SEZ developers seek more time

SEZ developers seek more time
The Financial Express, July 23, 2009, Page 2

fe Bureau, New Delhi

An increasing number of special economic zone (SEZ) developers are asking for additional time to develop the tax-free industrial enclaves due to insufficient demand for space, land acquisition problems and the liquidity crunch arising in the backdrop of the global economic crisis.

The Board of Approval on SEZs under the commerce ministry has got 74 requests from developers of the zones for extension of their validity period, citing the global economic crisis, commerce minister Anand Sharma told the Rajya Sabha on Wednesday.

“About 53 SEZ developers have since been granted extension of one year, subject to the same terms & conditions as envisaged in the original approval,” Sharma told the upper house of Parliament.

The number of applications related to extension of the validity period of the zones increased since January this year. Meanwhile, the Board has given its nod to scrap five notified zones belonging to Delhi-based realty major DLF and Mumbai-based K Raheja Universal.

The global economic crisis has led to drop in demand in overseas markets, which in turn have made the zones - exclusively meant for exports - less attractive as a business venture. In addition, SEZ developers are finding it difficult to source cheap loans to build the zones. This has led to increase in number of application for extension of the mandatory time period under which a zone has to be developed.

Under norms prescribed by the SEZ Act of 2005, a formally approved SEZ - zones with land under possession - have to take “effective steps to make the zone operational within three years.” Moreover, zones with in-principle approval — SEZs which are yet to acquire land — have to complete acquisition of land within one year of grant of the status.

Meanwhile, the government has taken a series of steps to help developers of the zones to tide over the crisis. This includes allowing developers and units of the SEZs to access cheap overseas loans through external commercial borrowing route for developing industrial infrastructure.

Moreover, rules related to computation of income tax exemptions were also tweaked in the Budget presented by finance minister Pranab Mukherjee this July to ensure that the developers and units get greater benefit. “These measures will help developers and units of the zones in tiding over this difficult period,” said LB Singhal, director general of Export Promotion Council for EoUs and SEZs.

At the moment, there are over 700 SEZs that have been given formal and in-principle approval.