired for Mangalore

Refinery in the year 1992 and a compensation of Rs. 65,000 per acre

was given. Now, besides SEZs, O.N.G.C was also acquiring land for
expansion. Some colleges were also buying land for even Rs. three

crore per acre. Some farmers complained that there was no

compensation for loss of agriculture on the land. There should be

different rates of compensation for paddy crop, cashew nut, coconut

and arcanut, etc, plantations. They stated that nobody had told them

about the jobs and rehabilitation and assurances, that were given

earlier, had not beenfulfilled. The Sub-committee’s attention was

drawn towards the poor      conditions prevailing in a rehabilitation

colony setup by O.N.G.C, which was 10 km. away from the plant.

There was acute scarcity of drinking water and other amenities. With

regard to a query of Sub-committee on the conditions of agricultural

labour, it was mentioned that they were the worst affected people and

were jobless or doing petty jobs. However, the practice of engaging

agricultural labour is very less prevalent as compared to that in the

northern parts of the country. The agricultural activity was mainly

looked after by the family members. The practice of joint family was

being followed generally in Karnataka. Moreover, villagers also share

work with each other on reciprocal basis. With regard to crop pattern,

all the lands were multi crop. Mainly coconut is grown all over

Dakshin Kannada.
      The farmers from Hassan District informed that they had been
given a compensation of Rs. three lakh per acre, while the market
rate was hovering around Rs 15 lakh per acre. They demanded
compensation for the loss of cultivation, as well as for the wells which
were existing in their fields. The small farmers who did not have any
other land, had become landless and they should be given
employment. One unit in the SEZ was operational. However, it had
not recruited local people and instead had employed people from
other areas.
      Almost every household has its own temple, with their family
deities adorned therein. The Sub-committee’s attention was drawn on
the issue of rebuilding/shifting of such religious places particularly
the family deities, since those land has been acquired. The
expenditure involved in relocation could be about Rs.75 thousand to
one lakh. This aspect had not been covered in any compensation
package.


      The Karnataka government, in its written submission, informed

that the formal, as well as in principle approval for the following

number of SEZ in Karnataka had been given:

Formal Approvals (29)               Status    of    Land      (1708.71
                                    hectares in total

22 IT/ITES - 688.54 ha              12 Own/Land/Joint Development
                                    – 221.97 ha

3 BT – 360.21 ha                    8 In Existing Industrial Area –
                                    271.92 ha
4 Sector Specific – 659.96 ha      5 KIADB (Government) – 1044.17
                                   ha
                                   4 KIADB Acquisition to private –
                                   170.65 ha


In Principle Approvals (16)        Status    of    Land    (4694.54
                                   hectares in total)
4 IT/ITES – 588.62 ha              1 Lease Land – 10.00 ha
1 BT – 10.12 ha                    9 KIADB to Acquire for Private –
                                   3253.14 ha
8 Sector Specific – 1655.80 ha     6 Pending for State Government
                                   approval – 1431.40 ha
2 Multi-Product 2320.00 ha
1 FTWZ – 120.00 ha




     The Sub-committee interacted with the officials of the State
Government also. The Principal Secretary (Industries) submitted that
the State Government had dual role in setting up of SEZs in the
State. The State Government first acquired land, developed it and
then transferred the same to the entrepreneurs. Secondly, it
facilitated acquisition of land to private developers. With regard to
giving of lands to entrepreneurs at higher rates, they submitted that
they had to look into other factors, such as cost of land, expenses
incurred on its development, interest on investment, etc., as well as
establishment cost and margins. With regard to employment to local
population, it was submitted that State Government emphasise upon
employment to all the people of the State, not the local people of a
particular area or district. However, the Sub-committee insisted to
provide employment to land loosers and affected farmers. With
regard to bearing the cost of shifting of family temples and rituals
connected therewith, they agreed to the demand and assured to look
into the matter.


                        Jamnagar (Gujarat)


      The Sub-committee visited Jamnagar on the 15th February,

2007 and interacted with the officials of the Gujarat Government and

the farmers. It was informed that the Reliance Infrastructure Limited

had applied 10th November, 2005 for getting Government and private

land of five villages of Lalpur Taluka. The Company had obtained in-

principle approval of the Ministry of Commerce and Industry, vide

their letter dated 21st October, 2005, for development of Petroleum

and Petrochemicals products based Special Economic Zone. The

Applicant company had declared 100% Export Oriented Project in

their application.

      Considering the Jantri Price and selling price of the agricultural
land in the last five years at the Sub-Registrar office, and
compensation related other things such as building, well, pipeline,
trees, etc, attached to the land, the company had offered Rs. 53,000/-
per Bigha (16 Guntha) for Jirayat (unirrigated) land and Rs. 65,000/-
per bigha for Bagayat (irrigated) land as the price of land under
acquisition. In the personal meeting, the land holders demanded the
price of Rs. 2,00,000/- to Rs. 7,50,000/- per Bigha. However, they did
not   produce    any    supporting   document     to   establish   its
reasonableness. Company’s efforts to get the land by land holders’
consent did not succeed because of the vast difference between the
price offered by the company and the price demanded by the land
holders.
      Company then applied to get Government Land measuring
1072-48-58 hectares and Gauchar Land measuring 264-79-35
hectare by sale. The Gram Panchayats of the villages, of which land
the company applied to give Gauchar land, passed resolutions to give
back the land to Government, after deducting from Gauchar land
without any compensation. The State Government approved to give
advance possession of land measuring 559-70-57 hectares. After
recovering possession cost and getting necessary undertaking from
the applicant company, the procedure for handing over advance
possession by Mamltdar-Lalpur was in Progress.
      The State Government of Gujarat also informed the Sub-
committee that 33 SEZs had been given approval by Government of
India and were at various stages of operations. The Sector-wise
breakup of the functional and notified SEZs was as under:
1.    Functional (3)
i)    Multi-product      2            (i)    Kandla SEZ (functional,
                                            1965      Earlier      FTZ
                                            converted into SEZ)
                                      (ii) Surat SEZ (functional, 1992
                                            Notified prior to SEZ
                                            Rules)
ii)   Sector-specific       1    Surat Apparel Park,        Surat
                                 (functional 6/2005)
2.    Notified        (6)


i)    Multi-product         2    (i)       Dahej SEZ by GIDC
                                 (ii)      Mundra Port & SEZ
                                        Ltd.                 By
                                        ADANIs

ii)   Sector-specific       4
1)    Petroleum             -    1 (Reliance, Jamnagar)
2)    Pharma                -    1     (Zydus   Infrastructure,
                                 Ahmedabad)
3)    Engineering           -    1 ( Essar SEZ Hazira Ltd.
                                 Hazira)
4)    Electronic            -    1 (GIDC,Gandhinagar)
3.    Formal
      approvals
      (issued   with
      LOA) (13)

i)    Multi-product         3    i)Mundra SEZ Ltd,
                                 ii) Essar SEZ, Jamnagar,
                                 iii) Kandla port Trust, Kandla,
                                 Kutch
ii)   Sector specitic       10
1.    Textiles       & 2         [GIDC, Ahmedabad Welspun –
            Apparels             Anjar]
2.    Gem & Jewellery 1          (Gujarat Hira Bourse, Surat)
3.    Ceramic & Glass 1          GIDC Jhagadia, Baruch
4.    I.T.                  3    (i)      Calico Construction &
                                        Impex    Pvt.       Ltd.,
                                        Gandhinagar
                                 (ii)     Aqualine Properties,
                                     Gandhinagar.
                             (iii)     Mugdha        (Thaltej)
                                     Complex    Pvt.    Ltd.,
                                     Ahmedabad

5.    Chemicals          1   Jubilant Infrastructure, Bharuch
6.    Pharmaceuticals    1   CPL              Infrastructure,
                             Ahmedabad
7.    Power              1   Adani Power Pvt. Ltd.,
iv)   In-principle
            (LOA    is
            yet to be
            finally
            issued)
            (11)

i)    Multi-product      3   (i)         GIDC, Hazira, Surat
                             (ii)        Adani Exports Ltd.,
                                     Ahmedabad
                             (iii)       Sterling Erection &
                                     Infrastructure Pvt. Ltd.,
                                     Bharuch

ii)   Sector specitic    8
1.    Engineering        3   NG       Realty    Pvt.   Ltd.,
                             Ahmedabad               Suzlon
                             Infrastructure Ltd., Vadodara
                             Dishman Infrastructure Ltd.,
                             Ahmedabad

2.    Steel Products     1   (Indian Steel Corporation Ltd.,
                             Anjar)
3.    Pharmaceuticals    2   Jubilant     Organosys      Ltd.,
                             Ahmedabad               Dishman
                             Infrastructure Ltd., Ahmedabad

4.    Power              1   Exxar Suvali SEZ Ltd., Surat
5.    Chemicals          1               Jayant Oils and Derivatives
                                         Ltd., Bharuch



      The mode of land acquisition by developers under various
stages, as informed by the Government of Gujarat was as follows:-


(i)     Notified – 7 (including             4953 hectares
        Surat Apparel Park which
        became operation in
        June, 2005)

        Government       land   -           2486 hectares
        allotted Land of Gujarat
        Industrial Development
        Corporation Ltd. (GIDC)             1812 hectares
        Land privately owned by
                                            440 hectares
        Developers
        Land      purchased    by           48 hectares
        Developers from farmers
        Land acquired under
        Land Acquisition Act                167 hectares
                                            4953 hectares
(i)     Formal Approval – 12                3390 hectares
        Government land allotted     -      1105 hectares
        Land of Gujarat Industrial
        Development Corporation
                                     -      404 hectares
        Ltd. (GIDC)
        Land privately owned by      -      1125 hectares
        Developers
        Land purchased by
        Developers from farmers      -      718 hectares
        Land purchased in Court
                                     -      38 hectares
        auction
                                           3390 hectares
(ii)      In-principle Approval –          6444 hectares
               12
          Government land to be        -   2723 hectares
                allotted
          Land of Gujarat Industrial
          Development Corporation      -   336 hectares
          Ltd (GIDC)
          Land privately owned by
          Developers                   -   640 hectares
          Land purchased/to be
                                       -   2745 hectares
          purchased by Developers
          from farmers
                                           6444 hectares
(iii)     Proposals    pending 11          1766 hectares
              before BOA

          Government land to be -          35 hectares
                allotted
          Land of Gujarat Industrial
          Development Corporation -        147 hectares
          Ltd (GIDC)
          Land purchased/to be
          purchased by Developers -        1584 hectares
          from farmers

                                           1766 hectares


        Regarding rehabilitation policy of the State Government upon
acquisition of the land, the policy of the State Government was to
ensure that the land-losers get a fair market price for their land in
accordance with law. The Government also tried to ensure that the
land-losers get employment, direct or indirect.
      The State Government also felt that there should be a uniform
policy for the entire country in respect of rehabilitation and would
welcome any initiative by the Central Government in this regard. They
would support any policy for rehabilitation of the people who
surrendered their land for industrial, infrastructure or other projects.
      The farmers of Jamnagar district informed the Sub-committee
that they had given their land at the rate of Rs 2,92,500 per bigha
(6.25 Bigha=1hectare) through direct negotiations and had signed
consent award. An advance of 10% of deal amount had been paid to
them. The rest would be paid later. They had not been assured of
employment, however, many of their boys were working with
Reliance and many people were getting contract work from the
company. People were willing to give land and there was no force or
compulsion on them to give land. According to them, they had been
earning very little from the land by way of agricultural produce. The
value of the crop produced was in the range of only Rs. 2000-2500
per annum. About 96% of the village land was being given for the
SEZ, however, the villages had not been affected and residential land
had not been acquired. Some farmers were of the view that they did
not need any employment as being Gujarati they preferred to do
business. Some farmers demanded that they should be given
employment as they had lost their livelyhood. Farmers also
complained that there was no rehabilitation policy of the State
Government.
      The President, Jamnagar District Congress Committee later in
his representation stated that GIDC had acquired land of farmers in
past. Land was purchased at Rs. 33000/- per bigha, which was
further sold to plot holders at Rs. 75/- Sq feet, which came to Rs.
9,00,000/- per bigha Rs. 75/- was the basic rate, but allotment was
done illegally, with Rs. 250/- per Sq. feet through mediaters. He
demanded a thorough investigation into the entire procedure of
allotment. He further submitted that the land, which was acquired,
had not been developed for the last five years, and just to promote
corruption, by way of improper practices, beurocrats of Gujarat
Industrial Development now planned for GIDC Phase 4, which would
the ruin farmers and villagers of Dared, Kansumra, Chela, Masitia,
Naghedi, Lakhabaval and other villages.
     According to him the people who gave land to Reliance
Industries limited, got Rs. four to Rs. five lakh per bigha, in
comparison to GIDC offer of Rs. 25 to Rs. 30 thousand per bigha,
which was injustice. The cases of farmers of GIDC phase 1, 2 and 3
for less compensation, were pending in local courts. The Sub-
committee felt that proper arrangements to inform the affected
farmers were not made. Moreover, many farmers complained that
they were not invited in the meeting though they were also the
sufferers. Besides, they complained of administration’s favour
towards a particular company, setting up the SEZ.


                         Mumbai (Maharashtra)


     They submitted that the land is a part of the Green Zone, under
the MRTP Act of 1966 and Land Use Plan of the Government of
Maharashtra, 1999. The area is fertile and rich in rice and mango
crops of world famed variety. Besides displacing the farmers, the
proposed SEZs would create environmental problem in the area. It is
well known that this region has been called the Paddy Bowl of
Konkan. In addition, it is a scenic area, with hundreds of farms and
trees and bio-diversity, which is rich and unmatched. It is also the
home of the famous Alphonso mango and other varieties, which is
exported to Mumbai and abroad.
      The farmers have owned and tended these fields for several
generations. The land in this area was very fertile and farming was
the main occupation of the residents. If their lands were taken away,
about 65000 people would lose their livelihood, and would starve.
      The Sub-committee noted that the farmers were against the
Special Economic Zones, and the feeling was that the Government
machinery was hand-in-glove with the SEZ promoters and their land
was being acquired forcibly. They overwhelmingly opposed SEZs and
the land acquisition.
      The Sub-committee was informed that the largest SEZ in the
country, the Maha Mumbai SEZ on 11,696 hectares, would displace
around one lakh people from 45 villages in Pen, Khalapur and Uran
tehsils.
      Some people alleged that they came to know about the visit of
the Sub-committee through newspaper reports, as the local
administration did not share information will the people. According to
them, some farmers from the affected villages had been hand-picked
to tell the Sub-committee all the good stories about the SEZ.
      The Sub-committee visited Khalapur in Raigad District, where
large number of project affected farmers were present. They informed
the Sub-committee that for SEZs namely Ranjankhar Industrial Zone,
Shahapur Industrial Zone, Uran/Panvel/ Pen SEZ and Khalapur
Industrial Zone, were planned for Raigad District, covering 84 villages
comprises more than 13,000 hectare of land. These SEZs would
displace several lakh of villagers taking away their agricultural land
for small amount of compensation. However they were neither willing
to part away with their land nor accept the compensation. The Maha
Mumbai SEZ being promoted by Reliance Industries Ltd., would be
spread over 33,000 acre displacing 45 villages. It would have its own
sewage and transport systems out of the jurisdiction of civic
authorities. The land acquired in Panvel and Uran is closed to the
Mumbai-Pune Expressway. It will be very closed to New International
Airport at Navi Mumbai and Jhawarlal Nehru Port Trust.
     In written submissions, the farmers from Khopta town
demanded initiation of enquiry in respect of land acquisition in the
town, and stopping of compulsory acquisition of their land. They
submitted that the lands were being usurped by the Government. The
land acquisition proceedings have been initiated in Pen, Panvel,
Urban, Alibag, talukas of Raigadh District. More than thirty-five
thousand acres of paddy growing land had been acquired. From May
2006 onwards, notification under section 4 has been issued to the
farmers and land owners, and there was widespread anger and
opposition. However, the Government of Maharashtra was adamant
and was proceeding with the process of issuing the notification under
section 6. They feared that soon the police machinery will be used to
forcefully oust approximately 5 lakh people.
     It was brought to the notice of the Sub-committee that Section
63-(I) (A) of the Bombay Tenancy & Agricultural Land Act, 1948
stipulated the right of land owners to sell land, without permission of
the collector, to any person, who is or is not an agriculturist, and who
intends to convert the same for bonafide industrial use. However,
when the requirement of land is more then 10 hectares, prior
approval of the Development Commissioner has been made
mandatory, who, while granting such permission, shall consider
justification or reasonableness of the requirement of land proposed to
be purchased with reference to the nature of industrial use of such
land, with the condition that the land shall be put to industrial use
within a period of five years, from the date of purchase, failing which
the person from whom the land is purchased shall have the right to
repurchase the same at the price for which it was originally sold. The
purchaser of the land cannot sell the land to third parties and crate
any interest in favour of third parties, who are merely interested in
Real Estate Development, rather than developing the land for
bonafide industrial use. They had learnt that the land proposed to be
acquired would be sold and transferred in favour of third parties,
which would be against the law. The developer of the proposed SEZ
has been specifically favoured to develop the land within a period of
15 years, from the date of purchase, in contravention of the enabling
provision which supulates that the land must be put in use within five
years from the date of purchase.
      Under the circumstances, the Development Commissioner,
while granting permission, should ascertain from the land owners as
to whether they are willing to sell land for bonafide industrial use
under 63-1A-(1). The enabling provision does not give absolute
power to the Development Commissioner to grant permission to
purchase land, without verifying the fact that land owner is actually
willing to sell land to the purchaser. Considering the various
Objections from the Government Agencies and the individual land
owners, it appears that the Development Commissioner, while giving
permission, has not given due thought deliberately, with a view to
oblige a powerful industrial group, and thereby the ordinary people
and land owners are facing great injustice.
During the meetings with farmers, many farmers wanted to place their
grievances against Government Officers favouring the developers
and the companies.
ANNEXURES
                               ANNEXURE – I


Note on Special Economic Zones by Shri A.B. Bardhan, General
                         Secretary, CPI
                  (Vide para 4.2 of the Report)

      The Special Economic Zones Act was passed by the

Parliament in 2005. The intended purpose was to provide a stable

policy framework for creating Special Economic Zones, which would

serve as engines for industrial growth and exports. However,

following the draft of the SEZ Rules and the commencement of the

process of granting approvals for the SEZs, a host of issues have

surfaced which necessitates a relook at the entire SEZ Policy

framework. Agricultural land is being acquired for the setting up of

SEZs in several cases resulting in displacement of farmers and other

sections of people, which have serious implications. Moreover,

several provisions made in the SEZ Rules have raised concerns of

misuse of the SEZ Act for creating a speculative real estate bubble

instead of building industrial infrastructure. The Reserve Bank of India

has warned against the possibilities of uneven development between

different regions owing to the SEZ Policy. There are also

apprehensions regarding substantial revenue losses on account of
the tax concessions provided under the SEZ Act. In view of this, a

review of the current SEZ Act and Rules is urgently required. The

relevant issues along with some suggested corrective steps are

elaborated below, which the Government should consider.

Address the Land Question
    A major difference between the Indian SEZ Policy and that of

China, which had pioneered the creation of SEZs, is on the question

of land. In the Chinese case, the State acquired the land and

developed the required infrastructure, where private enterprises were

invited to set up units. The land continued to be owned by the State.

In the Indian case, private entities are being involved in developing

the SEZ infrastructure. Land is being acquired by the State and

handed over the private developers. Some of the proposed SEZs

involve huge tracts of land, over 10000 hectares in some cases. If

private entities are allowed to own such huge tracts of land, it would

amount to the reestablishment of the zamindari system sixty years

after independence. This is totally unacceptable.

      Moreover, a thorough cost-benefit analysis of the SEZs,

especially the giant-sized ones, from the point of view of rehabilitation

and livelihood security of the displaced people, diversion of

agricultural land and its implications for good security, the nature of
urbanization, usage of power and water and environmental impact

assessment, is necessary before approving these projects. While

land is a State Governments before approving the SEZ proposals, the

Central Government also needs to take a view on the important

issues related to land acquisition, ownership and use. The following

measures are suggested:

  (a)   There should be no transfer of land ownership to the private
        developer. Private developers should only be allowed to take
        land on lease or build the infrastructure on a BOT basis.
        Moreover, the Board of Approval for SEZs at the Centre
        should only consider those proposals, which have been duly
        approved by the State Government;
  (b)   The Central Government should set an appropriate ceiling
        on the total land area under a SEZ, which can be developed
        by a private entity. In Section 5(2) of the SEZ Rules only
        minimum land area requirements for the different classes of
        SEZs have been mentioned. The maximum land area also
        needs to be specified here. Private entities should not be
        allowed possession or control of land beyond the stipulated
        ceiling;
  (c)   SEZs whose land area exceeds the specified ceiling should
        only be developed by the State (Public Enterprises of the
        Central or State Governments). The State can undertake
        Joint Ventures in developing such SEZs; but in such cases
        majority stake should lie with the public sector. Selection of
        the private developers in the case of Joint Ventures should
        be made in a transparent manner;
  (d)   SEZs should be built on non-agricultural land and acquisition
        of agricultural land for the purpose of SEZs should be
        discouraged. A provision limiting the acquisition of
        agricultural land should be built into the SEZ Act itself;
  (e)     In case of displacement of farmers and other sections of
          people, it is important to ensure the livelihood security of the
          displaced families in addition to providing adequate
          compensation. The role of the Government in land
          acquisition should be geared towards protecting the interests
          of the people, especially the displaced families. The
          Government should frame a National Rehabilitation Policy,
          preferably through a Central legislation, in order to address
          the issues concerning rehabilitation of displaced families.
          Suitable amendments should also be made to the Land
          Acquisition Act in order to address these issues;
  (f)     A model compensation and rehabilitation criteria should be
          framed by the Central Government and included in the SEZ
          Rules, following consultation with the State Governments. It
          should be ensured that the current owners of land are
          awarded compensation in line with market prices taking into
          account the expectation of future land development. The
          suggestion that displaced families be given minor equity
          stakes in the companies floated for the purpose of building
          SEZs can be considered as an option. A provision must also
          be made to compensate those with long-term tenancy rights
          on the acquired land and farm labourers; and
  (g)     The Government should urgently address the issue of
          unblocking and recycling of land and other assets of closed
          industrial units under liquidation. Data from the BIFR shows
          that recommendations for liquidation of 1254 private sector
          units, 31 Central PSUs and 41 State PSUs have already
          been sent to the High Courts. A fast track mechanism should
          be set up, by changing existing statutes if necessary, for
          unblocking the land of these closed units so that they can be
          made available for building SEZs or other industries.
Apply Appropriate Cap on Different Classes of SEZs
        The initial cap of 150 on the total number of SEZs was later

lifted by the Central Government. Since different classes of SEZs

have been envisaged in the SEZ Rules, a cap on the total number of
SEZs irrespective of its class and size makes little sense. However, if

several large SEZs developed by private entities are allowed to come

up in a few States, while many States do not receive any proposal

from private developers, this will only aggravate regional imbalances.

The RBI has also expressed concern on this issue in its latest Annual

Report. It needs to be noted that the total number of SEZs in China

stands at six only. Moreover, the proliferation of proposals for setting

up IT SEZs is clearly an attempt to take advantage to tax breaks.

There is an apprehension of existing units shifting over to SEZs,

which will result in loss of revenue that presently accrues to the

Government.

      Therefore, there should be separate caps for the total number

of multi-product and sector specific SEZs. This also provides a further

case for fixing an appropriate ceiling on the land area of SEZs

developed by private entities. The Central Government should

consider setting up of SEZs through public investment in those States

where private investment is not forthcoming. This is important form

the point of view of regional balance. A cap on the number of IT SEZs

should also be set keeping in mind the revenue considerations.
Revise the Criteria for Processing/Non-Processing Area
     The purpose of setting up SEZs is to promote foreign and

domestic investments and exports of goods and services. However,

certain provisions in the SEZ Rules prepared by the Ministry of

Commerce and Industry have opened up the possibility of misuse of

the myriad exemptions provided by the SEZ Act, which could thereby

fuel a real estate bubble. According to Section 6 of the SEZ Act: “The

areas falling within the Special Economic Zones may be demarcated

by the Central Government or any authority specified by it as- (a) the

processing area for setting up Units for activities, being the

manufacture of goods, or rendering services; or (b) the area

exclusively other than those specified under clause (a) or clause (b).

“The Central Government had therefore reserved the right to

determine how much of the land area under a SEZ should be allowed

as non-processing area.

     According to Section 5(2) of the SEZ Rules, while at least 50%

of the land area needs to be earmarked for developing processing

area for sector specific SEZs, the minimum processing area

requirement for multi-product SEZs is only 25%. It is noteworthy that

while the minimum land area requirement for sector specific SEZs is

100 hectares, for multi-product SEZs it is 1000 hectares. Therefore,
while a developer of a sector specific SEZ of 1000 hectares is

required to develop at least 500 hectares of processing area, the

developer of a 1000 hectares multi-product SEZ is required to build

only 250 hectares of processing area. This is a clear anomaly.

      The processing area of SEZs should not be less than 50%.

Further, 25% of the non-processing area should be dedicated for

infrastructure development. Building of residential and commercial

complexes should be permitted over 25% of the total land area. The

SEZ Rules should be suitably amended in this regard.

Regulate Land Use within SEZ Area
    There are certain provisions contained in the SEZ Rules, which

have given rise to apprehensions regarding misuse of the SEZ Policy.

For instance, Section 5(4) of the SEZ Rules state that “The Developer

or Co-Developer shall have at least twenty-six percent of the equity in

the entity proposing to create business, residential or recreational

facilities in a Special Economic Zone in case such development is

proposed to be carried out through a separate entity or a special

purpose vehicle being a company formed and registered under the

Companies Act, 1956.” However, no guidelines have been provided

for the creation of such facilities, either in terms of land use or other

essential regulatory parameters of such real estate development. The
RBI has recently raised the interest cost of credit for real estate

development in the SEZs. In keeping with such an approach, there is

a need to regulate real estate development within the SEZs.

     The SEZ rules have to clearly lay down norms for the

development of infrastructural facilities by private developers within

the SEZs, in terms of what is permissible and what is not. The role of

the SEZ Authority and the Development Commissioner in this regard

needs to be categorically defined. Most importantly, the SEZ Rules

should contain a Land Use Plan for the giant SEZs. The issue of

housing facilities for the workers in the giant SEZs have to be

concretely addressed. Wherever residential complexes would be

permitted within the SEZs, they should be built not only for the

management and the white-collared employees but also for the

workers. A situation where lakhs of workers of the SEZ units would

be forced to stay outside the SEZ area leading to a proliferation of

shantytowns in neighbouring areas should not be allowed to arise.

Review Tax Concessions
     The revenue implications of the tax holidays being given under

the SEZ Policy have to be seriously considered. According to media

reports, internal estimates of the Finance Ministry suggest a revenue

loss of Rs. 1,75,487 crore against an estimated investment of Rs.
3,60,000 crore. While these projected estimates are based upon

certain assumptions, the issue cannot be brushed aside by saying

that these revenue losses are “notional”, as the Minister for

Commerce and Industry has done in the Parliament. In a context

where subsidies on food, fuel and fertilizer are being whittled down

and the social welfare schemes promised in the NCMP being either

underfunded or abandoned by the UPA Government citing resource

constraints, the justifiability of the tax largesse to big business under

the SEZ Policy needs to be thoroughly debated. Through the Note on

Resource Mobilization submitted to the UPA Government-Left

Coordination Committee in January this year, the Left parties had

suggested that the Government should revisit the tax concessions

under the SEZ Policy. Unfortunately, this has not been considered so

far.

         Given the concerns expressed from different quarters with

regard to revenue loss, tax concessions in some areas in Chapter VI

of the SEZ Act, under the “Special Fiscal Provisions for Special

Economic Zones” need to be reconsidered by the Government:


   (a)     While customs and excise duty exemptions for units within
           the SEZs can be understood as measures to ensure price
           competitiveness of exports, the case for providing 100%
      exemption from income tax on profits for the first 5 years and
      50% for the next 5 years by modifying the Income Tax Act,
      as has been provided in the Second Schedule of the SEZ
      Act, does not seem to be persuasive. Such fiscal incentives
      for new units, if it is to be given at all, should not be for more
      than 2 years, as was done in the case of Chinese SEZs.
      Income tax concessions for a period longer than 2 years
      should only be provided for the reinvested portion of profits,
      and that too only for a maximum of five years;
(b)   Chapter VI of the SEZ Act provides for similar exemptions,
      drawhacks and concessions for the entrepreneurs setting up
      units within the SEZ and the developers of the SEZ. Thus
      private developers will be able to derive tax benefits without
      contributing to exports. The positive net foreign exchange
      earning requirement, specified in Chapter VI of the SEZ
      rules, is only valid for units within the SEZs and not the
      developers. Therefore the developers and the entrepreneurs
      should not be treated on par as far as tax exemptions and
      concessions are concerned. Fiscal incentives for developers,
      if they have to be provided at all, should be separately
      specified and should be considerably lesser than the ones
      provided for the entrepreneurs for income tax as well as
      customs and excise duties;

(c)   Exemption from Service Tax has been granted to the
      developers in a Special Economic Zone in the SEZ Act.
      Moreover, units in the International Financial Services
      Centre and Offshore Banking Units have been given income
      tax exemptions equivalent to those of other units in the
      SEZs. Securities transactions entered into by non-residents
      through the International Financial Services Centre under a
      SEZ have also been exempted from the Securities
      Transaction Tax. These policies will simply encourage
      investors, including in financial services, to move from other
      locations in India to SEZ areas, with no benefit to the
      economy and substantial revenue loss. These exemptions,
      which are unrelated to exports, should not be granted;

(d)   Section 50 of the SEZ Act state: “The State Government
      may, for the purposes of giving effect to the provisions of this
          Act, notify policies for Developers and Units and take
          suitable steps for enactment of any law:- (a) granting
          exemption from the State taxes, levies and duties to the
          Developer or the entrepreneur”. Thus the SEZ Act
          empowers the State Governments to tka decisions related to
          exemptions of State taxes. However, Section 5(5) of the SEZ
          rules state that “Before recommending any proposal for
          setting up of a are made available in the State to the
          proposed Special Economic Zone Units and Developer,
          namely:- (a) exemption from the State and local taxes, levies
          and duties, including stamp duty, and taxes levied by local
          bodies on goods requirement for authorized operations by a
          Unit or Developer, and the goods sold by a Unit in the
          Domestic Tariff Area except the goods procured from
          domestic tariff area and sold as it is; (b) exemption from
          electricity duty or taxes on sale, of self generated or
          purchased electric power for use in the processing area of a
          Special Economic Zone”. In effect, the SEZ Rules have
          imposed the granting of tax and duty concessions upon the
          State Governments, which is not in keeping with the spirit of
          the Act. Either this rule has to be amended or the Central
          Government      should     fully compensate      the    State
          Governments on the loss of revenue on account of these tax
          and duty exemptions; and

  (e)     The granting of duty concessions to goods sold by a Unit to
          the Domestic Tariff Area should not be permitted, since such
          concessions are intended only for exports. This will imply
          major diversion of productive activities away from the
          Domestic Tariff Area to the SEZ, with substantial revenue
          loss for both the Central and State Governments.

Protect Worker’s Rights

        Section 5 (5) (e), (f) and (g) of the SEZ Rules asks the State

Governments to delegate powers under the Industrial Disputes Act to

the Development Commissioner and to declare SEZs as Public Utility

Services. These are incompatible with the SEZ Act, which does not
contain any such provision. Such deviations of the SEZ Rules from

the parent Act have to be correct. The ILO recommendation

regarding    separation    of   powers    between     the      Development

Commissioner of an Export Processing Zone and the Grievance

Redressal Officer should be seriously considered in this regard.


Prevent Enclaves of Speculative Finance
      The provision for setting up Offshore Banking Units and

International Financial Services Centres within the SEZs needs to be

qualified. White the need for efficient financial intermediation and

credit delivery for the purpose of industrial and export promotion

within the SEZs is understandable, utmost care has to be taken to

ensure that these financial entities do not develop as tax havens for

speculative finance capital. There is no need for providing tax breaks

for the financial entities within the SEZs. All financial activities should

be within the regulatory ambit of the RBI and subject to the same tax

provisions regardless of whether their offices are physically located

within the SEZ or the Domestic Tariff Area. Moreover, the RBI needs

to ensure that the financial activities permitted within the SEZs are

strictly related to the economic activities within the zone.
Amend SEZ Act and Rules
    The suggestions made above involve amendments to the SEZ

Act and the SEZ Rules. The Left Parties believe that unless changes

are brought about, the SEZ Policy would degenerate into a free for

all, which would have serious consequences. The UPA Government

should therefore initiate a Review of the SEZ Act at the earliest with a

view of making appropriate amendment. Amendments to the SEZ

Rules can be made consequent to the Amendment of the Act. The

Board of Approval should stop granting fresh approvals until the

completion of the Review process. The changes suggested in the

Land Acquisition Act and the formulation of a National Rehabilitation

Policy, preferably through the passage of a Central legislation, should

also be considered on an urgent basis.
                               ANNEXURE-II

Note on Special Economic Zones by Shri Prakash Karat, General
                       Secretary, CPI (M)
                  (Vide para 4.21 of the Report)

      Introduction

      The purpose of the SEZ Act 2005 was to provide a stable policy

framework for creating Special Economic Zones, which would serve

as engines for industrial growth and exports. In an economy marked

by serve deficiencies in industrial infrastructure, there exists a case

for creating industrial clusters with sound infrastructure facilities and

simplified procedures for setting up and running industrial units which

would enable producers to take advantage of the economics of scale,

reduce production and transaction costs and successfully compete in

international markets. While plunging into the zero-sum game of

export led growth is clearly undesirable, particularly in the present

context when global trade imbalances are increasingly becoming

precarious and unsustainable, a policy to promote investment and

exports geared towards increasing the share of the manufacturing

sector in output and employment in India is a reasonable step.

      However, the initial objective underlying the SEZ Act has been

severely compromised, if not entirely defeated by the subsequent
actions of the Central Government. Several provisions made in the

SEZ Rules notified in February 2006, led to apprehensions regarding

possible misuse of the SEZ Act, especiaUy in terms of relocating

existing units in SEZs in order to derive tax benefits and undertaking

real estate ventures instead of building industrial infrastructure. Those

apprehensions got strengthened by the way en masse approvals for

SEZs were granted by the Board of Approval at the Centre. The

objective of creating additional economic acttvity was undermined by

the alacrity with which existing investment proposals were converted

into SEZs. The private developers gained an upper hand and

extracted all kinds of concessions by pitting State governments

against one another. Concerns were raised in several States

regarding fertile agricultural land being acquired for the sett/ng up of

SEZs resulting in displacement of farmers and other sections of

people. The Finance Ministry also pointed out that revenue losses on

account of the tax concessions provided under the SEZ Act would be

substantial. The Reserve Bank of India in its Annual Report further

warned against the possibilities of uneven development between

different regions owing to the proliferation of SEZs in close

proximity/contiguous to already well-developed areas. In this
backdrop it has become necessary to bring about appropriate

amendments to the SEZ Act and Rules.

      Proliferation of SEZ Proposals

      Approval for 237 SEZs has already been sanctioned by the

Board of Approval for SEZs along with "in-principle" approval for

another 164 SEZs. Thus overall 401 SEZ proposals have already

been granted by the Central Government, a mind-boggling number,

given the fact that the total number of SEZs across the world is

around 3000 and China has only 6 of them. Moreover, the fact that

these 401 proposals have been cleared within less than a year of the

promulgation of the SEZ Rules has created a situation entirely

different from what was envisaged during the passage of the Act.

Initially there was a cap of 150 on the total number of SEZs to be

permitted. Later the Government removed the cap and did away with

any restriction on the number of SEZs altogether. Official requests

made by several State Governments including Haryana, Orissa, West

Bengal, Kerala, Tamil Nadu, Punjab, Madhya Pradesh etc. has been

cited as the reason for lifting the cap. This logic is specious since the

requests were made in a context where en masse approvals had

already been granted to set up SEZs in a handful of States,
especially Andhra Pradesh, Maharashtra, Gujarat and Karnataka,

which had forwarded large numbers of SEZ proposals in the initial

phase. Several State Governments made the request to lift the cap

simply because they did not want a situation to arise where the first

150 SEZ proposals would be cornered by a few States with the

others left out of the race. The Board of Approval should have

realized that granting en masse approvals for the setting up of SEZs

in a few States would eventually lead to this situation. It seems all, if

not an overwhelming majority of the proposals forwarded by any

State Government, received approval from the Centre. This has been

a basic flaw in the approach of the Government.

        Formal SEZ Approvals

State                    Number of Formal Total Land          Area    (in
                         Approvals        Hectares)

Andhra Pradesh           45                   9460.797
Chandigarh               2                    87.49
Delhi                    1                    6
Goa                      4                    290.98
Gujarat                  19                   10682.25
Haryana                  19                   818.408
Jharkhand                1                    36
Karnataka                29                   1673.339
Kerala                   10                   569.651
Madhya Pradesh           4                    71.25
Maharashtra              47                   8130.8
Orissa                   5                    745.61
Pondicherry          1                 346
Punjab               4                 252
Rajasthan            3                 89.23
Tamilnadu            25                1300.571
Uttaranchal          3                 468.2
Uttar Pradesh        8                 133.83
Total                237               35332.67


          In-Principle SEZ Approvals

State                Number of     In- Total Land   Area   (in
                     Principle         Hectares)
                     Approvals
Andhra Pradesh       9                 3768.39
Chattisgarh          2                 2029
Dadar & Nagar Haveli 1                 80
Delhi                1                 11
Gujarat              10                5439
Haryana              27                43002.48
Himachal Pradesh     3                 5030
Karnataka            17                4720.962
Kerala               2                 414
Madhya Pradesh       6                 9309.25
Maharashtra          26                34052.09
Orissa               8                 4262.3
Punjab               7                 1571
Rajasthan            8                 12251.32
Tamilnadu            12                5078.02
Uttaranchal          1                 14
Uttar Pradesh        10                5954.25
West Bengal          14                11827.14
Total                164               148814.2
SEZ proposals Formally Approved with Land Area over 400

Hectares

State                     Number of SEZ with Land Area over
                          400 Hectares

Andhra Pradesh            4
Chandigarh                0
Delhi                     0
Goa                       0
Gujarat                   6
Haryana                   0
Jharkhand                 0
Karnataka                 0
Kerala                    0
Madhya Pradesh            0
Maharashtra               4
Orissa                    1
Pondicherry               0
Punjab                    0
Rajasthan                 0
Tamilnadu                 0
Uttaranchal               1
Uttar Pradesh             0
West Bengal               0
Total                     16


SEZ proposals Approved In-Principle with Land Area over 400

Hectares

State                     Number of SEZ with Land Area over
                          400 Hectares

Andhra Pradesh            3
Chattisgarh                   1
Dadar & Nagar Haveli          0
Delhi                         0
Gujarat                       2
Haryana                       11
Himachal Pradesh              3
Karnataka                     5
Kerala                        1
Madhya Pradesh                5
Maharashtra                   14
Orissa                        3
Punjab                        1
Rajasthan                     5
Tamilnadu                     3
Uttaranchal                   0
Uttar Pradesh                 2
West Bengal                   4
Total                         63


     It is the proliferation of SEZ proposals which has already

discredited the SEZ policy and given rise to genuine concerns related

to unplanned and imbalanced regional development, large scale

acquisition of fertile farmlancts, massive displacement, enormous

loss of tax revenue, needless government subsidies to corporates

and gross misuse of SEZs for real estate purposes. Out of the 237

formal approvals granted till date involving over 35000 hectares of

land, no fresh land acquisition has taken place since land already

available with the State Governments, SIDCs or private companies

has been utilised for the purpose. This clearly shows that most of
these projects were about to come up any way and the SEZ Act has

been used to avail tax and other incentives which would not have

otherwise accrued to these projects. The apprehension of industrial

projects in the pipeline being converted into SEZ projects overnight

has actually come true. The approval for most of these SEZs needs

to be reconsidered.

     The State wise distribution of the 237 SEZ proposals approved

till date shows that only four States taken together (Maharashtra,

Andhra Pradesh, Karnataka and Tamil Nadu) account for 146 SEZs,

i.e. over 60% of the total approvals. On the other hand there are

several States like Bihar or the North Eastern States, which have not

received any SEZ proposal. This dearly points towards the lopsided

pattern of development, that the first come first served approach

adopted by the Government, would bring about. If this approach is

continued further based upon blind faith reposed on the "market

forces", regional imbalance would be greatly aggravated in the

country. The Government would end up pushing the States into an

unhealthy competition of attracting more and more SEZ proposals by

granting ever greater concessions to private developers.
     The total land area proposed to be acquired for the 164 “in-

principle” approvals given till date is nearly 150000 hectares, which

includes 63 SEZs of over 400 hectares (i.e. 1000 acres). Thus, a

huge amount of land would have to be acquired in order to

materialize   these   projects.   Serious   problems   regarding   land

acquisition and displacement are bound to arise in these cases, in

addition to the problems already visible in the case of approved

SEZs. Therefore, the current approach of granting en masse

approvals for SEZs has to be given up. Since different classes of

SEZs have been envisaged in the SEZ Rules, a cap on the total

number of SEZs irrespective of its class and size makes little sense.

There should be separate caps for the total number of multi-product

and sector specific SEZs. Transparaent and stringent criteria should

be set for granting approvals for SEZs.

     Moreover, imbalances should not be allowed to develop

between States in terms of the number of SEZs permitted. SEZs

should be seen as a tool for regionally balanced growth by

encouraging more SEZs in backward States rather than allowing the

more developed States with better infrastructure from cornering all

the SEZ proposals. The Central Government should consider setting
up of SEZs through public investment in those States where private

investment is either not forthcoming or demands too many subsidies

and concessions. This is important from the point of view of regional

balance.

     The Question of Planning and Land-use

     An important question, which needs to be addressed vis-a-vis

SEZs, relates to Planning and Land-use policy. The location of

industries, supportive infrastructure and the consequent urbanisation

has to be carried out within the larger perspective of equitable,

sustainable and balanced regional development. The current market-

led model of SEZs, on the other hand, has subverted such Planning

and has become an instrument of reckless real estate development

and land speculation. Realty companies have already acquired large

tracts of land and are issuing mega IPOs based on the real estate

boom that the SEZs would generate. The short-term gains from a

change of land use are enormous for the private developers. There

can be no justification for acquisition of land by the estate

Governments in order to build SEZs, unless it is in keeping with a

Land-use policy and the planning laws.
      Land acquisition by the State Governments should be in

consonance with their optimal land use plans based on principles of

equity,   sustainability,   food   security,   and   balanced   economic

development. The view that land acquisition should be left entirely to

the market forces, which implies that corporates would be allowed to

purchase land directly from the farmers, is also flawed. Besides

ignoring the fact that land ownership patterns vary greatly across the

country and many more persons are dependant on land other than

land owners whose interests cannot be protected without the

intervention of the State in land acuisition for large projects, the

votaries of market based urbanization also fail to see how the current

pattern of unbridled real estate development in the name of SEZs is

subverting equitable, planned and balanced regional development. It

should be realized that the issue at stake not only involves acquisition

of land but also the change of land use by the State: appreciation of

land value occurs through changes in land-use. Currently, the real

estate developers are buying large tracts of agricultural land, creating

private land banks and approaching the State Governments for

changes in land use. The SEZ policy has made this change in land

use much easier by providing a legal cover for doing so. Such
unbridled appropriation of land by private entities under the cover of

developing SEZs cannot be allowed to continue.

     What is required in order to prevent such land grab is to uphold

the principle of Regional Planning. Regional or spatial planning looks

at optimal land use taking a region as a whole and not just towns or

cities. Within this, it plans out settlements, industrial spaces,

transportation hubs and networks, agriculture etc., taking into account

regional specificities and equitable development of the region. The

key issue is land use and how its use can meet the overall goal of

development. Any land acquisition by the State must also be for

'public good,: it cannot be that the State uses its powers to acquire

land from farmers and then auctions it for speculative real estate

purposes. The land use after acquisition must therefore be equitable

and plan for all sections of society. The Master Plans for cities, the

Delhi Master Plan for instance, has these provisions even though the

provisions for the poor have not been implemented. It has to be

ensured that SEZ proposals are in keeping with such State level

Plans and Land-use policy. State Governments should also be

encouraged to frame/update their Land-use policy.

     Land Acquisition, Compensation and Rehabilitation
      Acquisition of agricultural land and displacement of farmers and

others dependent upon land have become an issue of immediate

concern. The Union Commerce Minister has recently sent a letter to

State Chief Ministers advising them to restrict acquisition of multicrop

agricultural land to 10% of the total area acquired for a SEZ. The rest

has been left to the States, since land as well as compensation and

rehabilitation policy falls within the domain of the State Governments.

However, serious questions have already been raised from various

quarters vis-i-vis the Land Acquisition Act itself. This legislation,

which was enacted during the colonial period, is a misfit in the current

Indian setting and needs to be amended in order to make it congruent

with an independent and democratic State. This has to be done by

properly defining 'public purpose" and making the "eminent domain"

accountable and open to public scrutiny. Besides, a National

Rehabilitation Act needs to be adopted by the Central Government so

that displaced people are legally entitled to a share of the

development that causes displacement. It has to be ensured that the

displaced persons are in no way rendered worse off in the post-

displacement situation and their livelihood security guaranteed.

Compensation and Rehabilitation must be integrated into project
planning and implemented in a time-bound manner in order to avoid

the adverse socio-economic impact of land acquisition and land use

changes.

      There is a major difference between the Indian SEZ Policy and

that of



      Shri Karat drew attention of the Committee that 148 out of" the

237       SEZs   formally   approved   so   far   are   IT   SEZs.   The

disproportionately large number of proposals for IT SEZs clearly

shows an attempt by new IT units to avail the benefit of the ten year

tax break under the SEZ Act which otherwise cannot be availed by

the IT companies beyond 2009. In fact demands for further extending

the tax holiday for the IT companies for ten more years have already

been voiced by a section of the IT industry in order to ensure a level

playing field. Thus a situation has been created for the perpetuation

of tax breaks for one of the most profitable sectors of the economy,

which would also imply giving a go by to the Kelkar Committee

recommendation of rationalizing tax expenditures In this backdrop,

the idea of having small SEZs in sectors like IT should be dropped.

Tax concessions for the IT sector have outlived their economic
rationale. Projects below a minimum land area should not be granted

approval as a SEZ. A minimum land requirement of 100 hectares for

sector-specific SEZs and 400 hectares for multi-product SEZ should

be considered.

     According to Shri Karat Section 6 of the SEZ Act says: "The

areas falling within the Special Economic Zones may be demarcated

by the Central Government or any authority specified by it as - (a) the

processing area for setting up Units for activities, being the

manufacture of goods, or rendering services; or (b) the area

exclusively for trading or warehousing purposes; or (c) the non-

processing areas for activities other than those specified under

clause (a) or clause (b)." The Central Government had therefore

reserved the right to determine how much of the land area under a

SEZ should be allowed as non-processing area. Once the SEZ Rules

were framed by the Ministry of Commerce, it was found that while at

least 50% of the land area was needed to be earmarked as

processing area for sector specific SEZs, the minimum processing

area requirement for multi-product SEZs was only 25%. When this

provision came under heaW criticism as opening floodgates for real

estate ventures in the name of multiproduct SEZs, the minimum
processing area for multi-product SEZs was raised to 35%. The

anomaly, however, remains. While a developer of a sector specific

SEZ of 1000 hectares is required to develop at least 500 hectares of

processing area, the developer of a 1000 hectares multi-product SEZ

is required to build only 350 hectares of processing area. The

justification   for   having   separate   minimum    processing     area

requirements for multi product and sector specific SEZs is difficult to

understand. If both types of SEZs are primarily meant for industrial

development, they should not have separate minimum processing

area    requirements.     Unless   this   anomaly   is   removed,    the

apprehension regarding misuse of the SEZ Act for real estate

ventures would continue to remain. The processing area of SEZs

should not be less than 50%. Further, 25% of the non-processing

area should be dedicated [or infrastructure development like roads

and for trading or warehousing purposes. Building of residential and

commercial complexes should be permitted only within 25% of the

total land area.

       Commenting on tax concessions, Shri Karat submitted that an

estimate made by the Finance Ministry based upon the first 70 SEZ

proposals which were cleared by the Board of Approval earlier this
year, showed a loss of total tax revenue worth Rs 102621 crore from

2006-07 to 2009-1.0 on account of the tax incentives provided under

the SEZ Act. Out of this, loss of direct tax revenue was estimated to

be Rs. 53740 crore and loss of indirect tax revenue Rs. 48881 crore.

The revenue losses estimated by the Finance Ministry are notional

losses based upon certain assumptions regarding the, level of

investment and exports from the SEZs. However, the figures cannot

be ignored simply because they are notional, especially since the

Board of Approval has approved 331 more SEZ proposals since

these estimates were made. The Approach Paper to the XI Plan has

also observed that there are concerns that SEZs primarily focus on

real estate, that there is a lack of level playing field between

manufacturing units within SEZs and those in domestic tariff area,

and that there can be large loss of revenue on account of tax

concessions for exports of goods and services that are already been

exported without such concessions. These concerns would need to

be addressed and where necessary adequate safeguards put in

place". It has often been argued that the tax incentives provided in

the SEZ Act and the consequent revenue loss will be more than

compensated by, the gains in terms of additional exports and
employment generation. Equivalent tax concessions for the SEZ

developers have also been justified in terms of the extant income tax

concessions provided for investment in infrastructure. However, the

RBI has recently raised the interest cost of credit for SEZ developers,

which shows that the Central Bank is unwilling to view SEZs as

infrastructure development. Besides, the Finance Ministry has

already initiated an exercise of rationalizing tax concessions in

keeping with the recommendations of the Kelkar Committee. The tax

incentives provided in the SEZ Act would sabotage the entire

exercise of phasing out myriad corporate tax exemptions and export

incentives, in the name of providing a level playing field between the

units within and outside the SEZs. In order to avoid such a

predicament, which would be a big blow to resource mobilization, tax

concessions in some of the areas in Chapter VI of the SEZ Act, under

the "Special Fiscal Provisions for Special Economic Zones" need to

be reconsidered.

     There is a further issue with SEZs which relates to the

administrative structure and the character of local level institutors.

With regard to Administrative structure of SEZs, Shri Karat was of the

view that while this aspect has not been dealt with in the SEZ Act or
Rules, the Model State Policy on SEZ that the Centre is advocating

for the State Governments states that: "The State Government will

declare SEZ as Industrial Township and if necessary, relevant Act

would be amended so that SEZ Can function as a governing and

autonomous body as provided under Article 243(Q) of the

Constitution." In a context when private developers are building the

SEZs and would have a major say in the administrative affairs, the

democratic character of the SEZ authority becomes deeply suspect.

For instance, in Maharashtra, as per section 6.1 of the Draft

Maharashtra SEZ Act, 2003, the "township authority" will consist of

three nominees of the private developer and two nominees of the

State government - with the developer's nominee chairing the

authority. Therefore, private entities would be able to exercise

decisive administrative control over the local bodies of the SEZs.

Such an administrative structure for a large industrial township may

not be permissible within the framework of the Indian Constitution. All

these model policies, which are still prominently displayed in the SEZ

website of the Central Government needs to be summarily

abandoned. The SEZ Authorities should be strictly under the control

of the Government and no State Government should be allowed to
deviate from this position. Provisions for democratic representation

within the SEZ Authority should be made, especially since the

Authority will also be responsible for the provisions of civic amenities

like power and water supply within the SEZ Area.

      Several provisions within the SEZ' Act seek to concentrate

administrative    powers     in     the   hands    of   the   Development

Commissioner of a SEZ, with no provision to ensure democratic

accountability. The operation of criminal law is also set to be

restricted within the SEZs; for instance Section 22 of the SEZ Act

specifies that no investigation, Search or seizure within an SEZ can

be   undertaken    without    the     permission   of   the   Development

Commissioner, except in the case of an agency authorized by the

Central government to investigate "notified offences". The Model

State Policy for SEZs has gone further to state that "appropriate and

exclusive arrangements" will be made for "law and order and the

control of crime" within SEZs. Some of the State Governments have

framed their SEZ Policy on these lines. These provisions have given

rise to justifiable concerns regarding the creation of several

"countries" within the country in the name of SEZs, where the writ of

the Indian Constitution would not run and unaccountable entities like
the Development Commissioner or the private developers would

enjoy absolute administrative control Suitable amendments have to

be made in the SEZ Act to address these concerns, related to the

democratic character of the SEZ Authority, the powers and

accountability of the Development Commissioner and whether the

Central or State Governments would have the powers to exempt

SEZs from the laws of the land, especially those related to labour and

crime.
                                ANNEXURE-III

   Note on Special Economic Zones by Bhartiya Janata Party
                 (Vide para 4.31 of the Report)



INTRODUCTION

        The UPA government, which is now 30 months old, stands
exposed on many counts: betrayal of the promises to protect the
interests of the aam adami and kisans; weak and compromising
approach to dealing with the threats to India’s internal security;
criminalization of politics and governance at the central level;
scandals galore in ministry after ministry; including the country’s
defense establishment; and misuse of institutions for the purposes of
partisan and vindictive politics.
      One of the major scandals of the UPA government is the
manner in which it has permitted a mushroom of over 400 proposed
Special Economic Zones all over the country. By distorting a sound
SEZ policy formulated by the previous NDA government, it has
allowed many promoters to turn SEZs into the biggest land-grab
racket in the history of independent India.
      This is evident from the fact that, under the UPA government’s
framework of SEZs, the promoters are allowed to retain as much as
65%-75% of the acquired land for non-processing purposes-namely,
for purposes other than the industries and services for which the SEZ
is sought to be established. All the attractive incentives available to
the processing zone will also be available to the land under the much
larger non-processing zone. The current legal framework of SEZs
also creates a huge disadvantage to industries and business in the
Domestic Trading Area (DTA), with the distinct possibility of many of
them turning sick.
      Not surprisingly, many real estate companies, which have no
track record in manufacrturing or export businesses, have become
SEZ promoters. It is one of the worst-kept secrets of the UPA
government that granting permission to establish SEZs has become a
huge source of corruption for the ruling party. This is a repeat of what
happened in one of the biggest corruption scandals that rocked the
congress government in the early 1990s, when telecom licenses were
that many of the proposed SEZs will never come up, or become
successful.    Nevertheless, they will have dispossessed kisans,
khetmazdoors and other allied rural workers of their traditional
sources of livelihood.
      The Bharatiya Janta Party recognizes the need and usefulness
of SEZs. They are a necessary instrument to make India a strong
and globally competitive exporter in manufacturing and services. If
properly implemented, they will not only generate large-scale
employment but also raise the standard of Indian Industry and service
business.     They will enable India to attract FDI procure latest
technologies and learn best management practices from across the
world. Hence, we are proud of the fact that India’s first SEZ policy
was unveiled by the NDA government.
      The BJP President has established a committee under the
Chairmanship of Shri M. Venkaiau Naidu, to study and make suitable
recommendations. The Committee has had interaction with various
sections of opinion including representative of the agrarian sector,
various chambers of commerce and industry, tax specialists and the
state governments in which BJP is the ruling party or is a part of the
ruling alliance. The Committee has endeavored to (a) point out the
distortions in the SEZ scheme promulgated by the UPA Government
that need correction, and (b) present a proper perspective on before
the nation.
        Background
        In April, 2000, the NDA Government had incorporated in the
EXIM policy, a Special Economic Zones Scheme with a view to
providing an internationally competitive environment for exports. It
objectives included making available to units in SEZs goods and
services free of taxes and duties, integrated infrastructure for export
production, quick approval mechanisms and a package of incentives
to attract foreign and domestic investments for promoting exports.
The present UPA Government has brought a central law for SEZs
with a view to placing the policy on a firmer footing. Accordingly, the
Special Economic Zones Act 2005 was enacted in May 2005 and
subsequently Rules under it have been promulgated in February,
2006.
        That has set off a flurry of activity and even greater confusion
and controversy. The differing viewpoints of the Ministry of Finance
and the Reserve Bank of India on the one side and those of the
Ministry of Commerce and Industry on the other are not a hidden
secret. The difference between the Congress party and its Left allies
show no signs of being reconciled. The Congress-Left conflicts on the
labour matters are still to be played out.
     Inconsistent statements have come from Union Ministers on the
objectives of SEZs, their desirable sizes and numbers, the proportion
of the processing area, etc. The issues concerning land have been
highlighted by Congress leaders themselves in some states and
these have imported a new intensity to the debated on SEZs.
     The grant of approvals to SEZ projects across the country at
breakneck speed has given rise to suspicions of extraneous factors
playing a role and of business houses amassing large numbers of
projects simply to preempt the ground. As of now, the Board of
Approvals has given “formal approvals” to 237 SEZ projects and “in
principle approvals” to another 168. Thus as many as 400 SEZ
proposals are in the pipeline. However, it appears that apart from the
pre-existing 16 export processing zones which had been functioning
before the passing of the 2005 Act, only 25 of the formally approved
projects have been notified. The other projects are still in run-up
stages and it is difficult to say how many of them will be seriously
pursued.
     On the other hand, it is surprising to see that in many cases the
action for acquisition of land has been progressing rapidly even
though the project has not yet been approved. The eagerness of
developers to amass land, particularly in projects adjoining major
urban centers, has raised eye brows of people across the country
and have, in fact, made a Union Minister to term the promotion of
SEZs as a “land scam”. According to him, the SEZs serve as a ploy
to hand over huge tracts of agricultural land to corporate big wigs.
The tearing hurry with which SEZ projects have been approved,
obviously without adequate scrutiny and some even without
endorsement by the State Governments concerned or at variance
with their recommendations, lends credence to charges of corruption
in the process.
      It should have been expected that by provided the SEZ policy
on a statutory basis the Government would impart a sharper purpose
to it. It is unfortunate that what seems to have really happened is that
a scramble has been generated among developers to make quick
profits   by exploiting    cheaply acquired         land   for   real   estate
development and little attention has been paid to achieving the real
objective of generating industrial investments for the purpose of
export. The controversies and scams that seem to be snow balling
can only result in defeating the real objectives of the SEZs policy that
had been put in place by the NDA Government in the year 2000.
      Broadly speaking, the controversies raised by the SEZ policy of
the UPA Government relate to the following:-
      •     Number, size and location
      •     Real estate exploitation overwhelming the avowed

            purpose of generating investments for export oriented

            manufacturing and service businesses in the processing

            area.

      •     Loss    of    land   to   agriculture    and    inadequacy      of

            compensation and other deprivation suffered by farmers

            and allied rural workers.

      •     Neglect of village abodes within SEZs.
     •     Impact on central and state revenues.
     •     Dilution of the export objective.
     •     Impact on regional balance in development.
     •     Ambiguities in the trade interface between SEZs and the

           Domestic Trade Area (DTA) and the likelihood of tax

           evasion through “transfer pricing” and other malpractices.

     •     Administrative weaknesses.

     •     Ouster    of   state   government,   municipal   and     local

           authorities from the regulatory administration of SEZs

     Number, size and location:-
     As the SEZ scheme now stands and the manner in which it is
implemented there is a deluge of SEZ proposals. As of now, over 400
have been approved formally or in principle. The abnormality of this
can be gauged from the fact that, as of now, there are only 393 SEZs
all over the world. There is no cap on the number and it seems that
more projects will continue to be added. More than half the number
approved are very small in size related to IT, BPO and pharma
industries. Many EOUs have also sought conversion as SEZ.
     Experts believe that although SEZS appear to represent the
correct approach to provided good quality infrastructure in pockets,
providing a liberal and supportive business environment and thus
giving the much needed push for manufacture and services for
export, the Governments current approach is not the appropriate’ way
to achieve the intended result.
     The smaller SEZ projects are primarily aimed at winnig
continuance of the tax benefits that are available, under the current
dispensation, to software technology parks (STPs) and other EOUs
until 2009. The question arises as to why the government cannot
simply extend the term of those benefits so as to make them co-
terminus with the benefits in SEZs.
     Take the case of IT software and services (including BPO).
These constitute India’s leading export sector (with exports last year
amounting to US $ 23 billions and with a target of $ 60 billions in
2010). They have benefited from the STPI scheme and are still
comfortable with it. That scheme leaves decision make in the hands
of the entrepreneur and also encourages decentralization and
dispersal of industry. SEZ scheme will reduce their location options.
The stipulation of land and constructed area means that small and
medium scale enterprises cannot afford to set up their own SEZs. If
they do not move to an SEZ, they will lose much of the tax
advantages in the form of exorbitant rents to be paid to the
builder/developer. The SEZ scheme puts small and medium scale
enterprises at a comparative disadvantages.
      We strongly feel that the appropriate course is to extend for at
least 10 years beyond 2009 the term of the tax benefits under the
STPI and EOU scheme. That will obviate disruption of the on-going
arrangement and undue proliferation of SEZs.
     Approving a very large number of SEZs, instead of fewer well-
chosen ones, is not a desirable practice. We share the apprehension
expressed by various experts that only a few of the SEZs approved
are likely to be implemented. Many developers are just amassing
approvals (as they do for mining concessions and as they used to do
for the letters of intent in the days of license raj) and will wait and
watch until they see unmistakable commercial profit in taking up
implementation.
      We also believe that unless an SEZ has the critical mass it will
not have world-class infrastructure needed for the production of
exportable goods and services and will be remiss in its external
linkages of transport, sewage disposal, electricity transmission, etc.


      Real estate exploitation
      The broad pattern of incentives to units in the processing area
continues to be the same as it was under the April 2000 policy. This
is also similar to the incentives given to export oriented units (EOUs)
located outside the SEZs as also the IT and ITES (IT enabled
services) units. These units, for their imports from abroad or from the
domestic trade area are exempt from customs and excise duties, but
their exports to the domestic trade area attract the imposition of
customs duties. There is also exemption given from income tax and
some other central and local taxes. How much this will succeed in
attracting investments in units SEZs remains to be seen.
      However, the most striking feature of the present scheme is the
incentives available to the developers to develop and exploit the vast
areas outside the processing area. For multi-product SEZs such non-
processing areas could be as much as 65 percent (even 75 percent
with the approval of the Central Government) and for single-product
SEZs as much as 50 percent. This is sought to be justified by the
argument that establishing social infrastructure, which would
constitute things like housing facilities and entertainment, is critical for
attracting and sustaining processing investments in the SEZs. For
developing the non-processing area, the developers will be entitled to
duty free imports as also exemption from income tax and other taxes.
The disposal of real estate assets in the non processing area is not
encumbered by an requirement that they be utilized only for the
entrepreneurs and workers deployed in the processing area. It is this
component of development which holds the maximum attraction for
the SEZ developers. They have, therefore, designed huge SEZ
proposals entailing the such as Delhi, Gurgaon and Mumbai. Aided
by duty exemptions on their inputs and other tax exemptions as well
as cheap acquisition of land from farmers and state governments,
they are poised to make huge profits through real estate business.
We can clearly see the spectar of processing areas not taking off and
yet the non-processing areas getting built and exploited to the
fulfillment of the commercial objective of the SEZ developers.
      The extremely large number of SEZs being approved lends
further strength to our apprehensions that the SEZ scheme will
degenerate into a grand real estate venture, based on short changing
the farmers and on tax exemptions. Even going by the most optimistic
estimates, demand for land for export-oriented manufacturing and
services will not be of such order as to fill the SEZs being approved.
The SEZ developers are more certain of finding buyers for the
residential, commercial and entertainment components.
      This is the distortion that must be eliminated. The SEZs should
be solely devoted to processing area and that too primarily for the
purpose of export and if any social infrastructure has to be built, it
should be only to subserve the processing area, for the provision of
housing for workers and other stake-holders, their health care,
education etc. As will be elaborated subsequently, if any further
infrastructure has to be built in the surrounding areas, in the form of
housing, health-care, education, etc., it should be treated as a
township scheme which the Government should evolve a separate
policy with suitable obligations and incentives – legal and fiscal.
      The Committee feels that the minimum areas of the processing
zone in an SEZ should be raised from the present 35% of the total
area of the SEZ to 60%. We just do not see any justification in
permitting in any category of SEZs, more than 40 percent of the total
area for “non-processing” utilisaton.
      Under the weight of strong protests from various quarters, the
government decided to raise the minimum area of the processing
zone in an SEZ from 25% to 35%. This, however, was done only to
hoodwink the critics. For in the amendments ot the SEZ rules 2006,
which came into effect from August 10, the government has retained
the powers to relax the limit from 35% to 25% on a case to case
basis. Anyone who knows the Congress culture of governance knows
that “case to case” relaxation or exemption is a provision for political
kickbacks.
Protecting productive land and interests of land owning farmers
and other rural workers
      The SEZ proposals in the pipeline entail a huge requirement of
land. Rightly, therefore, there has been an outory across the country
that adequate safeguards need to be provided in the SEZ policy to
ensure that irrigated and agriculturally fertile land is not swallowed up
by the SEZs. Some advice on these lines has recently been sent by
the Union Ministry of Commerce and Industry to the State
Governments. However, the advice lacks specificity. There has to be
a clear stipulation in the Rules that no fertile land can be included in
an SEZ unless it is needed for its continuity and, in any case, its
proportion must not exceed 10 percent. It should be prescribed that
the SEZ proposals be supported by certification of the agricultural
quality of land by the local revenue authority.
      A lot of problems emanate from the lack of impact assessment
of the project proposals, before they are taken up by the Board of
Approvals. Such impact assessment must be made mandatory and
the content and the format of the assessment should be clearly laid
down. We feel that the impact assessment should focus on
conservation of agriculturally productive land, effect on environment
(this is particularly important so as to dispel the widely held
apprehension that making use of the overriding provisions of the SEZ
Act the environmental requisites will be given a short shrift), balanced
Urban Development as well as the objectives laid down in section 5
of the Special Economic Zones Act 2005, namely, generation of
additional economic activity, promotion of exports of goods and
services, promotion of investment from domestic and foreign sources,
creation   of   employment     opportunities      and   development   of
infrastructure facilities. The impact assessment exercises must have
the involvement of experts from the relevant fields. Those
undertaking the studies should be given the freedom to alter the
proposed areas or to suggest alternative locations.
Compensation of farmers and farm workers
      We now come to the important issue of remuneration to the
farmers who are deprived of their land, which is their only livelihood
and   income-earning     asset.   The    BJP    firmly   believes   that
considerations of equity for farmers, farm workers and allied rural
workers cannot be sacrificed for the benefit of promoters of SEZs and
the business operating in them. This issue has to be considered in
three parts, the first is of providing to them a fair opportunity price.
Secondly, it has to be kept in view that when agricultural land gets
transformed into industrial or Urban land, it secures a huge value
addition. The farmers must partake also in that added value. Thirdly,
much land is also being transferred to SEZs from State Government
and gaon sabhas. The fairness of the price to be charged for such
lands has also to be ensured.
      For acquisition of land from farmers, two modes are followed.
The first is of compulsory acquisition under the Land Acquisition Act,
whereby the so called “fair” market price is determined by taking an
average of recorded sales and adding 30 percetn solatium to it. The
other way is to let the SEZ developers purchase land directly from
farmers. In either of the modes, the farmer stands at a disadvantage.
In the compulsory acquisition mode, he is at a serious disadvantage
because the recorded sales rarely disclose the real opportunity price.
In the other mode also the farmer is a weaker bargaining party and
the SEZ developer is immensely more powerful, given his financial
prowess and the easy availability of real estate intermediaries.
      We are of the view (and this is of general significance,
transcending the subject of SEZs) that the State Governments must
prescribe minimum prices for land in various areas, which will be valid
both for registration of sales deeds as well as payment of
compensation. The prices should be high enough to reflect the
opportunity prices of land. Prescription of such minimum prices will
not only secure the interest of the farmers to a substantial extent, but
will also result in reducing the element of black money in land deals,
higher realization of stamp duty and more economical use of land for
Urban and Industrial purposes. The fixation of such minimum prices
is within the purview of the State Governments and they should be
directed to discharge this important duty.
      We feel that instead of the State Governments using their
coercive power of compulsory acquisition the SEZ developers should
be required to obtain land from the farmers through direct purchases,
but at prices higher than the minimum as suggested above. The
farmers should also be assisted in collective bargaining.
      The value addition that occurs when agricultural land is
transformed into industrial-urban land is also huge, often a substantial
multiple of the agricultural price. So that the farmer partakes in the
added value, he should be made a stake-holder in the transformed
land. Some states have prescribed that the farmers are allotted equity
shares in the developer companies. The benefit of that, in our view,
can be illusory unless some form of annuity can be assured in a pre-
specified amount. A more meaningful way will be to prescribe that in
the   developed    land   (in   the   processing   area     or   in   the
residential/commercial area or in built industrial, residential or
commercial accommodation) the farmer will be given a portion (which
can be quantified with reference to the quantum of land taken from
him). Such provisions are already being operated by many urban
development authorities and can be adapted in relation to the SEZs.
We feel that a minimum of 15 percent of the area in the processing
and the residential commercial parts in the non-processing zone
should go back to the farmers whose land has been taken.
      A lot of land within the SEZ limits belongs to State
Governments (either originally vested in them as forest or other land
or previously acquired under the Land Acquisition Act for some public
purpose, but not utilized for it) or to gaon sabhas or village
communities. The transfer to such land must be against a fair
opportunity price, which is best determined through a transparent
bidding process. To deliver it to SEZ developers either as equity
participation by the state industrial development corporation or at the
price of compulsory acquisition would be a mere fig leaf for a
commercial favour to the developer. It has also to be ensured that the
price obtained for village common lands is duly credited to the gaon
sabha accounts and is utilized for the betterment of the village or
village clusters.
      Acquisition of agricultural land by SEZ developers will, in
addition to the owner farmers, also displace the employment of actual
tillers, farm workers and allied rural workers. Justice should be done
to them through suitable compensation. In some states, a part of the
acquisition amount goes to the share croppers are duly recorded.
That, however, is not the case in most other states.
      It is important, therefore, that, in addition to suitable financial
compensation, the displaced farm labour and allied workers are given
preference in employment either by the SEZ developer or in the
business units in the SEZ. Every SEZ developer must be required to
set up a training institution on a BOT basis, where appropriate
training facilities for farm workers and other allied workers displaced
from their traditional employment may be established. There should
be a provision for their subsequent absorption in employment in the
SEZ establishment and in the processing units. They should get a
preferential treatment.
      Each SEZ proposal must include a plan for rehabilitation of the
workers who would be displaced from their traditional employment. A
proper implementation of that plan should be a specific condition
attached to the approval of the SEZ and the Development
Commissioner of the SEZ should be enjoined to oversee the
implementation of the rehabilitation plan.


Village abadis within SEZs

      Unless special measures are taken to absorb the village abadis
in the urban-industrial environment of the SEZ the danger is that they
will stay as segregated ghettoes and will fester as locations of social
distinction and conflicts. Every SEZ developer must be required to
prepare a redevelopment plan for the village abadis falling within the
SEZ limits and to execute that plan at his cost. The maintenance of
the redeveloped abadis should be a part and parcel of the civic
arrangements for the SEZ area in general.
Tax incentives and impact on revenues
      It is unfortunate that the Central Government has not given out
a credible assessment of the impact of tax concessions and
exemptions on government revenues. The Ministry of Finance has
estimated the loss of revenue to be of the order of Rs. 97,000 crores
until 2010, about Rs. 50,000 crores of which will be due to loss of
direct taxes and the rest as loss of custom and excise duties and
other central taxes. There is no mentioned of the revenue loss that
the State Governments will suffer. On the other hand, the Ministry of
Commerce and Industry has contended that due to increased
economic activity the accrual of revenue will in fact go up by about
Rs. 50,000 crores. Due to lack of an agreed assessment the public is
precluded from making an objective evaluation of the costs and
benefits of the SEZ scheme.
     All supplies of goods and services received by the developer or
a unit in an SEZ, either from abroad or from the DTA, are exempt
from customs and excise duties and from such taxes as the central
sales tax, service tax and stamp duty (as is leviable by the Central
Government). For the sales made from SEZ units to the DTA, custom
duty has to be paid. In addition, SEZ developers and units in SEZs
enjoy exemption from income tax and dividend distribution tax. The
Central Government also requires the state governments that for
sales to and from SEZ exemption of VAT/sales tax has to be granted.
The State Governments have granted partial or full exemption of the
stamp duty leviable by them.
      As has been stated above, insofar as the processing units are
concerned the tax exemptions are similar to those available under the
2000 scheme or to the EOUs. It is a moot question whether the
package of tax exemptions will attract sizeable additional investments
in processing units in SEZ over and above the investments that would
have occurred in the normal course. Of course, availability of
infrastructure and serviced land will be an attraction for the investors.
That would be the case also in any industrial estate or an
appropriately developed area, which is not a SEZ. The package of tax
concessions, we feel, each entrepreneur will examine in his specific
context and he will decide to make investments in a processing unit in
a SEZ only if he sees a definite benefit in doing so.
      We must, however, point out that while the incentives now
given to processing units in SEZs are similar to those available in the
erstwhile export processing zones or to EOUs, the tax incentives
given to SEZ developers are unprecedented. This imbalance
reinforces the apprehension that we have earlier expressed that
whether the processing areas succeed or not, the real estate
business in the non-processing areas, boosted by the unprecedented
incentive package and particularly if it is near an urban conglomerate
is more likely to be commercially successful.
      We do not see any legitimacy for tax incentives for the non-
processing area except in so far as it is used directly to support the
units in the processing area in the form housing for entrepreneurs
and employees and to serve their health case, educational and
community needs. Giving tax incentives for creation and operation of
hotels, restaurants, shopping malls and places of entertainment, all of
which will be open to use by people not directly deployed in the
processing area, will constitute an unjustifiable use of the exchequer,
designed primarily to enhance the commercial profits of the SEZ
developer. The discrimination so created vis-s-vis the businesses and
the entities located outside the SEZ will be unjust and will be difficult
to sustain even in courts of law.
      A related issue concerns the facilities whose products will spill
out for use by people and business located outside SEZs, for
instance a power plant or an airstrip. The incentives held out for them
include tax exemptions for capital inputs as well as consumables –
even the tax on the power generated. There is no justification in not
recovering from the owners of such facilities the tax exemptions that
relate to the supplies provided by them outside of the SEZ.
      The other observation that we have to make is that the
incentive package offered for processing units in SEZs is likely to
become the bench mark for policies of industrial promotion in the
country. Sooner than later, there will be clamour from units located
outside SEZs to be given the same dispensation as is being provided
to the units in SEZs. This demand will be difficult to resist because,
given the diluted export obligation by the SEZ units (in SEZs a unit
has only to be foreign exchange positive in the sense that its exports
have to exceed imports while an EOU is required to export most of its
output), they are hardly distinguishable from the other industrial units
operating across the country. We see the danger of emergence of a
pattern of industrial development supported and sustained by
subventions from the taxpayer.
Non-level laying field for business in DTA
      The only export related requirement prescribed for units in an
SEZ is that they have to be foreign exchange positive in the sense
that their sales in foreign currency have to exceed their purchases in
foreign currency and that too in an aggregate of 5 years. Given that
weak requirement the units will make substantial sales in DTA and in
so doing will be assisted by the support of, hopefully, a superior
infrastructure and cheaper and both assured supply of power. That is
why it is apprehended that units in DTA will lose the level playing field
and will be at a comparative disadvantage. We realize the difficulties
in segregating the production meant for export and that available for
home consumption. But we cannot understand why the export
requirement of units in SEZs cannot be maintained at the level of that
of the units in the erstwhile EPZs or of EOUs. That can help restore
the export objective of SEZs and go some way in allaying the
apprehension of entrepreneurs in DTA.
Interface between SEZs and DTA
      The trade interface between SEZs and the DTA is going to be
large and complex because, firstly, trade permitted between the two
is virtually limitless states starting from raw materials, through various
intermediate product stages essential for determination of tax benefits
and liabilities. We do not see in the Rules a foolproof framework for
such accounting. We see a vast scope for “transfer pricing” and other
malpractices for the purpose of tax evasion and reaping of
undeserved tax benefits.
SEZs and development of new townships
      A major lacuna in the UPA Government’s SEZ policy is that the
development of housing and other social infrastructure requirements
in the non-processing area is sought to be given the same fiscal
incentives as the business units in the processing area. The BJP is
firmly in favour of development of well planned and aesthetically
appealing habitats, with modern amenities, for various sections of
employees and stake-holders in SEZs.            The current pattern of
unplanned and chaotic and often illegal construction of housing and
non-housing structures within and around modern business clusters
has become a bane of urban development in India.          Our country
must eschew this pattern, and SEZs provide an opportunity to do so.
Nevertheless, and Committee feels that the Union Government, in
collaboration with State Government, should evolve a New
Townships Development Policy with suitable rules and incentives
(fiscal and non-fiscal) that attract investments and right kind of
developers as has been argued elsewhere in this report, the
incentives should be stronger at the proposed township is farther
from existing Metros and big cities. In order to prevent the growth of
slums, there should be adequate provision of housing, affordable
means of mass transport, and access to basic social infrastructure
amenities for people in the low-income category.
     The need for a policy of New Township Development is
supported by another important factor. In the Indian conditions unlike
in China (which has only 6 mega size SEZs), the variable size of
SEZs makes it almost impossible to design the SEZs as self-
contained entities in terms of the use of residential units, commercial
space and attendant social infrastructure amenities, such as hospitals
and educational institutions. Besides, problems associated with the
commercial viability and administrative ease of doing so, any such
attempt would render SEZs vulnerable to the criticism that the
Government is allowing establishment of “foreign zones” within the
country. In other words, there should be flexibility in the use of new
townships for the benefit of the people and businesses working both
within the processing zones of SEZs and without.
Reasonable balance
      The apprehensions that the SEZ policy may induce further
imbalances in the regional distribution of industrial activity emanates
from several reasons. The number of SEZ proposals and the number
of those approved vary greatly across states. It is observed that the
numbers are far greater in the states that are already industrially
more advanced. That is natural because those states have a greater
capability to put together SEZ proposals and are managerially more
competent to implement them. Such a differential trend can only be
arrested, if some definite measures are taken to help the industrially
backward states to generate and implement SEZ projects. So far
such an effort on the part of the Central Government has been totally
lacking.
      Secondly, the SEZ projects tend to be located in the vicinity of
large urban areas, obviously with an eye on the availability of
qualified work force nearby and with a view to exploiting the real
estate potential of the non-processing area within the SEZ.       This
approach of expediency needs to be firmly discouraged. There is no
legitimate justification for it because for housing the work force
needed for the SEZ more than adequate provision has been made by
way of the non-processing area. The State Governments, while
recommending SEZ proposals and the Board of Approvals while
approving them must ensure that the SEZs are located not in the
vicinity of larger urban areas and thereby further expanding their
sprawl. The SEZs should be close to the smaller towns which have
the potential for expansion and have the nucleus of trained
manpower which can be gradually expanded by educational and
training effort. In fact, the package of incentives for SEZs can be
graded stronger if the SEZ is located close to a small town and
weaker if it is close to a large urban area. In the scheme now being
pursued we find total lack of such a perspective.
      Thirdly, it is apprehended that new manufacturing units will tend
to be located in the SEZs, because of the tax benefits and the better
infrastructure they would provide, and the areas outside SEZ, will get
to host fewer units. In fact, the fear is that even the existing units
outside SEZs may consider relocating into SEZs, provided the costs
of relocation are out-weighed by the benefits available in the SEZs.
The provisions in the SEZ scheme to combat such a trend are
somewhat contradictory. On the one hand, checks are being provided
against such relocations. On the other hand, even some incentives
are being provided for relocation, such as exemption of capital gain
tax on the disposal of industrial assets outside the SEZs, when such
disposal is a precursor to relocation into an SEZ. This is a matter in
which clarity of purpose has to be ensured.
SEZ and the IT Sector
      As has been stated above, emergence ofa large numbere of
single product SEZs, particularly those for IT and ITES, is due to the
fact that many of the EOUs and IT and ITES units are considering
relocation simply to get a fresh lease of life for their tax concessions
which, outside the SEZs, are due to conclude by 2009-10. Those
concessions, as we have suggested above, should be extended for a
further period of 10 years. The decision should be takemn forthwith.
The prevalence of the uncertainty on this issue, as it obtains now is
tragic and may become the reason for unnecessary and avoidable
relocation decisions.
      The Government should take a clear view right at this stage so
that the future scenario is known to everybody.
Administrative weakness
      Provisions have been made for single window approvals,
composite application forms and unified returns and the Development
Commissioner and the Approval Committee have been vested with
powers under numerous laws with the objectives of minimizing the
hassles of the SEZ developers as well as entrepreneurs. However,
the fact remains that all activities concerning development of SEZs
and setting up and operating units in them are tightly controlled at
each stage. If in response to the market dynamics, any modifications
are required, those also would require approvals. The procedures
prescribed in the Act and Rules remind us of the bad old days of
licence raj.
      We see overlap in the roles of the Development Commissioner
and the private sector SEZ developer and can visualize turf disputes
arising   between   them.    The   authority   of   the   Development
Commissioner to secure compliance of the Rules and his directions
appears weak. In a face-off, the private sector developer is likely to
be stronger. Even the supreme step of take over of management will
be difficult to implement because ownership of the entire SEZ land
vests in the developer. Disposal of failed projects will be extremely
difficult and there will be the risk of the developer running away with
the land that he has already amassed.
       There should be an independent regulatory authority to deal
with issues related to SEZs.
Conclusion
       The Committee feels disappointed that the device of SEZ
introduced by the NDA Government with the objective of promoting
manufacture for export and FDI has been so much distorted and
degraded by the UPA Government that, instead of achieving its
avowed objectives, it is raising tensions and apprehensions among
various segments of our system. It has degenerated into a scramble
for amassing real estate and for profiteering from it by shortchanging
the farmer and using subventions from the taxpayer. A large section
of our entrepreneurship, particularly that in the medium and small
scale sector and in our leading export sector of IT and BPO feels left
out and aggrieved farmers and village workers, who will be displaced
by SEZs, are victims of apathy and insensitivity.
       The Bharatiya Janta Party would like to take up these issues for
debate in the Parliament and outside and bring pressure on the
Government to reverse the distortions.
Summary of recommendations
  1.     The Committee feels that the minimum area of the
         processing zone in an SEZ should be raised from the
         present 35% of the total area of the SEZ to 60%. We just do
         not see any justification in permitting in any category of
         SEZs, more than 40 percent of the total area for “non-
         processing” utilization.
  2.     No fertile and irrigated agricultural land should be acquired
         by the Governments for SEZs.
3.   Considerations of equity for farmers, farm workers and allied
     rural workers cannot be sacrificed for the benefit of
     promoters of SEZs and the businesses operating in them.
4.   State Governments must prescribe minimum prices for land
     in various areas, which should be high enough to reflect the
     opportunity prices of land. Instead of the State Governments
     using their coercive power of compulsory acquisition, SEZ
     developers should be required to obtain land from the
     farmers through direct purchases, but at prices higher than
     the minimum as suggested above.
5.   In order that farmers get to benefit from substantial value-
     appreciation of their land after it has been developed, a
     minimum of 15 percent of the area in the processing and the
     residential/commercial parts in the non-processing zone
     should go back to the farmers on a pro-rata basis.
6.   Where feasible, farmers should be allotted equity shares in
     the developer companies.
7.   In addition to suitable financial compensation, the displaced
     farm labour and allied eligible workers should be given
     preference in employment either by the SEZ developer or in
     the business units in the SEZ. For this, every SEZ developer
     must be required to set up a training institution.
8.   Each SEZ proposal must include a plan for rehabilitation of
     the people who would be displace from their traditional
     employment       and     livelihoods.     The        Development
     Commissioner of the SEZ should be enjoined to oversee the
     implementation of the rehabilitation plan.
9.    Every SEZ developer must be required to prepare a
      redevelopment plan for the village abadis falling within the
      SEZ limits and to execute that plan at his cost.
10.   Tax incentives for business units in the processing zone of
      an SEZ should not be made available in the non-processing
      zone.
11.   There should be level playing field for the Domestic Trade
      Areas (DTAs). Business in the DTAs should not be put to a
      disadvantage because of the incentives available to those in
      SEZs. There should be no scope for abuse of benefits
      available in SEZs for scale of goods and services in DTA.
12.   There should be special incentives for SEZs that are
      established closer to small towns.
13.   The tax exemptions currently available to IT and ITES units
      upto 2009 should be extended for a further period of 10
      years. This decision must be announced immediately, so
      that uncertainty on this issue, which has led many IT
      companies to consider relocation to SEZs, is put to an end.
14.   The     Union   Government,    in    collaboration   with   State
      Governments, should evolve a New Township Development
      Policy with suitable rules. Stronger incentives (fiscal and
      non-fiscal) should be provided for new townships located
      away from existing metros and big cities. There should be
      adequate provision of housing, affordable means of mass
      transport, and access to basic social infrastructure amenities
      for people in the low-income category.
  15.   There should be independent regulatory authority to deal
        with the issues related to the SEZs.
  16.   There should be clear guidelines to protect worker’ rights
        and   promote    their    welfare   and   also   guidelines   for
        environmental protection.



                                 ANNEXURE-IV

   Note on Special Economic Zones by All India Kisan Sabha
                 (Vide para 4.45 of the Report)

     Approval for 237 SEZs had already been sanctioned by the

Board of Approval for SEZs along with “in-principle” approval for

another 166 SEZs. Thus overall 403 SEZ proposals have already

been cleared within less than a year of the promulgation of the SEZ

Rules. This proliferation of SEZ proposals within a period of few

months has given rise to genuine concerns related to large-scale

acquisition of fertile farmlands, massive displacement, enormous loss

of tax revenue and gross misuse for real estate purposes. These

concerns have to be addressed and appropriate changes have to be

brought in the SEZ Act and Rules through amendments.

     Acquisition of agricultural land and displacement of farmers and

others dependent upon land have become an issue of immediate

concern. Detailed land-use maps should be prepared by the State
Governments before embarking upon land acquisition. Every state

should constitute a land zonation team consisting of soil scientists,

agronomists and remote sensing specialists to earmark soils with a

low biological potential for farming such as waste lands, lands

affected    by salinity,   acidity etc   for   industrial   activities   and

construction. The impact of such activities with respect to fragile or

endangered ecological zones should be examined in detail and

adequate safeguard measures should be taken. Acquisition of land

for industrial projects should avoid fertile farmland and displacement

as far as possible. Wherever acquisition of agricultural land was

unavoidable, the responsibility of securing adequate compensation

and proper rehabilitation for people displaced by SEZs and ensuring

their livelihood security has to be shared by the Central Government.

The Land Acquisition Act, which was enacted during the colonial

period, needs to be amended in order to make it congruent with an

independent and democratic State. Besides, a National Rehabilitation

Policy needs to be adopted by the Central Government. The following

additional provisions need to be made in the current SEZ policy:-

  (a)      There should be no transfer of land ownership to the private
           developer. Private developers should only be allowed to take
           land on lease;
  (b)     The Central Government should set an appropriate ceiling
          on the total land area under a SEZ, which can be developed
          by a private entity. SEZ Rules only specify minimum land
          area requirements for the different classes of SEZs. The
          maximum land area also needs to be specified;
  (c)     SEZs whose land area exceeds the specified ceiling should
          only be developed by the State (Public Enterprises of the
          Central or State Governments). The State can undertake
          Joint Ventures in developing such SEZs; but in such cases
          majority stake should lie with the public sector;
  (d)     A provision limiting the acquisition of multicrop agricultural
          land should be built into the SEZ Act itself;
  (e)     A model compensation and rehabilitation criteria should be
          framed by the Central Government and included in the SEZ
          Rules, following consultation with the State Governments;
  (f)     The model compensation and rehabilitation criteria for SEZs
          should ensure that the current owners of land are awarded
          compensation in line with market prices taking into account
          the expectation of future land development; and
  (g)     A provision must also be made to compensate
          sharecroppers as well as agricultural workers. The Central
          Government     should    share    responsibility for    the
          implementation of the model compensation and rehabilitation
          criteria.


        There should be separate caps for the total number of multi-

product and sector specific SEZs. Further categorization of SEZs into

small, medium and big may also be considered with appropriate caps

for the different categories. Transparent and stringent criteria should

be set for granting approvals for SEZs. Imbalances should not be

allowed to develop between States in terms of the number of SEZs
permitted. The Central Government should consider setting up of

SEZs through public investment in those States where private

investment is not forthcoming to maintain regional balance.

     The disproportionately large number of proposals for IT SEZs

(148 out of 237 approvals granted so far are for IT SEZs) clearly

showed an attempt by new IT units to avail the benefit of the ten year

tax break under the SEZ Act which otherwise cannot be availed by

the IT companies beyond 2009. A decision regarding the extension of

tax or other benefits to the IT sector or any other sector which

contributes to exports should be taken separately. Projects below a

minimum land area should not be granted approval as a SEZ. The

minimum land requirement for a sector-specific SEZ of 100 hectares

as specified in the SEZ Rules can provide an appropriate basis.

     The processing area of SEZs should not be less than 50%.

Further, 25% of the non-processing area should be dedicated for

infrastructure development. Building of residential and commercial

complexes should be permitted only within 25% of the total land area.

The list of permissible activities inside SEZs included items like

hotels, shopping arcades, restaurants and multiplexes which are not

directly related to industrial production. Besides revising the minimum
processing area requirement for multi-product SEZs to 50%, there is

also a need to lay down regulatory parameters for real estate

development within the SEZs. Besides having a list of permissible

activities, the SEZ Rules should also contain a Land Use Plan for the

SEZs, which would ensure that housing or other commercial

complexes constructed within the SEZs do not exceed the supportive

infrastructural needs of industrial units in the processing areas.

      The estimate made by the Finance Ministry, based upon the

first 70 SEZ proposals which were cleared by the Board of Approval

earlier, showing a loss of total tax revenue worth Rs 102621 crore

from 2006-07 to 2009-20 on account of the tax incentives provided

under the SEZ Act. Out of this, loss of direct tax revenue was

estimated to be Rs 53740 crore and loss of indirect tax revenue Rs

48881 crore. The tax incentives provided in the SEZ Act would

sabotage the entire exercise of phasing out myriad corporate tax

exemptions and export incentives, in the name of providing a level

playing field between the units within and outside the SEZs. In order

to avoid such a situation, which would be a big blow to resource

mobilization, tax concessions in some of the areas in Chapter VI of
the SEZ Act, under the “Special Fiscal Provisions for Special

Economic Zones” need to be reconsidered:

  (a)   While customs and excise duty exemptions for units within
        the SEZs can be understood as measures to ensure price
        competitiveness of exports, providing 100% exemption from
        income tax on profits for the first 5 years and 50% for the
        next 5 years which has been done in the SEZ Act, is clearly
        excessive. Income tax concessions for a period longer than
        2 years should only be provided for the reinvested portion of
        profits, and that too only for a maximum of 5 years;
  (b)   The SEZ Act provides for similar exemptions, drawbacks
        and concessions for the entrepreneurs setting up units within
        the SEZ and the developers of the SEZ. Thus private
        developers will be able to derive tax benefits without
        contributing to exports since the positive net foreign
        exchange earning requirement is only valid for units within
        the SEZs and not the developers. The developers and the
        entrepreneurs cannot be treated on par as far as tax
        exemptions and concessions are concerned. Fiscal
        incentives for developers, if they have to be provided at all,
        should be separately specified and should be considerably
        lesser than the ones provided for the entrepreneurs for
        income tax as well as customs and excise duties;
  (c)   The SEZ Rules have imposed the granting of tax and duty
        concessions upon the State Governments, which is not in
        keeping with the spirit of the SEZ Act. Either this rule has to
        be amended or the Central Government should compensate
        the State Governments on the loss of revenue on account of
        these tax and duty exemptions; and
  (d)   Exemption from Service Tax has been granted to the
        developers in a Special Economic Zone in the SEZ Act.
        Moreover, units in the international Financial Services
        Centre and Offshore Banking Units have been given income
        tax exemptions equivalent to those of other units in the
        SEZs. Securities transactions entered into by non-residents
        through the International Financial Services Centre under a
        SEZ have also been exempted from the Securities
          Transaction Tax. These exemptions, which are unrelated to
          exports, should not be granted.


Section 49 (b) of the SEZ Act reads:-

     “Provided that nothing contained in this section shall apply to

any modifications of any Central Act or any rules or regulations made

thereunder or any notification or order issued or direction given or

scheme made thereunder 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 or work, provident funds,

employers’ liability, workmen’s compensation, invalidity and old age

pensions and maternity benefits applicable in any Special Economic

Zones.”

     There has been an attempt to dilute labour laws while framing

the SEZ Rules. Section 5 (5) (e), (f) and (g) of the SEZ Rules asks

the State Governments to delegate powers under the Industrial

Disputes Act to the Development Commissioner and to declare SEZs

as Public Utility Services. Moreover, the Model SEZ Act for the State

Governments framed by the Centre also contains a long list of

exemption clauses in labour laws, including in the Minimum Wages
Act and the Contract Labour (Regulation and Abolition) Act. Such

deviations of the SEZ Rules as well as the Model SEZ Act for State

Governments from the SEZ Act have to be corrected to ensure that

no dilution of labour laws occur. The ILO recommendation regarding

separation of powers between the Development Commissioner of an

Export Processing Zone and the Grievance Redressal Officer should

also be seriously considered in this regard.
                              ANNEXURE-V

  Note on Special Economic Zones by Centre Of Indian Trade
                            Unions
                 (Vide para 4.62 of the Report)


     Please refer to your letter No. RS. 1/27/2005-CC(SEZ) dated

16th January, 2007 requesting us to submit our views on functioning

of Special Economic Zones (SEZs), expecially in the context of

applicability of various Labour Laws in the SEZs.

     Export Processing Zones (EPZs) have been in operation in our

country since long and the Special Economic Zones are envisaged to

operate with the same objectives as the EPZs had. The legal position

as on date is that the EPZs are also covered by the same labour laws

as in the non-EPZ areas. But the reality had been that none of the

labour laws including those on formation and activities of trade unions

are ever implemented in the industrial units/establishments in the

EPZs and any effort on the part of the workers working in the EPZs

for implementation of labour laws or raise grievance on the same

have always been tackled with repression and victimization by the

employers with active patronage of the administration. There have

been numerous complaints of violation of labour laws pertaining to

minimum wages, working hours, social security, trade union rights etc
affecting workers in various EPZ-based units in the country with

practically no remedial actions on the part of the grievance redressal

authority, rather the workers have been subjected to victimization and

repression both by the employers and the administration.

      Our considered opinion is that there should be no difference

between the SEZ and non-SEZ areas in respect of applicability of

Labour Laws. There cannot be any special dispensation for the

employers in the SEZ based units in respect of applicability of labour

laws as would legitimize the ongoing labour-law violations in the

EPZs/SEZs. Rather, in view of the huge concessions in terms of tax--

holidays etc granted to SEZ based units including the private

developers also the restricted entry inside the SEZ area, special

measures for both inspection (including joint inspection with Central

Trade Union representatives) by impartial agency and enforcement of

all the labour laws within the SEZ should be statutorily put in place.

      In this connection please note that we have submitted a note

(copy enclosed) on 29th September 2006 to the Chairman of the

Committee on Subordinate Legislation to examine the Rules framed

under the SEZ Act in totality.
       The following are the excerpts from the above note (Para 5)

which pertain to the issue of applicability of various labour laws in the

SEZs:

       Function of Development Commissioner has been defined in

Section 12 of the Act. The Act does not touch on the labour related

issues, which are being governed by existing labour laws of the land

under designated agency as per the relevant Act.

       However, Rule 5(5)(e), (f) and (g) calls upon the State

Governments to endeavor to delegate power to Development

Commissioner under 10 Act, 1947 (No 14 of 1947) in relation to units

in SEZ, workmen employed by the developer and declaration of SEZ

as public utility service. This is not at all consistent with the parent

Act.

       In this context, it must be taken note of that in the process of

deliberation on the Bill in both the houses, Parliament, in its wisdom

decided to drop the labour related clauses originally proposed in the

Bill providing for power to state and central govt. to exempt the

establishments in SEZs from the purview operation of various labour

laws. Aforementioned provisions in the rules tinkering into and/or

intruding upon the normal process of labour administration militates
against the spirit in which Parliament deliberated and decided on the

issue.

      Transfer   of   power    of   State   Labour    Commissioner      to

Development Commissioner, through such a rule without a legislative

backing is totally untenable. It is also in complete violation of concrete

recommendation of ILO as have been specified by the Committee of

Freedom of Association of ILO and recorded in the Report of 33Z'd

session of the Committee (in response to complaints no 2228 on

violation of labour rights in Visakhapatnam Export Processing Zone)

and endorsed by the Governing Body of ILO of which Government of

India is a member, in its meeting no. GB288fi during November 2003.

The ILO Committee observed that, it the Committee recalled that in

its previous conclusions, it had noted that there could be

incompatibility between the two functions of Deputy Development

Commissioner and Grievance Redressal Officer when performed by

the same persons and had requested the Government to review this

situation [see above para 3, recommendation (e), and 331st Report,

para 470]"(para 748). The Committee further recommended that

categorically to Government of India "to take all necessary steps so

as to ensure that the functions of Grievance Redressal Officer (GRO)
are not performed by Deputy Development Commissioner in the EPZ

of Visakhapatnam (currently GRO and DOC are the same person)

but another independent person or body having the confidence of all

parties ... ‘ (para 751-d).

      In view of the above, no such back door vesting of powers to

Development Commissioner through a rule will be acceptable to the

trade union movement of the country. The clauses i.e. 5(e), (f) and

(g) under Section 5 should be fully I deleted from the rules.

      It would be higly apreciated if the Committee on Commerce

gives us a chance to present our views orally before the Members of

the Committee.

      Thanking you,

                                                        Yours sincerely,
                                                                    Sd/
                                                          (M.K.Pandhe)
                                                              President
                                  ANNEXURE-VI

 Note on Special Economic Zones by Dr. Kirit Somaiya, Ex-M.P
              and Convenor, BJP Investors’ Cell

                      (Vide para 4.75 of the Report)

         Respected Dr Joshi Ji

         Sub:- SEZ – Evolution and evaluation – Healthy execution.

         SEZ concept introduced in India in 2000/01. Fast manufacturing

growth of China inspired us towards SEZs. The first six years of

evolution     &   execution      needed   evaluation.   Experience   and

observation demanded improvement in policy, rules, functioning of

BOA and execution process.

         There are 393 functioning SEZs in the World. India has

approved 400, which will rise to 800 in 2007. RBI, MOF, IMF, WB

Political Parties and Experts have expressed their concern. It is felt

that healthy implementation of the policy needed minimum dilution,

deviation to avoid distortion.

         Basic principle of Economy

   (1)     Concessions for Backward Areas now maximum
           concessions for most developed areas metro cities SEZs.
   (2)     Cost of Land be cheaper and for that to go away from the
           development area. The great rush for Mumbai-Navi Mumbai,
           Delhi-Gurgaon suggests different.
(3)   IT industries asked to continue present Tax Concessions.
      Government giving additional tax exemptions to the Builder-
      Developers of IT SEZ (200 IT SEZ in-around Metro Cities).
          Observations

          1.      Idea, Thrust, Commitment

   (I)         Original idea to promote export, attract FDI by developing

               new township with worldclass infrastructure. Thrust on

               manufacturing sector.

   (II)        Attractions; exemption, relaxation, concessions in taxation,

               labour laws, land acquisition for hassle free environment

               treatment and “foreign territory”.

   (III)       Dilution of commitment/compliance for exports, FDI and

               manufacturing segment. Developers become unit holders to

               abuse the benefits for DTA-Non Export business.

          2.      Tax Heaven/Tax Arbitrage

          Developer-cum-unit holder to get undue 25% to 35% indirect

tax benefits on erection, capital investment for DTA business capital

goods, e.g. Power Project, Electronic Items (Customs Duty, CVD nil

or negligible), Hotels, Housing, Malls etc.

          Developer becoming unit holders to get undue tax benefits.

Lession be learnt from abuse of Tax benefits of North East Cigarette-

Tobacco Industries, Maritius Route & PN route.
      Direct/indirect taxes provisions to be corrected, loopholes to be

plugged, tax benefit should be only for export activities and

infrastructure development.




      3.    SEZ in China and other countries

      Almost all countries including China identified territory area,

developed new township. Private entrepreneurs given land only for

setting up Export Oriented Units (EOUs). In China no issue of abuse

of tax provisions, land acquisition, “new Zamindars”, etc. prevails as

Government itself is the owner.

      Commerce Ministry and Finance Ministry should separately

study the concept, provisions, and benefits to private entrepreneurs

of different countries.

      4.    Non-Processing        Zones:    This    is    an       Indian

phrase/concept

      Illagel, non-scientific provisions of 75% non-processing zone.

The   calculation given/submitted    by couple     of    private   mega

developers accepted by Government Abuse of Government system
to get maximum land in and around metro cities for real estate and

other business.

      Mahendra Multi-sector (1000 hectares) SEZ in Chennai is

having 72% processing zone. The 75% Non-Processing Zone

demand/idea seems to be given/promoted by the SEZ developers of

Navi Mumbai and Gurgaon.

      Impact on farmers due to manipulative acquisition/purchase of

agricultural land for housing, hotels, medical education industries.

      Minimum 50 to 60% processing zone in Multi Sector SEZ.

cofification of activities in non-processing zone. No tax benefit for

non-export/service sector business activities. Strict provisions to

restrict/limit housing, hotels, malls, education - medical business. No

tax benefits should be given for such activities.




      5.    Infratructure Development

      SEZs in and around metro cities are adding burden on present

infrastructure. Small IT/ITES, single sector SEZs not adding any

infrastructure, social infrastructure.
      So many Mega SEZs in Gurgaon, Haryana, Punjab where NO

Port available is quite surprising.

      Mega SEZ Developers usually prefer to go away from Metro

City considering land cost. In India Mega SEZ coming in & around

Metro Cities.

      Provision of disincentive to SEZ in and around metro cities.

Abuse of Government Acquisition provisions to get farmers land

cheaply by avoided.

      6.    Agricultural land:

      Fthis problem seems to be limited to couple of Mega SEZs.

State be asked to submit detail study-status of requirement of such

fertile, agriculture land. Acquisition of agricultural/fertile land for non-

processing zone be avoided.

      Size of mega SEZ can be brought down. There should be

Minimum acquisition of such land. Mega SEZs should be pused to

small and medium towns.

      7.    Compensation and rehabilitation:

      Land acquisition started without such policy. Maharashtra,

Punjab and Haryana as well as Union Government are helping
private developers to acquire, purchase land without evolving healthy

rehabilitation package.

        It is shocking that at most of the places State Governments

given        permission   Developers     to   purchase     agricultural   land.

Developers are using State Government permissions, papers to

purchase the land from farmers. Nowhere rehabpackage drafted or

implemented.

        National Policy on compensation and rehabilitation should be

formed wherein provisions of annuity and share in developed land,

provision of one house and employment to one person of the project

affected family be made mandatory.

        8.      Impact on domestic Industries:

        Undue benefits to SEZ developers-cum-unit holders for DTA

business will affect the competitiveness in domestic industries.

Tax/stamp duty/land price shall make the project cost 40 to 50%

cheaper in SEZ which will have negative impact in domestic

industries, employment etc.

        In      future    domestic     industries   will    demand        same

relaxations/benefits. The whole country then can become SEZ, i.e
Tax Heaven. Long term implication on tax, revenue collection of State

Central Governments.

     Disincentive and penalty for DTA business. Level playing field

for domestic industry.

     9.    New Zamindars of Mega SEZs (?)

     Concern expressed those 2/3 private entrepreneurs/developers

getting approval approval for 4 to 8 Mega SEZ each, 40,000 to

50,000 hectares land. Government itself helping/supporting, providing

undue benefit to make a couple of people bigger than the country.

     Size of mega SEZs be curtailed and an entrepreneur may be

given permission for 1 or 2 SEZ.

     10.   Tax Exemptions only for Bonded Area-Processing

Zones Activities:

     Processing Zones are going to be bonded area. Non-

processing zones are as good as DTA (no separate boundary-

fencing-gates-excise barriers/gates). The business activities in non-

processing zones are at par & connected with DTA. That means

business activities in non processing zones are open-meant for DTA

but all tax exemptions shall be available to the Developers for/of SEZ

Processing Zones.
        All activities in non processing area should be taxable(at par

with DTA).

        11.   Transparent decision-making processing:

        Ambiguity, loopholes regarding provisions of 25 to 35%

processing zones/taxes/land acquisition/compensation/market price

shall be removed.

        The recent so-called corrections by Ministry of Commerce/BOA

enhancing minimum processing zone requirement from 25% to 35%

is “Eye Wash”. The ambiguous amendment states that – “now

minimum requirement of processing zone will be 35%, which can be

relaxed to 25% case to case basis”.

        It is understood that Commerce Ministry is approving SEZ in

haste    without   studying   the   proposal   in   detail   or   receiving

recommendations/observations from States. In some cases even

objections, reservations of State Governments are bypassed e.g.

Karnataka, Maharashtra.

        Commerce Ministry, CBDT, CBEC should review all provisions,

correct the language, plug the loopholes and illogical provisions.
        SEZ concept of says cheaper land, i.e. away from the major

cities, adjacent to port. But what is happening in India is contrary to

this.

        In China and other countries benefits are given to unit holders,

particularly   EOU.    Here   in   our   country   we   have   extended

maximum/most of the benefits to developers.

        Dilution and manipulation resulted into suspicious atmosphere.

This can have long lasting implications on the economy and country.

        These are few suggestions given in brief. I am enclosing

herewith a Power Point Presentation explaining the same in detail.

        With kind regards,



                                                     Yours sincerely,
                                                                  Sd/
                                                      (Kirit Somaiya)
                                             Ex-Member of Parliamenty
                              ANNEXURE-VII

 Note on Special Economic Zones by Bharatiya Mazdoor Sangh
                  (Vide para 4.84 of the Report)



      Government of India has planned to have Special Economic

Zones in many parts of the country in order to' attract Foreign Direct

Investment (FDI). Any Private Company, Public undertaking State

GoveII11l1ent or its agencies can establish SEZs with the approval of

the competent authority. An SEZ enjoys liberal economic policies,

maximum facilities and freedom from Labour-law hassles. The SEZ

project enjoys 100% FDI, exemption from Income Tax and Service

Tax. The owner of this project may set up his industry in 25% of the

area and use the rest 75% land for building a township for residential,

educational & commercial. activities. There is a proposal for having

no labour Laws in SEZs. They enjoy the privilege of "Hire and Fire".

SEZ are being treated as Foreign Territory for Tax purposes and for

the enforcement of Labour Laws. SEZ will range from 10 hectares to

self" contained townships across thousands of hectares. There will be

Airports,   immaculately   designed   Roads,    Hospitals,   Cinemas,

Theatres, Shopping Malls, Homes and Manicured Parks. Thus

overseas visitors would be able to fly in 'and out of these picturesque
preserves without having any contact with the real India. Indian

Criminal Laws will apply in SEZs. Thefts and murders will be

investigated by a single enforcement agency and offenders will be

tried in Special Courts. All Industrial units and other Estts. in SEZs

will be declared as "Public Utility Service" under the provision of

Industrial Disputes Act.

      To have or not to have SEZs have been in the headlines for

some time. It created a sort of controversy. It is for the first time that

the two Ministries of the UP A Govt. at the centre (Finance and

Commerce & Industry) had different approach on the subject and

stood face to face. The Finance Ministry is worried on a very large

revenue loss due to tax and other concessions in SEZs where as the

Commerce Ministry is hopeful of making up this loss in the long run

besides creating more than One Lakh jobs.

      The Finance Ministry fears that it would suffer Tax-revenue loss

to the tune of Rs. 90,000 crores. The Reserve Bank of India report

too reads that SEZs may cause transfer of sources out of the less

developed areas. RBI has, therefore, placed SEZs in real estate

category. It will deprive them of cheap loans from Banks. Some

experts are of the view that the business houses instead of making
fresh investments may shift their business to SEZs in order to save

on taxes. The hope that SEZs may generate enhanced tax revenue

and create over One Lakh jobs may turn out to be an illusion as

happened in the case of Export Processing Zones (EPZs) which

could not create substantial jobs although sufficient tax relaxations

were given to them. SEZs may get benefits of reduced taxes under

captive system and minimum investment but only the big companies

will gain from them. Will its gains reach the common man is a big

question mark? Planning Commission Dy. Chairman - Shri Montek

Singh Ahluwalia came out in support of recent Reserve Bank of India

decision to treat the SEZs as exposure to "Real Estate". He said he

was not in favour of concessional finance for these Zones. "The Tax

incentives given for SEZs will be. Misused and will lead to high

revenue loss running into crores of Rupees," said Ahluwalia

     It is all the more interesting that in spite of controversy on this

policy of the Govt. the interest of State Governments arid the Pvt.

Enterprises in SEZs has not deflated. Reliance Plans to have an SEZ

in Navi Mumbai spread over 14000 hectare land (One hectare =

10,000 sq meters). This will contain power plant of 2000 MV capacity,

a dam to store water and easy access to the harbour and the airport.
Tata consultancy services (TCS) will have four SEZs and Infosys two

in Karnataka mainly for Software and Banking services.

      A Policy on SEZs was declared in April 2000 in order to

enhance exports and attract FDI. The Parliament changed it into an

Act in 2005. SEEPZ in East Mumbai, Kandla in Kutch, Noida in Utter

Pradesh and Falta in West Bengal all 8 EPZs were promoted to be at

par with SEZs. The provisions in SEZ are so attractive that Finance

Ministry fears that the i. existing business houses who have already

been exporting their products may shift their. manufacturing units to

SEZs so that it is exempted from Paying taxes and duties. According

to Ministry of Commerce 94 SEZs will start working in next 18 months

by December 1994. 22 of them have already been notified and will be

functional within 6 months.

      Developing SEZs is against the interest of the farmers,

labourers and the common man. The land of crisis-ridden tiller is

already being sold for pittance to the industrialists to be converted

into real Estate. The farmers of Singur in Hugli Distt. of West Bengal

are fighting a hard battle to prevent Tata Motors from taking over their

fields for their factory. Ms Mamta Banerjee took out a huge

demonstration against West Bengal Govt. on 26 Sep. on the issue.
The Uttar Pradesh Govt. is also forwarding 12 such proposals to the

Central Govt.

     The Union Govt. has, as yet sanctioned 164 proposals. These

will require 26,800 hectares of land. 266 more proposals requiring

75,000 hectares of land are under the consideration of the Govt

which may be cleared in another month or so. These include PASCO

and Haldia Projects also.

     The SEZ scheme does not seem to have been evaluated

properly. Where as the Finance Minister P. Chidambaram is talking of

Rs. 90,000 crore loss in tax revenue, the Commerce Ministry's G.K.

Pillai is hopeful of garnering Rs. 45,000 crore annually as indirect

taxes besides generating Jobs for 5 lakh persons and an investment

of 1,00,000 crore including FDI of 25,000 crores.

     We demand that Govt. should form a Regulatory Authority to

reconsider the whole issue of this type of Zones. Moreover waste and

barren land should be put to use for such purposes instead of fertile &

productive farm land. It is wrong to acquire agricultural land for this

purpose. Sonia Gandhi also opposed giving farm land in the Chief

Ministers meeting on 22 Sep. 2006.
      To establish SEZs in Green Belt area is a big land scam, a

move to usurp formers land and to destabilise the villages.

      Bharatiya Mazdoor Sangh demands of the Govt. of India to

permit Trade Unions to function in SEZs so as to prevent exploitation

of labour. 75% of the land should be used for setting up the industry

and 25% for other commercial activities. Otherwise this sort of

industrialisation will not serve national interest rather end in

Industrialists land scam.
                             ANNEXURE-VIII

Note on Special Economic Zones by Hind Mazdoor Sabha (HMS)
                 (Vide para 4.85 of the Report)



      As the things stand today there is a proposal to set up 600

SEZs. So far the Government has cleared 237 SEZs of which 63

have been notified while another 162 have been approved in

principle. Another 300 proposals are awaiting first stage clearance.

      So far there is no actual estimate of land to be acquired for

setting up all the proposed SEZs yet the acquisition of land for 63

SEZs already cleared is estimated to be 1,34,000 hectares mostly

fertile. This gives an idea about the total land required for all the

proposed SEZs. The important areas of          concern for HMS are

therefore:

1.           Rehabilitation of Farmers and Agriculture Labour to be

displaced from such a huge mass of land. So far the Government has

no plan.

2.     Food Security due to shortage of agriculture product to be
created by converting such a huge mass of agricultural fertile land
into barren land.
      HMS is thankful to EGOM who has in their meeting on January

22,2007 decided to clear only 63 SEZs and extend freeze on all new
zones, but it should not be for political reasons only but based upon

above realities.

      Even the Union Finance Minister is learnt to have shown great

apprehension about possible misuse of land acquired for SEZs by

developers, who were using the projects to construct malls, hotels

and residential complexes, which in no way add to country's exports

but will finally take the country back to the old lamindari system and

then Kingdoms.

      The revenue loss due to Tax sops to these SEZs is

unimaginable and non-recoupable. The revenue Department has

estimated the loss to be as high as RS.1 ,02,621 Crores only due to

tax sops in SEZs, which is likely to increase with their increasing

number. This is too heavy a loss when the Govt. of India does not

have enough funds to finance and meet with its obligation of

providing Social Security for unorganised sector workers and extend

the implementation of National Rural Employment Guarantee Act to

remaining 400 Rural Districts and then to the urban areas. The

country has even today thousands of villages without potabie water,

electricity and roads, which are more important.
     HMS is strongly opposed to exempting SEZs from labour laws.

All labour laws and other laws of the land must be made applicable

and enforceable in SEZs. We totally reject the idea of creating

'foreign enclaves' .in the country, by exempting them from labour and

other laws of the country. HMS is also opposed to the transfer of

powers of Labour Commissioners to the Development Commissioner

provided in the SEZs.

HMS strongly demands:
1.   AII Trade Union rights including Right to organise and
Collective Bargaining in SEZ's.
2.   All legal protection available to the workers shall be made
available in SEZ s viz. Job Security Income Security Social Security
Good Working Conditions Medical Care Education facilities etc.
3.   Participation of workers in Management
                                ANNEXURE-IX

       Note on Special Economic Zones by All India Trade Union
                          Congress (AITUC)

                     (Vide para 4.88 of the Report)



      Land acquisition for setting up of Special Economic Zones

under the Special Economic Zone Act 2005 has b come a highly

controversial matter in the country. AITUC is firmly oppose to the Act

in the existing form and demands a National Commission be

appointed by the Central Government to comprehensively review the

entire Act and the concept behind it in consultation with the Central

Trade Unions and other affected parties in order to ensure that the

rights of the workers, farmers including rural labour and others

involved are fully protected.

      AITUC is against creation of unlimited number of Special

Economic Zones. Their number should be the barest minimum and

there should be a cap on the total number of Special Economic

Zones in a State. Sixty-six Special Economic Zones have already

been, created involving acquisition of more than 1,34,000 hectares of

land. If all the 300 Special Economic Zones proposed to be set up are

created, it will affect not only agriculture adversely but also food
security and will undermine the availability of resources for

development. It will also result in regional imbalance and locational

disparities. It will expose the workforce to the whims and mercies of

entrepreneurs. AITUC is of the firm view that the country needs a

balanced economic growth, social justice for amelioration of human

distress and not creating independent entities .of prosperity at select

places for generating super profits for the corporates. AITUC is also

against creating a new Zamidari System in the country under the

framework of Special Economic Zones.

     While AITUC supports industrialisation of the country, it rejects

the concept that Special Economic Zone is the only way to

industrialise. AITUC, therefore, strongly urges that industrialisation

should not be made contingent upon creation of Special Economic

Zones.

     Land ownership should not be 'transferred to the corporates.

The title of the land should be in the name of the Government.

Fanners should not be compelled to surrender their land and as far

as possible only wasteland or fallow/barren land should be utilised for

Special Economic Zones. The land acquisition should be totally

transparent and made public before acquisition of the land. Private
Corporates should be given limited land for SEZs, half of which

should statutorily be used for development of Processing Area and

the other half for the development of infrastructure. AITUC is against

State Government offering land many times more than what is

actually required for setting up of a Processing Area. This will enable

corporates to build residential houses for the rich and for making

Malls to earn huge profits for themselves. AITUC rejects the idea that

Special Economic Zones will generate employment. AITUC is of the

opinion that the number of farmers and rural workers who will get

dispossessed by the acquisition of land by corporates will be more

than the number who may get employment. AITUC demands not only

full and generous compensation to the dispossessed but also a

provision be made in the SEZ Act for providing jobs to those who are

affected by acquisition including farm labour. Larger SEZ should be

given   to   public   sector   undertakings    for   development     and

industrialisation. Activities connected with the development of real

estate and Malls in the SEZs should be curbed as it will lead to

creation of land mafias. In fact, before acquiring agricultural land, land

belonging to closed industrial units should be used for SEZs.
       Massive tax concessions have been given to corporates for

creation of SEZs, Under the SEZ Act (Section 26 to 30) and SEZ

rules, excessive Tax and Tariff concessions are being given to

companies for a consecutive period of 15 years. This would increase

the burden of taxation on the common people, Once given the status

of SEZs private industries will simply reap the benefits of all

leverages provided by the government, the most critical being land

acquisition in the name of 'public purpose'.

       The definition of the 'economic activity' in the SEZ Act is very

opaque and gives free hand to any activity - service, packaging,

entertainment, hotels, golf courses etc. All these activities would get

all   the   concessions   and   subsidies      from   the   people.   The

disproportionate growth as a result of SEZs will adversely hit small

scale industries, manufactures and entrepreneurs in the long run.

       For instance, they have been exempted from all taxes, cess

and duties, industrial transaction tax, securities and service tax,

electricity duties and Central taxes, etc. Income from exports has also

been exempted from Income Tax. This is a massive drain on national

economy amounting to nearly 1.71 lakh crores according to

Government circles. There is no justification for such huge and
massive concessions to corporates. This plunder must be stopped. It

will only add to their super profit at the cost of fulfillment of more

urgent tasks and commitments made in the National Common

Minimum Programme like enactment of a comprehensive law for the

workers of the unorganized and agricultural sector. The SEZs will

become 'foreign enclaves' which will encroach upon the rights of the

local self governments like Gram Panchayats' and will be violation of

the 73rd Constitutional Amendment. The SEZ Act (Section 9,11,12

and 31) is taking away this power back to the center and bureaucracy

(by creating 'Board of Approvals' and 'Development Commissioner'

and SEZ Authority', the most powerful in SEZs), the accountability of

whose is not certain.

     They will also snatch the sovereignty of locals from their lands,

and natural resources which is the backbone of local economy and

sustenance and also their fundamental right to movement as Indian

citizens is being violated. The fact that the SEZs would have their

own regulations, the rights for environmental and labour related

clearances, security arrangements will actually mean that they would

be self contained privatized autonomous entities. This is against the

Indian Constitution and nationhood.
Application and enforcement of labour laws in SEZs .

     Though under Section 49 of SEZ Act, matters relating to trade

unions, industrial and labour disputes, welfare of labour, including

conditions of work, provident funds and employers liability towards

workers are applicable as prescribed under various statutes, handing

over powers of enforcement and ensuring the applicability have been

mandatory (Rules 5 (e) and (f)) to Development Commissioners

negate the same as they are not accountable to either the

appropriate Government specified in various Acts or to the trade

unions. Trade Unions are not allowed to be formed in SEZs and no

statutory mechanism has been provided to ensure applicability of

various labour laws.

     AITUC is fIrmly and strongly opposed to exempting SEZs from

labour laws. All labour laws and other laws of the land must be made

applicable and enforceable in SEZs. We totally reject the idea of

creating 'foreign enclaves' in the country, by exempting them from

labour and other laws of the country. AITUC is also opposed to the

transfer of powers of Labour Commissioners to the Development

Commissioner provided under the Rules.
     AITUC therefore seeks re-appraisal of the SEZ policy and

amendment to the SEZ Act 2005 keeping in view the following issues:

  1. A National Commission be set up to review the SEZ Act and

      the concept behind it.

  2. No transfer of land ownership to private developers. All efforts

      should be made to locate and identify the barren, fallow and

      waste land for setting up industries under the SEZ Act. The

      States should help to develop infrastructure in such areas.

  3. Appropriate ceiling on land 'area under a SEZ developed by

      private developer and bigger SEZ to be built by the Public

      Sector. The current pattern of usage of land in SEZ needs to

      be thoroughly reversed to curb the chances of building mafias

      and real estate dealers' mischief.

  4. Limiting acquisition of agricultural land. Acquisition of multi

      crop lands should not be allowed.

  5. Framing      national   rehabilitation   policy,    amending   land

      Acquisition Act SEZ should not be allowed to become 'foreign

      enclaves'. All laws including labour laws be made applicable

      in   such   zones      and   powers     given     to   Development
      Commissioners should be withdrawn in the matter of labour

      laws.

  6. Framing a model compensation and rehabilitation policy that

      should cover all affected people including farm labour apart

      from the land-owning farmers.

  7. Before opting for agriculture land for industrialisation all

      possibilities of recycling land blocked in closed units be

      explored.




                           MINUTES

       MINUTES OF THE MEETINGS OF THE COMMITTEE ON
                      COMMERCE


                                 *VII
                         SEVENTH MEETING

     The Department Related Parliamentary Standing Committee on
Commerce met at 10.00 A.M. on Thursday, the 8th December, 2005,
in Committee Room ‘B’, Ground Floor, Parliament House Annexe,
New Delhi.

     PRESENT
1.        Dr. Murli Manohar Joshi  Chairman

      RAJYA SABHA

2.    Dr. T. Subbarami Reddy
3.    Shri Thennala G. Balakrishna Pillai
4.    Shri Abu Asim Azmi
5.    Shri Dinesh Trivedi
6.    Shri Robert Kharshiing
      LOK SABHA
7.    Shri Radhey Shyam Kori
8.    Shri N.N. Krishnadas
9.    Shri Shankhlal Majhi
10.   Shri Rajaram Pal
11.   Shri Vir Chandra Paswan
12.   Shri Badiga Ramakrishna


      SECRETARIAT

      Shri Surinder Kumar Watts, Deputy Secretary
      Shri D.K.Mishra, Committee Officer


2.    *                                                             *
*

_______________________________________________________
_____
*Minutes of the 1st to 6th Meetings of the Commitee pertains to other
subjects.
***Pertains to other subjects.
3.1. *                                                               *
*

3.2   *                                                              *
*
4.    The Committee then decided to take up the subject of
‘Functioning of Special Economic Zones’ for examination, in view of
their contribution towards boosting the Country’s exports for
examination. In this connection, it decided to hear a presentation on
the subject by the Secretary, Department of Commerce, at its next
sitting. In the meantime, the Chairman directed the Secretariat to
obtain a background note and other relevant material/information on
the subject from the Ministry. The Members were of the view that it
would be better if on-the-spot visits to SEZs which are functional and
those which are about to become functional, are undertaken, for the
sake of first hand information on the subject. Accordingly, the
Committee decided to visit the Special Economic Zones at Cochin,
Kandla and Mumbai in the second week of January, 2006. It
authorized the Chairman to finalise the details of the visit and
approach Hon’ble Chairman, Rajya Sabha, to obtain permission for
the visit of the Committee.

5.    The Committee adjourned at 10.40 A.M

_______________________________________________________
_____
***Pertains to other subjects.
                                     XI
                        ELEVENTH MEETING

    The Department Related Parliamentary Standing Committee on
Commerce meet at 11.00 A.M. on Friday, the 12th June, 2006, in
Room No. ‘63’, First Floor, Parliament House, New Delhi.


      PRESENT

1.        Dr. Murli Manohar Joshi  Chairman

      RAJYA SABHA

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Abu Asim Azmi
4.    Shri Robert Kharshiing

      LOK SABHA
5.    Shri K. Francis George
6.    Shri Shankhlal Majhi
7.    Shri Ram Chandra Paswan
8.    Shri Jivabhai A. Patel
9.    Shri Haribhau Rathod
10.   Shri S.P.Y. Reddy
11.   Shri Sarbananda Sonowal
12.   Shri C.H. Vijayashankar

      WITNESS

      *                                                      *
      *

      SECRETARIAT

      Shri Ravi Kant Chopra, JS & FA
      Shri Surinder Kumar Watts, Director
      Shri D.K.Mishra, Committee Officer
_______________________________________________________
_________
*Minutes of the 8th to 10th Meetings of the Commitee pertains to other
subjects.
***Pertains to other subjects.
2.       *                                                            *
*

3.       *                                                            *
*

4.    A verbatim record of the proceedings of the meeting was kept.
5.    The Committee also decided to further examine the subject of
functioning of SEZs. The Members were of the view that it would be
better if on-the-spot visits to some more SEZs, *** at Kolkata,
Chennai and Mumbai are undertaken. Accordingly, the Committee
decided to visit the Special Economic Zones, *** at Kolkata, Chennai
and Mumbai tentatively on or after 5th of July, 2006. It authorized the
Chairman to finalise the programme and details of the visit and
approach Hon’ble Chairman, Rajya Sabha, to obtain permission for
the visit of the Committee.
6.    The Committee adjourned at 12.50 A.M.



_______________________________________________________
_________
***Pertains to other subjects.


                                     III
                              THIRD MEETING

     The Department Related Parliamentary Standing Committee on
Commerce met at 3.00 P.M. on Tuesday, the 26th September, 2006,
in Room No. ‘63’, First Floor, Parliament House, New Delhi.
      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Banwari Lal Kanchhal
4.    Shri Moinul Hassan
5.    Shri Dinesh Trivedi
6.    Shri Robert Kharshiing

      LOK SABHA

7.   Shri C.K. Chandrappan
8.   Shri D.V. Sadananda Gowda
9.   Shri Jivabhai A. Patel
10.  Shri Virchandra Paswan
11.  Shri Shisupal N. Patle
12.  Shri E. Ponnuswamy
13.  Shri Kashiram Rana
14.  Shri Haribhau Rathod
15.  Shri S.P.Y Reddy
16.  Shri Bharatsinh Madhavsinh Solanki
17.  Shri Sarvananda Sonowal
18.  Shri Manjunath Kunnur
19.  Shri Amitava Nandy
20.  Shri Braja Kishore Tripathy
_______________________________________________________
_________
*Minutes of the 1st & 2nd Meetings of the Commitee pertains to other
subjects.
      SECRETARIAT

      Shri Ravi Kant Chopra, JS & FA
      Shri M.K. Khan, Under Secretary
      Shri D.K.Mishra, Committee Officer

2.    At the outset, the Chairman welcomed the newly nominated
Member, Shri Braja Kishore Tripathy to the Committee.

3.    *                                                             *
*

3.2   *                                                             *
*

4.    *                                                             *
*

5.    The Committee also decided to further examine the subject of
‘Functioning of SEZs’ and *** by making on-the-spot visit to Kandla
and Surat SEZs, as well ***. Accordingly, the Committee decided to
visit the SEZs at Kandla and Surat and *** from 15th to 20th October,
2006. The Committee authorized the Chairman to finalise the
programme as well as details of the visit and to approach Hon’ble
Chairman, Rajya Sabha, to obtain permission for the visit of the
Committee.

6.    The Committee decided to meet again on 14th October, 2006 at
3.00 P.M. in Delhi.

7.    The Committee adjourned at 4.20 p.m.
_______________________________________________________
_______
***Pertains to other subjects.
                                    IV
                           FOURTH MEETING

       The Department Related Parliamentary Standing Committee on
Commerce met at 3.00 P.M. on Saturday, the 14th October, 2006, in
Committee Room ‘A’, Ground Floor, Parliament House Annexe, New
Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Jai Parkash Aggarwal
4.    Shri K. Keshava Rao
5.    Shri Dinesh Trivedi
6.    Shri Robert Kharshiing

      LOK SABHA

7.    Shri Omar Abdullah
8.    Shri D.V. Sadananda Gowda
9.    Shri Radhey Shyam Kori
10.   Shri Virchandra Paswan
11.   Shri Shisupal N. Patle
12.   Shri E. Ponnuswamy
13.   Shri Kashiram Rana
14.   Shri Haribhau Rathod
15.   Shri S.P.Y Reddy
16.    Shri Nikhilananda Sar
17.    Shri Sarvananda Sonowal
18.    Shri Manjunath Kunnur
19.    Shri Braja Kishore Tripathy

       SECRETARIAT

       Shri Ravi Kant Chopra, JS & FA
       Shri Surinder Kumar Watts, Director
       Shri M.K. Khan, Under Secretary
       Shri D.K.Mishra, Committee Officer



2.     *                                                              *
*

3.     The Chairman informed Members that a communication had
been received from the Ministry of Commerce and Industy,
requesting for postponement of the visit of the Committee, proposed
from 15th to 20th October, 2006, to ***, Kandla, Surat and ***, since
the Government of Gujarat and all the establishments, including the
units in SEZs, would remain closed during that period, on account of
Deepavali. He had, therefore, acceded to the request and postponed
the visit.

4.         The Committee then discussed the future dates for the visit.
After due deliberation, the Committee decided that Visakhapatnam
and NOIDA SEZs may also be included in its itineray.               The
Committee, accordingly, decided to undertake the visit starting from
6th November, 2006.        The Committee authorized the Chairman to
finalize the dates and programme of the visit and also approach
Hon’ble Chairman, Rajya Sabha to seek his approval to the
revised/extended tour programme.

5.    The Committee adjourned at 3.45 p.m.
_______________________________________________________
_______
***Pertains to other subjects.
                               V
                            FIFTH MEETING

       The Department Related Parliamentary Standing Committee on
Commerce met at 4.00 P.M. on Tuesday, the 21st November, 2006, in
Committee Room ‘A’, Ground Floor, Parliament House Annexe, New
Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Jai Parkash Aggarwal
4.    Shri K. Keshava Rao
5.    Shri Dinesh Trivedi

      LOK SABHA

6.    Shri Shisupal N. Patle
7.    Shri Kashiram Rana
8.    Shri S.P.Y Reddy
9.    Shri Amitava Nandy
10.   Shri Braja Kishore Tripathy
11.   Shri Sippipari Ravichandran

      WITNESS
      REPRESENTATIVES OF THE   MINISTRY OF COMMERCE
      & INDUSTRY (DEPARTMENT OF COMMERCE)

      Shri G.K. Pillai, Secretary
      Shri Anil Mukim, Joint Secretary
      Shri Yogender Garg, Director

      SECRETARIAT

      Shri Ravi Kant Chopra, JS & FA
      Shri Surinder Kumar Watts, Director
      Shri M.K. Khan, Under Secretary
2.      *                                                              *
*

_______________________________________________________
_______
***Pertains to other subjects.
3.       The Committee then heard the views of the representatives
of the Department of Commerce on the subject of Functioning of
SEZs. Members sought certain clarifications which were replied to by
the   witnesses.   The     discussions   remained   inconclusive.   The
Committee decided to hear the Commerce Secretary again on the
subject on a later date.

4.     A verbatim record of the discussions of the meeting was kept.

5.    The Committee adjourned at 5.15 p.m.




                                    VI
                              SIXTH MEETING
     The Department Related Parliamentary Standing Committee on
Commerce met at 3.00 P.M. on Wednesday, the 6th December, 2006,
in Room No. ‘63’, First Floor, Parliament House, New Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Jai Parkash Aggarwal
4.    Shri Banwari Lal Kanchhal
5.    Shri Moinul Hassan
6.    Shri Dinesh Trivedi
7.    Shri Robert Kharshiing

      LOK SABHA

8.    Shri C.K. Chandrappan
9.    Shri N.N. Krishnadas
10.   Shri Jivabhai A. Patel
11.   Shri E. Ponnuswamy
12.   Shri Gingee N. Ramachandran
13.   Shri Kashiram Rana
14.   Shri S.P.Y Reddy
15.   Shri Manjunath Kunnur

      WITNESSES

      REPRESENTATIVES OF THE   MINISTRY OF COMMERCE
      & INDUSTRY (DEPARTMENT OF COMMERCE)

      Shri G.K. Pillai, Secretary
      Shri Anil Mukim, Joint Secretary
      Shri Yogender Garg, Director

      SECRETARIAT
      Shri Ravi Kant Chopra, JS & FA
      Shri Surinder Kumar Watts, Director
      Shri M.K. Khan, Under Secretary
2.    The Committee resumed the hearing of views of the
representatives of the Department of Commerce on the subject of
Functioning of SEZs which had remained inconclusive in the meeting
held on the 21st November, 2006. Members sought certain
clarifications which were replied to by the witnesses.

3.    A verbatim record of the discussions of the meeting was kept.

4.    The Committee adjourned at 4.55 p.m.
                                  VII
                           SEVENTH MEETING

    The Department Related Parliamentary Standing Committee on
Commerce met at 11.00 A.M. on Friday, the 12th January, 2007, in
Committee Room ‘Main’, Ground Floor, Parliament House Annexe,
New Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Jai Parkash Aggarwal
4.    Shri K. Keshava Rao
5.    Shri Moinul Hassan
6.    Shri Rajkumar Dhoot
7.    Shri Dinesh Trivedi
8.    Shri Robert Kharshiing

     LOK SABHA
9.    Shri Omar Abdullah
10.   Shri C.K.Chandrappan
11.   Shri Radhey Shyam Kori
12.   Shri N.N.Krishnadas
13.   Shri Jivabhai A. Patel
14.   Shri Virchandra Paswan
15.   Shri Shisupal N. Patle
16.   Shri Kashiram Rana
17.   Shri Haribhau Rathod
18.   Shri S.P.Y Reddy
19.   Shri Nikhilananda Sar
20.   Shri Sarvananda Sonowal
21.   Shri Amitava Nandy
22.   Shri Braja Kishore Tripathy
23.    Shri Sippipari Ravichandran
WITNESSES

REPRESENTATIVES OF             MINISTRIES

MINISTRY OF RURAL DEVELOPMENT

Shri Bhaskar Chatterjee, Additional Secretary
Shri Rakesh Behari, Joint Secretary
Shri A.K. Singh, Director

THE MINISTRY OF FINANCE (Department of Revenue)

Shri K.M.Chandrasekhar, Secretary
Shri R. R. Singh, Member (IT) CBDT
Shri Devendra Dutt, Member (Cus) CBEC
Shri Arbind Modi, Joint Secretary (TPC) CBDT
Shri Mukul Singhal, Joint Secretary (REV)
Shri B. K. Juneja, ADGC (Export Promotion) CBEC
Shri Dinesh Verma, CIT (ITA) CBDT

RESERVE BANK OF INDIA

Shri Anand Sinha, Executive Director

MINISTRY OF HOME AFFAIRS

Shri V. K. Duggal, Secretary

MINISTRY OF DEFENCE

Shri S. Banerjee, DG (Acq)
Lt. Gen. H.S. Lidder, CISC
Shri A. K. Jain, Additional Secretary (J)
Air Marshal A. V. Vaidya VM, Offg. CISC
Maj Gen Daljeet Singh, ACIDS (FP)
Brig R. P. Dastane, DDG MO (D)
Air Cmde M.M. Chaturvedi, DACIDS (FP)
R. Adml R. K. Dhowan, ACNS (P&P)
MINISTRY OF URBAN DEVELOPMENT

Shri Raja Mani, Joint Secretary
      MINISTRY OF LABOUR AND EMPLOLYMENT

      Ms. Sudha Pillai, Secretary
      Ms. Gurjot Kaur, Joint Secretary
      Dr. Ashok Sahu, Economic Adviser
      Shri Devinder Singh, Director

      SPECIAL INVITEE

      Shir Yogendra Garg, Director, Department of Commerce

      SECRETARIAT

      Shri Ravi Kant Chopra, JS & FA
      Shri Surinder Kumar Watts, Director
      Shri M.K. Khan, Under Secretary
      Shri D.K.Mishra, Committee Officer

2.    *                                                               *
*

3.    *                                                               *
*

4.1   The Committee then heard the views of the witnesses listed
above on the subject of Functioning of SEZs. Members sought
certain clarifications which were replied to by the witnesses. The
Chairman directed the witnesses to send written replies in resonse to
questions for which information was not readily available.

4.2   A verbatim record of the discussions of the meeting was kept.

5.1   Some Members expressed the view that in view of the
importance of the subject, its further examination was required.
There was a need for interaction with the farmers, whose land had
been/was being acquired for setting up of SEZs. Further, the views
of different State Governments, where the SEZs were being set up,
as well as that of the stake-holders in the SEZs, like the promoters,
developers, unit-holders, etc., were also essential, to enable the
Committee to formulate views on the subject. Members were of the
view that while the representatives of State Governments and other
stake-holders could appear



_______________________________________________________
_______
***Pertains to other subjects.

before the Committee, the farmers may not be able to come to Delhi,
to present their views before the Committee. For this purpose, the
Committee decided to constitute a Sub Committee, which would visit
various places to be identified by the latter, and interact with the
farmers, to elicit their views in respect of acquisition of their lands for
the SEZs.        The Sub Committee would have the following
composition:

         (i)     Shri Kashiram Rana-Convenor
         (ii)    Shri Dinesh Trivedi-Co-Convenor

                 Members
                 Rajya Sabha
         (iii)   Shri K. Keshava Rao
         (iv)    Shri Moinul Hassan

                 Lok Sabha

         (v) Shri Omar Abdullah
         (vi) Shri D.V. Sadananda Gowda
         (vii) Shri Braja Kishore Tripathy
5.2   The Committee authorized the Chairman to approach Hon’ble

Chairman, Rajya Sabha, for permission to the visit of the Sub

Committee, as soon as the details are worked out by the latter.

5.3   The Committee also authorized the Chairman to identify stake-

holders and the States, whose representatives could be invited to

appear before the Committee and approach Hon’ble Chairman, Rajya

Sabha, to seek permission for inviting the representatives of different

State Governments before the Committee.

6.    A verbatim record of the discussions of the meeting was kept.

7.    The Committee adjourned at 4.50 p.m.




                                  VIII
                            EIGHTH MEETING

     The Department Related Parliamentary Standing Committee on
Commerce met at 11.00 A.M. on Wednesday, the 24th January, 2007,
in Committee Room ‘Main’, Ground Floor, Parliament House Annexe,
New Delhi.


      PRESENT
1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Jai Parkash Aggarwal
3.    Shri K. Keshava Rao
4.    Shri Moinul Hassan
5.    Shri Rajkumar Dhoot
6.    Shri Dinesh Trivedi
7.    Shri Robert Kharshiing

      LOK SABHA

8.    Shri Omar Abdullah
9.    Shri C.K.Chandrappan
10.   Shri Radhey Shyam Kori
11.   Shri N.N.Krishnadas
12.   Shri Virchandra Paswan
13.   Shri Shisupal N. Patle
14.   Shri Gingee N.Ramachandran
15.   Shri Kashiram Rana
16.   Shri Haribhau Rathod
17.   Shri Nikhilananda Sar
18.   Shri Bharatsinh Madhavsinh Solanki
19.   Shri Sarbananda Sonowal
20.   Shri Manjunath Kunnur
21.   Shri Braja Kishore Tripathy
22.   Shri Sippipari Ravichandran
WITNESSES

REPRESENTATIVES OF             ALL INDIA KISAN SABHA
Shri K. Varadha Rajan, General Secretary,
Shri Noorul Huda

REPRESENTATIVES OF COMMUNIST PARTY OF INDIA

Shri A. B. Bardhan, General Secretary,
Shri D.Raja, Secretary

REPRESENTATIVE OF BJP INVESTORS’ CELL

Dr. Kirit Somaiya, Convenor.

REPRESENTATIVES OF DEVELOPERS/PROMOTERS OF
SEZ

Shri Manoj Chanduka, General Manager (Finance), Mundra
Port and SEZ Ltd. (Gujarat Adani Port Ltd.)
Shri Basant Jain, DGM Special Projects, Mahindra & Mahindra
Shri D. Prashad, Principal Projects Advisor, Haryana SEZ,
Reliance Infrastructure
Shri Chandrakethu Jha, Vice President,
Ms.Bargavi Natesan, Manager. Infosys
Shri Srikant Badiga, Vice President, Hyderabad Gems Ltd


REPRESENTATIVES OF STATE GOVERNMENTS

GUJARAT

Shri Arvind Aggarwal, Commissioner, Industries,
Shri G.I.Desai, Deputy Commissioner, Industries
Shri Bharat Rawal, Joint MD, GSIDC

ANDHRA PRADESH

Shri D.A.Somayajulu, Adviser to Government,
     Shri Sutheertha Bhattacharya, Commissioner of Industries

     HARYANA

     Shri D.R.Dhingra, Director, Industries & Commerce


     MAHARASHTRA

     Shri K. Shivaji, Development Commissioner, Industries
     Shri Apurva Chandra, Resident Commissioner
     Shri Tanaji Satre, Joint CEO, MIDC

     WEST BENGAL

     Shri Hem Pande, Principal Secretary to the Government of
     West Bengal & Resident Commissioner

     UNITS

     Shri S. Surya Narayanan, Executive Director, Celebrity
     Fashions Limited
     Shri Saravanan, General Manager, Celebrity Fashions Limited

     SPECIAL INVITEE

     Shir Yogendra Garg, Director, Department of Commerce,
     Ministry of Commerce & Industry, Government of India

     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D. K. Mishra, Committee Officer

2.   The Committee heard the views of the witnesses listed above
on the subject of “Functioning of SEZs”. Members sought certain
clarifications which were replied to by the witnesses. The Chairman
directed the witnesses to send written replies in resonse to questions
for which information was not readily available.

3.     The hearing of the views of the representatives of State
Governments, Reliance Infrastructure, Hyderabad Gems Ltd and
Calebrity Fashions Limited remained inconclusive due to paucity of
time. The Committee decided to hear them again in detail in its next
meeting, to be held on 1st February, 2007.

4.     A verbatim record of the discussions of the meeting was kept.

5.     The Committee adjourned at 4.50 p.m.


                                    IX
                             NINTH MEETING

     The Department Related Parliamentary Standing Committee on
Commerce met at 11.00 A.M. on Wednesday, the 1st February, 2007,
in Committee Room ‘Main’, Ground Floor, Parliament House Annexe,
New Delhi.


       PRESENT

1.       Dr. Murli Manohar Joshi  Chairman

       Rajya Sabha

     2. Shri Thennala G. Balakrishna Pillai
     3. Shri Jai Parkash Aggarwal
     4. Shri Moinul Hassan
     5. Shri Banwari Lal Kanchhal
     6. Shri Robert Kharshiing

       LOK SABHA
7.    Shri D. V. Sadananda Gowda
8.    Shri Virchandra Paswan
9.    Shri Shisupal N. Patle
10.   Shri Kashiram Rana
11.   Shri S.P.Y Reddy
12.   Shri Nikhilananda Sar
13.   Shri Amitava Nandy
14.   Shri Braja Kishore Tripathy
15.   Shri Balashowry Vallabhaneni

      WITNESSES

      REPRESENTATIVES OF STATE GOVERNMENTS

      GUJARAT

      Shri Arvind Aggarwal, Commissioner, Industries,
      Shri G.I.Desai, Deputy Commissioner, Industries
      Shri Nayan Raval, General Manager, GSIDC


      ANDHRA PRADESH

      Shri Sutheertha Bhattacharya, Commissioner of Industries
      Shri Murlidhar Reddy, Executive Director, APIIC

      HARYANA

      Shri P. K. Chaudhery, IAS, Financial Commissioner & Principal
      Secretary
      Shri D.R.Dhingra, Director, Industries & Commerce


      MAHARASHTRA

      Shri C. Shivaji, Development Commissioner, Industries
      Shri Apurva Chandra, Resident Commissioner
      Shri Tanaji Satre, Joint CEO, MIDC

      TAMIL NADU
     Shri Rajaraman, Special Secretary to Government, Industries
     Department

     WEST BENGAL

     Shri Hem Pande, Principal Secretary to the Government of
     West Bengal & Resident Commissioner

     REPRESENTATIVES OF DEVELOPERS/PROMOTERS

     WIPRO

     Shri Puneet Kumar, General Manager
     Shri Raj Shekar, Manager, Administration

     RELIANCE INFRASTRUCTURE

     Shri D. Prashad, Principal Projects Advisor, Haryana SEZ

     HYDERABAD GEMS LTD

     Shri Srikanth Badiga, Vice President
     Shri G. K. Nair, Director, Geetanjali Group

     DLF

     Shri Nilesh Ramjiyani, Deputy General Manager (Indirect
Taxes)
     Shri Yogesh Verma
     SPECIAL INVITEE

     Shri P. V. Sivaraman, Deputy Secretary, Department of
     Commerce, Ministry of Commerce & Industry, Government of
     India


     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D. K. Mishra, Committee Officer

2.   The Committee heard the views of the witnesses listed above
on the subject of “Functioning of SEZs”. Members sought certain
clarifications which were replied to by the witnesses. The Chairman
directed the witnesses to send written replies in resonse to questions
for which information was not readily available.

3.   A verbatim record of the discussions of the meeting was kept.

4.   The Committee adjourned at 5.10 p.m.
                                  X
                            TENTH MEETING

     The Department Related Parliamentary Standing Committee on
Commerce met at 11.30 A.M. on Saturday, the 10th February, 2007,
in Committee Room ‘A’, Ground Floor, Parliament House Annexe,
New Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai

      LOK SABHA

3.    Shri C.K.Chandrappan
4.    Shri Virchandra Paswan
5.    Shri Shisupal N. Patle
6.    Shri Kashiram Rana
7.    Shri S.P.Y Reddy
8.    Shri Nikhilananda Sar
9.    Shri Sarbananda Sonowal
10.   Shri Amitava Nandy
11.   Shri Sippipari Ravichandran

      WITNESSES

      REPRESENTATIVES OF DEPARTMENT OF AGRICULTURE
      AND    CO-OPERATION

      Shri P. K. Mishra, Secretary (A&C)
      Dr. S. M. Jharwal, Principal Advisor
       Shri Shamsher Singh, Additional Commissioner (NRM)
       Shri N. B. Singh Agriculture Commissioner
     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D. K. Mishra, Committee Officer

2.   The Committee heard the views of the witnesses listed above
on the subject of “Functioning of SEZs”. Members sought certain
clarifications which were provided by the witnesses. The Chairman
directed the witnesses to send written replies in response to
questions for which information was not readily available.

3.   A verbatim record of the discussions of the meeting was kept.

4.   The Chairman informed the Committee that the Sub-committee
for SEZs would visit Haryana, Andhra Pradesh, Karnataka, Gujarat,
Maharashtra and Orissa from 11th to 17th February, 2007. The
Committee felt that some more Members may be nominated to the
Sub-committee and authorized the Chairman to nominate additional
Members in the Sub-committee, as considered necessary.

5.   The Committee adjourned at 2.10 p.m.
                                    XI
                        ELEVENTH MEETING

    The Department Related Parliamentary Standing Committee on
Commerce met at 3.00 P.M. on Monday, the 26th February, 2007, in
Committee Room ‘Main’, Ground Floor, Parliament House Annexe,
New Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri K. Keshava Rao
4.    Shri Banwari Lal Kanchhal
5.    Shri Moinul Hassan
6.    Shri Dinesh Trivedi

      LOK SABHA

7.    Shri C.K.Chandrappan
8.    Shri E. Ponnuswamy
9.    Shri Kashiram Rana
10.   Shri Nikhilananda Sar
11.   Shri Amitava Nandy
12.   Shri Sippipari Ravichandran

      WITNESSES
      REPRESENTATIVES OF MINISTRY OF COMMERCE &
      INDUSTRY
I     DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION
      Dr.Ajay Dua, Secretary
      Shri Gopal Krishna, Joint Secretary
      Mrs. Gauri Singh, Director
II   DEPARTMENT OF COMMERCE
     Shri G.K.Pillai, Secretary
     Shri Yogindra Garg, Director
     Shri P.V.Sivaraman, Deputy Secretary

     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D. K. Mishra, Committee Officer

2.   The Chairman informed Members that some representatives of
farmers from Jhajjar District in Haryana had met him in his room.
They complained that they were not informed of the Sub-committee’s
visit to Jhajjar by the local administration. According to them, agents
of the promoting company only were brought before the Sub-
committee. Also, some farmers, who got the news of the visit of the
Sub-committee, were not allowed to meet the Sub-committee. Some
Members, who were also Members of the Sub-committee, informed
that they also had received similar complaints during the visit. The
Committee observed that it was a serious matter. The farmers should
not have been stopped from meeting the Sub-committee.

3.   The Chairman also informed Members that the Secretary,
Ministry of Urban Development had been invited to present his views
before the Committee on 26th February, 2007 on the subject of
Functioning of SEZs. However, Secretary (Urban Development)
expressed his inability to come due to an official engagement of an
unavoidable nature. Therefore, the Chairman, alongwith some
Members of the Sub-committee for SEZs, heard his views on 23rd
February, 2007 on the subject. The Committee decided that the
verbatim record of the discussions may form part of Commttee’s
record and may be circulated to all the Members.

4.   The Committee then heard the views of the witnesses listed
above on the subject of ‘Functioning of SEZs’.     Members sought
certain clarifications, which were replied to by the witnesses. The
Chairman directed the witnesses to send written replies in response
to the queries for which information was not readily available. The
evidence remained inconclusive.

5.   A verbatim record of the discussions of the meeting was kept.

6.   The Committee adjourned at 5.30 p.m.
                                XII
                         TWELFTH MEETING

       The Department Related Parliamentary Standing Committee on
Commerce met at 4.00 P.M. on Wednesday, the 7th March, 2007, in
Committee Room ‘D’, Ground Floor, Parliament House Annexe, New
Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha
2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Banwari Lal Kanchhal
4.    Shri Moinul Hassan
5.    Shri Dinesh Trivedi

      LOK SABHA

6.    Shri C.K.Chandrappan
7.    Shri E. Ponnuswamy
8.    Shri Kashiram Rana
9.    Shri Nikhilananda Sar
10.   Shri Amitava Nandy
11.   Shri Braja Kishore Tripathy
12.   Shri Sippipari Ravichandran

      WITNESSES
      REPRESENTATIVES OF MINISTRY OF COMMERCE &
      INDUSTRY
      DEPARTMENT OF COMMERCE

      Shri G. K. Pillai, Secretary
      Shri Anil Mukim, Joint Secretary
      Shri Yogindra Garg, Director
      Shri P. V. Sivaraman, Deputy Secretary
     Ms. B. Ravindran, Under Secretary
     Shri J. P. Singh, Section Officer

     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D. K. Mishra, Committee Officer

2.   The Committee heard the views of the above witnesses on the
subject ‘Functioning of SEZs’. Members sought certain clarifications,
which were replied to by the witnesses.

3.   A verbatim record of the discussions of the meeting was kept.

4.   The Committee adjourned at 5.30 p.m.
                               *XVIII
                      EIGHTEENTH MEETING

       The Department Related Parliamentary Standing Committee on
Commerce met at 12:00 Noon on Friday, the 08th June, 2007, in
Committee Room ‘C’, Ground Floor, Parliament House Annexe, New
Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      Rajya Sabha

2.    Shri Thennala G. Balakrishna Pillai
4.    Shri K. Keshava Rao
5.    Shri Banwari Lal Kanchhal
6.    Shri Moinul Hassan
7.    Shri Dinesh Trivedi
8.    Shri Robert Kharshiing

      LOK SABHA

8.    Shri C.K.Chandrappan
9.    Shri N. N. Krishnadas
10.   Shri Shisupal N. Patle
11.   Shri Haribhau Rathod
12.   Shri S. P.Y. Reddy
13.   Shri Nikhilananda Sar
14.   Shri Manjunath Kunnur
15.   Shri Braja Kishore Tripathy
16.   Shri Sippiparai Ravichandran

      SECRETARIAT

      Shri Ravi Kant Chopra, JS & FA
      Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary

_______________________________________________________
_________
*Minutes of the 13th to 17th Meetings of the Commitee pertains to
other subjects.
2.   The Committee took up for consideration the draft Report on

the Functioning of Special Economic Zones, as approved by the Sub-

committee. After an in-depth discussion, the Committee adopted the

same, with some modifications. The Committee authorised the

Chairman to effect necessary changes and corrections in the draft

Report.   Since the Parliament was not in session, the Committee

authorized the Chairman that the Report may be presented to

Hon’ble Chairman, Rajya Sabha in accordance with the procedure

laid down in the direction of Hon’ble Chairman, as published in Rajya

Sabha Bulletin, Part II, dated 25th January, 1996.

3.    The Chairman thanked Members of the Sub-committee and

the Committee for their painstaking efforts in finalizing the Report.

Members also expressed a deep sense of gratitude and appreciation

to the Chairman for his efforts all through the examination of the

subject and guidance in drafting the Report.          Members also

appreciated the support provided by the Secretariat in facilitating

examination of the subject by the Committee as well as in drafting the

Report.

4.   *                         *                                  *

5.   The Committee adjourned at 1.15 p.m.
_______________________________________________________
______________________
***Pertains to other subjects.
                                     XIX
                      NINETEENTH MEETING

    The Department Related Parliamentary Standing Committee on
Commerce met at 10.30 A.M. on Wednesday, the 20th June, 2007, in
Room No. ‘53’, First Floor, Parliament House, New Delhi.


      PRESENT

1.     Dr. Murli Manohar Joshi  Chairman

      RAJYA SABHA

2.    Shri Thennala G. Balakrishna Pillai
3.    Shri Moinul Hassan
4.    Shri Dinesh Trivedi
5.    Shri Robert Kharshiing

      LOK SABHA

6.    Shri Radhey Shyam Kori
7.    Shri Shisupal N. Patle
8.    Shri Kashiram Rana
9.    Shri Haribhau Rathod
10.   Shri S. P.Y. Reddy
11.   Shri Nikhilananda Sar
12.   Shri Manjunath Kunnur
13.   Shri Amitava Nandy
14.   Shri Braja Kishore Tripathy
15.   Shri Sippiparai Ravichandran

      SECRETARIAT

      Shri Surinder Kumar Watts, Director
      Shri M.K. Khan, Under Secretary
       Shri D.K. Mishra, Committee Officer
2.    The Chairman informed Members that the Eighty-third Report

of the Committee on the Functioning of Special Economic Zones

(SEZs), which was adopted by the Committee on the 8th June, 2007,

will be presented to Hon’ble Chairman today at 12.00 noon at his

residence.

3.    *                                                         *

*

4.    The meeting concluded at 11.40 a.m.

_______________________________________________________
______________________
     ***Pertains to other subjects.
                                               II

       MINUTES OF THE MEETINGS OF THE SUB COMMITTEE
           ON SPECIAL ECONOMIC ZONES (SEZs)


                                   I
                             FIRST MEETING

      The Sub Committee for Special Economic Zones of the
Department Related Parliamentary Standing Committee on
Commerce met at 3.00 P.M. on Wednesday, the 24th January, 2007,
in Banquet Hall, Ground Floor, Parliament House Annexe, New Delhi.


     PRESENT

1.     Shri Kashiram Rana-Convenor
2.    Shri Dinesh Trivedi-Co-Convenor

     MEMBERS

     RAJYA SABHA

3.   Shri K. Keshava Rao
4.   Shri Moinul Hassan

     LOK SABHA

5.   Shri Braja Kishore Tripathy


     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D.K.Mishra, Committee Officer
2.     The Convenor welcomed Members to the first meeting of the
Sub-committee and gave them an over view of the work assigned to it
by the main Committee.

3.     The Sub-Committee then discussed its future programme. After
some discussion, the Sub-Committee decided to visit the States of
Haryana, Maharashtra, Andhra Pradesh, Gujarat and Karnataka from
11th to 17th February, 2007. The Sub-Committee authorized the
Convenor to finalize the details of the visit programme and seek
permission of the Hon’ble Chairman, Rajya Sabha through the
Chairman of the Committee for the visit.

3.     The Sub-Committee adjourned at 3.30 p.m.



                                     II
                             SECOND MEETING

     The Sub Committee for Special Economic Zones of the
Department Related Parliamentary Standing Committee on
Commerce met at 3.00 P.M. on Thursday, the 1st February, 2007, in
Banquet Hall, Ground Floor, Parliament House Annexe, New Delhi.


       PRESENT

1.      Shri Kashiram Rana-Convenor


       MEMBERS

       RAJYA SABHA

     2. Shri Moinul Hassan
     LOK SABHA

3.   Shri Braja Kishore Tripathy
4.   Shri D.V. Sadananda Gowda


     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D.K.Mishra, Committee Officer

2.   The Convenor of the Sub-committee informed Members that
permission of Hon’ble Chairman, Rajya Sabha had been obtained to
visit the States of Haryana, Maharashtra, Andhra Pradesh, Gujarat
and Karnataka from 11th to 17th February, 2007. The Convenor also
informed that a large number of tribals and farmers in Orissa were
facing problems in respect of acquisition of their lands for SEZs. The
Sub-committee, accordingly, reviewed its programme and decided to
include Orissa in the itinerary of the proposed visit. The Sub-
committee authorized the Convenor to seek approval of Hon’ble
Chairman, Rajya Sabha for inclusion of Orissa in the proposed visit,
through the Chairman of the Committee.

3.   The Sub-Committee adjourned at 3.30 p.m.
                                         III
                                 THIRD MEETING

      The Sub Committee of the Department Related Parliamentary
Standing Committee on Commerce for Special Economic Zones met
at 4.30 P.M. on Thursday, the 5th April, 2007, in Committee Room
‘Main’, Ground Floor, Parliament House Annexe, New Delhi.


     PRESENT

1.     Shri Kashiram Rana-Convenor
2.    Shri Dinesh Trivedi-Co-Convenor

     MEMBERS

     RAJYA SABHA

3.   Shri Moinul Hassan
4.   Shri Thennala G. Balakrishna Pillai

     LOK SABHA

5.   Shri Braja Kishore Tripathy


     SECRETARIAT

     Shri Ravi Kant Chopra, JS & FA
     Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary
     Shri D.K.Mishra, Committee Officer

2.   The Sub-Committee considered and adopted the draft study
note on its visit to Haryana, Andhra Pradesh, Karnataka, Gujarat and
Maharashtra   from   11th   to    16th     February,   2007,   with   some
modifications, for consideration by the main Committee.
3.     The Sub-Committee adjourned at 4.45 p.m.




        MINUTES OF THE MEETING OF THE SUB COMMITTEE OF
     THE DEPARTMENT RELATED PARLIAMENTARY STANDING
                 COMMITTEE ON COMMERCE

                                      III
                                FIRST MEETING

      The Sub-committee of the Department Related Parliamentary
Standing Committee on Commerce met at 11.00 A.M. on Tuesday,
the 5th June, 2007, in Private Dinning Room (PDR), Ground Floor,
Parliament House Annexe, New Delhi.


       PRESENT

1.       Dr. Murli Manohar Joshi-Chairman

        RAJYA SABHA

2.      Shri K. Keshava Rao
3.      Shri Moinul Hassan
4.      Shri Dinesh Trivedi

       LOK SABHA

5.      Shri Kashiram Rana
6.      Shri Braja Kishore Tripathy


       SECRETARIAT

       Shri Ravi Kant Chopra, JS & FA
       Shri Surinder Kumar Watts, Director
     Shri M.K. Khan, Under Secretary


2.   The Sub-committee took up for consideration the Draft Report
on the Functioning of Special Economic Zones.        After a detailed
discussion, the Sub-committee finalized the Draft Report with certain
modifications, for further consideration by the Main Committee.

3.   The Sub-committee adjourned at 3.15 p.m.

								
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