The wrangling between the two ministries has been there right from the start of the concept of SEZs. Commerce minister Kamal Nath, who executed the idea of SEZs, rolled out a welcome mat for promoting exports and attracting investment in the country. However, the finance minister, right from the conceptual stage of SEZ, has been lukewarm to the idea and expressed reservations stating revenue loss and diversion of industry from non-SEZ areas to the SEZ areas.

In a recent proposal, the finance ministry is understood to have stated that SEZs cannot afford to have a tax free regime as it weaken India's hand in the WTO negotiations. In addition to this, the finance ministry has also raised doubts about how the international community would perceive these subsidies stating that it could be viewed as export subsidies.

It could be difficult for India to justify these exemptions and many countries could impose additional duties on goods imported from India.

According to industry associations, it is not advisable for the country to backtrack on SEZ policy at this stage as it will give a wrong signal to investors. As regards hampering the WTO negotiations and subsidy backlash from the trading partners, the industry experts say it is fear, which is unfounded at this stage, and it is better to cross the bridge when it comes.