The Hindu Business Line : SEZs in a flux

As a topic, SEZ (Special Economic Zone) has turned out to be a knotty issue. The Chinese model has `land'ed itself in trouble closer home. So much so, the Commerce Ministry is hurriedly considering changes to the SEZ Rules in the aftermath of Nandigram tragedy. And, in all earnestness, http://commerce.nic.in offers a chat facility on SEZ, `every working day' for an hour from 5 p.m.

To be equipped for an intelligent discussion on SEZ, take the help of Treatise on Special Economic Zones, by Kanu Doshi and Yogesh Ashar, from Snow White Publications Pvt Ltd (www.swpindia.com).

The Foreword by Nayan Patel, President of Indian Merchants' Chamber, concedes that the SEZ policy has stirred up `certain vexed issues that need to be addressed'. Such as: `the demand to regulate use of farm land for industrial purposes, valuation of land under acquisition, compensation to farmers, role of State in all of these, and so on'.

The preface notes that concessions and tax exemptions for SEZs `have lured businessmen in India and even from across the world to set up manufacturing hubs in India involving massive investments'. The authors advise Indian industry `to summon managerial skills of the highest standards for successful SEZ forays'.

While explaining the `multi-layer system' for acquisition of land for SEZ, the authors cite from recent news and judgments. One is about Commerce Minister Kamal Nath's exhortation to industry (expressed in a September 2006 interview) to accept that agriculture land cannot be acquired for SEZ purposes. "In his view, the SEZ Act is not meant to be a real estate legislation. At the same time, he also stated that imaginary concerns should not hurt employment generation in the country. He also averred that land acquisitions should be between a willing seller and willing buyer." Alas, willingness can often be engineered.

The book devotes separate chapters to the establishment of SEZ, constitution of Board of Approval, special fiscal provisions for SEZs, modifications to the Income-Tax Act, forex requirements and monitoring, and circulars/notifications. Part 2 of the book is on State government policies relating to SEZs.

Appendices contain valuable information, and text of key decisions. The Gujarat High Court's verdict (unreported) in Shah Kantilal Depar vs Reliance Infrastructure Ltd is one such. The petitioners, in this case, were `residents of various villages of District Jamnagar', and the target of their grievance was Reliance's new refinery.

The court dismissed the PIL (public interest litigation) holding that there was no loss to the aggrieved agriculturists `since only 12 per cent of the total land would be affected'. The court also upheld the Report of Experts that the acquired land were `not fertile lands', and that delaying the project would cause `huge financial loss for the company and loss of huge benefits to be accrued to the Revenue and loss of job opportunities to the unemployed... '

Topical read for leading edge professionals.

The book begins by explaining each of the sections in the SEZ Act, 2005. For instance, the word `services' is elaborately dealt with. Section 2(z) defines `services' as tradable services which are covered under the GATS (General Agreement on Trade in Services) and prescribed by the Central Government, and which earn foreign exchange. Section 2(m) defines `export' as taking goods or providing services out of India, from SEZ. List of services, as in Rule 76 of the SEZ Rules, 2006, and the definition of `service' as found in precedents and other legislation have been painstakingly compiled, to provide the context.

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