SEZ norms out, one irritant goes

But facilities usage could spawn another rumpus

NEW DELHI: One contentious issue may have been put at rest with the board of approval (BoA) for special economic zones (SEZs) clearing guidelines for setting up infrastructure facilities in the SEZs for which they can claim tax exemption, but grey areas about use of these facilities might just spark off another controversy.

The authorised activities in the non-processing areas that developers could undertake include both basic as well as social infrastructure.

The basic infrastructure includes roads with street lighting, water treatment plants, sewage and garbage disposal facilities, electrical and gas distribution networks, security offices and police posts, effluent treatment plants, office space, parking, telecom and other communication facilities, rainwater harvesting plants, fire protection systems and the like.

The social infrastructure includes housing, playgrounds, swimming pool, recreational facilities including club house, indoor/outdoor games, gymnasium, medical centers, crèches, restaurants, coffee shops and food courts, shopping arcades.

While these are common to all SEZs, developers of sector specific SEZs can also provide multiplexes, school/technical institution/educational institutions as well as rail heads.In addition to all these, the multi-product SEZs will also be allowed ports, airports/air cargo complex, inland container depot, banks and golf courses.

The BoA perhaps tried to nip in the bud possible land speculation by setting limits on the size of various facilities (See graphic above). The tax benefits can be availed only within these limits.

However, the BoA has also said that developers can be given permission to build beyond these limits if they can show that these are required for employees of units in the SEZs. If the BoA approves the expansion, the tax benefits can be claimed for the extra facilities as well.

Responding to questions, special secretary in the commerce ministry G K Pillai admitted that the use of the facilities would not be restricted to employees of units located in SEZs. However, he dismissed chances of these guidelines being misused to provide expensive facilities even as the employees themselves are denied access to them because of the exorbitant costs.

Developers have been told to give employees first preference in providing these facilities, he said, and said the development commissioners would be empowered to ensure that this was done. But he admitted that employees could sub let houses allotted to them.

Pillai also ruled out mushrooming of such social infrastructure. The Master Plan of SEZs, he pointed out, reserved 40% of the non-processing area for green cover.

The BoA also set out criteria for approval of SEZ developers. In the case of sector specific SEZs, they would need a minimum investment of RS 250 crore or net worth of Rs 50 crore while in the multi-product SEZ they would need a minimum investment of Rs 1000 crore or net worth of Rs 250 crore.

Clarifying the issue of who would administer the IT/ITES SEZ, Pillai said the director of the Software Technology Parks of India would be declared the development commissioner for these SEZs but would function under the overall supervision of the ministry of commerce.