Mumbai: India Inc on Sunday warned that frequent changes in the Special Economic Zone (SEZ) policy could prove costly for the country as investors may change their mind and turn to other countries due to limited incentives.
"On the prowl, India needs investment to figure itself in the league of developed countries. SEZs with its incentives are not just an attractive investment destinations for many in India and overseas, but these are really an important step for India's industrialisation path also," an industry source said.
Industry sources said Maharashtra Government's draft legislation 'SEZ and designated Areas Act', submitted to the Centre in February, was still pending, acting as a dampener for industry to commit investments in SEZs.
Maintaining that India needs to compensate with the agricultural land, another source said, while America has positioned itself as the numero uno grains producer in the world by employing only six per cent of its populace, India lags far behind though employs close to 70 per cent of its populace on agriculture.
"To combat unemployment, it's necessary for India to make productive use of lands. But, with frequent changes in the SEZ policy, India could lose investment worth of millions," he said.
So far 150 SEZs have been cleared. Recently, 18 others are cleared by Board of Approvals and 13 more given in-principle nod.
Following farmers' agitation in different parts of the country over land acquisition, the Centre has put a blanket ban on prime agricultural land acquisition for industrial purposes.
To aggravate the problem, Reserve Bank hiked the risk weightage on SEZ lending for commercial banks directing them to treat SEZs at par with any real estate projects.
"How can India resist flight of investments with such poor infrastructure and without offering any incentive to the industry, while China offers free of land to investors," a top industrialist said.
India Inc, on a roll now, was taken aback by the decision and are now prefering to adopt a wait and watch' approach till there is greater clarity on SEZ policies.
Reliance Industries, which is setting up the Navi Mumbai SEZ and Maha Mumbai SEZ, said it would go by the Government's instances in the SEZ projects.
Videocon's Venugopal Dhoot also maintained that he would abide by Government's suggestions.
Already the Union Commerce Minister Kamal Nath has said that the Government would not allow SEZs to be sabotaged and stated that he would write to RBI saying lending to SEZs can not be comparable with lendings to real estate projects since the primary activity of the former is manufacturing.
Bankers also want greater clarity on the SEZ policies before increasing their exposure to the sector.
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