Ministry wants FDI in SEZs monitored

The defence ministry has cautioned against giving clearances to FDI in special economic zones from "countries of concern and unfriendly entities", insisting that a national security exception clause be introduced to regulate overseas investment.

According to fresh guidelines being suggested by the ministry, "foreign participation in sensitive sectors and from countries and entities of concern should be subject to appropriate screening irrespective of the fact whether the FDI is permitted through automatic route or the Foreign Investment Promotion Board".

The ministry is of the view that there is a need for effective monitoring and the national security exception clause to regulate FDI, with focus on security, official source said.

It also wants an institutional mechanism for defining policies, which should include feedback and control. It has also been made clear to the commerce ministry that the nationality of persons working in SEZs should be considered while giving clearances.

In many cases, SEZ operators are bringing in staff from "countries of concern" to get their projects off the ground, the sources said.

Armed forces have asked the government to keep SEZs at least 10 km away from the country's borders and 20 km from sensitive installations like airfields, radars and communication.

The guidelines, which will govern approval of SEZs, also include a provision that IT and ITeS zones should also be at a distance from military installations to avoid interference with ground-to-ground communication and radar pick-up.

The defence ministry, which is represented on the Board of Approvals, has also suggested that SEZs in coastal areas should be cleared only after taking the view of the armed forces.

According to sources, armed forces are particularly concerned about the safety of airfields from the bird menace that can come from the industries and height of structures in SEZs.