SEZs Get Nod To Prune Area

Six major SEZs have clipped the size of their projects, foregoing potential tax gains for them. The developers have got the commerce ministry nod to de-notify parts of their tax-free enclaves for better viability.

The projects include Hyderabad Gems SEZ Ltd, Reliance Industries' Navi Mumbai IT SEZ, L&T Phoenix Info Parks, Maharashtra Industrial Development Corporation's (MIDC) agro SEZ, Vikas Telecom SEZ and Dahej SEZ. The government has also allowed the de-notification of DLF's IT SEZ near Delhi. The developers have realised that instead of holding on to the plots to earn future tax breaks, it will be better to surrender them now to improve the projects' financial viability. The realty sector has been one of the hardest hit in the economic slowdown. The SEZ projects were the crown jewels of the real estate companies. The government has, however, deferred the Maharashtra Airport Development Corporation's request to de-notify 361 hectares from the 1,578-acre multi-product SEZ in Maharashtra. MADC officials said if the ministry does not permit them to use the rail and cargo operations in the non-processing area of the SEZ in Nagpur, they would like to get that portion de-notified. They said rail and cargo access for units within and outside the SEZ is vital to the SEZ's viability. While officials of other SEZs did not immediately respond or declined to comment, L&T Phoenix Infoparks officials confirmed that they are seeking a de-notification of two hectares in their Vijayawada SEZ and use that space to build housing or commercial complex. The companies have opted for de-notification because they still meet the minimum area requirement for SEZs. For instance, the minimum area for an IT SEZ is 10 hectares, while it is 100 hectares for a sector-specific SEZ and 1,000 hectare for a multi-product SEZ. To obtain an order from the government for a partial de-notification, the developer has to cite reasons and provide proof of refund with interest of any tax sops availed of on the area sought to be denotified. Also, that area should be free of industrial units or residential and commercial complexes.