Govt lifts ban on SEZs but ruins big dreams

TIMES NEWS NETWORK[ FRIDAY, APRIL 06, 2007 02:15:41 AM]

NEW DELHI: The government has overhauled its policy on special economic
zones (SEZs), making large, multi-product SEZs virtually impossible to
build.

The empowered group of ministers (eGOM) headed by foreign minister
Pranab Mukherjee, which met in the political shadow of the Nandigram
violence, on Thursday lifted the freeze on approving new SEZs but
changed several parameters to make the policy more acceptable.

As per the new norms, the size of an SEZ cannot exceed 5,000 hectares
(12,500 acres). Earlier, there was only a lower limit of 1,000 hectares
for multi-product SEZs. Now, state governments can impose a lower
ceiling, if they want to. More importantly, state governments can no
longer acquire land for a special economic zone on behalf of private
developers; nor can state governments form joint ventures with private
developers if they do not already have land in possession to offer the
project. States can acquire land to develop SEZs on their own, provided
they stick to the new relief and rehabilitation package to be announced
soon.

Also, at least 50% of the total area in an SEZ has to be earmarked for
processing units. Earlier, the norm was 35% for multi-product SEZs and
50% for sector-specific SEZs. SEZs will also have tougher export
obligations to meet—instead of being merely net foreign exchange
earners, they will have to have export earnings at least equivalent to
their purchases from the domestic tariff area.

While the ceiling of 5,000 hectares on SEZs will presently affect the
plans of just a handful of SEZs, the biggest challenge for private
developers lies in acquiring large tracts of land meeting all contiguity
norms without government help. Developers of large projects were banking
on state governments, who have the power to take over land for
industrial projects, to acquire tricky bits of land.

Speaking to ET, senior commerce ministry officials said the Centre has
decided to give states the authority to cut down on the size of the SEZs
further in response to representations from a number of parties,
including the Left, on the need to fix lower limits. "If states deem
fit, they can even fix the ceiling at 1,000 hectares. The Centre doesn't
have any problems regarding that," an official said.

With the Nandigram fiasco resulting in the loss of several lives and
protests against forcible land acquisition gathering steam in
Maharashtra, the eGoM decision to debar states from acquiring land for
private players is clearly aimed at avoiding more violence.

http://economictimes.indiatimes.com/News/Economy/Policy/Govt_lifts_ban_on_SEZs_but_ruins_big_dreams/articleshow/1862910.cms