Published & Updated as on - 2010-03-14

Opposition parties claim developers are trying to make money by using the land for real estate projects.

The Andhra Pradesh government has slapped notices on the developers of special economic zones (SEZs), asking them to explain delays in project execution and seeking details on the use of land allocated to them, after opposition parties alleged that many SEZs were misusing land acquired with government support.

A body representing SEZ developers, however, blames the delays on the global economic downturn and the government’s failure to provide assured infrastructural support.

Andhra Pradesh has 73 notified SEZs—the highest in the country. Another 30 SEZs are awaiting notification, giving the state 103 of the 346 SEZs approved by the Union commerce ministry nationwide.

“Of the 73 notified SEZs so far in the state, with a projected investment of some Rs70,000 crore, only 19 SEZs have become operational, attracting an investment of some Rs10,000 crore,” said Kanna Lakshminarayana, Andhra Pradesh’s minister for major industries and commerce.

“The government would take back the land allotted to the developers of SEZs if they failed to convince the authorities on delays in setting up industrial units or (have been) found using the lands for other purposes,” Lakshminarayana warned.

The notified SEZs had acquired 27,722 acres of land across the state, the minister added.

Opposition parties have claimed that the developers of these SEZs were trying to make money by using the land for real estate development.

T. Sunil Reddy, chairman of the Andhra Pradesh SEZ Developers’ Association, said the global economic slowdown was largely responsible for the delay in the implementation of SEZ projects. The government’s inability to provide the infrastructure assured to them had also played a major role in raising the development cost and turning the SEZ projects unviable, he added.

As many as 42 SEZs are coming up in state capital Hyderabad or its neighbouring districts of Ranga Reddy, Medak and Mahaboobnagar, where the cost of land acquisition is very high.

B.R. Meena, vice-chairman and managing director of Andhra Pradesh Industrial Infrastructure Corp. Ltd (APIIC), the nodal agency for SEZs in the state, admitted that government agencies had failed to provide the assured infrastructure to many SEZ developers.

“APIIC is developing 20 SEZs on its own and had assisted another 23 SEZs in acquiring land. While two more SEZs are also (being developed) by the government agencies belonging to urban development, 28 SEZs are being developed by the private players,” said Meena.

APIIC, he added, was preparing a report on how many SEZs had failed to take off despite the government fulfilling its infrastructural obligations.

Reddy of the SEZ developers’ association said the absence of additional tax benefits in the proposed extension of the Software Technology Parks of India Scheme was also holding back small and medium information technology (IT) and IT-enabled services (ITeS) firms from moving to SEZs.

“Another major reason for IT/ITeS units not showing interest in SEZs is the proposed new direct tax code that threatens to take away tax exemptions to SEZs,” said the chairman of a private IT/ITeS SEZ, who did not want to be named.

As many as 43 SEZs in Andhra Pradesh were to host IT and ITeS firms, while the rest proposed to host units of industries, including pharmaceuticals, biotechnology, aerospace, hardware, semiconductors, leather, footwear, gems and jewellery, apparel, building products, alumina, printing paper, and food processing.

A number of IT/ITeS SEZs have already sought extension from the Union commerce ministry, while some have sought to denotify, either completely or partially, so they can use the allotted land for other purposes.

Komatireddy Venkat Reddy, Andhra Pradesh’s IT minister, said his ministry had served notices on IT/ITeS SEZ developers to submit the details on land utilization.

“We have decided to take back the unutilized land from these SEZs and allot them through auction to small and medium IT/ITeS firms interested in setting up their units,” he said.

The Andhra Pradesh government, which has announced the highest ever annual budget of Rs1.13 trillion for 2010-11, plans to raise some Rs3,500 crore from the sale of land to fund its developmental programmes.

But APIIC’s Meena said the government could take back land only from those SEZs whose land acquisition had been assisted by government agencies. Private SEZ developers were free to do anything with their land assets.

There are 18 IT/ITeS SEZs being developed by private players, mostly in and around Hyderabad.

Source: www.livemint.com 2/3/10