Standards, not double standards : Bhaskar Goswami
India should take US-backed WTO attempts to thrust GM foods on us with a pinch of salt.
If things do not work your way, seek influence of a heavy weight. This is exactly what the United States is trying to do. With India not accepting genetically modified (GM) foods, the US is trying to rope in the World Trade Organisation (WTO) to exert pressure. Knowing that India has not violated any WTO norms, the US is still trying to use the Geneva route to open the Indian market to GM foods. It is opposing India’s efforts to set standards for labeling GM products. Terming it as trade restrictive, it has threatened to invoke the WTO provisions on creating technical barriers to trade, and sanitary and phyto-sanitary measures.
Either way, India is refusing to blindly toe the American line. The government has taken two significant measures to regulate GM products. First, the ministry of commerce has issued a notification, which prohibits the import of genetically modified organisms (GMOs) for food, feed or processing, industrial processing, research and development for commercialisation or environmental release without the approval of the Genetic Engineering Approval Committee (GEAC).
Second, the health ministry has amended the Prevention of Food Adulteration (PFA) Act, and issued a similar notification which covers import, manufacture, storage, distribution or sale of GM food. Both these new rules have also made labeling of GM products compulsory.
Human safety from eating GM foods has been a matter of great concern. After GM soya was introduced in the UK, for instance, cases of allergies went up. A 2005 study found that GM pea, which is under development, caused severe immune responses in mice. Another study reported that GM maize-fed rats developed major lesions in kidneys and livers. Likewise, a number of other scientific studies have pointed out the harmful effects of GM food.
Notwithstanding GM industry claims to the contrary, the fact remains that many aspects of this technology still remain uncertain and several products are being released into the market without adequate tests and trials. In agriculture, for example, GM and non-GM crops cannot grow in isolation and can easily combine through pollination, mixing of seeds etc. Experiments to study the impact of such contamination on the environment and food have simply not been done. It is, therefore, to prevent illegal imports, and also to enable consumers to make a conscious choice that labeling norms are essential.
Since the US does not segregate GM products from non-GM ones, almost all processed food products contain traces of GMOs. This is also the main reason why they persistently oppose labeling. Ironically, while goods imported into the US have to meet the most stringent specification, whenever any US exporter is directed to follow the same procedures by the importing country, it is termed as a trade barrier. When similar tactics failed with India, the US turned to the WTO, which has legal instruments, to help it out.
Using multilateral bodies to prevent GM labeling is not new. The US has consistently blocked international legislation on labeling at various forums like the United Nations’ Food Standards Committee and Codex Committee on Food Labeling. However, this time it has challenged the sovereign right of India to decide about its food and its safety, something which is not only against democratic principles but also runs contrary to the Cartagena Protocol on Biosafety. As it is, under pressure from edible oil importers in India, the commerce ministry has exempted the import of GM soybean oil from labeling requirement till March 2007. Even the amended PFA of the health ministry is quite lax. Instead of rigorous biosafety tests before allowing the import, the ministry is merely relying on the safety information provided by the importer.
Further, the amendment is coming at a time when there is no laboratory in the country, which can test products for GM presence. Instead of protecting the health interests of the citizens by prohibiting production or import of GM food, the amendment in its present form intends to legalise its trade.
Now, through the WTO, the US wants India to lift all curbs on the import of GM products into the country.
Incidentally, major trading partners of the US, such as Canada, Japan, South Korea, European Union and Australia follow their own GM labeling protocols but the US has never brought such complaints against these countries.
It is obvious that the notifications are not only discriminatory but meant to browbeat India into submission. While the extreme reaction of the US is not surprising, the government should resist the attempt of US to dump GM food into India and concerned citizens should insist on strengthening the PFA in the interest of the consumer.
The writer is with the Forum for Biotechnology & Food Security, New Delhi
Saturday, May 19, 2007
Thursday, May 17, 2007
Why is India importing Wheat ?
Wheat Imports : Subverting Procurement, Cheating Farmers - Bhaskar Goswami
Countercurrents.org, 16 May 2007
http://www.countercurrents.org/goswami160507.htm
For the second year in the running, India is importing wheat. Last year the government justified imports on account of lower production. This year it is being justified in the name of higher prices for farmers.
In order to meet the buffer stock requirements, the government has decided to import up to 50 lakh tonnes of wheat this year. Thanks to the government’s policies, from a wheat surplus nation, India today has been reduced to the world’s largest importer of wheat.
Alarm bells began ringing in early March when, despite predictions of a bumper wheat harvest in India, the US Wheat Associates - a trade body funded by the federal government and US wheat producers - said India will import up to 30 lakh tonnes of wheat this year. Well, not only has the government followed this diktat, but has revised this estimate by 20 lakh tonnes more as a small favour to multinational grain corporations.
The rush to go for imports right now is questionable. With an additional 18 lakh hectares under wheat, the production has increased by forty lakh tonnes. Since the peak wheat procurement season is during the second half of May, there is ample time left for the government to meet its procurement target of 151 lakh tonnes. On 1st May, the Food Secretary said that stocks are adequate to last till January 2008. On 5th May, the Food and Agriculture Minister, Sharad Pawar announced, “Last year, the buffer stock position was only two million tonne, this time it is 4.5 million tonne. That is why I am quite comfortable about the buffer stock.”
The Minister justified the move to import wheat by adding, “However, I want to build up stock for the next year”. This, when the wheat produced is adequate to meet the country’s requirements and there is no shortage in the buffer stock. Wheat for the next season is yet to be planted but the government is apprehensive of a bad crop next year!
"If the farmer is getting a better price, as Agriculture Minister I am the happiest person. However, as a Food Minister, if I face any problem, I will import," said Pawar. He was referring to farmers getting a better price by selling to private companies thereby leaving little for the government to pick up. This is a replay of the 2006 argument, when the Food Corporation of India (FCI) failed miserably to meet its procurement target. By offering a lower price to farmers, the government made out a case for imports, which translated to a windfall of Rs. 5,100 crores to grain corporations like the Australian Wheat Board, Glencore, Toepfer, Cargill, etc.
This year, the procurement is worse than what it was last year. By end of April, even half of the procurement target was not met, and a shortfall of 25 lakh tonnes by the end of the procurement season is possible. This is because the Minimum Support Price (MSP) of Rs. 850 per quintal offered by the government is much lower than the prevailing market rate of over Rs. 1,000. Naturally, bulk of the wheat is being cornered by the private sector. As expected, the gains to grain corporations this year will also be much higher than 2006. Lack of rainfall in Europe, Australia and South Africa has affected wheat production and depressed world wheat stocks to their lowest in the last 25 years. Wheat from Ukraine and Russia will hit markets only by August, while Pakistan is still a small exporter. Major wheat exporter, Argentina, has banned wheat export to control domestic prices.
The only players left are the US and Canada, where the price of wheat is already up by $40 per tonne over last year. Given the global supply crunch, announcement of imports by India will push the price through the roof, as it happened last year. While last year India paid around $207 per tonne of wheat (approximately Rs. 930 per quintal), the cost this year is likely to be upwards of $300 per tonne (or Rs. 1,200 per quintal at the current exchange rate), a rich bonus for corporations.
Instead of doling out Rs. 6,000 crores to corporations for importing 50 lakh tonnes of wheat, a hike in the MSP would have fetched an even higher price to farmers than what they are receiving from private companies and also helped FCI meet the procurement target. But then that never was the intent.
By paying a premium to grain corporations and denying a fair price to our farmers, the government has sent a clear message to farmers: they should no longer expect a guaranteed price for what they produce.
Notwithstanding the government’s claims, in reality it is building a case to dismantle the price support and procurement mechanism which are designed to protect farmers from price volatility and the poor from starvation. The Economic Survey 2005-06 states “Market for farm output continues to depend heavily on expensive government procurement and distribution systems. A shift from the current MSP and public procurement system and developing alternative product markets are essential for crop diversification and broad-based agricultural development”.
The government is following this dictum. By deliberately offering a lower MSP and importing at higher costs, the system is being covertly scrapped. The Agriculture Produce Marketing Committee Act has been amended to allow private agencies to directly procure food grains from farmers. The amended Essential Commodities Act allows storage and movement of food grains. Agriculture commodities can be traded in futures markets involving speculation. No wonder multinational grain firms are cornering bulk of the food grains produced across the country.
There is more. As part of the larger game plan to shut down the FCI, the government is also toying with the idea of issuing food stamps to the Below Poverty Line families, which will reduce the food subsidy bill. There is another proposal to replace the Public Distribution System (PDS) with direct cash payments to poor families.
To reduce storage costs, the government is considering playing in the futures market in the months when it needs food grains for running the PDS - there would be no need for an MSP in such a case. The warehousing system is also being privatized. Recommendations of the consultancy firm McKinsey hired by the Food Ministry are already being implemented and FCI’s capital costs have been reduced, workforce slashed, minimum buffer stock for rice lowered, and private companies engaged in procurement.
From all this, it is clear that instead of fixing the problems at FCI, the government has decided to fix the blame on FCI and close it down. That there are major problems with the functioning of the FCI is undeniable. However, dismantling it will amount to another safety net for farmers as well as the poor, who depend on the PDS, going down. This, of course, suits the government. After all, food subsidy for the poor costs the exchequer Rs 23,986 crores during 2006-07.
The Indian State has a history of subverting procurement and price support mechanisms. Back in 2002, dairy cooperatives were on the brink of being wiped out courtesy dumping by the developed countries, which was facilitated by the State. In case of cotton, the Maharashtra government subverted the monopoly cotton procurement scheme and today the price being paid to cotton farmers is a fraction of what they received earlier. Similarly, Marketfed in Kerala, which procures pepper from farmers, is facing subversion. The cases of cardamom, coconut, cashew – in fact, almost all agri-commodities – have a common thread running through them: deliberate subversion of procurement and manipulation of support price.
The intentions of the government are quite clear – deny farmers a higher price for their produce and dismantle the price support and procurement machinery. While farmers may presently be getting a higher price by selling wheat to private players, the euphoria is unlikely to last long.
In the absence of MSP and procurement by government, there are very high chances of concentration of agri-business corporations. Once this cartel takes over, they will dictate the price to Indian farmers. With imports being made a norm, the future of wheat farmers is indeed bleak.
It is time to play a requiem for India’s wheat revolution.
Countercurrents.org, 16 May 2007
http://www.countercurrents.org/goswami160507.htm
For the second year in the running, India is importing wheat. Last year the government justified imports on account of lower production. This year it is being justified in the name of higher prices for farmers.
In order to meet the buffer stock requirements, the government has decided to import up to 50 lakh tonnes of wheat this year. Thanks to the government’s policies, from a wheat surplus nation, India today has been reduced to the world’s largest importer of wheat.
Alarm bells began ringing in early March when, despite predictions of a bumper wheat harvest in India, the US Wheat Associates - a trade body funded by the federal government and US wheat producers - said India will import up to 30 lakh tonnes of wheat this year. Well, not only has the government followed this diktat, but has revised this estimate by 20 lakh tonnes more as a small favour to multinational grain corporations.
The rush to go for imports right now is questionable. With an additional 18 lakh hectares under wheat, the production has increased by forty lakh tonnes. Since the peak wheat procurement season is during the second half of May, there is ample time left for the government to meet its procurement target of 151 lakh tonnes. On 1st May, the Food Secretary said that stocks are adequate to last till January 2008. On 5th May, the Food and Agriculture Minister, Sharad Pawar announced, “Last year, the buffer stock position was only two million tonne, this time it is 4.5 million tonne. That is why I am quite comfortable about the buffer stock.”
The Minister justified the move to import wheat by adding, “However, I want to build up stock for the next year”. This, when the wheat produced is adequate to meet the country’s requirements and there is no shortage in the buffer stock. Wheat for the next season is yet to be planted but the government is apprehensive of a bad crop next year!
"If the farmer is getting a better price, as Agriculture Minister I am the happiest person. However, as a Food Minister, if I face any problem, I will import," said Pawar. He was referring to farmers getting a better price by selling to private companies thereby leaving little for the government to pick up. This is a replay of the 2006 argument, when the Food Corporation of India (FCI) failed miserably to meet its procurement target. By offering a lower price to farmers, the government made out a case for imports, which translated to a windfall of Rs. 5,100 crores to grain corporations like the Australian Wheat Board, Glencore, Toepfer, Cargill, etc.
This year, the procurement is worse than what it was last year. By end of April, even half of the procurement target was not met, and a shortfall of 25 lakh tonnes by the end of the procurement season is possible. This is because the Minimum Support Price (MSP) of Rs. 850 per quintal offered by the government is much lower than the prevailing market rate of over Rs. 1,000. Naturally, bulk of the wheat is being cornered by the private sector. As expected, the gains to grain corporations this year will also be much higher than 2006. Lack of rainfall in Europe, Australia and South Africa has affected wheat production and depressed world wheat stocks to their lowest in the last 25 years. Wheat from Ukraine and Russia will hit markets only by August, while Pakistan is still a small exporter. Major wheat exporter, Argentina, has banned wheat export to control domestic prices.
The only players left are the US and Canada, where the price of wheat is already up by $40 per tonne over last year. Given the global supply crunch, announcement of imports by India will push the price through the roof, as it happened last year. While last year India paid around $207 per tonne of wheat (approximately Rs. 930 per quintal), the cost this year is likely to be upwards of $300 per tonne (or Rs. 1,200 per quintal at the current exchange rate), a rich bonus for corporations.
Instead of doling out Rs. 6,000 crores to corporations for importing 50 lakh tonnes of wheat, a hike in the MSP would have fetched an even higher price to farmers than what they are receiving from private companies and also helped FCI meet the procurement target. But then that never was the intent.
By paying a premium to grain corporations and denying a fair price to our farmers, the government has sent a clear message to farmers: they should no longer expect a guaranteed price for what they produce.
Notwithstanding the government’s claims, in reality it is building a case to dismantle the price support and procurement mechanism which are designed to protect farmers from price volatility and the poor from starvation. The Economic Survey 2005-06 states “Market for farm output continues to depend heavily on expensive government procurement and distribution systems. A shift from the current MSP and public procurement system and developing alternative product markets are essential for crop diversification and broad-based agricultural development”.
The government is following this dictum. By deliberately offering a lower MSP and importing at higher costs, the system is being covertly scrapped. The Agriculture Produce Marketing Committee Act has been amended to allow private agencies to directly procure food grains from farmers. The amended Essential Commodities Act allows storage and movement of food grains. Agriculture commodities can be traded in futures markets involving speculation. No wonder multinational grain firms are cornering bulk of the food grains produced across the country.
There is more. As part of the larger game plan to shut down the FCI, the government is also toying with the idea of issuing food stamps to the Below Poverty Line families, which will reduce the food subsidy bill. There is another proposal to replace the Public Distribution System (PDS) with direct cash payments to poor families.
To reduce storage costs, the government is considering playing in the futures market in the months when it needs food grains for running the PDS - there would be no need for an MSP in such a case. The warehousing system is also being privatized. Recommendations of the consultancy firm McKinsey hired by the Food Ministry are already being implemented and FCI’s capital costs have been reduced, workforce slashed, minimum buffer stock for rice lowered, and private companies engaged in procurement.
From all this, it is clear that instead of fixing the problems at FCI, the government has decided to fix the blame on FCI and close it down. That there are major problems with the functioning of the FCI is undeniable. However, dismantling it will amount to another safety net for farmers as well as the poor, who depend on the PDS, going down. This, of course, suits the government. After all, food subsidy for the poor costs the exchequer Rs 23,986 crores during 2006-07.
The Indian State has a history of subverting procurement and price support mechanisms. Back in 2002, dairy cooperatives were on the brink of being wiped out courtesy dumping by the developed countries, which was facilitated by the State. In case of cotton, the Maharashtra government subverted the monopoly cotton procurement scheme and today the price being paid to cotton farmers is a fraction of what they received earlier. Similarly, Marketfed in Kerala, which procures pepper from farmers, is facing subversion. The cases of cardamom, coconut, cashew – in fact, almost all agri-commodities – have a common thread running through them: deliberate subversion of procurement and manipulation of support price.
The intentions of the government are quite clear – deny farmers a higher price for their produce and dismantle the price support and procurement machinery. While farmers may presently be getting a higher price by selling wheat to private players, the euphoria is unlikely to last long.
In the absence of MSP and procurement by government, there are very high chances of concentration of agri-business corporations. Once this cartel takes over, they will dictate the price to Indian farmers. With imports being made a norm, the future of wheat farmers is indeed bleak.
It is time to play a requiem for India’s wheat revolution.
Lessons From China - Special Export Zones - SEZ
Special Export Zones - SEZs : Lessons from China
In Motion Magazine, 14 Feb 2007
Countercurrents.org, 13 Feb 2007
India Together, 9 Feb, 2007 - http://www.indiatogether.org/2007/feb/opi-sezschina.htm
While single-minded pursuit of exports has helped China touch record growth figures, millions have been left behind, besides incurring huge environmental costs. And without even the limited dose of welfare that China offers its poor farmers, India must wary of copying China's SEZ-approach, writes Bhaskar Goswami.
China's record economic growth rate fuelled by the Special Economic Zones (SEZ) is often advocated as the reason for India to adopt this approach. Since the 1980s, China implemented a series of measures and policies with the sole purpose of achieving rapid economic growth. As evidence over the years has shown, this single-minded pursuit of growth has lowered the efficiency and effectiveness of economic policies, besides incurring huge resource and environmental costs. The Chinese experience offers a valuable lesson for India.
Cost of Export-driven Growth
China has to feed 22 percent of the world's population on only 7 percent of land. In July 2005, China's countryside had over 26.1 million people living in absolute poverty and was home to 18 percent of the world's poor, according to Chinese Minister Li Xuju quoted in the People’s Daily. Every year, an additional 10 million people have to be fed.
Despite this daunting target, between 1996-2005, "development" caused diversion of more than 21 percent of arable land to non-agricultural uses, chiefly highways, industries and SEZs. Per capita land holding now stands at a meager 0.094 hectares. In just thirteen years, between 1992 and 2005, twenty million farmers were laid off agriculture due to land acquisition.
As more arable land is taken over for urbanization and industrialisation, issues related to changes in land use have become a major source of dispute between the public and the government. Protests against land acquisition and deprivation have become a common feature of rural life in China, especially in the provinces of Guangdong (south), Sichuan, Hebei (north), and Henan province. Guangdong has been worst affected. Social instability has become an issue of concern. In 2004, the government admitted to 74,000 riots in the countryside, a seven-fold jump in ten years. Whereas a few years ago, excessive and arbitrary taxation was the peasants' foremost complaint, resentment over the loss of farmland, corruption, worsening pollution and arbitrary evictions by property developers are the main reasons for farmers' unrest now.
While rural China is up in arms against acquisition of land, SEZs like Shenzen in Guangdong showcasing the economic miracle of China, are beset with problems. After growing at a phenomenal rate of around 28 percent for the last 25 years, Shenzen is now paying a huge cost in terms of environment destruction, soaring crime rate and exploitation of its working class, mainly migrants.
Foreign investors were lured to Shenzen by cheap land, compliant labour laws and lax or ineffective environmental rules. In 2006, the United Nations Environment Programme designated Shenzen as a 'global environmental hotspot', meaning a region that had suffered rapid environmental destruction.
There's more. According to Howard French, the New York Times bureau chief, most of the year, the Shenzen sky is thick with choking smoke, while the crime rate is almost nine-fold higher than Shanghai. The working class earns US$ 80 every month in the sweatshops and the turnover rate is 10 percent – many turn to prostitution after being laid off. Further, real-estate sharks have stockpiled houses which have caused prices to spiral and have created a new generation of people French calls "mortgage slaves" in an article in the International Herald Tribune on 17 December 2006.
The mindless pursuit of growth following the mode of high input, high consumption and low output has seriously impacted the environment.
In 2004, China consumed 4.3 times as much coal and electricity as the United States and 11.5 times as much as Japan to generate each US$1 worth of GNP, according to the The Taipei Times. Some 20 per cent of the population lives in severely polluted areas (Science in Society) and 70 percent of the rivers and lakes are in a grim shape (People’s Daily). Around 60 per cent of companies that have set up industries in the country violate emission rules.
According to the World Bank, environmental problems are the cause of some 300,000 people dying each year. The Chinese government has admitted that pollution costs the country a staggering $200 billion a year - about 10 per cent of its GDP.
While export-driven policy for economic growth has helped China touch record growth figures, the income gap is widening and rapidly approaching the levels of some Latin American countries. Going by a recent report by the Chinese Academy of Social Sciences, China's Gini coefficient – a measure of income distribution where zero means perfect equality and 1 is maximum inequality – touched 0.496 in the year 2006. In comparison, income inequality figures are 0.33 in India, 0.41 in the US and 0.54 in Brazil. Further, the rural-urban income divide is staggering – annual income of city dwellers in China is around US $1,000 which is more than three times that of their rural counterparts.
It is in this backdrop that India's SEZ thrust must be seen. Following China, India is replicating a similar model where vast tracts of agricultural land are being acquired for creating SEZs and other industries.
The September 2005 notification on Environment Impact Assessment is lax for industrial estates, including SEZs, and apprehensions of dirty industries coming up in these zones are quite real. Further, with drastic changes in labour laws favouring industry being considered, the plight of workers in these SEZs will be similar to those in China. Such a mode of development is environmentally unsustainable and socially undesirable.
Further, it is now widely acknowledged that Chinese exports have also been boosted by its undervalued currency, something which Ben Bernanke, chairman of the US Federal Reserve, terms as an "effective subsidy". This is a luxury that Indian exporters do not enjoy. The argument for setting up SEZs to emulate China's export-led growth is therefore questionable.
Is export-driven growth through SEZs desirable for India ?
There is no doubt that exports play a significant role in boosting GDP. However in the case of a country with a sizeable domestic market, the choice lies with the producer to either export or supply to the domestic market. Ila Patnaik of the National Institute for Public Finance and Policy wrote in the The Indian Express in December 2006 that household consumption in India at 68 percent of the GDP is much higher that that of China at 38 percent, Europe at 58 percent and Japan at 55 percent. This is an important source of strength for the domestic manufacturing industry of India.
Given the high level of consumption of Indian households, it is quite possible that this rush is fuelled not by the desire to export out of the country but by the possibility of exporting from SEZs into the Domestic Tariff Area (DTA). The SEZ Act is also designed to facilitate this. Any unit within the SEZ can export to the DTA, after paying the prevailing duty, as long as it is a net foreign exchange earner for three years.
It is therefore a win-win situation for these units.
The sops in a SEZ will reduce the cost of capital while labour reforms will ensure trouble-free operations. Further, given the considerable international pressure to reduce industrial tariffs, SEZs will be able to export to the DTA at highly competitive prices. This does not augur well for units outside the SEZs who will now face unfair competition. As cheaper imports have already played havoc with the livelihoods of artisan sector of the economy, cheaper imports into DTA from SEZs will also adversely affect the domestic industry. No wonder many of them now want to migrate into SEZs.
In a country with 65 percent of the population depending on agriculture as a means of livelihood, industry ought to be complementary to agriculture. Through SEZs however, industry is being promoted at the cost of agriculture. Valuable resources spent to create SEZs will be at the cost of building better infrastructure for the rest of the country, something that will affect both the domestic industry as well as agriculture.
Other lessons India could learn from China : Welfare
While the Chinese experience with export-driven economic growth definitely offers many sobering lessons, there are many other areas where India can learn from China. China has initiated a series of measures to arrest social tensions and rising inequality in rural areas. In April 2004, the State Council, China's cabinet, halted the ratification of farmland for other uses and started to rectify the national land market. The Minister of Agriculture, Du Quinglin, promised "not to reduce acreage of basic farmland, change its purpose or downgrade its quality".
China also abolished agricultural tax in 2006 and increased subsidy for food grain production by 10 percent. To boost rural income, the selling price of grain was increased by 60 percent in 2005. In 2004, out of a total 900 million farmers in China, 600 million received US$ 1.5 billion (Rs.6,630 crores approximately) as direct subsidies. 52 million of the Chinese farmers have joined in the rural old-age insurance system and 2.2 million received pensions in 2005.
More than 80 million farmers had participated in the rural cooperative medical service system by the end of 2004, and 12.57 million rural needy people had drawn allowances guaranteeing the minimum living standard by the end of 2005.
India, on the other hand, either does not have any of these safety nets or is in the process of dismantling the few that exist.
There is much to learn as well as unlearn from the Chinese experience.
Until that is done, millions of poor across the country will be made to pay an even higher price than the Chinese did for following this flawed approach.
In Motion Magazine, 14 Feb 2007
Countercurrents.org, 13 Feb 2007
India Together, 9 Feb, 2007 - http://www.indiatogether.org/2007/feb/opi-sezschina.htm
While single-minded pursuit of exports has helped China touch record growth figures, millions have been left behind, besides incurring huge environmental costs. And without even the limited dose of welfare that China offers its poor farmers, India must wary of copying China's SEZ-approach, writes Bhaskar Goswami.
China's record economic growth rate fuelled by the Special Economic Zones (SEZ) is often advocated as the reason for India to adopt this approach. Since the 1980s, China implemented a series of measures and policies with the sole purpose of achieving rapid economic growth. As evidence over the years has shown, this single-minded pursuit of growth has lowered the efficiency and effectiveness of economic policies, besides incurring huge resource and environmental costs. The Chinese experience offers a valuable lesson for India.
Cost of Export-driven Growth
China has to feed 22 percent of the world's population on only 7 percent of land. In July 2005, China's countryside had over 26.1 million people living in absolute poverty and was home to 18 percent of the world's poor, according to Chinese Minister Li Xuju quoted in the People’s Daily. Every year, an additional 10 million people have to be fed.
Despite this daunting target, between 1996-2005, "development" caused diversion of more than 21 percent of arable land to non-agricultural uses, chiefly highways, industries and SEZs. Per capita land holding now stands at a meager 0.094 hectares. In just thirteen years, between 1992 and 2005, twenty million farmers were laid off agriculture due to land acquisition.
As more arable land is taken over for urbanization and industrialisation, issues related to changes in land use have become a major source of dispute between the public and the government. Protests against land acquisition and deprivation have become a common feature of rural life in China, especially in the provinces of Guangdong (south), Sichuan, Hebei (north), and Henan province. Guangdong has been worst affected. Social instability has become an issue of concern. In 2004, the government admitted to 74,000 riots in the countryside, a seven-fold jump in ten years. Whereas a few years ago, excessive and arbitrary taxation was the peasants' foremost complaint, resentment over the loss of farmland, corruption, worsening pollution and arbitrary evictions by property developers are the main reasons for farmers' unrest now.
While rural China is up in arms against acquisition of land, SEZs like Shenzen in Guangdong showcasing the economic miracle of China, are beset with problems. After growing at a phenomenal rate of around 28 percent for the last 25 years, Shenzen is now paying a huge cost in terms of environment destruction, soaring crime rate and exploitation of its working class, mainly migrants.
Foreign investors were lured to Shenzen by cheap land, compliant labour laws and lax or ineffective environmental rules. In 2006, the United Nations Environment Programme designated Shenzen as a 'global environmental hotspot', meaning a region that had suffered rapid environmental destruction.
There's more. According to Howard French, the New York Times bureau chief, most of the year, the Shenzen sky is thick with choking smoke, while the crime rate is almost nine-fold higher than Shanghai. The working class earns US$ 80 every month in the sweatshops and the turnover rate is 10 percent – many turn to prostitution after being laid off. Further, real-estate sharks have stockpiled houses which have caused prices to spiral and have created a new generation of people French calls "mortgage slaves" in an article in the International Herald Tribune on 17 December 2006.
The mindless pursuit of growth following the mode of high input, high consumption and low output has seriously impacted the environment.
In 2004, China consumed 4.3 times as much coal and electricity as the United States and 11.5 times as much as Japan to generate each US$1 worth of GNP, according to the The Taipei Times. Some 20 per cent of the population lives in severely polluted areas (Science in Society) and 70 percent of the rivers and lakes are in a grim shape (People’s Daily). Around 60 per cent of companies that have set up industries in the country violate emission rules.
According to the World Bank, environmental problems are the cause of some 300,000 people dying each year. The Chinese government has admitted that pollution costs the country a staggering $200 billion a year - about 10 per cent of its GDP.
While export-driven policy for economic growth has helped China touch record growth figures, the income gap is widening and rapidly approaching the levels of some Latin American countries. Going by a recent report by the Chinese Academy of Social Sciences, China's Gini coefficient – a measure of income distribution where zero means perfect equality and 1 is maximum inequality – touched 0.496 in the year 2006. In comparison, income inequality figures are 0.33 in India, 0.41 in the US and 0.54 in Brazil. Further, the rural-urban income divide is staggering – annual income of city dwellers in China is around US $1,000 which is more than three times that of their rural counterparts.
It is in this backdrop that India's SEZ thrust must be seen. Following China, India is replicating a similar model where vast tracts of agricultural land are being acquired for creating SEZs and other industries.
The September 2005 notification on Environment Impact Assessment is lax for industrial estates, including SEZs, and apprehensions of dirty industries coming up in these zones are quite real. Further, with drastic changes in labour laws favouring industry being considered, the plight of workers in these SEZs will be similar to those in China. Such a mode of development is environmentally unsustainable and socially undesirable.
Further, it is now widely acknowledged that Chinese exports have also been boosted by its undervalued currency, something which Ben Bernanke, chairman of the US Federal Reserve, terms as an "effective subsidy". This is a luxury that Indian exporters do not enjoy. The argument for setting up SEZs to emulate China's export-led growth is therefore questionable.
Is export-driven growth through SEZs desirable for India ?
There is no doubt that exports play a significant role in boosting GDP. However in the case of a country with a sizeable domestic market, the choice lies with the producer to either export or supply to the domestic market. Ila Patnaik of the National Institute for Public Finance and Policy wrote in the The Indian Express in December 2006 that household consumption in India at 68 percent of the GDP is much higher that that of China at 38 percent, Europe at 58 percent and Japan at 55 percent. This is an important source of strength for the domestic manufacturing industry of India.
Given the high level of consumption of Indian households, it is quite possible that this rush is fuelled not by the desire to export out of the country but by the possibility of exporting from SEZs into the Domestic Tariff Area (DTA). The SEZ Act is also designed to facilitate this. Any unit within the SEZ can export to the DTA, after paying the prevailing duty, as long as it is a net foreign exchange earner for three years.
It is therefore a win-win situation for these units.
The sops in a SEZ will reduce the cost of capital while labour reforms will ensure trouble-free operations. Further, given the considerable international pressure to reduce industrial tariffs, SEZs will be able to export to the DTA at highly competitive prices. This does not augur well for units outside the SEZs who will now face unfair competition. As cheaper imports have already played havoc with the livelihoods of artisan sector of the economy, cheaper imports into DTA from SEZs will also adversely affect the domestic industry. No wonder many of them now want to migrate into SEZs.
In a country with 65 percent of the population depending on agriculture as a means of livelihood, industry ought to be complementary to agriculture. Through SEZs however, industry is being promoted at the cost of agriculture. Valuable resources spent to create SEZs will be at the cost of building better infrastructure for the rest of the country, something that will affect both the domestic industry as well as agriculture.
Other lessons India could learn from China : Welfare
While the Chinese experience with export-driven economic growth definitely offers many sobering lessons, there are many other areas where India can learn from China. China has initiated a series of measures to arrest social tensions and rising inequality in rural areas. In April 2004, the State Council, China's cabinet, halted the ratification of farmland for other uses and started to rectify the national land market. The Minister of Agriculture, Du Quinglin, promised "not to reduce acreage of basic farmland, change its purpose or downgrade its quality".
China also abolished agricultural tax in 2006 and increased subsidy for food grain production by 10 percent. To boost rural income, the selling price of grain was increased by 60 percent in 2005. In 2004, out of a total 900 million farmers in China, 600 million received US$ 1.5 billion (Rs.6,630 crores approximately) as direct subsidies. 52 million of the Chinese farmers have joined in the rural old-age insurance system and 2.2 million received pensions in 2005.
More than 80 million farmers had participated in the rural cooperative medical service system by the end of 2004, and 12.57 million rural needy people had drawn allowances guaranteeing the minimum living standard by the end of 2005.
India, on the other hand, either does not have any of these safety nets or is in the process of dismantling the few that exist.
There is much to learn as well as unlearn from the Chinese experience.
Until that is done, millions of poor across the country will be made to pay an even higher price than the Chinese did for following this flawed approach.
New Maharajas of India
The New Maharajas of India - Devinder Sharma and Bhaskar Goswami
In Motion Magazine, 19 Dec 2006
Countercurrents.org, 17 Dec 2006
India Together, 16 Dec 2006 - http://www.indiatogether.org/2006/dec/dsh-mahasez.htm
What is it like to be a modern-day Indian prince ?
Devinder Sharma and Bhaskar Goswami explain how the laws of the land are being redefined to bring in the reality of the royal tag for the rich and beautiful.
It took nearly 15 years for India’s first Home Minister Sardar Patel to ensure that the 554 princely estates scattered throughout the country finally integrate with the new nation. Some 45 years later, and in the 60th year of India’s Independence, almost an equal number of princely estates are once again being carved out.
A new breed of Maharajas is all set to grab the crown.
The only difference being that the new princely estates comes within the gambit of a strange sounding acronym -- SEZ -- meaning Special Economic Zones. As the name suggests, these cut out zones will have a special status, very special indeed. Except for floating its own currency, these zones would operate more or less like a princely estate, and would even have special courts to try the economic offences.
Doling out state largesse in the name of ‘production incentives’ -- no, it’s not fair to dub these as subsidies -- these SEZ will primarily be duty free zones. Complete exemption from excise duty, custom duty, sales tax, octroi, mandi tax, turnover tax, as well as income tax holiday for ten years, are some of the inducements.
Also spelled out are provisions for 100 per cent foreign direct investment, exemption on income tax on infrastructure capital fund and individual investment, and an assurance of round-the-clock electricity and water supply. The SEZ promoters have also been given a waiver from carrying out an Environment Impact Assessment.
Permitted to indulge in commodity hedging, external commercial borrowings up to US$ 500 million without any maturity restrictions, freedom to bring in export proceeds without any time limit and make foreign investments from it, exemption from interest rate on import finance, and setting up off-shore banking units with income tax exemption for three years and subsequently 50 per cent tax for another two years are some of the financial enticements.
And if the new Maharajas were to sub-contract production to local manufacturers outside the princely estates, there would be duty drawbacks, exemption from state levies and income tax benefits.
All these exemptions will mean a revenue loss of more than Rupees 1.75 lakh crore (Rs 1,750 billion) to the state exchequer after five years. Although this staggering amount is enough to feed the country’s 320 million people who go to bed hungry stomach for a number of years, or provide guaranteed employment to at least two members of each of the rural families for the next five years, this is a ‘small price’ that the nation must pay to keep for the royalty tag for the rich and beautiful. In a way, what is being considered as a revenue loss is in reality like the Privy Purse for the new Maharajas.
The Privy Purse was a grant given to the princely states after India’s Independence in 1947. As part of the process of accession to the Indian union, the Privy Purses were accorded in terms of measurement of the revenue and potential of the merging states. These Privy Purses, provided to some 400 princely rulers, were abolished by the then Prime Minister Mrs Indira Gandhi in 1969.
Legally authorized to disallow any inspection, search or seizure without prior permission, and with sanction to operate its own private security system, these princely estates will for all practical purposes be autonomous.
That is how the former princely estates operated-- of course, with blessings of the British Empire. The new princes too enjoy the confidence of the ruling Congress-led UPA (United Progressive Alliance) Coalition. Moreover, with the National Democratic Alliance (NDA) and the left parties bending backwards by seeking a few amendments to support the SEZ, the political backing is complete.
No wonder, the State governments are letting no stone upturned to acquire agricultural land and offer it on a platter. With promises of ‘the right kind of environment’ many chief ministers are waiting with garlands in hand. Take for instance the Haryana Chief Minister who had specially flown to Mumbai to invite a top industrialist. Gujarat government had sent a team abroad to invite investments for SEZ.
The Orissa government is moving a step ahead. It is seeking amendment to the Scheduled Area Tribal Immovable Property Act thereby allowing outsiders to come and buy the tribal land. Given a choice, the central and state government would leave no stone upturned to handover the prime land to industrialists -- Tatas, Ambanis, Mittals, and the likes.
Union Commerce Minister Kamal Nath has been going around seeking investments from European countries for the SEZ. After all, he has a huge responsibility to ensure that the Prime Minister’s dream of turning India into an international workshop is turned into a reality.
You may call it ‘the biggest land-grab of the century’ or term it as ‘open-loot,’ the powers that be are simply not deterred. Prime Minister Manmohan Singh has repeatedly said that the SEZ are the need of the day. No wonder, agricultural land, which is a scarce commodity, is suddenly available in abundance. Unmindful of the fact that the per capita land holding is already at an abysmally low 0.25 acre, the government is using the draconian Land Acquisition Act 1854 to further purchase any land that it sets its eyes on. In the first phase of clearances accorded by the government, a total of 1.25 lakh hectares of prime agricultural land are in the process of being acquired. In the second phase, too, almost an equal area would be obtained.
It was only after an increasing tide of protests that the Ministry of Commerce asked the state governments not to acquire agricultural land and to also ensure prevailing market value to farmers.
The State governments are however more eager to make available land to the industries.
In Punjab, where almost the entire state is irrigated, SEZs are being set up on prime agriculture land. The Punjab government, for instance, is using repressive techniques to browbeat the agitating farmers near Barnala, who have been opposing the forcible acquisition of land for the private company, Trident. Similarly, farmers have been agitating against the government’s repressive policies for acquiring fertile land for an SEZ near Amritsar.
Although rules forbid acquiring more than 10 per cent of the double-cropped area for setting up SEZ, the fact remains a majority of the princely estates are coming up on fertile land.
Even in Himachal Pradesh, where the average farm size is about 0.4 hectares, the government is keen to convert 35,000 hectares in the Kangra valley into SEZ.
One of the biggest SEZ is coming up near Mumbai. Spread over 14,000 hectares, it is coming up predominantly on double-cropped land. The Mukesh Ambani group has already acquired 9,000 acres of land in Jamnagar for its petro-product SEZ. It plans ultimately to increase the size of the product to 10,000 acres and convert it into a multi-product SEZ.
With provisions for owning 65 per cent more land than required, the government has provided the ‘developers’ of SEZ an environment to build supermarkets, malls, restaurants, recreation parks and so on -- essentially given permission for building small princely estates. Out of 1.25 lakh hectares allocated so far to SEZ, nearly 31,250 hectares can be used for real estate development.
The real estate firms are obviously elated.
Another major SEZ proposed in Jhajjar adjoining New Delhi is spread across 10,000 hectares and is again gobbling double-cropped land. Interestingly, both these SEZ, proposed to occupy a landmass larger than the suburb of Gurgaon, are yet to be officially approved. In Mangalore, one of the promoters is the government-owned ONGC and 2,200 hectares of double- and even triple-cropped land is being acquired for setting up an SEZ.
Take the case of Tata Steel promoted Gopalpur SEZ in Orissa. Originally acquired by the state government for a paltry sum, land was handed over to Tatas for a steel plant. When the plant didn’t come up, and the farmers demanded the land to be returned, the company promptly proposed to convert this land into an SEZ. Korean steel giant Posco, which is also setting up a steel unit in Orissa, was provided with 1,600 hectares of land and exclusive access to an iron ore mine despite massive protests by farmers. Posco now wants this land to be converted into an SEZ and the state government is willing.
In another interesting example, the CPM [Communist Party of India (Marxist)] government in West Bengal has acquired some 400 hectares of fertile land for the Tatas to set up an automobile factory at Singur, near Kolkata. Technically speaking Singur is not an SEZ, but what makes the deal politically significant is that the State government has actually acquired the land at cost of Rs 140-crore.
It has been made available to Tatas for a-mere Rs 20-crore, which is one-seventh of the cost price. Even that can be treated as a loan for 5 years. Ironically, while the poor rural women in self-help groups (SHGs) in West Bengal pay a minimum annual interest rate of 24 per cent for micro-credit, Tatas will be charged a nominal rate of 0.1 percent for macro-credit.
In Kerala too, the communist government is gung-ho over the promise of SEZ.
The setting up of the princely estates is being primarily justified on account of employment generation. The premise is that it will create 5 lakh (500,000) job opportunities. Does this kind of employment generation mean anything for India? This question has been conveniently ducked and for obvious reasons. Now let us examine the ground realities.
It was at the beginning of this century that some 75 lakh (7,500,000) people, more than the population of Switzerland, had applied for a mere 28,000 lowly paid jobs in the Indian Railways. For a country, which is on a fast track information highway, this does not mean anything significant except for statistics. Even if you were to employ five lakh out of these 75 lakh (7,500,000), isn’t that a mere drop in the ocean? Millions of assured jobs can be created if the total amount of revenue loss -- Rs 1.75 lakh crore (17,500,000) -- and the several times higher public sector investment to follow is used for employment generation.
Not to discount the achievements in information technology, the fact remains that IT has provided only five to six lakh jobs. The BPO service industry that we hear about every other day actually employs only 2 lakh (200,000) people. Why a large number of IT companies applied for setting up SEZs is not because they intend to provide huge job opportunities but are simply looking forward to take advantage of the tax concessions.
The tax exemption currently enjoyed by the IT sector comes to an end in 2009-10. Moreover, since existing contracts and employment can be shifted, it is quite likely that IT units will merely shift their operations into an SEZ, thereby nullifying claims of employment and revenue generation.
With such large-scale diversion of land the first and foremost impact will be through displacements. Our estimates show that close to 1.14 lakh (114,000) farming households (each household on an average comprising five members) and an additional 82,000 farm worker families who are dependent upon these farms for their livelihoods, will be displaced.
In other words, at least 10 lakh (1,000,000) people (twice the number of jobs that SEZ promise to create) who primarily depend upon agriculture for their survival will face eviction. The plight of farm labour is surely going to be worse as they will not only witness their source of livelihood being taken away but they will hardly see any employment opportunities for them in the princely estates. All they can do is to stand outside the tall gates of the SEZ and dream to be born in such families in their next birth.
Now let us take a stock at the annual loss in income for those displaced. As per the latest report of the National Sample Survey Organisation (NSSO 2005), the average income of a farming household stands at Rs. 2,115 per month (income from cultivation - Rs. 969; farming of animals - Rs. 91; wages -- Rs. 819; and non-farm business -- Rs 236). Of these, income from the first two sources (Rs. 1,060) will be immediately lost.
Therefore, each farming household will lose Rs. 12,720 every year. The total loss of annual income for the 1.14 lakh (114,000) displaced farm families works out to Rs.145 crores. While it remains a fact that most of these displaced farmers would earn more for their land, several studies have shown that unless a rehabilitation policy is in place a majority of these farmers would ultimately end up further marginalized over a period of time.
As per the National Rural Labour Commission, an average agricultural worker gets 159 days of work in a year; and as per NSSO (2005), the average daily wage of agricultural labour in rural areas is around Rs. 51.
Considering this, the estimated 82,000 agricultural labourers’ households will lose Rs. 67-crore in wages. And put together, the total loss of income to the farming and the farm worker families is to the tune of Rs. 212-crore (2,120,000,000) a year. For the marginalized, the loss of income -- even if it hovers around the poverty line -- has disastrous implications.
After all, the small piece of land is his only economic security.
Food security too is no longer the national priority. Otherwise, no sensible government would have at any cost tinkered with the country’s dwindling ability to produce food for its own population. Our own conservative estimate shows that the nation will suffer a loss of Rs. 250 to 400 crores (4,000,000,000) from the reduction in area under cultivation of food grains alone. Foodgrain production is expected to drop by at least 4 to 5 lakh (500,000) tonnes a year. (1) Remember these are only conservative estimates. In case of land under high value crops, the losses would be much higher.
Tall promises of employment generation notwithstanding, who will be held accountable if the promise of job creation remains unfulfilled? First of all, the Ministry of Commerce has no true basis for telling us how many jobs will be created. It is merely a guess- estimate. Secondly, if the past experience is any indication, the real jobs that are added by the industries are only a miniscule of what they promise. Take the case of Pepsico’s entry into Punjab in the 1980s. The multinational giant promised to create 50,000 jobs. In reply to a 1991 parliamentary question, the Ministry of Food Processing acknowledged that the company had created only 482 jobs, of which 210 were unskilled workers.
It is primarily to avoid embarrassments at a later stage for promises un-kept that industrial houses are seeking the advise of consultancy firms like Price Water House, Ernest & Young, and Feedback Ventures among others to prepare master plans for the promoters. Basically the job of these consultancy firms is to write the proposal in such a format using the right vocabulary so that its gets the government’s nod. At the same time the State governments too are utilizing their services to ensure that the land transfers do not invite unnecessary litigation. In essence, if you are rich and can afford to hire a consultancy firm to write a proposal on your behalf you can aspire to be a modern-day prince.
It is therefore a free for all activity. If you can mobilize political support by hook or by crook you can be rest assured that you are on the right path to royalty. Whether you finally deliver what you promise is something that you can leave to the consultants to take care of. What is more significant is that where in the world will you find a pliable government and a supporting bureaucracy like India that helps you to not only identify the place where you want to set up your princely estate but also provide you all the necessary sops, support and protection.
In China, from where India drew inspiration, only six SEZ -- at Shenzhen, Shantou, Xiamen, Zhuhai, Hainan and Pudong -- have been set up so far. These economic zones, all in public sector, came after a lot of debate and deliberation, and all of them are situated along the coast. Faced with shrinking cultivable land, the Chinese SEZ have come up only in wastelands. In India, all these norms have been thrown to the wind. World over, there are only some 400 special economic zones. If it was such a productive and useful activity, why hasn’t the world woken up to the promises that Dr Manmohan Singh’s government has been making?
Creating an economic magic has not been the reason for setting up the SEZ. It is essentially aimed to create a series of affluent islands amidst the cesspool of poverty, hunger and deprivation. An oasis, or call it a pocket of effluence for the rich and elite. After all, the rich and the elite find the poor an eyesore. They have to be therefore translocated elsewhere.
For the rest of the country, exploited in the name of development, sub-Saharan Africa is the only comparison.
1.
Loss Projection (Production & Value)
Crop Loss (lakh tonnes) Value (Rs. Crores)
Sole Wheat # 3.38 371*
Sole Paddy $ 2.5 245**
Wheat + Paddy % 1.7 lakh tonnes of wheat
and 1.25 lakh tonnes of rice 310
* Based on average wheat import cost for year 2005-06 (Rs. 11,000/ tonne)
** Based of average international price of low quality rice for September 2006 (US$ 217 per tonne) for low quality rice (September prices are generally lower than the rest of the year, so this figure is quite conservative). For the sake of analysis, we took the following averages:
# Average All India Yield: 2.7 tonnes/ ha
$ Average All India Yield: 2.0 tonnes/ ha
% Assuming that only two food grain crops are grown across 1 lakh hectares under SEZ
In Motion Magazine, 19 Dec 2006
Countercurrents.org, 17 Dec 2006
India Together, 16 Dec 2006 - http://www.indiatogether.org/2006/dec/dsh-mahasez.htm
What is it like to be a modern-day Indian prince ?
Devinder Sharma and Bhaskar Goswami explain how the laws of the land are being redefined to bring in the reality of the royal tag for the rich and beautiful.
It took nearly 15 years for India’s first Home Minister Sardar Patel to ensure that the 554 princely estates scattered throughout the country finally integrate with the new nation. Some 45 years later, and in the 60th year of India’s Independence, almost an equal number of princely estates are once again being carved out.
A new breed of Maharajas is all set to grab the crown.
The only difference being that the new princely estates comes within the gambit of a strange sounding acronym -- SEZ -- meaning Special Economic Zones. As the name suggests, these cut out zones will have a special status, very special indeed. Except for floating its own currency, these zones would operate more or less like a princely estate, and would even have special courts to try the economic offences.
Doling out state largesse in the name of ‘production incentives’ -- no, it’s not fair to dub these as subsidies -- these SEZ will primarily be duty free zones. Complete exemption from excise duty, custom duty, sales tax, octroi, mandi tax, turnover tax, as well as income tax holiday for ten years, are some of the inducements.
Also spelled out are provisions for 100 per cent foreign direct investment, exemption on income tax on infrastructure capital fund and individual investment, and an assurance of round-the-clock electricity and water supply. The SEZ promoters have also been given a waiver from carrying out an Environment Impact Assessment.
Permitted to indulge in commodity hedging, external commercial borrowings up to US$ 500 million without any maturity restrictions, freedom to bring in export proceeds without any time limit and make foreign investments from it, exemption from interest rate on import finance, and setting up off-shore banking units with income tax exemption for three years and subsequently 50 per cent tax for another two years are some of the financial enticements.
And if the new Maharajas were to sub-contract production to local manufacturers outside the princely estates, there would be duty drawbacks, exemption from state levies and income tax benefits.
All these exemptions will mean a revenue loss of more than Rupees 1.75 lakh crore (Rs 1,750 billion) to the state exchequer after five years. Although this staggering amount is enough to feed the country’s 320 million people who go to bed hungry stomach for a number of years, or provide guaranteed employment to at least two members of each of the rural families for the next five years, this is a ‘small price’ that the nation must pay to keep for the royalty tag for the rich and beautiful. In a way, what is being considered as a revenue loss is in reality like the Privy Purse for the new Maharajas.
The Privy Purse was a grant given to the princely states after India’s Independence in 1947. As part of the process of accession to the Indian union, the Privy Purses were accorded in terms of measurement of the revenue and potential of the merging states. These Privy Purses, provided to some 400 princely rulers, were abolished by the then Prime Minister Mrs Indira Gandhi in 1969.
Legally authorized to disallow any inspection, search or seizure without prior permission, and with sanction to operate its own private security system, these princely estates will for all practical purposes be autonomous.
That is how the former princely estates operated-- of course, with blessings of the British Empire. The new princes too enjoy the confidence of the ruling Congress-led UPA (United Progressive Alliance) Coalition. Moreover, with the National Democratic Alliance (NDA) and the left parties bending backwards by seeking a few amendments to support the SEZ, the political backing is complete.
No wonder, the State governments are letting no stone upturned to acquire agricultural land and offer it on a platter. With promises of ‘the right kind of environment’ many chief ministers are waiting with garlands in hand. Take for instance the Haryana Chief Minister who had specially flown to Mumbai to invite a top industrialist. Gujarat government had sent a team abroad to invite investments for SEZ.
The Orissa government is moving a step ahead. It is seeking amendment to the Scheduled Area Tribal Immovable Property Act thereby allowing outsiders to come and buy the tribal land. Given a choice, the central and state government would leave no stone upturned to handover the prime land to industrialists -- Tatas, Ambanis, Mittals, and the likes.
Union Commerce Minister Kamal Nath has been going around seeking investments from European countries for the SEZ. After all, he has a huge responsibility to ensure that the Prime Minister’s dream of turning India into an international workshop is turned into a reality.
You may call it ‘the biggest land-grab of the century’ or term it as ‘open-loot,’ the powers that be are simply not deterred. Prime Minister Manmohan Singh has repeatedly said that the SEZ are the need of the day. No wonder, agricultural land, which is a scarce commodity, is suddenly available in abundance. Unmindful of the fact that the per capita land holding is already at an abysmally low 0.25 acre, the government is using the draconian Land Acquisition Act 1854 to further purchase any land that it sets its eyes on. In the first phase of clearances accorded by the government, a total of 1.25 lakh hectares of prime agricultural land are in the process of being acquired. In the second phase, too, almost an equal area would be obtained.
It was only after an increasing tide of protests that the Ministry of Commerce asked the state governments not to acquire agricultural land and to also ensure prevailing market value to farmers.
The State governments are however more eager to make available land to the industries.
In Punjab, where almost the entire state is irrigated, SEZs are being set up on prime agriculture land. The Punjab government, for instance, is using repressive techniques to browbeat the agitating farmers near Barnala, who have been opposing the forcible acquisition of land for the private company, Trident. Similarly, farmers have been agitating against the government’s repressive policies for acquiring fertile land for an SEZ near Amritsar.
Although rules forbid acquiring more than 10 per cent of the double-cropped area for setting up SEZ, the fact remains a majority of the princely estates are coming up on fertile land.
Even in Himachal Pradesh, where the average farm size is about 0.4 hectares, the government is keen to convert 35,000 hectares in the Kangra valley into SEZ.
One of the biggest SEZ is coming up near Mumbai. Spread over 14,000 hectares, it is coming up predominantly on double-cropped land. The Mukesh Ambani group has already acquired 9,000 acres of land in Jamnagar for its petro-product SEZ. It plans ultimately to increase the size of the product to 10,000 acres and convert it into a multi-product SEZ.
With provisions for owning 65 per cent more land than required, the government has provided the ‘developers’ of SEZ an environment to build supermarkets, malls, restaurants, recreation parks and so on -- essentially given permission for building small princely estates. Out of 1.25 lakh hectares allocated so far to SEZ, nearly 31,250 hectares can be used for real estate development.
The real estate firms are obviously elated.
Another major SEZ proposed in Jhajjar adjoining New Delhi is spread across 10,000 hectares and is again gobbling double-cropped land. Interestingly, both these SEZ, proposed to occupy a landmass larger than the suburb of Gurgaon, are yet to be officially approved. In Mangalore, one of the promoters is the government-owned ONGC and 2,200 hectares of double- and even triple-cropped land is being acquired for setting up an SEZ.
Take the case of Tata Steel promoted Gopalpur SEZ in Orissa. Originally acquired by the state government for a paltry sum, land was handed over to Tatas for a steel plant. When the plant didn’t come up, and the farmers demanded the land to be returned, the company promptly proposed to convert this land into an SEZ. Korean steel giant Posco, which is also setting up a steel unit in Orissa, was provided with 1,600 hectares of land and exclusive access to an iron ore mine despite massive protests by farmers. Posco now wants this land to be converted into an SEZ and the state government is willing.
In another interesting example, the CPM [Communist Party of India (Marxist)] government in West Bengal has acquired some 400 hectares of fertile land for the Tatas to set up an automobile factory at Singur, near Kolkata. Technically speaking Singur is not an SEZ, but what makes the deal politically significant is that the State government has actually acquired the land at cost of Rs 140-crore.
It has been made available to Tatas for a-mere Rs 20-crore, which is one-seventh of the cost price. Even that can be treated as a loan for 5 years. Ironically, while the poor rural women in self-help groups (SHGs) in West Bengal pay a minimum annual interest rate of 24 per cent for micro-credit, Tatas will be charged a nominal rate of 0.1 percent for macro-credit.
In Kerala too, the communist government is gung-ho over the promise of SEZ.
The setting up of the princely estates is being primarily justified on account of employment generation. The premise is that it will create 5 lakh (500,000) job opportunities. Does this kind of employment generation mean anything for India? This question has been conveniently ducked and for obvious reasons. Now let us examine the ground realities.
It was at the beginning of this century that some 75 lakh (7,500,000) people, more than the population of Switzerland, had applied for a mere 28,000 lowly paid jobs in the Indian Railways. For a country, which is on a fast track information highway, this does not mean anything significant except for statistics. Even if you were to employ five lakh out of these 75 lakh (7,500,000), isn’t that a mere drop in the ocean? Millions of assured jobs can be created if the total amount of revenue loss -- Rs 1.75 lakh crore (17,500,000) -- and the several times higher public sector investment to follow is used for employment generation.
Not to discount the achievements in information technology, the fact remains that IT has provided only five to six lakh jobs. The BPO service industry that we hear about every other day actually employs only 2 lakh (200,000) people. Why a large number of IT companies applied for setting up SEZs is not because they intend to provide huge job opportunities but are simply looking forward to take advantage of the tax concessions.
The tax exemption currently enjoyed by the IT sector comes to an end in 2009-10. Moreover, since existing contracts and employment can be shifted, it is quite likely that IT units will merely shift their operations into an SEZ, thereby nullifying claims of employment and revenue generation.
With such large-scale diversion of land the first and foremost impact will be through displacements. Our estimates show that close to 1.14 lakh (114,000) farming households (each household on an average comprising five members) and an additional 82,000 farm worker families who are dependent upon these farms for their livelihoods, will be displaced.
In other words, at least 10 lakh (1,000,000) people (twice the number of jobs that SEZ promise to create) who primarily depend upon agriculture for their survival will face eviction. The plight of farm labour is surely going to be worse as they will not only witness their source of livelihood being taken away but they will hardly see any employment opportunities for them in the princely estates. All they can do is to stand outside the tall gates of the SEZ and dream to be born in such families in their next birth.
Now let us take a stock at the annual loss in income for those displaced. As per the latest report of the National Sample Survey Organisation (NSSO 2005), the average income of a farming household stands at Rs. 2,115 per month (income from cultivation - Rs. 969; farming of animals - Rs. 91; wages -- Rs. 819; and non-farm business -- Rs 236). Of these, income from the first two sources (Rs. 1,060) will be immediately lost.
Therefore, each farming household will lose Rs. 12,720 every year. The total loss of annual income for the 1.14 lakh (114,000) displaced farm families works out to Rs.145 crores. While it remains a fact that most of these displaced farmers would earn more for their land, several studies have shown that unless a rehabilitation policy is in place a majority of these farmers would ultimately end up further marginalized over a period of time.
As per the National Rural Labour Commission, an average agricultural worker gets 159 days of work in a year; and as per NSSO (2005), the average daily wage of agricultural labour in rural areas is around Rs. 51.
Considering this, the estimated 82,000 agricultural labourers’ households will lose Rs. 67-crore in wages. And put together, the total loss of income to the farming and the farm worker families is to the tune of Rs. 212-crore (2,120,000,000) a year. For the marginalized, the loss of income -- even if it hovers around the poverty line -- has disastrous implications.
After all, the small piece of land is his only economic security.
Food security too is no longer the national priority. Otherwise, no sensible government would have at any cost tinkered with the country’s dwindling ability to produce food for its own population. Our own conservative estimate shows that the nation will suffer a loss of Rs. 250 to 400 crores (4,000,000,000) from the reduction in area under cultivation of food grains alone. Foodgrain production is expected to drop by at least 4 to 5 lakh (500,000) tonnes a year. (1) Remember these are only conservative estimates. In case of land under high value crops, the losses would be much higher.
Tall promises of employment generation notwithstanding, who will be held accountable if the promise of job creation remains unfulfilled? First of all, the Ministry of Commerce has no true basis for telling us how many jobs will be created. It is merely a guess- estimate. Secondly, if the past experience is any indication, the real jobs that are added by the industries are only a miniscule of what they promise. Take the case of Pepsico’s entry into Punjab in the 1980s. The multinational giant promised to create 50,000 jobs. In reply to a 1991 parliamentary question, the Ministry of Food Processing acknowledged that the company had created only 482 jobs, of which 210 were unskilled workers.
It is primarily to avoid embarrassments at a later stage for promises un-kept that industrial houses are seeking the advise of consultancy firms like Price Water House, Ernest & Young, and Feedback Ventures among others to prepare master plans for the promoters. Basically the job of these consultancy firms is to write the proposal in such a format using the right vocabulary so that its gets the government’s nod. At the same time the State governments too are utilizing their services to ensure that the land transfers do not invite unnecessary litigation. In essence, if you are rich and can afford to hire a consultancy firm to write a proposal on your behalf you can aspire to be a modern-day prince.
It is therefore a free for all activity. If you can mobilize political support by hook or by crook you can be rest assured that you are on the right path to royalty. Whether you finally deliver what you promise is something that you can leave to the consultants to take care of. What is more significant is that where in the world will you find a pliable government and a supporting bureaucracy like India that helps you to not only identify the place where you want to set up your princely estate but also provide you all the necessary sops, support and protection.
In China, from where India drew inspiration, only six SEZ -- at Shenzhen, Shantou, Xiamen, Zhuhai, Hainan and Pudong -- have been set up so far. These economic zones, all in public sector, came after a lot of debate and deliberation, and all of them are situated along the coast. Faced with shrinking cultivable land, the Chinese SEZ have come up only in wastelands. In India, all these norms have been thrown to the wind. World over, there are only some 400 special economic zones. If it was such a productive and useful activity, why hasn’t the world woken up to the promises that Dr Manmohan Singh’s government has been making?
Creating an economic magic has not been the reason for setting up the SEZ. It is essentially aimed to create a series of affluent islands amidst the cesspool of poverty, hunger and deprivation. An oasis, or call it a pocket of effluence for the rich and elite. After all, the rich and the elite find the poor an eyesore. They have to be therefore translocated elsewhere.
For the rest of the country, exploited in the name of development, sub-Saharan Africa is the only comparison.
1.
Loss Projection (Production & Value)
Crop Loss (lakh tonnes) Value (Rs. Crores)
Sole Wheat # 3.38 371*
Sole Paddy $ 2.5 245**
Wheat + Paddy % 1.7 lakh tonnes of wheat
and 1.25 lakh tonnes of rice 310
* Based on average wheat import cost for year 2005-06 (Rs. 11,000/ tonne)
** Based of average international price of low quality rice for September 2006 (US$ 217 per tonne) for low quality rice (September prices are generally lower than the rest of the year, so this figure is quite conservative). For the sake of analysis, we took the following averages:
# Average All India Yield: 2.7 tonnes/ ha
$ Average All India Yield: 2.0 tonnes/ ha
% Assuming that only two food grain crops are grown across 1 lakh hectares under SEZ
Wheat Package - For Whose Benefit ?
Wheat package: for whose benefit ? - Bhaskar Goswami
The Hindu, 8 Oct 2006 - http://www.hindu.com/op/2006/10/08/stories/2006100800371400.htm
It is designed to camouflage government's flawed policies that led to imports this year.
Does the following sound familiar?
Wheat productivity has declined in the past decade and the Ministry of Agriculture has therefore unveiled a "fresh" plan to enhance it. Across 138 districts which have assured irrigation, a subsidy package for replacing existing seeds, sprinkler and drip irrigation, diesel for irrigation, fertilizers, and extension services geared to promote improved package of practices will help increase productivity.
The Centre will meet half the cost of Rs. 2,480 crore while the States and farmers will have to share the balance. Like many other Centrally sponsored schemes, this too is designed to aid unprofitable agriculture input - producers of the government and the private sector.
The detachment of the mandarins at the Ministry from reality is obvious from what this package offers. Terming the seed saved by farmers as unproductive, the government wants to increase the seed replacement rate (SRR).
While advocating this they ignore the fact that being a self pollinated crop, wheat seed need not be replaced every year. Careful selection of seed from the previous year's harvest can well serve the purpose, which most farmers have been doing for ages.
That seed replacement has little to do with increasing the productivity of wheat can be seen from the case of Punjab which produces more than 42 quintals a hectare with an SRR of less than 5 per cent, while States such as Uttar Pradesh and Madhya Pradesh with much higher SRR of 18 and 15 per cent produce much less. Yet, Rs. 160 crore has been allocated for seed replacement which will certainly bring joy to the State seed corporations that are running at a loss.
Not fully effective :
Similarly, a Rs. 200 crore subsidy has been earmarked for micro-nutrients. Micro nutrients play an important role in maintaining productivity and it is now well known that deficiency of zinc in soil is principally responsible for the declining wheat yield.
However, chemical fertilizers cannot fully compensate for micro-nutrient deficiency as seen in Punjab where zinc supplements have failed to increase the yield. Organic manures, on the other hand, contain a range of trace elements that can tackle this problem.
However, no subsidy is made available to promote their application. As in the past, this subsidy will not benefit farmers but indeed help a few fertilizer companies to stay afloat. Another Rs. 150 crore allocated for diesel subsidy will rapidly deplete the aquifers while the pump manufacturers will laugh their way to the bank.
Subsidised sprinkler sets for drip irrigation is another intervention proposed. Sprinklers do have the potential to increase irrigation efficiency by providing water to match crop requirements. However, it has been seen that in irrigated areas sprinklers are not very popular as cropping pattern on such land is generally water-intensive.
While the Green Revolution contributed to India's food security, it seems the lessons learnt from the trail of devastation that this intervention has caused have been forgotten.
Thousands of hectares that earlier supported soil nourishing legumes were put under high yielding varieties of wheat and paddy and have now turned into wasteland. These water guzzling crops fed on chemical fertilizers have rendered the underground aquifers dry and the once productive soil completely barren.
Instead of enhancing productivity of wheat, the present package will further erode the natural resource base.
This package is designed to camouflage the government's flawed policies that led to wheat imports this year.
The Hindu, 8 Oct 2006 - http://www.hindu.com/op/2006/10/08/stories/2006100800371400.htm
It is designed to camouflage government's flawed policies that led to imports this year.
Does the following sound familiar?
Wheat productivity has declined in the past decade and the Ministry of Agriculture has therefore unveiled a "fresh" plan to enhance it. Across 138 districts which have assured irrigation, a subsidy package for replacing existing seeds, sprinkler and drip irrigation, diesel for irrigation, fertilizers, and extension services geared to promote improved package of practices will help increase productivity.
The Centre will meet half the cost of Rs. 2,480 crore while the States and farmers will have to share the balance. Like many other Centrally sponsored schemes, this too is designed to aid unprofitable agriculture input - producers of the government and the private sector.
The detachment of the mandarins at the Ministry from reality is obvious from what this package offers. Terming the seed saved by farmers as unproductive, the government wants to increase the seed replacement rate (SRR).
While advocating this they ignore the fact that being a self pollinated crop, wheat seed need not be replaced every year. Careful selection of seed from the previous year's harvest can well serve the purpose, which most farmers have been doing for ages.
That seed replacement has little to do with increasing the productivity of wheat can be seen from the case of Punjab which produces more than 42 quintals a hectare with an SRR of less than 5 per cent, while States such as Uttar Pradesh and Madhya Pradesh with much higher SRR of 18 and 15 per cent produce much less. Yet, Rs. 160 crore has been allocated for seed replacement which will certainly bring joy to the State seed corporations that are running at a loss.
Not fully effective :
Similarly, a Rs. 200 crore subsidy has been earmarked for micro-nutrients. Micro nutrients play an important role in maintaining productivity and it is now well known that deficiency of zinc in soil is principally responsible for the declining wheat yield.
However, chemical fertilizers cannot fully compensate for micro-nutrient deficiency as seen in Punjab where zinc supplements have failed to increase the yield. Organic manures, on the other hand, contain a range of trace elements that can tackle this problem.
However, no subsidy is made available to promote their application. As in the past, this subsidy will not benefit farmers but indeed help a few fertilizer companies to stay afloat. Another Rs. 150 crore allocated for diesel subsidy will rapidly deplete the aquifers while the pump manufacturers will laugh their way to the bank.
Subsidised sprinkler sets for drip irrigation is another intervention proposed. Sprinklers do have the potential to increase irrigation efficiency by providing water to match crop requirements. However, it has been seen that in irrigated areas sprinklers are not very popular as cropping pattern on such land is generally water-intensive.
While the Green Revolution contributed to India's food security, it seems the lessons learnt from the trail of devastation that this intervention has caused have been forgotten.
Thousands of hectares that earlier supported soil nourishing legumes were put under high yielding varieties of wheat and paddy and have now turned into wasteland. These water guzzling crops fed on chemical fertilizers have rendered the underground aquifers dry and the once productive soil completely barren.
Instead of enhancing productivity of wheat, the present package will further erode the natural resource base.
This package is designed to camouflage the government's flawed policies that led to wheat imports this year.
Subscribe to:
Posts (Atom)