INDIA BUSINESS WORLD - MAY 2006
THE MONTH THAT WAS...

SEZ POLICY DEADLOCK PUTS 40 PROPOSALS ON BACK BURNER

 EVEN as the finance ministry has locked horns with the commerce & industry ministry over the policy on special economic zones (SEZs), the government has put on hold more than 40 SEZ proposals. Three proposals, including two from the DLF Group, have been rejected while two applications have been withdrawn. Out of the projects on hold, nearly 20 are from IT and IT-enabled services, which has become a bone of contention due to the minimum area requirements.

Government sources said four SEZ proposals from the DLF Group are on hold while two others have been rejected. Proposals from a number of prominent players like Wipro, HCL, Cognizant Technology Solutions, Essar, the Raheja Group and Adani Exports have also been deferred by the board of approvals, which examines SEZ proposals.

According to senior government officials, the projects that have been put on hold in the case of Wipro, HCL Technopark and Cognizant Technology pertain to IT and IT-enabled services (ITES). The proposals from Adani Exports and Essar Hazira are multi-product SEZs.

In the case of free trade warehousing zones (FTWZs), proposals for projects in Greater Noida, Kandla and Chennai have been put on hold. IDA of the Netherlands has proposed a FTWZ at Mahindra City in Chennai while the other two proposal are from Free Trade Warehousing Zone.

It is understood that the government is unlikely to take a decision on pending projects, especially IT sector SEZs, till the group of ministers (GoM) headed by defence minister Pranab Mukherjee settles the row within the government over minimum area requirement. The GoM is expected to narrow the differences between the two departments.

DLF Universal's plan for a multiproduct SEZ at Panchkula and an IT SEZ at Hyderabad were among the three projects rejected by the Board of Approvals. The only other project that has been rejected was from Apparels and Handloom Exporters Association for a textiles SEZ near Chennai.

Among the projects on hold include a proposal from DLF Commercial Developers for an IT SEZ at Hyderabad and DLF Cyber City's proposal from an IT SEZ at Gurgaon. Another IT project of the DLF Akruti Infopark in Pune has also been put on hold. The other proposal of DLF, which is on hold, is a multi-product SEZ at Hindupur in Andhra Pradesh.

According to Yogesh Verma, who heads the DLF Group's SEZ division, the company was given an option of choosing between SEZ projects at Panchkula and Ambala as the government did not see it viable to have two multi-product SEZs within 40km of each other. DLF has decided to go for the Ambala project. In case of the Hyderabad project, the state government said they would not be able to provide for the land, so the project was dropped.

The Delhi-based real estate group had earlier announced plans to invest anywhere between Rs 30,000-Rs 40,000 crore over the next 10 years for setting up at least half-a-dozen SEZs across the country. The group has already announced setting up SEZ projects at Amritsar, Ludhiana, Gurgaon and Ambala.

Also on the anvil are several sector specific SEZs from the DLF Group, spread across the country, with most of them in the IT space.

Government officials said Adani Exports had sought permission for a 30,000-hectare, multi-product SEZ at Ahmedabad while Esaar Hazira SEZ has sought permission for a 1,100-hectare, multi-product SEZ at Hazira. Both projects are on hold.