Ministers to decide on infrastructure limit in SEZs

The empowered group of ministers on special economic zones (SEZs) will, at its next meeting, take a final call on allowing infrastructure development in the non-processing area of the zones.

The commerce ministry had, in March, put on hold this change in the SEZ rules.

Earlier, a developer could have built more hospitals, schools, housing units and other social infrastructure in the non-processing area than approved by the board of approval. However, the additional construction was not eligible for tax exemptions.

According to the rules, at least 50 per cent of a zone has to be dedicated to core activity in the processing area. The remaining part of the zone, known as the non-processing area, is for support infrastructure.

However, as the provision enabling this has been put on hold, a developer cannot create additional infrastructure in the non-processing area even if he decides not to seek tax exemptions.

For each activity, a zone developer has to take the approval of the board and conform to the quantum of area allowed.

"Though we allowed additional activity in the non-processing area, the department of revenue had concerns regarding this. Hence we have referred the matter to the empowered group of ministers," said a commerce ministry official.

SEZ experts said not allowing the development of additional area was not healthy for the developers' plans.

"Most developers, while buying land from the state government authorities, enter into land-use agreements. There is no surety that the board will allow the entire quantum of the area in a non-processing area to be developed. This will mean breaching the land-use pattern agreement," said an analyst, requesting anonymity.