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Bengal SEZs face uncertainty as state govt rethinks nod

Indronil Roychowdhury, Kolkata, The Financial Express

March 01, 2012


High-profile special economic zones, like those of Wipro, Unitech Hitech and others, are likely to face uncertainty as the West Bengal government has decided to revisit the approvals granted to them.

Infosys officials on Wednesday met state industry minister Partha Chatterjee in Kolkata amid reports that the state government has planned to repeal the state SEZ Act.

The repeal would saddle the developers of future projects with a massive stamp-duty liability that was waived in most of the state SEZ Acts, including that of West Bengal. Existing projects like Wipro carry the approval of the Centre that overrides any state law, but West Bengal government's objection to SEZs in principle is a dampener.

Jindal, Videocon, Shapoorji & Pallonji's SEZ notifications have already been denotified. Since the state government had said it will not sanction land for any industrial project that carries an SEZ tag, at least 34 developers (including these three) are asking the Board of Approval at the Centre to denotify the notifications already issued to them.

Of the 34 SEZs approved by the Union commerce ministry in the state, six have got notified-SEZ approvals, 14 formal approvals and 14 in-principle approval. All these SEZs together have put up an investment proposal of above R60,000 crore including that of Jindal's proposed R40,000-crore mega steel venture in Salboni.

Sajjan Jindal, who has so far given the highest investment proposal in the state, after having acquired the entire 4,334 acre at Salboni has put the ball in the government's court to arrange for iron ore. Jindal had convinced Mamata Banerjee to demand for a national iron ore policy, through which he can secure iron ore for his proposed project in the state.

"Such a long-drawn condition only signifies that Jindal's investment would not come to the state and that the decision of not investing was taken when it was clear to the company that its project would not be allowed to get SEZ status," source close to the development said.

According to Sudesh Sonthalia, eastern region chairman of Export Promotion Council for EOUs & SEZs, even if the state repealed its SEZ Act of 2003, it could not put a bar to the facilities enjoyed by the SEZs under the central Act.

SEZ is a central subject and the state has only a recommending power over it. The Centre would not notify an SEZ unless the state recommends it, Sonthalia said.

But according to Ashok Ghosh, a tax expert, only the Falta SEZ developed by the Union commerce ministry, has no state control. Other SEZs like Manikanchan, Wipro, Unitech Hitech and Bantala are subject to incentives under state SEZ Act of 2003, which the government has proposed to repeal.

State industry and commerce minister Partha Chatterjee said the state SEZ Act, which would be repealed in the forthcoming budget session, would be done through a bill, being prepared at present. Since enforcing or repealing an Act cannot be given a retrospective effect the state would withdraw all fiscal benefits from the SEZs with effect from the date the Bill for repealing the Act is passed.

But Ghosh said if the government withdrew the benefits given to existing SEZs, it would be against the law of Promissory Estoppel, which stops from denying the promise made earlier.

"In case the government violates the law of Promissory Estoppel, it would attract a number of court cases," Ghosh said.

Chatterjee said the government was working on a Bill considering all sides. Sonthalia said another difficulty was in getting notified land. Citing his own SEZ venture, he said his company purchased 157 acres for developing an SEZ for IT companies and it got the BOA approval following the earlier government's proposal. Now the present government would not allow holding more than 24 acres and the remaining land has to be vested with it.

Ghosh said nullifying the earlier government's recommendations would also be against the law since there is a Supreme Court ruling against giving retrospective effect to policies. The earlier government's policy allowed SEZ in the state for which there were recommendations. But with the government against SEZ, nullifying its recommendations would tantamount to giving retrospective effect to its policy.