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Charges of SEZs provoking land scams, tax loss to exchequer refuted

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`Though formal approvals have not been frozen, until 75 non-IT SEZs become fully operational or after a lapse of five months whichever is earlier, there would be a review of existing SEZs for further grant of SEZs.'

New Delhi , Aug. 31

The Commerce Ministry on Thursday refuted the allegations that the special economic zones have engendered land scams and that there were immense tax loss to the exchequer if the inordinate rush to establish more SEZ units is not stopped.

Briefing newspersons on the record of SEZs, the Special Secretary in the Department of Commerce, Mr G.K. Pillai, clarified that as on date 150 formal approvals have been granted for setting up SEZs entailing an area of 26,800 hectares. Out of these formal approvals, SEZs proposed by State Industrial Development Corporations would be set up over an area of 9140 hectares. In these cases, the land was already in possession of these Corporations and would have been acquired for industrial purposes by the State Government prior to the introduction of SEZ policy.

`No fresh land acquisition'

He said that even in other cases, the applicants were holding the land at the time of applications and there are no cases involving fresh land acquisition. He said that about the new 225 cases to be granted formal clearance, the total area involved is about 75,000 hectares. He said the area proposed for these 225 proposed SEZs is only a fraction of the total areas under cultivation (120 million hectares) in the country. He said that as many as 22 SEZs have been notified out of the 150 SEZs that were given formal clearance by the Board of Approval.

Referring to the latest annual report of the Reserve Bank of India, which voiced concern over lack of adequate backward and forward linkages in these SEZs, Mr Pillai said that the SEZ experience so far shows that the SEZ units developed strong linkages with the domestic tariff area (DTA) in as much as the raw material sourcing in engineering, textiles/apparel units, food processing and agro processing units is largely from DTA.

He said that even in the case of jewellery units, the polished diamonds are sourced primarily from the DTA. He said that the SEZ set up by Nokia in Chennai has already attracted a few vendors for component and chip manufacturing for cellphone. Mr Pillai pointed out that the RBI has given due credit to the policy of SEZs and how it is going to transform the landscape by generating employment and greater manufacturing activity within the country over the medium to long-term.

Employment creation

On the controversy over processing and non processing area, he said that the 35 per cent processing area for multi-product SEZs is way ahead of the 12 to 15 per cent manufacturing activity space set apart in industrial cities or industrial parks as approved by the Urban Development Ministry. He said the SEZs units would creat large-scale direct and indirect employment and total employment to be created by December 2007 is five lakh.

Foreign direct investment of the order of $ 5-6 billion is also likely by the December end 2007 in infrastructure development of SEZs and in setting up units there. He clarified that tax breaks for developers for all the facilities they bring to make investment attractive into SEZs is only one-time.

Officials said that the empowered Group of Ministers had not frozen any further formal approval but said that until 75 non-IT SEZs become fully operational or after a lapse of five months whichever is earlier, there would be an assessment or review of existing SEZs for further grant of SEZs. They said that it was also decided to monitor IT SEZs separately. The Board of Approval for establishing SEZs would meet in September to consider cases. After the lifting of ceiling was announced, there was less rush for filing fresh applications, which was expected, they said.

Related Stories:
RBI frowns on revenue implications of SEZ policy
To cap or not to cap SEZ
Land acquisition dogs setting up of SEZs

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