Left impact

V. VENKATESAN
in New Delhi

Behind the making of the Special Economic Zones Act, 2005, lies the
watchdog role played by the Left in Parliament.

THE Atal Bihari Vajpayee government, through Commerce Minister Murasoli
Maran, announced a Special Economic Zone Scheme in April 2000 with a
view to providing an internationally competitive environment for
exports. The objectives of SEZs include making available goods and
services free of taxes and duties, integrated infrastructure for export
production, quick approval mechanisms, and a package of incentives to
attract foreign and domestic investments for promoting exports. While
the policy relating to SEZs is contained in the Foreign Trade Policy,
incentives and other facilities offered to SEZ developers and units were
being implemented through various notifications and circulars issued by
the Ministries and departments concerned.

The United Progressive Alliance (UPA) government, after coming to power
in 2004, felt that the existing system did not inspire enough confidence
in investors for them to commit a substantial amount of money for the
development of infrastructure. To provide a long-term and stable policy
framework with a minimum regulatory regime and to provide expeditious
single-window clearance, the government thought it necessary to bring a
Central Act for SEZs in line with international practice.

Before the SEZ Bill was introduced in the Lok Sabha on May 10, 2005,
there were 11 functioning SEZs. In addition, approvals had been given
for setting up 35 new SEZs in the private/joint/state sector. The Bill
was passed by both Houses of Parliament on May 12, 2005, and it secured
the President's assent on June 23, 2005. The passage of the Act and its
subsequent notification after the framing of rules has given a fillip to
the birth of more SEZs: as on September 29 this year, the Board of
Approvals set up under the Act had approved a total of 181 SEZs across
the country.

While the quantitative expansion of SEZs has been a noticeable
achievement of the Act, the fears expressed during the debate in
Parliament and the crucial amendments moved by the Left parties to the
original Bill introduced by Commerce Minister Kamal Nath need to be
highlighted in the context of the controversy over certain aspects of
the Act.

Section 50 of the original Bill said: "The State government may, for the
purposes of giving effect to the provisions of this Act, notify policies
for developers and units and take suitable steps for enactment of any
law granting exemption from the State taxes, levies and duties to the
developer or the entrepreneur... ." It further said: "Directing that any
of the provisions of any State Act relating to trade unions, industrial
and labour disputes, welfare of labour including conditions of work...
invalidity, old-age pensions, and maternity benefits or any other
activity relating to the SEZ shall not apply... ."

Hidden agenda

In the Lok Sabha, Rupchand Pal of the Communist Party of India (Marxist)
made it clear that if the government wanted Left support it would have
to remove the part that denied people their basic human rights. He said:
"It is not acceptable. Even in a SEZ the basic human rights, maternity
benefit, compensation should not be denied."

Section 49 of the original Bill was even more blatant. It said: "The
Central government may, by notification, direct that any of the
provisions of this Act (other than Sections 54 to 56) or any other
Central Act or any rules or regulations made thereunder or any
notification or order issued or direction given thereunder (other than
the provisions relating to making of the rules or regulations) specified
in the notification shall not apply to a SEZ... ."

It did not take long for Rupchand Pal to detect the government's hidden
agenda in using the phrase "any other Central Act", which include laws
intended to protect the interests of workers. He sought an amendment to
the Bill to protect labour rights if the government wanted the Left's
support.

Section 3(4) of the original Bill had the potential to derail the
federal structure. It said: "In case a State government intends to set
up a SEZ, it may, after identifying the area, forward the proposal
directly to the Board for the purpose of setting up the SEZ... Provided
that the Central government may, after identifying the area, suo motu
set up and notify a SEZ without referring the proposal to the State
government concerned or the Board."

Rupchand Pal asked in the Lok Sabha: "How can it be done without making
a reference at least to the State government in a federal set-up?" His
plea was that State governments should not be ignored because `land' is
a State matter. "Land, water, etc., will be provided by the State
governments and the State governments will have their representatives in
the Board. So, why should they ignore the State governments for
nothing?" he asked.

Gurudas Dasgupta of the CPI added: "However justified may be your
economic programme, if labourers are given a raw deal and if labourers
are harassed and exploited, there cannot be any success to any
programme, least of all the SEZs."

Nilotpal Basu of the CPI(M) warned in the Rajya Sabha: "The word
`without' is infringing the very spirit and the very framework of the
Bill. The motion of cooperative federalism is the heart of the entire
legislation."

Thanks to the MPs' intervention, the government accepted the suggested
amendments. Section 3(4) of the Act reflects the amendment suggested by
the Left parties: the Centre may, after identifying the area, suo motu
set up and notify the SEZ, but only after consulting the State
government concerned.

The government deleted the clause exempting application of any State Act
relating to trade unions, industrial and labour disputes, welfare of
labour, including conditions of work in the SEZs, while drafting Section
50 of the Act. The government also deleted the clause denying old-age
pensions, maternity benefits and concessions to invalid persons.

The Act carries an important proviso to Section 49, to address the
concerns of the Left parties that SEZs might be kept out of the purview
of the labour laws enacted by Parliament. The proviso says that this
Section shall not apply to matters relating to trade unions, industrial
and labour disputes, welfare of labour including conditions of work,
provident funds, employers' liability, workmen's compensation,
invalidity and old-age pensions and maternity benefits applicable in any
SEZ. It means that the Centre cannot by notification direct that laws
relating to these matters will not apply to SEZs.

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