Govt may revisit SEZ selection policy

NEW DELHI: This could come as a major setback to developers who are riding high on the new SEZ policy. The government may have to modify the draft, laying down clear guidelines for the selection procedure, as the current SEZ licences can be challenged legally.

Simply put, this means all applicants who have acquired the approval may now come under the government lens as the new selection criteria are being worked upon.

The finance ministry has raised concerns that the selection of developers for SEZ licences could be challenged in court, as there are no clear-cut norms laid down for the purpose. With no such guidelines, any move to raise the cap on the number of developers from 150 as suggested by the commerce minister should be put in abeyance, it says.

In a missive to the commerce ministry, the North Block has asked for a policy over the SEZ developer selection issue. Otherwise, there is no way to justify how an SEZ promoter is given a licence to operate, it explains. The SEZ Act does not have any such provisions, except those for minimum area and export commitments. It is also of the view that to counter charges of discrimination, even for the current lot, a policy framework is desirable.

The finance ministry’s comments are expected to be debated at the forthcoming meeting of the e-GoM on SEZs later this month. At present, the Board of Approvals grants such licences. The e-GoM has so far decided to cap the number of licences at 150, but commerce minister Kamal Nath wants this limit to be raised.

The implications of the differences will be huge for the corporate sector. Real estate, IT and even infrastructure companeis like power have become major enthusiasts for the SEZ enclaves. Several states have extended additional sops to SEZ promoters, in a bid to develop large-scale industrial promotion in their states.

The finance ministry has pointed out that there has been a massive rush for SEZ projects. The review is necessary as it will not be possible to accommodate all fresh requests in view of a possible revenue loss and misuse of tax benefits.

Government sources said they had also questioned the basis on which “in-principle approvals” have been given, in some cases, beyond the cap of 150.

Both the ministries have been at loggerheads over the SEZ issue for quite some time. Even when the SEZ tax framework was being worked out, the ministries had wrangled over who would run the fiscal policy for the SEZs. It was finally resolved in favour of the commerce ministry.