Four DLF SEZs denotified

Four DLF SEZs denotified
Business Standard, June 3, 2009, Page 1

BS Reporter / New Delhi

Covering 100 acres, the realtor will use the land to develop commercial projects.

The Board of Approvals on Special Economic Zones (SEZs) today agreed to denotify four zones of real estate major DLF, with the rider that the company will have to repay all tax benefits that it availed of while developing these.

The Board of Approvals (BoA) had denotified another DLF zone in Delhi in December 2008. Today's move leaves the realty major with six notified zones, almost half of what it started out with in 2008

In its request to the BoA, the company had said it was unable to develop the zones because of a “liquidity crunch” and “slowdown in the economy”. Ramesh Sanka, DLF's group CFO, said the land, which covers over 40 hectares or roughly 100 acres, would be used to erect commercial buildings, mainly for the IT sector. He said the group proposed to go ahead with the six other SEZs.

The denotification of the four zones is in the nature of an "in-principle"move. “Once the company repays the tax benefits and we get a confirmation from the Customs department and the development commissioner, the board will give the final go-ahead to de-notify the zones,” said DK Mittal, additional secretary, department of commerce.

The tax incentives amount to Rs 6 crore to Rs 7 crore, though the amount is still to be verified, Mittal added.

Notification is the final approval needed from the commerce ministry, after which an SEZ can start enjoying direct and indirect tax benefits.

The issue of denotification had attracted some controversy last year. Initially, the commerce ministry had maintained there were no provisions for denotification in the SEZ Act of 2005. But in subsequent deliberations, the law ministry told its commerce counterpart that the BoA had the power to scrap the zones. The finance ministry, meanwhile, maintained that tax benefits would have to be repaid to the government by the developer of a notified zone before it was scrapped.

India currently has 315 notified zones, of which 80 are operational. In 2008-09, exports from SEZs — tax-free export-oriented havens that are modelled on China's SEZs — stood at about Rs 95,000 crore, about 42 per cent more than Rs 66,638 crore in the previous year.

Nine zones get formal approval

Meanwhile, the BoA also formally approved nine zones, which includes a multi-product zone by Krishnapatnam Infratech Pvt Ltd in Chillakur, Andhra Pradesh, and two infotech zones to be developed by Larsen & Toubro in Mumbai and Emaar MGF in Alwaye, Kerala.

One-year extensions of formal approval status was also given to 21 zones. Formal approvals are granted to zones that have land under possession. The extension has been granted because these zones have had problems accessing credit to complete construction or facing falling demand for SEZ space, owing to falling global demand for goods and services.

However, the BoA declined to grant extensions to two proposed multi-product SEZs, since the developers had not bought any land to develop these. Developers of these two zones — Videocon Realty and Infrastructure Ltd (in Madhya Pradesh) and Writers and Publishers Ltd (in Maharashtra) — had been given in-principle approval a couple of years ago.