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Govt May Relook At SEZ Land Ceiling.


Date: 28-07-2011
Subject: Govt May Relook At SEZ Land Ceiling
Amidst protests against land acquisition, the government today said it may relook at the land ceiling of 5,000 hectare for the Special Economic Zones (SEZs).

"Land issues are critical...I think the minimum size is something that needs to be looked at again definitely. You are not going to find 5,000 (hectares) of land area, it is a pipe dream. Its not going to happen...I think that we need something to talk about," Commerce Secretary said at an Assocham conference on SEZs here.

The Commerce Ministry is likely to put up for review the issue before a Group of Ministers (GoM) headed by Finance Minister Paranab Mukherjee soon.

It was the GoM which had earlier lowered the land ceiling for SEZs from 10,000 hectares to 5,000 hectares in the face of protests, including against Nandigram.

With the land becoming an emotive issue for the farmers and increasing litigations against land acquisition, the SEZ developers are finding it difficult to acquire even 5,000 hectares.     

A number of developers, including that of Mukesh Ambani-promoted Navi Mumbai SEZ Pvt Ltd are grappling with the problems of land acquisition. Several of them have also dropped their projects because of the problem.     

Khullar also said the developers should also start looking at other states, besides Kerala, Tamil Nadu, Maharashtra, Karnataka, Gujarat and Andhra Pradesh - to set up tax free enclaves.     

"Why you developers are still not going to other 15-16 states? Why are you guys sticking to just six states. In some states, there has been a sea change in just five years (you should look at those areas)," he said.     

These six states contribute about 92% to the country's total exports from SEZs. In 2010-11, shipments from SEZs stood at Rs 3.15 lakh crore, a jump of about 43% over the same period previous year.     

"The regional concentration of SEZs has to end...you have to step out of Bangalore and Hyderabad. You have to go to the hinterlands because you are going to get land cheaper there, you are not going to get land cheaper in (metropolitan cities)," he said.     

He added that similarly the developers would get cheap labour in hinterlands not near big cities. Out of about 580 SEZs approved, 133 have started exports.

In India, SEZs are concentrated mainly in Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, Maharashtra and Gujarat.     

Khullar said the economy is likely to go through a difficult patch in the next three years due to lack of adequate land for the industry, mounting wage bills and poor infrastructure which could blunt the competitive edge.     

Besides, the infrastructure sector is going to face 20 to 25% shortage of power and the water problem will get worse, he added.     

On uncertainties about Direct Tax Code (DTC), the Secretary said: "The problem is about future decision makers and thats when the DTC kicks in. The uncertainty about tax laws is really more if it bars or holds back somebody from taking a decision".     

The draft DTC has proposed withdrawal of exemptions for new units that come up after the tax code is implemented and replacement of tax exemption on profits for developers with sops on investments. The DTC is expected to be implemented from the next fiscal.     

"Don't worry too much about DTC. I am convinced that when the Standing Committee will start hearing, they will hear all of you...all of you will get a fair hearing. It will not be biased," he said.     

The industry has also expressed concern over the imposition of Minimum Alternate Tax (MAT) of 18.5% on the book profits of SEZ developers and units.     

Under the SEZ Act, SEZ units get 100% tax exemption on profits earned for the first five years, a 50% exemption for the next five years and another 50% exemption on re-invested profits in the following five years. SEZ developers, on the other hand, get 100% tax exemption on profits for 10 years, which they can choose in the block of the first 15 years.

Source : moneycontrol.com

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