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SEZ bitter-sweet blueprint

June 25: An all-party parliamentary panel has drawn up a series of recommendations on special economic zones, lining up a threat as well as an opportunity before the government.

The proposals include a cap on the area of SEZs, rethink on large-scale tax exemptions, scrapping the law that allows forcible land acquisition and a ban on “in-principle” approvals.

If the proposals are accepted in toto, many projects may have to redraw their plans and the commerce ministry — a staunch advocate of SEZs — might feel that the “engines of growth” are being derailed.

For the proposed chemical hub in Haldia, which will need fresh acquisition of over 4,000 hectares, the state government will have to finely balance its acquisition plan and leave out irrigated double crop or multi-crop land.

According to the recommendations, only single-crop and rain-fed land can be used.

“The percentage of cultivable land should not exceed 20 per cent of the total area of a multi-product SEZ,” recommended the standing committee. In case of other SEZs, the limit is 40 per cent.

While the Haldia project may just sail through by some juggling of cropping pattern data, Reliance Industries — planning 5,000-hectare-plus SEZs in Maha Mumbai and Haryana — will have to recast its plans. Real estate majors DLF and Omaxe will also have to go back to the drawing board.

The government might also take exception to the proposal to stop notifying new SEZs till legislative modifications are made.

The opportunity for government lies in the composition of the panel, headed by BJP leader Murli Manohar Joshi.

All big parties with a stake in the SEZ policy are represented in the 31-member committee: the Trinamul Congress by Dinesh Trivedi, the CPM by Amitava Nandy and the Congress by Jai Parkash Aggarwal.

The team can also claim to represent the views of a wide cross-section as it took depositions from political parties, trade unions, farmers’ organisations and SEZ promoters.

The recommendations of such panels are not binding on the government but they are usually taken seriously. In this case, sources said, the panel approved the proposals in “near-unanimity”.

If the government chooses to the use the report as a launch pad for discussions, it could prove easy to reach a consensus that will have wider political acceptability.

Another undeclared advantage is that the proposals virtually seek to make SEZs less attractive to investors. Such a sobering effect may eventually leave only long-term investors in the field, which will help SEZs stave off charges that they are real estate developers out to reap the benefit of tax exemptions.

The report is to be tabled in Parliament in the coming session.

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