As many as eight Special Economic Zones proposals in Goa were scrapped at one stroke by the inter-ministerial Board of Approvals, which met here today. The Board also decided to ask 12 developers in the state why their zones should not be cancelled.

This is the first incident of a reversal of a Central policy, following a strong anti-SEZ movement in Goa last year that had threatened to bring down the Digambar Kamat-led Congress government.

SEZs are underwritten by a central law passed by Parliament in 2005 that permits special taxation and other fiscal benefits to the developers and the units inside these zones.

The Goa government, on December 31, 2007, had recommended that the Centre scrap all the zones in the state following widespread public protests. Anti-SEZ protesters had argued that the zones will put extra pressure on the already fragile infrastructure in the state and lead to a dilution of the Goan identity.

Their argument was that "outsiders" would flood Goa in search of SEZ jobs that the locals will not be able to fill. This cancellation is the first time in history that ethnic issues have led to reversal of central industrial policy.

Formally approved zones that are facing withdrawal of status include Inox [Get Quote] Mercantile Company's 48-hectare Biotech zone in Verna, Panchbhoomi Infrastructure Pvt Ltd's 18.5-hectare  infotech zone in North Goa and a 48-hectare Infotech zone of Paradigm Logistics in Verna.

"We are following the principle of natural justice and are sending showcause notices to 12 formally approved zones. Proposals that were sent by the state and were yet to be considered by the Board of Approvals  will be treated as withdrawn," said Commerce Secretary Gopal Krishna Pillai, who heads the board.

Three controversial SEZs in Goa --  Cipla's Meditab Specialities, Raheja's IT/ITeS SEZ and Peninsula Pharma's bio-tech SEZ -- which were formally notified were, however, given a temporary reprieve, as the board decided to launch formal talks with the Goa government on the issue. The Goa government has been insistent on their denotification and scrapping.

The commerce ministry believes scrapping zones will send a wrong signal to foreign investors. The ministry argues that even in the case of denotification of the three zones, the industrial units built by the developers will continue to exist.

Sources said that Cipla had already invested more than Rs 200 crore (Rs 2 billion) in building two units at the Meditab zone.

Initially, the commerce ministry was of the view that notified zones could not be de-notified. But Commerce Minister Kamal Nath had subsequently said that denotification was an option that could be exercised. The matter was then referred to the law ministry.

Sources said issues relating to compensation to SEZ developers, as they have already pumped in money to set up industrial infrastructure, will have to be addressed.

The commerce ministry is hopeful that even if 20 SEZs in the state are axed, the three notified SEZs would continue to function.

Former minister Mathany Saldhana, who is leading the anti-SEZ agitation, said: "We consider today's development a partial victory, but nevertheless the first major step in saving our state that could have lost its cultural heritage against the tide of the migrants coming in for jobs. It would also have ruined Goa's environment. However, we vow not to rest till the three SEZs that have been notified are completely withdrawn by the government".

The Board of Approval today also gave formal approval to 10 zones, and in-principle approval to 14 other zones spread across the country.

Goa's paradise regained

• 2007 September-December: Widespread protests in Goa against SEZs. Goa government recommends to the Centre scrapping of all SEZs in the state and denotification of three others.
• 2008 January: Commerce ministry officials say the SEZ Act does not provide for denotification. Goa Chief Minister Digambar Kamat meets Commerce Minister Kamal Nath, who says denotification is possible. Issue referred to the law ministry.
• 2008 February: Law ministry says denotification of SEZs involves compensation of the developers, who have already invested in construction inside the zones.
• Board of Approval decides that proposals of eight zones, which it had not considered, will stand withdrawn.
• Also decides to send showcause notices to 12 other formally and in-principally approved zones.