BUILDING BLOCKS 

In a big boost to non-metros,govt allows smaller SEZs 

Govt Also Sets 10-Year Deadline For Zone Completion To Oust Non-Serious Players 

SETTING up special economic zones in smaller cities is set to become more attractive after the government has decided to reduce the minimum built up area requirement for sector specific zones such as IT,gems & jewellery and bio-tech in tier-2 and tier 3 cities.
The guidelines have also given a 10-year deadline to developers for setting up the required infrastructure in a bid to weed out non-serious SEZ players.
The built up area requirement for SEZs so far was too large to attract developers in small cities as investors wouldnt want to put in money in building infrastructure without knowing whether the whole of it would get occupied, pointed out Raju Bhatnagar,vice president,Nasscom.With the reduction of the required built up area by half for tier 2 cities (relatively small cities usually with less than one million population) and by a fourth for even smaller tier 3 cities, investments in such zones have become more attractive, he added.
According to a notification put out by the commerce department, SEZs in tier-2 cities such as Madurai, Varanasi, Raipur, Amritsar, Agra and Asansol will have a minimum built up area half of the earlier requirement.
This means that IT SEZs, which earlier had to have a built up area of one lakh square meter,will now have to have infrastructure over only 50,000 square meter in such cities. Similarly, gems & jewellery SEZs, requiring a built up area of 50,000 square meters, would now have a reduced requirement of 25,000 square meters in tier-2 cities In tier 3 cities such as Jaipur, Ghaziabad and Kochi, the minimum built up area requirement has been brought down further to 25% of the original requirement.
However, for big cities such as Delhi, Kolkata, Mumbai, Chennai and Bangalore, the old dispensation would continue. Nasscom is confident that the move would promote growth of the $60-billion ITITeS sector in small towns and cities and reduce load on large cities. It has also proposed to the government a virtual SEZ scheme, in which the requirment of built up area would be waived for all IT SEZs. For start ups which just need a small area with three-four computers,it does not matter if the built up area requirement is reduced to even 1,000 sq metres. The Virtual SEZ proposal of the Nasscom can only help such small IT firms, says Vishnu Dussad, CEO of Nucleus Software, a Noida based mid cap firm, with a turnover of about Rs 200 crore.
The governments move to ensure that the built up area requirement is respected by developers by setting a ten-year deadline for its completion would oust non-serious players. There are instances where a developer sets up just one or two units in the entire zone to show that it is operational and does not carry out any other activity waiting for more favourable returns, said Hitender Mehta, Gurgaonbased consultant and an expert on SEZs.

Economic Times, New Delhi, 23-07-2010