According to senior government officials, the EGoM scheduled to meet on August 7 after a long gap, will consider a proposal to let state governments compulsorily acquire land if private developers procure 70 per cent of the land required for the SEZ.

The crux of the problem is an April 4, 2007 decision of the EGoM that asked the Board of Approval under the Department of Commerce not to consider any case where land has been compulsorily acquired. The BoA has, so far, given formal nod to 467 SEZs, of which 225 have been notified. There are as many as 135 zones that have received in-principle approvals, but have not been able to procure the required land.

The officials said one of the biggest obstacles for developers has been the availability of large tracts of land because land holdings in India are highly fragmented. Another issue relates to the contiguity clause that requires developers to have a mass block of un-separated land to qualify for tax sops. “The BoA has been extending exemptions on a case-to-case basis for multi-product SEZs on the contiguity clause. Say, for instance, if there is a railway track in Jhajjar where Reliance plans an SEZ, it is not something the company can do about,” said an official.

An executive from one of the big four consulting firms, who did not wish to be named, said that in most cases after a developer gets an in-principle approval, the states help them by acquiring land through their industrial development corporations. “They, however, impose onerous responsibilities in terms of employment generation for local people, compensation for land acquired and resettlement of affected people,” he said.

But in April last year, following huge controversies, the EGoM decided that no SEZ approvals would be granted if land belonging to even one individual was compulsorily acquired after April 4, 2007, even if it formed a minuscule fraction of the total area.

Smaller states including Kerala were the most affected since almost all IT-ITES SEZ proposals involved some land acquisition. So much so that Kerala Chief Minister V.S. Achutanandan wrote to the Prime Minister in April this year requesting a major dilution on land acquisition rules. He wanted the government to let Kerala acquire land compulsorily if the developer procures even 30 per cent of the total area required. His proposal will also be discussed by the EGoM in its meeting on August 7.