Round one to Nath; cap on SEZs removed

NEW DELHI, AUG 23: 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.

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 told FE 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 told FE, “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.”

Finance Ministry
• Increased revenue drain if the cap on the number of SEZ is removed
• Difficult to trace revenue leakage through misuse
of SEZ subsidy
Commerce Ministry
• Investments worth $5 billion, employment generation of 15 lakh
• Tax breaks will attract investments and spur economy

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.

http://www.financialexpress.com/fe_full_story.php?content_id=138239