Revival of the SEZ: Commerce ministry bats for growth

While the Commerce Ministry is all set to reduce the minimum land requirement for Special Economic Zones to arrest the slackening pace of growth in these tax-free zones, the finance ministry is likely to oppose the move as the proliferation of such zones will result in massive revenue losses.

In a much awaited package, the commerce ministry will soon announce reducing the minimum area for multi-product SEZs from 1,000 hectares to 250 hectares; and multi-services/sector-specific SEZs from 100 hectares to 40 hectares.

A Business Line report however says the finance ministry is pitching for a few big SEZs instead of many small ones as more tax-free enclaves means the need to appoint additional field officers to oversee the operations. However, due to the constraints faced by developers in procuring large, vacant and non-agricultural land for SEZs, the Commerce Ministry has reduced the threshold limit for each sector-specific SEZ.

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Getting land in one stretch without any construction in between is difficult. A railway line or a waterway or power cable in between the land is considered not contiguous. Hereafter contiguity norms will apply only to processing areas where manufacturing and export take place while other sectors need not follow this rule. The most controversial amongst these was the 1,233-ha multi-product Navi Mumbai SEZ (NMSEZ) P, promoted by Reliance Industries Chairman Mukesh Ambani and his associate Anand Jain. “The project failed to take off, as it could not meet the contiguity norms ever since it was sanctioned by the government,” said a Business Standard report.

Developers are also facing problems when it comes to expansion, relocation and single-window clearance. As a result, exports have taken a hit.

Another relaxation is that non-processing zones in SEZ located near urban areas and cities need not have housing residences, hospitals and schools.

Since SEZs have led to increased exports, employment and investment, relaxation of norms would only help in investors viewing SEZs positively, especially after a fall in investments in due to the imposition of minimum alternate tax and dividend distribution tax. The Commerce Ministry too asked for a change in these taxes but Finance Ministry is not likely to do so.