'SEZ developers divert huge tracts of land for other purposes'

Flaying the SEZ policy, CAG said large tracts of land acquired for special economic zones were de-notified but the resultant price appreciation benefited developers.
"We noted a trend wherein developers approached the government for allotment/purchase of vast areas of land in the name of SEZ. However, only a fraction of the land so acquired was notified for SEZ and later de-notification was also resorted to within a few years to benefit from price appreciation," the CAG report, which was tabled in Parliament today, said.
In terms of area of land, out of 39,245.56 hectare of land notified in the six states (Andhra Pradesh, Gujarat, Karnatka, Maharashtra and West Bengal), 5,402.22 hectares (14 per cent) of land was de-notified and diverted for commercial purposes in several cases, it said.

Many tracts of land acquired were not serving the objectives of the SEZ Act, it added.
It also said that in four states (Andhra Pradesh, Karnatka, Maharashtra and West Bengal), 11 developers/units had raised Rs 6,309.53 crore of loan through mortgaging SEZ lands.
"Out of which, 3 developers/units had utilised the loan amount (Rs 2,211.48 crore) i.E 35 per cent, for the purpose other than the development of SEZ, as there was no economic activity in the SEZs concerned," it added.

It said that there was a requirement of multiplicity of approvals for these zones with just 38.78 per cent of them becoming operational after their notification.

"52 per cent of the land allotted remained idle even though the approval dated back to 2006. There was a decline in the activity in the manufacturing sector in the SEZs. Land acquired for public purposes were subsequently diverted (upto 100 per cent in some cases) after de-notification," it added.
On tax administration, CAG said its review indicated several instances of extending in-eligible exemption/ deductions to the tune of Rs 1,150.06 crore and systematic weakness in direct and indirect tax administration to the tune of Rs 27,130.98 crore.
"SEZs had availed tax concessions to the tune of Rs 83,104.76 crore (IT - Rs 55,158 crore; indirect taxes - Rs 27,946.76 crore) between 2006-07 and 2012-13," it added.

Further it said that developers and unit holders were almost left un-monitored, in the absence of of an internal audit set-up. "This posed a huge risk for the revenue administration".
The Commerce and Industry Ministry, it said, should review the SEZ policy and procedures regarding developers seeking vast tracts of land from the government in the name of SEZs and putting only a fraction of it for notification.