Mega SEZs may be freed from space jam

Written by Arun S | New Delhi, Jan 27 | Updated: Jan 28 2008, 07:00am hrs
The 5,000-hectare restriction on building multi-product special economic zones may soon go. The government will discuss the matter at a much-awaited empowered group of ministers (eGoM) meeting, now scheduled for February 4.

This will be a significant development because commerce and industry minister Kamal Nath had, in December 2007, categorically ruled out any chance of relaxing the area limit despite stiff lobbying by developers. His comments were in response to commerce secretary GK Pillais statement. Pillai had said the government might consider easing the norm.

In a sign that the government is now more comfortable with the development of the SEZs, the eGoM may also decide to let developers build additional facilities in non-processing areas (zones that have social amenities but have no industrial activity) without tax concessions. This is expected to improve the commercial viability of SEZs. The group will also address the finance ministrys objection to giving tax breaks to such real estate development.

The meeting, to be headed by foreign minister Pranab Mukherjee, will also allow states to acquire up to 30% of land in a proposed SEZ, only if its developer has already acquired the remaining 70%. On the agenda is also a proposal to exempt developers, co-developers and units from the service tax.

Relaxation of the 5,000-hectare cap will most likely boost the ultra-mega multi-product SEZ plans of developers like Reliance Industries Ltd, DLF, Adani, Omaxe and the Singapore-based Ascendas group.

In April last year, the ministers had set the ceiling after violent agitations at Nandigram in West Bengal, where Indonesias Salim Group was planning an SEZ. There was also intense opposition from several quarters, including from the Left parties, after allegations about fertile land being acquired for SEZs began cropping up from different states.

Citing the revised Relief and Rehabilitation Policy notified in October 2007 and the Cabinet nod for the proposed amendments to the Land Acquisition Act, 1894, the commerce ministry, the nodal ministry for the SEZ policy, feel that the eGoM can revise the position now.

The high-level meeting will also discuss a new proposal to set the minimum area requirement for handicrafts SEZs at 10 hectares. Another important issue on the agenda is: the proposed amendments to the drawback-duty entitlement pass book scheme rules to help developers and co-developers of SEZs benefit on payment made in rupees for materials bought from the domestic tariff area.