SEZ loans may cost less

PM asks for review of Reserve Bank's classification

ARUN S
DATELINE

NEW DELHI, APR 3: The Prime Minister has asked the empowered group of
ministers (eGoM) on special economic zones (SEZs) to decide if these
areas should be given infrastructure status, as opposed to the RBI
classification that treats them akin to commercial real estate.
Infrastructure status would make loans to SEZs cheaper.
According to government sources, the eGoM meeting, originally planned
for the second week of April, will now be held on April 5 following
pressure from investors. Other important issues on the agenda include
capping the maximum area of an SEZ at 10,000 hectares and raising the
processing area to 50% for all SEZs.

At present, there is no limit on the size of an SEZ. Further, the
minimum processing area for a multi-product SEZ is fixed at 35%, while
for multi-services and sector-specific SEZs, it is 50%.

The government has circulated the agenda note to SEZ developers and
other stakeholders for the April 5 eGoM meeting, the sources said. The
group would also take a final call on whether 84 SEZs free of legal
issues related to land acquisition be notified.

The RBI had last September increased the risk weightage on bank lending
to SEZs to 150%, and more than doubled the general provisioning
requirement to standard advances from 0.4% to 1%. Investors have
strenuously complained to the government that the move had increased
costs substantially.

The commerce ministry had opposed the RBI move, arguing that SEZs would
attract huge FDI, create more employment and help develop world-class
infrastructure.

http://www.financialexpress.com/fe_archive_full_story.php?content_id=160055