Controversy over changes in SEZ norms

Controversy over changes in SEZ norms

New Delhi: The government is considering a fresh revision in the draft guidelines for development of special economic zones (SEZs) that could dilute the role of state governments in acquisition and development of land for these projects and make adherence to environment rules optional.

The government has, however, disputed this interpretation.

The confusion regarding the proposed changes followed after the ministry of commerce and industry omitted some specific clauses regarding land acquisition that were present in the previous draft guidelines issued in August.

The ministry had issued the first set of draft guidelines on 5 August for public discussion. It incorporated the suggestions and issued revised draft guidelines on 13 November. And it has sought comments on the new guidelines by 10 December.

The earlier draft said “the developer may acquire land by negotiations and mutual consent". It also said that “the state government may allocate government land for setting up of SEZ in the manner as may be prescribed. The state government may also agree to acquire land for establishment of SEZ by consent agreement or through proceedings under the relevant Act provided there is no forceful acquisition".

However, the new guidelines have omitted both these earlier clauses.

D.K. Mittal, additional secretary in the commerce ministry and in charge of SEZs, said: “The intention is not to dilute the previous guidelines. There are separate guidelines which prohibit forceful acquisition. That’s why it is not repeated here. Then, land acquisition is a state government domain. Hence, we did not want to get into that."

However, analysts have a different point of view.

“The clarity is missing in the new sets of guidelines regarding the role of the state government in development of SEZs. While I support that state governments should not acquire land on behalf of private players, I do not understand why the clause which said that state governments can allocate land in their possession for SEZs was deleted. The new guidelines are confusing regarding where the state government should come in and where it should keep out," said Sameer Bhatia, senior director and national leader, SEZ advisory practice, Deloitte Touche Tohmatsu.

However, Hitendra Mehta, head of law firm Vaish Associates, Gurgaon, said the guidelines are advisory in nature and it was up to the state governments to follow it or not.

The new guidelines have proposed other changes, too.

The earlier draft required “10% of the non-processing area" of SEZs to be used for constructing low-cost housing in keeping with the National Urban Housing Policy 2007. Under the new draft guidelines, “5% of the total area" must be used for constructing low-cost housing and dormitories in all SEZs of a size of 100 ha or more. The new guidelines prescribe that in case of SEZs below the size of 100 ha, developers should provide low cost housing to employees “depending upon the need of the SEZ as per the National Urban Housing Policy 2007." The earlier provision that required 50% of an SEZ’s employees to reside within the zone has now been done away with.

The new provision may ensure that SEZ developers do not reduce processing area to have more non-processing area where they can build low-cost housing.

Mehta said the present guidelines do not prohibit developers from renting or leasing out housing developed in the zone to outsiders though it is primarily meant for their own employees.

The new guidelines have also diluted the strict environmental provisions prescribed in the earlier draft. The earlier guideline said: “Planning of the SEZs shall mandatorily address environmental sustainability issues, green buildings, planned green areas, groundwater recharging areas and disaster mitigation aspects."

However, the new guidelines say, “Developers of the SEZs would strive to address environmental aspects as prescribed by law, planned green areas, groundwater recharging areas and disaster mitigation aspects," thus doing away with the mandatory nature of previous guidelines as well as the provision of green buildings.

Director general of export promotion council for export-oriented units (EoUs) and SEZs L.B. Singhal said the issue is being separately addressed by the commerce ministry through provisions for “green SEZs".

The ministry has already received suggestions on it from SEZ developers and is contemplating notifying the guidelines, Singhal added.

The new guidelines for physical infrastructure now require developers to provide appropriate medical and low-cost food facilities in the zone for use by the residents and employees.

India announced an SEZ policy in April 2000 and enacted a comprehensive SEZ legislation in June 2005, which came into effect on 10 February 2006.

The country’s tax-free enclaves have attracted foreign direct investment of at least Rs10,900 crore in the past three years. In 2008-09, exports from such zones were worth Rs99,689 crore.