New Delhi: The commerce ministry’s plan for “green” special economic zones (SEZs) has been shelved.
Speaking on condition of anonymity, a senior commerce ministry official said that the decision was taken so as not to add to the financial burden of SEZs, which are already struggling after the government decided to impose additional taxes and phase out some incentives.
Two years ago, the ministry had proposed mandatory norms for making SEZs green, but had not notified them. It had proposed the guidelines for green SEZs in July 2009, seeking comments from stakeholders and formulated a set of draft guidelines a month later. The proposed guidelines provided a big thrust to the use of renewable sources of energy and guaranteeing zero waste generation.
According to the draft green guidelines, each SEZ has to install a solar power system to generate a minimum of 50 kilowatt per hectare. “For this purpose, developers will have flexibility to use 10% of nonprocessing area for any authorized operation beyond the limits prescribed for it,” it said.
The proposed guidelines also mandate “zero” waste from each zone, require that 75% of the open area be landscaped to reduce the so-called heat island effect, and insist on electrically driven transportation facilities within the zones.
Hitendra Mehta, a partner at Gurgaon-based law firm Vaish Associates and an expert on SEZ matters, said though green SEZ as a concept is a great idea, it would require a lot of investment by SEZ developers. “Market sentiments not being very optimistic on SEZs, making such guidelines mandatory would make real estate in SEZs uncompetitive when compared to domestic tariff area,” he said.
Mehta said many big SEZs such as Mahindra World City in Chennai are anyway introducing energy-efficient technologies. “As such technologies become cheaper, other SEZs will also start using them,” he added.
Gaurav Shorey, an architect and energy consultant who was with The Energy and Resources Institute (Teri), said the green SEZ policy has been shelved due to pressure from private developers, who think such a policy is an additional burden.
The finance ministry has mandated SEZ developers and units to pay minimum alternative tax at 18.5% on book profit and dividend distribution tax of 15% on dividend declared. The ministry has also proposed to replace the current profit-linked incentives with investment-linked incentives once the new direct taxes code comes into effect.
The green SEZ guidelines had also proposed that all buildings in SEZs will have to be energy efficient and comply with the energy conservation building code, which defines key parameters for energy-efficient buildings.
Shorey said green buildings could be built without any extra cost if models developed indigenously are implemented, while Western models may see cost escalation anywhere between 5% and 40%.
He said Teri and the ministry of new and renewable energy are jointly formulating a set of sustainability guidelines for large developments, including SEZs, which will be out in six months. “However, the guidelines will remain voluntary as we currently lack capacities before we could make them mandatory,” he added.
So far, 584 formal approvals have been granted for setting up SEZs, out of which 381 have been notified. According to the commerce ministry, as on 31 March, more than Rs 2.2 trillion has been invested in SEZs and direct employment to 676,608 persons has been generated. During fiscal 2010-11, exports from SEZs aggregated Rs 3.15 trillion, registering a growth of about 43.11% over the exports for the year 2009-10.