The proposal to set up a special economic zone (SEZ) at Nandagudi near Bangalore in Karnataka has invited a lot of brouhaha over the last few days.

While the SEZ policy of the Government of India has generally created excitement within the industry (with all major industrial groups flocking with proposals before the Government), it has invited an equal amount of skepticism from civil society. Its criticism pertains to the fact that the policy could result in land grabbing through the process of ‘eminent domain’ by shortchanging land owners. Further problems include the inability to appropriately rehabilitate the land dwellers. Following the uproar that was created in Nandigram in West Bengal a few months ago, the controversy has travelled southward towards the phonetically similar village of Nandagudi in Hoskote Taluk, Karnataka State (55 kilometres from Bangalore city).

The SEZ at Nandagudi is proposed to be developed by a private business group. The proposal was met with severe resistance from the outset not only from civil society but from within the Government. Several departments of the Karnataka Government as well as bureaucrats voiced their dissent to the SEZ for several reasons – (i) it would aggravate the water shortage in the area, (ii) it was to be established on farm land (depriving farmers of their livelihood), (iii) the farmers cannot be adequately rehabilitated as they had no skills apart from agriculture, (iv) the price of land in the area is skyrocketing due to its proximity to the new Bangalore International Airport at Devanahalli (and the landowners cannot obtain the benefit of the appreciation of land value). But, despite these objections the Government of Karnataka approved the proposal.

However, as reported in The Hindu Business Line, the Central Government came to the rescue of the dissidents of the proposal last Friday (June 22) when the Board of Approval under the SEZ Act (BoA) presided over by the Commerce Secretary decided to defer the approval of the Nandagudi SEZ. The BoA decided to take into account instructions of the Central Government that no land should be acquired by a State Government unless 100% owners give their consent.

This is a welcome move as it takes away the power of the State Government to indulge in compulsory land acquisition through the power of ‘eminent domain’. In a sense, it makes the land acquisition process a consensual one as notification of SEZs is not possible if even a single landowner objects to acquisition. On the other hand, the process could give rise to difficulties if State Governments are to allow private developers of SEZs to negotiate directly with landowners, as has been planned. Lands are fragmented with a large number of landowners who may not be able to form coalitions to negotiate adequately with private developers. Landowners (such as farmers, with low levels of literacy) may be susceptible to coercion and undue influence from players such as private developers who are well-versed in real estate matters. Hence, Governments should not be allowed to abdicate their responsibilities entirely and leave negotiation of land-deals directly with landowners. State Government ought to monitor the process to ensure that “fair” compensation is paid to the landowners, and that they are properly rehabilitated.

I suspect this controversy is unlikely to die down soon. Farmers as well as political parties have threatened to continue their agitation over the Nandagudi SEZ. We will have to wait and watch the developments over Nandagudi as they are likely to impact other SEZs too.