The government on Thursday decided to raise the minimum processing area in a special economic zone (SEZ) to 50% from earlier 35%, a move which may throw cold water on plans of many real estate developers who were eyeing a piece of the SEZ pie. With a view to prevent SEZs turning into a real estate scam, the empowered group of ministers made 50% minimum processing area mandatory for both multi-product (from 35%) and sector specific SEZs (from 25%).

The government has to forego revenue from the zone, thus there should be greater production activity, an official said, adding more so since land acquisition has become such a big controversial issue. The companies such as DLF, Unitech, Reliance and Adani that had been planning large SEZs would now have to keep a larger part of the zone for production activity.

Processing area implies manufacturing facilities where the actual production or services activity for exports takes place. Now, since the processing area has been increased to 50%, the space available for social and business infrastructure supporting the zone like housing, hotels, malls, schools, hospitals, entertainment centres for the employees of the zone will be equal to production facilities.

Earlier, a developer could use 65% of the land for these facilities. For example, a developer who was setting up a multi-product SEZ of 1,000 hectares could use 650 hectares for any other activity while only 350 hectares would be used for the activity for which the zone had been set up.

Interestingly, the finance ministry has always been insisting a higher floor for processing area. Earlier, it had pitched for keeping the proportion at 75%, but the EGoM had in June decided to keep the floor at 35%.Now, the ministry it seems has been able to wield some influence in the backdrop of the dispute.

The minimum area requirement for a multiproduct SEZ is 1,000 hectares, sector-specific zone is 100 hectares and for IT, biotechnology and gems & jewellery, it is 10 hectares.
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  • Govt. Shatters Dreams of SEZ Developers, 83 Zones to Be Notified

    Now, 50% of the total area in a special economic zone (SEZ) has been earmarked for processing units. Earlier, it was 35% for multi product SEZ and 50% for sector specific SEZs. Such a decision by the government may put cols water on the efforts of real estate developers who are jostling hard to get a chunk of the SEZ pie.

    The government requires to stop thinking about the kind of revenue from the zone, thus there should be large productivity, said an official. Also, the land acquisition especially for the development of the SEZs has become a controversial issue in the past months, he adds. The prominent real estate developers such as DLF, Unitech, Reliance, and Adani who had been planning to come up with large SEZs would now have to keep a larger part of the zone just for production activity.

    Processing area is where the actual production of services activity for exports takes place. Since, it has been increased to 50%, the space available for the development of social and business infrastructure supporting the zone including residential properties, hospitals, hotels, shopping malls and entertainment venues for the employees of the zone will be equal to production facilities. Thus, both the processing area and the development space will make the ratio of 50:50.

    In addition, SEZ will also have tough export obligations to meet instead of being merely net for foreign exchange earners; they will require exporting earnings at least equivalent to their purchases from the domestic tariff area.

    Interestingly, the finance ministry has always been insisting a higher floor for processing area. Earlier, it had pitched for keeping the proportion at 75%, but the EGoM had in June decided to keep the floor at 35%.Now, the ministry it seems has been able to wield some influence in the backdrop of the dispute.

    The finance ministry has always given a stress on higher floor for processing area of a SEZ. Earlier, it had been decided to allocate 75%, but the EGoM had in June decided to keep the floor at 35%.

    Area of a SEZ is capped at 5,000 hectares. However, the state can fix the lower ceiling. As for now, EGoM has given clearance to 83 SEZs.
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