PM urged to review RBI stand on SEZ

NEW DELHI: Even as the discord within the government over special economic zones (SEZs) has intensified with commerce and industry minister Kamal Nath questioning the Reserve Bank’s view that SEZs are like any real estate project, the Board of Approvals (BoA) for these zones cleared a Rs 53,000-crore project by South Korean giant Posco.

Since clubbing SEZs with real estate projects would increase the cost of these projects, Prime Minister Manmohan Singh’s intervention has been sought to resolve the issue.

“The PM is looking at it... I have brought it to his notice,” Mr Nath said. Taking a cue from his touch stance, the BoA provided formal approvals to 18 projects and in-principle approvals to 13 projects. The current bunch of clearances, which include projects by Essar and Zydus, take the total number of SEZ approvals to 181. The Posco project, to be located in Orissa, was among the major proposals waiting for clearance.

Mr Nath’s appeal to the PM for a review of RBI’s stand on SEZs comes close on the heels of a political storm over takeover of farmland for these zones. Congress supremo Sonia Gandhi has said that farmers should be adequately compensated, prompting various other leaders including agriculture minister Sharad Pawar, to oppose the takeover of fertile farm land for SEZs. In fact, the West Bengal government — run by the Left parties which wield sizeable clout at the Centre — has said that only wasteland should be used for SEZs.

The commerce & industry ministry said that state governments has accepted its proposal to allocate only wasteland for SEZs. “State government representatives at the Board of Approvals meeting confirmed that lands involved in all these cases would be on waste/barren lands or single crop lands only,” said a statement issued by the ministry here.

The conflicting views on SEZs have persisted ever since the finance ministry objected to tax concessions provided for these zones. While the UPA government has kept the sops intact, the Reserve Bank first expressed concerns about development imbalances due to these zones. Then, the apex bank asked banks and financial institutions to treat them as real estate projects — a move that would increase the cost of borrowing for SEZ developers due to higher risk weightage.

Urging the industry to take up the issue with RBI, Mr Nath dared the critics of the SEZ policy for an ‘open debate’. “I am willing for an open debate, but nobody is coming forward.

There are some real concerns, which the government will address. But there are some imaginary concerns also... SEZs are the engines of growth and the government will not allow the regime to be sabotaged,” he said. Mr Nath assured the industry that government will not allow the scheme to get sabotaged, while the BOA indicated that it was business as usual by going ahead with clearances.

The spotlight is likely to be on the prime minister’s view on RBI’s decision to club SEZs with real estate projects.