SEZ Loans May Cost Less

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.

In The Zone
• Govt has sent agenda note to SEZ developers and stakeholders on the Apr 5 eGoM meet
• eGoM may cap maximum area for an SEZ at 10,000 hectares & raise processing area to 50% for all SEZs
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  • Government Planning To Revisit The SEZ Policy

    CPM wants to cap SEZ area at 2,000 hectares

    A day after reports of government planning to revisit the SEZ policy, CPM on Tuesday said multi-product SEZs should not have land beyond 2,000 hectares, adding that a decision should be taken about which industries required SEZs.

    Like Congress, CPM general secretary Prakash Karat also said caste census was not required. He said many states had conducted surveys of backward classes which could be put together and if gaps still existed, a commission could be set up.

    Reiterating that the CPM could not accept the SEZ Act in its present form, Karat said as far as West Bengal was concerned, post-Nandigram there would be a review of all projects requiring large-scale land acquisition. However, projects which do not entail large-scale land acquisition or have people’s consent would continue.

    Giving details of the threeday meeting of CPM’s central committee and politburo, Karat said West Bengal chief minister Buddhadeb Bhattacharjee had admitted to mistakes in Nandigram.

    He said the decision to send police was taken by the state government but it had no idea as to how it would unfold. The party’s central committee has asked the West Bengal state committee to examine the circumstances and the handling of matters that led to police action on March 14.

    Karat also said the party was in favour of judicial enquiry but due to the intervention of Calcutta High Court, which had ordered a CBI probe, it could not be taken up. But, he said, if any police excesses were established, action should be taken. He also said compensation would be decided after the divisional commissioner’s inquiry.

    On CBI reports that apart from police there were armed CPM cadre in Nandigram, Karat said, ‘‘Some people have died of head injury and stab wounds also. The truth will come out.’’ Once again Karat said the party was against scurrilous campaign on Nandigram.

    On the foreign policy front, Karat said interim government in Nepal was an important landmark.
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  • Yes to Special Economic Zones

    After 73 days of a freeze on Special Economic Zones which saw heated political and economic debate, the UPA government finally cleared the process of approving and notifying SEZs . But it had to make one concession to political pressure: it put a cap of 5000 hectares on multi-product SEZs — as per earlier norms, there was no cap.

    After a meeting of the Empowered Group of Ministers on SEZs, chaired by Pranab Mukherjee, here today, Commerce Minister Kamal Nath said: “The EGoM has decided that all pending SEZ applications where there are no controversies over land acquisition will be processed.”

    This, effectively, clears the way for 53 SEZs — already okayed by the Law Ministry — to be notified as early as tonight. These include big-ticket investors like Nike, that was on the verge of shifting its Tamil Nadu investment plans out of India due to the freeze and Brandix Apparels, ready to start operations more than two months ago in its Vizag textile SEZ. The Law Ministry is looking at notifying 31 more SEZs which have got formal approval.

    With the freeze being lifted, the government hopes to generate 15 lakh jobs through SEZs by 2009. Commerce Secretary Gopal K Pillai said 5 lakh new employment opportunities are expected by the end of this year itself. In fact, it’s the employment-generation potential of SEZs that seems to have helped the policy resurface in the face of strong opposition, not just from the Left parties, but from within the government too.

    Today’s decision also means that other pending SEZ applications can start start moving forward — 88 with formal approval, 162 with in-principle approval and nearly 350 new applications.

    While none of the notified SEZs is bigger than 5,000 hectares, there are six SEZs with in-principle approvals that will have to change their plans given the cap order. These include Reliance’s proposed 10,000-hectare Mahamumbai SEZ and a similar sized-one at Jhajjar in Haryana as well as an SEZ proposed by DLF at Gurgaon. The EGoM also revised the minimum processing area within multi-product SEZs up from 35 per cent of the total area to 50 per cent. “There is only one notified multi-product SEZ at Mundra, that will be affected by the change. The minimum processing area for sector-specific SEZs is already 50 per cent,” a Commerce Ministry official explained.

    “State governments cannot undertake any compulsory acquisition of land,” Nath said. In cases where states resort to acquisition to set up their own SEZs, they have to follow the guidelines as per the new relief and rehab policy.

    At the meeting while one senior Minister is said to have asked for the freeze to continue, Nath is said to have argued that SEZs were “employment-generators” and any effort to frustrate this policy would be counter-productive. While agreeing that he had no objection to putting SEZs with land issues on hold, he questioned the rationale for putting all SEZs in suspended animation.
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