Cap on SEZs makes companies pay more

Cap on SEZs makes companies pay more
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First Published: Fri, Feb 23 2007. 06 36 AM IST
Updated: Fri, Feb 23 2007. 06 36 AM IST
New Delhi: With the government freezing further approval and notification of special economic zones (SEZ), companies that want to locate their units in these are having to pay more money to secure slots in the 63 zones that have been notified, or even in those that have been approved.
The government first grants an approval to developers of such zones and notifies them only after the land acquisition process is complete. Since 23 January, it has neither approved nor notified zones, waiting for a rehabilitation policy on farmers displaced by these zones.
According to a senior government official, who did not wish to be named, the freeze on approvals and notifications has created an artificial scarcity. “Companies which do not want to delay their investments and set up units inside an SEZ are having to pay a huge premium to locate their units inside the notified SEZ. The price of land has in some cases doubled,” he said. The government has approved 237 zones and 300 applications are awaiting approval.
Developers of the zones maintain that the increase in cost has nothing to with the freeze. Rajeev Talwar, group executive director, DLF Ltd said: “In the last one year, there has been a cost escalation of at least Rs15 per sq ft. We’re now commanding anywhere between Rs85 and Rs100 per sq.ft. This is, however, more on account of our good construction and attractive location.” An IT industry executive, who did not wish to be identified, claimed that the price of land in DLF’s notified SEZ in Gurgaon had, in the last 40 days, increased from around Rs60-65 per sq feet to over Rs95 per sq.ft. “Another SEZ of DLF in Gurgaon, which is also awaiting notification, is also fetching a premium,” he said.
An executive at a Delhi-based developer building an SEZ in Greater Noida confirmed that land is being sold at a premium but also said the government’s involvement in everything from the nature of units wishing to put down facilities in an SEZ to the transaction between these and the developer was making the process of selling land more cumbersome.
With rehabilitation of displaced farmers becoming a political issue, a large infrastructure engineering company has decided that it will acquire land privately for its upcoming projects. “We are looking at acquiring 100 acres of land privately for a project in Uttrakhand,” said an executive of the company, who did not wish either himself or the company to be identified. Even that route isn’t free from risk, according to another executive at an IT company that acquired land privately in Uttar Pradesh. “Local politicians, on account for the state elections, are trying to garner public support by instigating farmers to seek compensation for the land they have already sold to us,” he said.
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First Published: Fri, Feb 23 2007. 06 36 AM IST