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PMO applies brakes on new SEZs

Jan 17, 2007 03:22 PM IST Business Business

New Delhi: The SEZ juggernaut seems to have been stopped in its tracks, at least for the time being.

Sources have told CNN-IBN that the Prime Minister's Office has cancelled the meeting of the Board of Approvals to approve new SEZs. The decision is likely to impact big-ticket proposals, including that of the Tata Group, which is planning a 10-million tonne steel plant over in Orissa over a 1,173-hectare plot.

The sources say no new SEZ is likely to get the nod till the government comes up with a rehabilitation policy for those displaced in the process in view of the growing tension between the government and the farmers over the acquisition of farmland.

Also hampering the SEZ proposals is the continuing differences between the Finance and Commerce ministries. According to the sources, there have been differences between the two ministries over the size and number of SEZs. The chances of huge revenue losses have also raised the eyebrows in the Finance Ministry.

The Group of Minister on SEZs is likely to meet on January 22 to review the performances of the 75 SEZs sanctioned so far. It is after this review that the GoM is likely to take a call on giving clearance to more SEZs.

The battle between the Commerce and Finance Ministry over the SEZs has been long standing. The Finance Ministry had wanted a cap on the number of SEZs and also wanted the minimum area to be increased so that bigger SEZs could be created.

But the GoM had decided not to put any cap on the numbers and also did not bring in any minimum area requirement. The Finance Ministry has also been talking about a loss of Rs 1 lakh crore in revenue as a result of the creation of the SEZs, something the Commerce Ministry has been disputing all along.

On its part, the GOM had said that it would review the performance of the 75 SEZs in six months. That time is up now and the GOM will meet on January 22 to take stock. Even if the GoM gives a go ahead, the Government is, however, likely to wait for the rehabilitation policy to be unveiled before taking a call on the future course of action