The Special Economic Zones (SEZs) Bill was approved by both houses of Parliament within two days in May 2005, with little discussion or dissent. Introduced as policy by the National Democratic Alliance (NDA) in 2000, the SEZ law was enacted by the United Progressive Alliance (UPA), at the time supported by the Communist Party of India (Marxist). Like similar zones in the Americas, Southeast Asia or China, the Indian SEZs aimed at creating export-led enclave economies with tax and duty concessions. Ostensibly, the Indian SEZ model was premised on the Chinese model comprising seven large State-owned SEZs with targeted incentives for specific industries.

But the Indian model went much further. Superseding the existing 11 Export Processing Zones in the country, it envisioned no ceilings on the numbers and sizes of SEZs. It eschewed targeted incentives for blanket concessions to industry. And its comprehensive scope included most economic activities — mining, agriculture, manufacturing and services. By April 2011, the Government had ‘formally approved’ a whopping 584 SEZs (with 377 ‘notified’ to begin operations). This number rose from 366 formally approved (and 142 notified) in August 2007. The ‘global financial meltdown’ did evidently little to dampen the enthusiasm for India’s SEZs.

In stark contrast, in less than two years of enactment, tenacious resistance against SEZs erupted across the country from peasants’ and citizens’ groups, forcing the central and state governments to respond variously with violent repression, tactical reversal, negotiation and deferrals. In Gujarat, Maharashtra, Goa, Karnataka, Tamil Nadu, Andhra Pradesh, Orissa, West Bengal and Haryana, land and resource acquisition for SEZs emerged as a central contention between state forces, corporate developers and peasants’ and citizens’ groups. In the ensuing furore, in March 2007, 14 people died in police firing while protesting the acquisition of 25,000 acres for Indonesian Salim SEZ in Nandigram, West Bengal. As violence escalated in November 2007 with an unclear number of people dead (accounts vary from seven to 100), the state government eventually moved the SEZ out of the area. Similarly, under immense pressure from widespread protests, the Chief Minister of Goa announced a ‘new year gift’ on December 31, 2007, cancelling all 15 SEZs in the state. By November 2009, one of the most ambitious SEZs on the outskirts of Mumbai, the Mumbai SEZ, failed to secure even a quarter of the 11,300 hectares of land ‘approved’ for it, and officially ceased operations.

As the resistance to medium and large SEZs unfolded across the country between 2007 and 2010, the message was loud and clear — people would not give up their lands; SEZs had to go. While resistance to land acquisition has proved to be one of the biggest stumbling blocks for SEZs, the insistence of the current government on expanding manifold the scope of land acquisition is intriguing.

As SEZs became political hot potatoes, 2011 saw a near-freeze on the enthusiasm for new proposals. The Minimum Alternate Tax (MAT) levied by the Finance Ministry in 2011 imposed 18.5 per cent tax on booked profits, amid industry hue and cry over ‘policy reversal’ (incidentally, the same industry is perfectly happy with policy reversals in the land acquisition act). The current government has been unable to reverse the MAT, pointing to sources of friction within central ministries (particularly Finance and Commerce) over revenue loss from SEZs.

According to the Comptroller and Auditor General (CAG) of India, 52 per cent of the land approved for allotment to SEZs remains idle and SEZs have not had any significant impact on economic growth, trade, infrastructure, investment or employment. The 2014 CAG report notes that SEZs with notable achievements were established prior to the SEZ Act 2005. Overall, while 56.64 per cent of SEZs caters to the IT/ITES sector, only 9.6 per cent is for manufacturing multi-product SEZs. The report notes the disturbing trend that while developers sought allotment of vast areas of land for SEZs, they notified only a fraction as SEZs, even denotifying SEZ land to benefit from price appreciation. In six states, 14 per cent of SEZ land was diverted for commercial purposes.

The number of approved SEZs has reduced from 584 in 2011 to 491 in 2014 (see table). A study of meeting minutes reveals that almost every Board of Approval (BoA) meeting for SEZs receives requests for withdrawals from developers. SEZs are widely portrayed as failures and victims of the UPA’s ‘unstable policy environment’ by industry representatives and in the media. The decision by the SEZ Board of Approval to discontinue any forcible land acquisition for SEZs has also been a big blow for developers. Herein is a piece of the political puzzle behind the Land Acquisition Ordinance and Amendment Bill. Without the State acquiring commons and private properties, there can be no large private project — this illiberal contradiction of India’s growth story overturns the liberal holy grail of ‘the free market of willing buyers and sellers’.

(Preeti Sampat is a public policy scholar at The Hindu Centre for Politics and Public Policy and teaches at the Department of Sociology, Delhi School of Economics)