Foreign funds in SEZs may be screened

The commerce ministry wants companies that are in the race to set up special economic zones (SEZs) to disclose the extent and source of foreign direct investment proposed.

This comes in the wake of increased security concerns on FDI inflows, especially with regard to telecom and port-based SEZs.

"We have modified the checklist recently to include three parameters pertaining to FDI. These are the extent of FDI, its source, and asking the applicant to reveal the country and name of the company bringing in the investment. We have also included a provision that will make it mandatory for applicants who have proposed to set up telecom and port SEZs to confirm if the FDI is according to the norms of Press Note 5, 2005, which imposes various security-related conditions," a commerce ministry official said.

The changes have also been made in view of an increase in proposed FDI inflow to SEZs. Of late, a number of multinational companies, including Google, Dell and Accenture, have shown interest in bringing FDI into SEZs.

Proposals of companies like Posco, IDA of the Netherlands and Salim group of Indonesia, among others, are expected to be considered by the Board of Approval in its forthcoming meetings.

The commerce ministry had earlier specified 21 parameters in the checklist for SEZ applicants. These include the developer company's share capital and reserves, the source of funds for the project and the audited accounts of the developer for the last three years (for all the constituents in case the developer is a special purpose vehicle) or audited accounts of the flagship company.

Officials said no decision had been taken so far to further modify the checklist to ensure land used for the zone was agricultural land. Till now, the government has accorded final approval to 164 cases, while around 225 proposals are pending before the Board of Approval.