Cap on SEZs likely to be raised to 300

150 SeZs have already received formal approval.

The empowered group of ministers (EGoM) on special economic zones, which is scheduled to meet this week, is likely to double the cap on the number of such zones to 300.

While the commerce ministry has not suggested any limit in the agenda note prepared for the EGoM, official sources said the ministers were expected to increase the limit by at least 150 since there were around 200 proposals pending with the government.

Even as the EGoM is mulling increasing the limit on the number of such zones, the National Manufacturing Competitiveness Council that met on Friday was critical of the government's SEZ policy.

Government sources said the council had expressed concern about the utility of these zones in boosting manufacturing activity, and attracting greenfield investments. It felt that some companies were pushing for SEZ clearance in view of the tax benefits given to the zones, the sources said.

The commerce secretary had made a presentation on the SEZ policy before the council.

Commerce & Industry Minister Kamal Nath had recently written to the prime minister on the need to review the limit on the number of zones, since the pending proposals had the potential to attract an additional investment of $5 billion, and generate direct employment for at least 5 lakh people, and indirect employment for around 10 lakh.

The sources said increasing the limit would also check the development of a secondary market in these zones. With the number of SEZs capped at 150, several companies with approved zones had put their equity for outright sale in the market.

No lock-in period has been envisaged in the SEZ Act 2005, and the developer of a zone is free to sell up to 100 per cent of the equity of the project company, after he has received an approval for the zone.

"If the limit is increased, companies desirous of setting up such zones can directly apply to the government rather than pay huge premiums to a company with an approved zone," a commerce ministry official said.