September 27, 2006
Minister
SEZs: To use or not to use prime agricultural land
The
Special Economic Zone (“SEZ”) Act, 2005 (the “Act”)
and the SEZ Rules, 2006 (the “Rules”), again came under
fire when an issue was raised about the nature of land to be
allocated for SEZ purposes1.
The
SEZ is a Government of India-notified special geographical area,
ear-marked for specific commercial activities and sectors, which
are export-oriented. The developer and a unit in an SEZ are
entitled to certain income tax benefits over a prescribed period
of time, in addition to other taxation benefits. The Rules mandate
the minimum area requirements for sector specific / multi-purpose
SEZs which are located in different states. The procedure for
obtaining an approval for an SEZ is very detailed and is specified
in the Act and Rules. The developer of the SEZ has to identify the
land and mention it as a vital part of the application to the
requisite authorities, which comprise of a Board of Approval
instituted under the Act and the State Government.
The
Minister for Commerce and Industry, Government of India, Mr. Kamal
Nath, in a news report2, has urged
the State Governments to ensure that the land that is proposed to
be utilized for SEZ is not prime agricultural land. Lands, which
are less fertile, or are wastelands, may be used instead. It
was also mentioned in the news report that it was vital to
formulate a compensation, resettlement and rehabilitation policy
for protecting the interests of the persons displaced due to
industrial projects
These
views come in at a time when the
SEZ regime is under a controversy. While the
Commerce Ministry is bullish
on it due to its impact on boosting
industrial development and growth , the Finance Ministry is
concerned about the revenue
losses that will result due to the various tax concessions under
the regime. The revenue loss is estimated to be INR. 1,700,000
million.
Impact:
In
view of this, the Government of India may modify the Act or the
Rules with regard to the land to be identified for the SEZ
purposes and the compensation or rehabilitation of the displaced
farmers. Mean
while, we have to wait and watch the developments.
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You
can direct your queries or comments to the authors
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Source:
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The
Economic Times, September 24, 2006
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The Financial Express, September 26, 2006
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