No new SEZs for states going slow on clearance

Written by Rituparna Bhuyan | New Delhi | Updated: Jan 28 2010, 05:22am hrs
The board of approval (BoA) on special economic zones will not consider any proposal from states that have not fast-tracked their clearances for the projects. The board, the final authority that decides on SEZ-related matters, will discuss the plan at its meeting on February 11.

It is suggested that no new proposal be put up to the BoA from state governments which have not effectively put in place the system of single window mechanism. This would be applicable to new approvals and to requests seeking extension of in-principle or formal approval as well, said the agenda note for the board meeting, which will be chaired by commerce secretary Rahul Khullar.

While there are about 100 functional zones that will not be impacted by this decision, a total of 617 SEZs are in various stages of approval. SEZ policies have had a yo-yo ride over the last couple of years, especially those that planned acquisition of large tracts of land. Delay in land acquisition and the economic downturn have seen several developers surrender their plans. The BoA proposal will partially offset some of those delays.

The commerce ministry had urged states to set up a one-stop shop arrangement for SEZs, but so far only a few states have implemented the single window mechanism. While Gujarat has the most business-friendly state-level SEZ Act, Uttar Pradesh, Haryana and Madhya Pradesh also have functional Acts. Many industrialised states like Maharashtra, Andhra, Karnataka and Rajasthan dole out incentives to SEZs through policies.

Experts point out that even in states with SEZ Acts and policies, there is no effective implementation of the single window mechanism.

In a state like Gujarat too, there are instances where developers have to run from pillar to post to take clearances from state authorities. There are inordinate delays faced by developers in states like Haryana and Rajasthan, where one has to take permissions from various points. The single window mechanism exists only on paper, says SEZ expert Hitender Mehta of Vaish Associates.

Developers have to take critical permissions like environmental and master plan clearances from state authorities and also interact with electricity and water supply agencies. The SEZ Act of 2005 seeks to ensure that developers get their clearances not only at the central level but also in states at a single place.

Experts agree that the proposed move by the commerce ministry is aimed at bringing synergy between the measures taken by the Centre with that of states for the benefit of SEZs. Having a single window mechanism at central and state level ensures uniformity and erases lot of policy related uncertainty. For example, in states without an effective SEZ-related Act or policy, investors are left at the mercy of field formations of state tax officials, says SJ Vijay, managing director of Salmon Leap, a Bangalore-based consultancy.

Meanwhile, the proposed state SEZ Acts of Maharashtra, Andhra Pradesh, Karnataka and Chattisgarh are yet to be operationalised as they have not got Home Ministry nod. These state level Acts have proposed a number of relaxations for labour-related laws. Sources said even though the commerce ministry had been pushing for speedy clearance of these Acts, the Home ministry was yet to take a final decision on the legislations.