The government has decided to lift the cap on the number of Special Economic Zones (SEZs), currently at 150.
The empowered Group of Ministers headed by Defence Minister Pranab Mukherjee has decided not to limit the number of SEZs despite opposition from Finance Minister P Chidambaram.
The decision is a victory for Commerce Minister Kamal Nath, who has been seeking a relaxation of the cap. But Kamal Nath will have to wait for five more months before the Board of Approvals (BoA) sanctions fresh proposals.
The Mukherjee panel on Wednesday said fresh proposals will be taken up only after the first 75 of the 150 approved zones became operational. In the meantime, the Commerce Ministry would process 200 pending proposals from domestic and foreign corporates to be considered by the BoA.
Kamal Nath told reporters the empowered group would meet in the next five months to "review the ground situation".
Insiders said while Mukherjee tried to play the neutral referee, those in favour of more than 150 SEZs outnumbered the rest.
Communications and IT Minister Dayanidhi Maran apparently sided with Kamal Nath while Montek Singh Ahluwalia, the deputy chairman of Planning Commission, also pushed for more SEZs.
Sources said Chidambaram waged a lone battle seeking to limit the SEZs to 150, citing revenue implications and a possible shift of existing units to new zones from the Domestic Tariff Area (DTA). While the Finance Ministry cited a revenue hit of about Rs 90,000 crore, Kamal Nath and his team countered with a separate set of figures. The Commerce Ministry team projected net revenue earnings of Rs 44,000 crore owing to enhanced economic activity - both manufacturing and services exports, sources said.
After getting a go-ahead from the eGoM, Kamal Nath will now rope in chief ministers and hold discussions with leaders of the Left parties to blunt their opposition to SEZs.
"I will discuss with chief ministers to resolve land acquisition-related issues for operationalising the SEZs that have already been approved," said Kamal Nath before leaving for Kuala Lumpur for the Asean Economic Ministers conclave.
On the Left parties' opposition, Kamal Nath cited the letter written by West Bengal Chief Minister Buddhadeb Bhattacharya supporting SEZs.
To placate the Left leadership, Kamal Nath sanctioned at least four SEZs in West Bengal ahead of the crucial meeting of the eGoM. All four were in electronic hardware & software as well as IT-enabled services as per the West Bengal government's recommendations. Two SEZs were also approved for Kerala. Sources said by clearing four SEZs in IT and IT-enabled services sector for Tamil Nadu, Kamal Nath had won over Maran ahead of the Wednesday meeting.