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VOL. XXIV NO. 17, December 16-31, 2014
Deja vu!
by Maj. General S.G. Vombatkere, vsm (retd.)

Uncanny similarities between SEZ Act 2005 and concessions granted to John Company for Madras in 1639

Special Economic Zones (SEZs) are not a new concept, but the scale, speed and socioeconomic ambience with which these are being created are entirely new. Since enactment of the SEZ Act 2005, 300 SEZs have become functional and 560 more approved. While reading about the foundation of Madras (now Chennai) in 1639, and the manner in which the British received a firman from the local ruler for grant of land and trading concessions, the similarity with the creation of SEZs raised a feeling of deja vu.

Government’s proposal for SEZs aims to accelerate economic development by promoting export of goods and services, attracting foreign direct investment (Rs. 1,000 crore was expected by end-2007) and creating employment (500,000 jobs) through providing investors preferential treatment in terms of facilities and taxes. SEZs are deregulated areas within which special concessions are provided to industrial or commercial corporates so that they may flourish unhindered by the laws, rules and regulations that apply in the rest of the country, which are obviously construed as limiting corporate profits. The concessions are provided by the Special Economic Zones Act, 2005. Presumably corporates have had a hand in suggesting and drafting the legislation.

Exemptions from 21 Central Acts dealing with cesses, taxes and duties for products like rubber, oil, tobacco, sugar, tea, salt, mica, coffee, and modifications to the Income Tax Act, and amendments to the Insurance, Banking Regulation and Stamp Acts within SEZs provide concessions and simplify procedures to enhance competitiveness and create the necessary ‘climate’ for profits. The concessions concerning land, labour and rates of taxes, customs duties, etc. may be reduced or exempted altogether.

SEZs are favoured with water and electric power at subsidised rates. Workers cannot form trade unions for collective bargaining for fair wages and better working conditions, and are open to exploitation in ‘sweet shops’, the corporates thereby maximising profits. Also, the inapplicability of environmental laws within SEZs further enhance corporate profits by ‘saving’ expenditure on environmental protection.

* * *

Government acquires land for SEZs to the extent required by the corporates that come up with a proposal for investment. Land is acquired (under Land Acquisition Act, 1894) from private owners and compensation is paid at rates determined by Government. Government may provide the land to the corporate at a rate higher than cost of acquisition, and gain revenue at the cost of the farmer. Or it may be sold at a subsidised rate (as in the case of the chemical SEZ at Nandigram in West Bengal), in which case the exchequer pays the difference. Whichever method is adopted, the corporate gains and the farmer or the public loses.

* * *

From ancient times, high authority in any society (chieftain, king, emperor) promulgated edicts favouring particular powerful persons by bestowing property and/or power on them at the pleasure of the ruler, with the quid pro quo of that beneficiary paying tributes to the ruler by extracting taxes from the peasantry. In Moghul times, this was called a firman. In a modern democracy, governments pass laws empowering the administrative machinery to execute tasks and projects.

The Constitution of India mandates separation of powers of the executive, legislature and judiciary so that checks and balances are possible, and no one arm of the Constitution can gain undemocratic dominance. But contrarily, the SEZ Act actually integrates the powers of the executive, the elected institutions and the judiciary, in a government-appointed Development Commissioner, who is a bureaucrat, and/or the Developer, who is a business person (a corporate body is also a “person”) providing the investment. Being exempted from the burden of laws that apply elsewhere in India, an SEZ is effectively separate from the Indian State in the form of a corporate colony. In this sense, the SEZ Act is not unlike a firman on the Government of India, providing corporate economic independence.

* * *

On August 22, 1639, Francis Day of the British East India Company secured a piece of land near the fishing village of Madraspatam (that was later called Madras) through a firman granted by Damerla Venkatadri, a Nayak of the Vijayanagar Kingdom. The land was used to construct Fort St. George that became a seat of power for expansion of British trade, the political power arising from which resulted in India becoming a British colony.

From the choice of words in the firman that gave trading rights and concessions to the English, it appears that Day drafted the document. It appears that, besides wanting commerce to flourish in his territory, the Nayak wanted to utilise English ships to import horses from Persia, and also have a place of refuge from hostile neighbours in a contingency. It was the Nayak’s firman that led to construction of Fort St. George for the purpose of “peaceful prosecution of commerce from a place of safety”. It is further stated that in order to encourage the English to conduct their trade, “they were given the privilege of bringing the goods and sending them out customs-free, and of providing themselves with supplies for themselves and their sea-going ships duty-free from the country.

The Nayak granted land and permission to build the fort according to the needs and design of the British based upon Day’s “great hopes by reason of our promises often made unto him”, thereby indicating that Day already had considerable influence over the Nayak because of favours that the British had done, or some gold that was paid to the Nayak. The Nayak goes on to agree to advance the cost of construction on the understanding that the British would repay the cost when they took possession of the fort. Later, “to make more full expression of our affection to the English nation”, the Nayak sanctions to the British “full power and authority to govern and dispose of the Government of Madraspatam for the term and space of two years”, and goes on to offer them trade concessions.

Out-doing himself in his generosity, the Nayak grants that “whatsoever provisions the English shall buy in my Country, either for their fort or ships, they shall not be liable to pay any custom or duties for the same”, and that “whatsoever goods or merchandise the English Company shall either import or export ...”, shall “... for ever after, be custom free.” In relation to other traders, the English obtain most-favoured-nation status in the firman when he grants that for any goods which the English may bring to or through the Nayak’s country, the English “shall pay half the duties that other merchants pay, whether they buy or sell the said commodities either in my Dominions or in those of any other Nague whatsoever.” The Nayak gives even further scope to the British to set up their own economic system, saying, “the said English Company shall perpetually enjoy the privileges of mintage without paying any dues or duties whatsoever.”

The Nayak guaranteed the quality and honesty of the merchants or craftsmen whom the English might employ, and in the event that such persons “fail in their performance”, the Nayak would “make good to the English all such sums of money as shall remain on their accounts, or else deliver them their persons, if they shall be found in any part of my territories”. Thus, the Nayak underwrites losses that the English may incur due to his citizens’ non-performance and, abjectly surrendering his right to rule over his own subjects, even hands over defaulters to the English.

There is an uncanny similiarity between the SEZ Act 2005 in granting land, concessions and privileges to corporates for SEZs, with the firman granted by the local ruler to the British on August 22, 1639 for land and concessions to establish a trading post in Madras.

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In this issue

Are we waiting for their collapse?
Madras Landmarks - 50 years ago
Crowd-funding to support social causes?
Deja vu!
Sowing the seeds of freedom
Laurence Hope – A life of mystery
The Red Hills Railway
A 2500-year-old 'industrial estate'

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