SEZ land monetised by developers
CHENNAI: An interaction of export oriented units (EOU) and special economic zones (SEZ) was organized within the city recently by the Export Promotion Council for EOUs and SEZs (EPCES) in association with the Madras Export Processing Zone (MEPZ) for resolving issues faced by these units.
The responsibility of conducting a study on revisiting SEZs was entrusted to the Indian Council for Research on International Economic Relations (ICRIER) by the ministry of commerce and industry. The motive behind the study was to understand and comprehend the impact of the existing policies on SEZs, examine the issues pertaining to successful establishment of SEZs within India, analyse the cost as well as the benefit of SEZs and accordingly make suitable policy recommendations.
Currently, SEZs are struggling with hosts of issues, which include the applicability of minimum alternate tax (MAT) or dividend distribution tax (DDT). These policies have had an adverse effect on the growth, employability, investments and exports of SEZs within the country. The council on its part has placed a request for the fixation of MAT at its original introduction rate of 7.5 per cent.
EOU/SEZ sector’s contribution to the national exports amounts to one-third along with proffering employment opportunities for more than 15 lakh people. During the fiscal of 2012-13, exports from SEZs stood at Rs 4,76,159 crore, representing a significant growth of 31 per cent over exports during 2011-12 fiscal .
Are debt-ridden developers using SEZ land as a means to monetise their assets?
It appears so, as a clutch of real-estate developers are dropping their special economic zone (SEZ) plans in the wake of issues pertaining to land acquisition, minimum alternate tax (MAT) along with the slow demand from companies.
At the least, three to four main developers, such as Parsvnath, Unitech and Shriram Properties, are seeking denotification or a complete sell-out of their SEZ ventures. Other developers, such as Raheja Developers, DLF and Indiabulls, are also known to be searching for exit options.
Denotification of SEZ:
The Bangalore-based Shriram Group, is seeking to sell its Gateway SEZ for $150 million, it is a 1.3 million square feet IT SEZ located in Chennai. Reportedly, this is being done by the company to clear its Rs 600 crore debt.
In the same fashion, Unitech group also plans to sell its IT SEZ in Gurgaon which comprises 3.5 million square feet of office space. Unitech Corporate Parks (UCP), which has a 60 per cent stake in the IT SEZ, was established to invest only in commercial real estate. Around Rs 1,100-1,200 crore is expected to be generated by the sale, which Unitech could employ to retire its debts and further its expansion plans. Reliance Industries, Parsvnath Infra Ltd are some other players seeking to monetise by denotifying their respective SEZ projects.
In 2005, the SEZ Act was introduced with the motive of developing infrastructure, generating employment opportunities and fostering the economic growth.
However, mid-way, the foundation of the act was tweaked, resulting in confusion among investors. The economy conjointly took a backseat, prompting corporations and developers to abandon their expansion plans. Furthermore, almost none of the states had any clear policy on SEZs. A combination of all these factors has deteriorated the charm of SEZs.
