While industry and the markets largely viewed the Left parties withdrawing support to the Manmohan Singh government with the hope that the UPA would now push through its long-pending laundry list of key economic reforms, in the short run, the flux could persist.
For starters, the developments of Tuesday caused the Centre to indefinitely postpone a key meeting to sort out several wrangles over its single reform showpiece: special economic zones (SEZs).
The July 10 meeting of the empowered group of ministers (eGoM) on SEZs, chaired by external affairs minister Pranab Mukherjee, was expected to resolve much-deferred issues, including relaxing the land ceiling of 5,000 hectare imposed in April 2007, as well as permitting states to acquire up to 30% of land for SEZs, as opposed to the earlier diktat preventing states from forcibly acquiring land for private SEZs.
These moves were expected to help realise the ultra-mega, multi-product SEZ plans of Reliance Industries Ltd, the Adani group, Omaxe, DLF and Singapore-based Ascendas group. The commerce ministry had cited the revised Relief & Rehabilitation Policy notified in October 2007 and the Cabinet nod for the proposed amendments to the Land Acquisition Act, 1894, to contend that the eGoM could now relax the land ceiling.
Allowing developers to build more facilities in the non-processing area without tax concessions was also on the agenda. The eGoM was to discuss a finance ministry proposal to impose a 12.5% minimum alternate tax on SEZs as well as fix an export obligation on SEZ units.
While the government would now be hoping to push through reforms in banking, pension and insurance in its remaining tenure, it all hangs on the UPA surviving the upcoming trust vote.