INDIA BUSINESS WORLD - APRIL 2007
The Month that was ...

GOVERNMENT TO ALLOW CONVERSION OF SECTOR-SPECIFIC SEZS

RECOGNISING the problems faced by developers in acquiring huge tracts of land for multi-product SEZs, the government has decided to allow conversion of sector-specific SEZs, requiring less land, into multi-product ones once the mandated quantum of land is acquired. The move will help sector-specific zones such as Reliance's petrochemicals SEZ in Jamnagar, Essar's steel SEZ in Hazira and Mahindra Gesco's IT SEZ in Jaipur.

The commerce department has also laid down that developers should make adequate provisions for rehabilitation of displaced persons as per the relief and rehabilitation policies of state governments. The move is significant in view of the political opposition to acquisition of farm land for industrial projects.

A notification dated March 16 amending the SEZ Rules 2006 says that if a developer, subsequent to approval or notification of a SEZ, acquires more contiguous and vacant land which makes the total area meet the criteria for another class of SEZ, the board of approvals (BoA) may consider such cases on a case-to-case basis.

Other amendments include granting exemptions on construction material purchased by contractors appointed by a unit on behalf of the SEZ unit (it was earlier available only to developers), extending sub-contracting provisions to developers to enable them to use facilities like ready-mix concrete, repositioning of multi-services SEZs to provide for a minimum 50% processing area and including financial details about promoters, net worth, FDI and source of FDI part of the checklist for SEZ applications.

Official sources said that the amendment on conversion was important for both notified sector-specific SEZs looking for an opportunity to expand and the ones in the pipeline which have ambitions of setting up multi-product SEZs but do not possess enough land.

The mandatory area requirement for multi-product SEZs is 1,000 hectares, while for sector-specific SEZs the floor is just 100 hectares. For IT SEZs, the requirement is even lower at 10 hectares.

Sources said while Mahindra Gesco is waiting for approval to convert its IT SEZ into a multi-product SEZ, Reliance and Essar want to acquire more land to convert their sector-specific SEZs into multi-product ones.