Govt defers decision on Posco SEZ

The government has deferred a decision on South Korean steel major Posco's request for allowing more time to set up multi-product SEZ in Orissa till the Board of Approval's next meeting.

The inter-ministerial Board of Approval (BoA), chaired by Commerce Secretary Rahul Khullar, deferred the issue due to the absence of a "reasoned submission" of the Orissa government.

As per the rules, state government's nod is required for a final clearance by BoA to set up an SEZ.

"...A faxed request was received from the government of Orissa, stating that it would submit its views later. No reasoned submission has been provided...The matter is deferred to the next meeting, before which the state government may make a reasoned submission," the minutes of the BoA meeting, held on November 28, said.

The Posco SEZ, to be set up in Jagatsinghpur, had received in-principle approval from the BoA but it expired in October. Subsequently, the steel giant's India subsidiary had sought more time from the government for its SEZ, that has to come up on 1,620.49 hectares in Orissa.

The BoA also gave extra time to 11 SEZ developers, including those of Parsvnath SEZ, to execute their projects.

Four tax free zones including Dr Reddy's Laboratories and City Gold Realties were de-notified.

While some asked for de-notification of their SEZs due to change in their business plans, others have cited reasons such as imposition of Minimum Alternative Tax (MAT).

The BoA also gave its approval to set up four zones, including Free Trade and Warehousing Zone to be set up by Mundra Port and SEZ in Gujarat, over an area of 168.41 hectares.

Exports from SEZs grew 26.2% year-on-year to Rs 1.76 lakh crore during April-September this fiscal.

Out of 381 notified zones, 148 are operational. Maximum number of them are in sectors such as IT/ITES, engineering, electronics, hardware and textile.

SEZs and export oriented units (EoUs) contributed 34% to the country's export shipments in 2010-11.

However, in the wake uncertainties over tax incentives, scores of SEZ developers were given more time to execute their project and some of them have surrendered.

The draft Direct Taxes Code, which is to replace the Income Tax Act, has proposed withdrawal of exemptions for new units.

In this backdrop, the Commerce Ministry has floated a discussion paper to revamp the policy.