Land fetters off export zones

- Transfer of SEZ ownership allowed

OUR SPECIAL CORRESPONDENT

New Delhi, April 18: The Centre today relaxed the minimum land requirement for special economic zones (SEZ) to rekindle investor interest in the concept of creating large export enclaves, anchored by free market principles and designed to build a "brave new world" of enterprise and excellence.

It reduced the minimum land requirement for multi-product zones from 1,000 hectares to 500 hectares and for sector-specific units from 100 hectares to 50 hectares. The government has also scrapped the minimum land requirement of 10 hectares for setting up SEZs for information technology and IT-enabled services.

The SEZ idea — which had caught fire in 2005 after the UPA government enacted a special legislation — had sparked a mad scramble for approvals. At present, 143 SEZs are operating in the country with five in Bengal.

But investor interest in the idea sputtered out quickly because of a political firestorm over the sensitive issue of acquiring land for these industrial ventures and general outage over the hire-and-fire labour policy that these enclaves wanted to adopt.

The imposition of minimum alternate tax (MAT) and dividend distribution tax (DDT), certain provisions in the proposed direct tax code and the global slowdown also joined together to take the sheen off such units.

"The SEZ scheme has not been able to realise its full potential so far. We have undertaken a comprehensive review of the SEZ Policy ... I am happy to announce a package of reforms for reviving investor interest in such zones," commerce minister Anand Sharma said.

Sharma said the government had received feedback from SEZ units which suggested that they were placed at a severe disadvantage in the absence of an exit policy.

"We have now decided to allow transfer of ownership of SEZ units, including sale," he said.

Taking note of the problem of aggregating large tracts of uncultivable land for setting up special economic zones, Sharma said, "We have decided to reduce the minimum land area requirement by half for different categories of SEZs."

"Minimum built up area requirements (for IT\ITES SEZs) have also been considerably relaxed," he said.

The requirement of one lakh square meters will be applicable for seven major cities — Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangalore, Pune and Calcutta.

The Export Promotion Council for EOUs and SEZs welcomed the steps but said the initiative "may not result in substantial investments due to the levy of MAT".

P. C. Nambiar, chairman of the council, said, "For those notified SEZs not operationalised, there are no facilities or incentives provided in the policy. Reduction of minimum area may help new proposals. This initiative may not result in further investment mainly because most of the already notified SEZs cannot be run unless MAT and DDT are withdrawn."

"This issue needs to be addressed very seriously for attracting investments," the council said.

To a query on MAT, Sharma said it was beyond "my purview and jurisdiction" to do away with MAT, but concerns of the SEZ developers and promoters have been duly communicated to the ministry concerned.

"There has been discussions, but because of constraints, the finance minister was not inclined to review the measures introduced earlier," Sharma said, adding that the reforms will elp the sector.

The functional SEZs have attracted an investment of over Rs 2.36 lakh crore and exports from them totalled Rs 4.76 lakh crore in 2012-13.

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