Promoters and investors alike seem to be losing interest in some of Gujarat’s special economic zones (SEZs) which, till recently, were seen as essential if the state was to take the next great leap forward in development.
The two main reasons given by promoters for their sudden loss of interest in SEZs are unsuitability of land allotted by the state government, and worries about losing tax benefits under the direct tax code (DTC). Strangely, the recession continues to be a stumbling block for
SEZ promoters.
In the last few months, while one promoter sought withdrawal of the approval earlier granted to its SEZ by the SEZ Board of Approvals (BOA), another promoter sought de-notification of its special economic zone. A third promoter has sought extension of the validity period of the approval granted to its proposed SEZ.
Interestingly, the BoA has granted the request of all the above-mentioned SEZ promoters. At its last meeting, the BoA approved the request of Strength Real Estate Private Limited for withdrawal of the approval granted to its proposed IT/ITeS special economic zone at Vemali near Vadodara.
Earlier, Strength Real Estate Private Limited - a special purpose vehicle (SPV) floated by Mumbai-based K Raheja Corporation — was granted approval for its Vadodara SEZ that was to be spread over an area of 13.74 hectares. But in its request for withdrawal of that approval, the same developer gave global recession, unsuitability of the land allotted by the state government and loss of tax benefits under the DTC as reasons for its loss of interest.
Two months back, the BoA granted Essar SEZ Hazira’s request for de-notification of an area of 28.841 hectares. Essar had cited exit of units due to the global recession as the reasons for its request for de-notification.
Similarly, the BoA has also granted Cadila Pharmaceuticals request for extension of validity of formal approval that was earlier granted to its proposed SEZ near Ahmedabad. The promoter fears discontinuation of tax benefits after implementation of the Direct Tax Code (DTC).
In its request to BoA, Cadila Pharmaceuticals had stated that the viability of SEZs depends mainly on the final indication in DTC of sops for SEZ vis-à-vis other countries in Asia. “The developer needs more time to complete the project and has, therefore, requested grant of further extension of validity of the formal approval,” Cadila Pharmaceuticals had said in its request.
Even the state-owned company, GIDC has requested that the area of its SEZ in Kutch be reduced from 131 hectares to just 15 hectares. The company had also requested that the name of the SEZ be changed from Gujarat Growth Centres Development Corporation Limited (GGCDCL) to GIDC. It has also sought a change in its sector from ‘Handicraft and Artisan’ to only ‘Handicraft’.
Ahmedabad-based SEZ consultant, Monish Bhalla, was unwilling to comment on DTC norms. But he said that due to global recession, the future of SEZs may not be good.
“SEZs in Gujarat are not successful,” Bhalla said. “Those companies who entered SEZ sector 2-3 years back might make profit as real estate business, but as exporting units, the concept of SEZ may not be successful.”
Source : dnaindia.com