Commerce min rejects higher SEZ area proposal

NEW DELHI: In a move that is sure to cheer up India Inc, the commerce & industry ministry has turned down the finance ministry���s proposal to revise the minimum area stipulations for special economic zones (SEZs). A communication to this effect has been sent for consideration by the group of ministers (GoM) on SEZs, headed by defence minister Pranab Mukherjee.

The finance ministry has been insisting that minimum area specified for sector-specific SEZs like those proposed by the IT sector and the gems & jewellery industry should be increased to 25 hectares as compared to 10 hectares prescribed under SEZ rules.

The commerce & industry ministry���s contention is that increase in the minimum area stipulation would cause hardship to promoters of SEZs which have already been approved by the government. It is understood that the communication would be personally taken up by commerce & industry minister Kamal Nath when the GoM meets.

Developers of these SEZs would have already taken steps to implement the project on the basis of the government approval and they could face financial losses is the argument of the commerce & industry. In a way, this makes it clear that retrospective changes in the minimum area stipulation would be harmful to the industry, while the option of prospective changes is open for discussion.

Mr Kamal Nath���s move is sure to spark yet another turn in the ongoing tussle over SEZ policy. Ultimately, the GoM may have to work out a compromise with the guidance of Prime Minister Manmohan Singh.

���An increase in the minimum area requirement would have an impact on proposals that had been approved for setting up the SEZs before the Rules (SEZ Rules) came into force.

It would also impinge on many of the proposals considered by the BOA (Board of Approval) in its meeting on March 17, ���06,��� says the commerce & industry ministry���s communication. The government would be pushed into an embarrassing position if the decision already taken is rolled back, senior officials said.

Interestingly, the situation was discussed by the Committee of Secretaries (CoS) headed by cabinet secretary BK Chaturvedi last month. On the basis of discussions at the Committee meeting, it has been decided to grant approvals for projects which were cleared by the BOA with the backing of the commerce department as well as the department of revenue in the finance ministry. For all other categories, including those which were approved before the SEZ rules came into force, the final decision would be left to the GoM.

The commerce & industry ministry has also cited a representation from the industry against revision in the minimum area requirement for SEZs. It has also been pointed out that the SEZ rules have tried to streamline clearances by prescribing minimum area for various categories. The earlier rules did not have any stipulation, the commerce & industry ministry has argued.