Victory for Kamal Nath, no cap on SEZs

Over 200 applicants for special economic zones frustrated by the government’s decision to cap the number of SEZs at 150 can rejoice.

Over 200 applicants for special economic zones (SEZs) frustrated by the government’s decision to cap the number of SEZs at 150 can rejoice. An empowered group of ministers on Wednesday decided to remove the cap, but with a rider. The government would take a fresh look at the situation after six months or once 75 SEZs become operational.

The approval of new SEZs would have to wait until the government reviewed the functioning of those already cleared, commerce and industry minister Kamal Nath said after the meeting.

New proposals for setting up SEZs would be taken up by the board of approvals only after thorough examination of the zones that are already operational by an empowered group of ministers, he said after a meeting of the eGoM.

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The eGoM decision has come as a shot in the arm for the commerce ministry which has all along been opposing any artificial ceiling on the number of SEZs.

Official sources said that since the cap was now removed, the scope for a secondary market-trading of the approvals would no longer exist. A commerce ministry official said, “What we are looking is a self-regulation among the developers to avoid misuse of the scheme. At the same time, the government would ensure strict enforcement of SEZ Act and Rules.’’

Concerned over the revenue drain the SEZ scheme could result in, the finance ministry had wanted retention of the cap. It had also expressed doubt over the legal tenability of the system of giving approvals without a clear selection procedure. North Block was also apprehensive about a secondary real estate market developing in the SEZs and was keeping an eye on the establishment of big malls, golf courses and entertainment zones as it felt that such developers would take unfair advantage of the SEZ rules to make a quick buck from the real estate by using duty free raw material.

The eGoM is headed by Defence Minister Pranab Mukherjee and includes the finance and the commerce ministers. Recently, Kamal Nath had written to the Prime Minister pointing out the importance of reviewing the cap especially since the pending proposals had the potential to bring in $5 billion and generate employment of about 15 lakh.

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A key constituent of the ruling UPA, the CPI(M) also alleged that only real estate developers were benefitting the tax incentives granted to SEZs. The Left on Wednesday asked the government to review its policy on SEZs. Another apprehension among certain quarters was about the lack of transparency in the takeover of agricultural land for setting up SEZs and also the poor compensation package for the displaced.

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