Though several state chief ministers including DMK’s Karunanidhi and Congress’s Y S Rajasekhara Reddy have written to Prime Minister Manmohan Singh and the chairman of the empowered Group of Ministers on SEZs, Pranab Mukherjee, to lift the freeze on SEZ approvals as investors are getting edgy, a senior government official told The Indian Express today that the ministers’ group may not even meet till the UP elections are over. So lifting the freeze on SEZs seems out of the question till then, he said.

The West Bengal violence comes at a time when the Commerce Ministry had allayed the concerns of the Congress party by briefing at least two former chief ministers as a precursor to the expected meeting of the Empowered Group of Ministers (EGoM) this month to lift the January 23 suspension on SEZ notifications. As of now, only 63 out of a total 235 approved SEZ that are not facing any land acquisition issues have been notified by the UPA government.

Government sources said that even as the UPA government tarries on the notifications, footwear multinational Nike, which has a cleared SEZ plan in Tamil Nadu, has indicated that it would walk out of India as it has commercial commitments to meet next year. Nike has plans to invest $300 million into the SEZ in and has even ordered machinery for the project.

More big-ticket investors are in the process of pulling the plug on their SEZ plans. Apart from Nike, US-based Velankani Communications Tech, which intended to set up a $600 million IT SEZ in Tamil Nadu, is one of them. Nike and Velankani alone were expected to employ over 40,000 workers in the state.

Now, DMK supremo M Karunanidhi is likely to visit New Delhi soon to meet Congress president Sonia Gandhi, in a last-ditch attempt to prevent investors’ flight from the state. His strongly-worded letter to the PM a few weeks back had failed to break the impasse.

In Andhra Pradesh, Brandix Apparels, which has been awaiting the notification of its textile SEZ to start operations, is now considering retrenching the 600-odd women workers it trained and employed. “They are not here for charity. If their commercial operations are not starting, they can’t keep employees on their rolls indefinitely,” the government official said.

Commerce Ministry officials too seem to have given up hope of a resolution of the current stalemate at least till the UP elections conclude. Till then, they are bracing for a sharp dip in investor enthusiasm for SEZs. “We expect a 25 per cent drop from the existing investment plans for SEZs,” an official said.

The fact is that killing of 11 people in the police firing in Nandigram could not have come at a worse time. Last week, the Commerce Ministry briefed former Madhya Pradesh Chief Minister Digvijay Singh and former Karnataka Chief Minister Veerappa Moily on the entire SEZ policy of the UPA government in a bid to address all the concerns of the High Command. The two former CMs were given detailed clarifications on the following issues:

• SEZ impact on domestic industry (Ministry said that this is one of the many earlier schemes like EOU)

• Tax losses to the Indian economy (Ministry said two studies ICRIER by Finance Ministry and CUTS International by Commerce Ministry had been commissioned to study this)

• Ceiling of the maximum size of multi-product SEZs (already under consideration of the EGoM)

• Land acquisition problems

Sources said the original plan was that the two former CMs would then report back to the High Command and Pranab Mukherjee. This would then be followed by summoning of EGOM on March 21 before the present Budget session goes into recess.

However, the police action at Nandigram has taken the wind out of this exercise and will force the Congress leadership to keep the SEZ notifications into cold storage till the UP elections are over.

It is another matter that the SEZs were expected to provide 15 lakh additional jobs and get an investment of over Rs 58,000 crore before the 2009 general elections.