At a media-studded book release function, a leading editor was recounting a recent incident. He was travelling with a top Uttar Pradesh politician (who we will not name but call Mr A) in his brand new plane. The politician told him that the plane was a gift from a leading industrialist (who we will not name but call Mr AA). The editor was then told that the return gift by the politician was not meagre: it was 1,000 hectares (ha) of prime agricultural land for a new special economic zone (sez). Hearing this tale, we in the audience smiled wisely. This was titillating sleaze.
The idea of sezs is borrowed from China, where zones are created to facilitate manufacturing and business activity, which are special in terms of labour and tax laws. These are countries within countries, intended to expedite reform that cannot be done across board. With the enactment of the sez Act 2005, the idea is catching on like wildfire in India.
And why not? After all, which industrialist will turn down the chance to get between 1,000-10,000 ha of prime land for industrial and real estate development? The land is acquired from farmers by government — using all its persuasive and muscle power — and then handed over to industry. Which industrialist will not cut many corners to ensure that this scheme, which gives them not just exemption from custom duties but also income and excise tax, is not expedited? It is only incidental, they will say, that the scheme also allows them to build hotels, schools, hospitals, houses, airports and ports. They will not tell you that these mega-profit developments are carefully regulated by some clumsy rules so that the ‘real estate’ purpose is assured.
Why should we be surprised then by the sleaze and scam stories that surround these zones? These are the deals of modern India, in which corruption comes in many colours and kinds.
Two key concerns have been raised: the fact that large areas of cultivable lands are being acquired for industry and there is inadequate compensation to farmers and others displaced. Two, that there will be a substantial loss of revenue for government with manufacturing and services moving to these tax-free havens. It is also suggested in fact that these zones will not lead to a flood of new investment, but indeed the flight of old investment, which will want the tax-free status. The case of Korean giant Posco’s mega steel plant is a case in point. It ‘managed’ to get categorised as an sez, well after it had already come into the country to set up shop.
But sez status is the ultimate development dream. I have no doubt that in the current weak political scenario industry will wriggle out with some glib answers and some tall promises of providing employment to the displaced.
I have also no doubt that sezs are the beginning of the end of the idea of one India.
The fact is that sezs are not even about creating a few special zones. They are about the abdication of responsibility to sort out the underlying problems that plague the country as a whole. The fact is that infrastructure, power, water, housing, education and health services are in a mess. Over the past 50 years, we have tried in our ham-handed socialist ways to find answers to provide services for all. We don’t know why, but this approach is not working. There is growing impatience about growth. Therefore, the easier and much less complicated answer is to let that part of India, which can provide for itself, to prosper. The grandiose idea will be then the government can take care of the needy with some sops and some more developmental schemes. But we forget that the reason why the answers of the past were not working was precisely because we ensured that the rich were ecologically subsidised in the name of the poor. Now this will get worse.
But in this way enclave India will grow. Water will come, not from public municipal taps, which cannot be fixed, but from private companies, which will purify it and supply it in bottles or colony taps, for those who can pay. It is another matter that these companies will not pay or pay a pittance for the same water they consume. Power will come from electricity companies, which will produce it exclusively for those who pay bills covering the cost, plus profit, of its manufacture. Of course, there will be no garbage in the colony as cleaners will come from outside — for a price — and take it away. Where and how, it is best not to know. In this way, infrastructure development is no longer a problem: it is built for those who can pay. Flyovers can take people straight from the company-run airport to their homes and work. Rich and poor India are now separated at birth.
The fundamentally fatal flaws in this approach are many: first, let us be clear, this rich and exclusive India will continue to be subsidised to the hilt. Second, it will be built on the backs of the poor using the might of the state. The land, for instance, is not bought by the rich private sector paying the price the seller is willing to sell on — the market price and above. This private property will be acquired under the convenient cover of land acquisition acts at discounted prices. Third, the resources for development will be severely compromised, as growth will no longer contribute to revenues of government.
Who said that civilised countries had to tax their rich to support their poor? That was old India’s baggage. This new India only dreams. Nightmares are for others. This is another India. Here, everything is possible. It is another matter that it is not ours.