Coming as a shot in the arm for Indian IT companies, the government’s move to relax minimum land requirements for IT Special Economic Zones (SEZs) will partially mimic the earlier Software Technology Park of India (STPI) scheme’s route to drive growth, say industry experts. While companies looking to scale up operations would benefit, the scheme also gives developers the option of monetising an asset.
In its annual supplement to the Foreign Trade Policy 2009-14, the government on Thursday did away with the minimum requirement of 10 hectare (25 acre) for an SEZ, while relaxing the minimum built-up area requirement. It has also included an exit policy to permit transfer of ownership and sale of SEZ units.
?To some extent, it is mimicking the STP scheme. Earlier, the STP scheme never had a minimum requirement,? said V Balakrishnan, board member and head, Infosys BPO, Finacle and India business unit. ?Small companies can easily take a smaller place now,? he said, adding that they should be able to scale up at their own pace.
The earlier software technology parks scheme effectively allowed even companies housed in a garage to avail benefits because it did not have such restrictions, said Vivek Kulkarni, chairman of Brickwork India, a rating agency, and also a former Karnataka IT secretary. He added that the benefits of the relaxation may have its limits, considering that the minimum built-up area in the seven major cities is still 1 lakh square metre.
?If you say 100 square feet is good enough, then you are encouraging the smallest player. In this industry the smallest players are the most important,? said Kulkarni. ??Effectively, the SEZ policy only encouraged builders and not entrepreneurs. Now, what the government has done is a step in the right direction.?
The move is also expected to give larger firms a leg-up. ?Many a time you don’t get contiguous land and they would also save on land cost,? said ISN Prasad, Karnataka’s principal secretary to the department of IT, biotechnology and science & technology.
?We are delighted that the government recognises IT exports as a key growth driver for India?s exports and the SEZ scheme. Removing the minimum land requirement and reducing the built up area will enable the SEZ scheme to realise its true potential,? Som Mittal, president of National Association of Software and Service Companies (NASSCOM), said in a statement. It would now be feasible for IT SEZs to come up in tier-two and tier-three locations and make the SEZ policy more inclusive by attracting SMEs, the body said.