Essar Hazira SEZ Fate To Be Decided Next Week

NEW DELHI: The fate of the Essar SEZ in Hazira, under finance ministry lens for alleged flouting of SEZ rules, will be decided next week when the board of approval (BoA) will take up the case in its meeting to come to a conclusion.

Although the law ministry had given the project a clean chit after examining the matter, the finance ministry is not yet convinced. Now, BoA will take a final call on whether the SEZ should be allowed to carry on or whether its license should be revoked. The revenue department representatives will also attend the BoA meeting.

The revenue department, in a report, had said that the land on which the Essar SEZ was set up was not vacant when the company filed its SEZ application. It had claimed that it was against SEZ rules which specified that the land identified for SEZs should be vacant. There was, therefore, a case for revocation of its license.

The law ministry, approached by the commerce ministry for its opinion on the case, however, absolved Essar of the charges by stating that vacant land would not only include land that is barren but also that which is available with the developer and is free from encumbrances. The finance ministry, though, is not convinced about this interpretation of the word vacant.

The finance ministry had also accused Essar of evading duty and manipulating records. While the company can get away by paying the stipulated fine for these offences, if it is established that the land on which the Hazira SEZ has come up was not vacant prior to the application, the project could lose its SEZ status and all the tax sops which come with it.

According to commerce ministry sources, Essar originally did not have plans of building up an SEZ on the location. In 2004, Essar was actually planning to increase the capacity of its steel plant in Hazira.

However, in 2005, it decided to invest in a steel SEZ instead to benefit from the tax concessions given to SEZ units. It approached the government with a proposal for a steel SEZ in December 2005. The revenue department’s contention is that Essar had already built structures at the existing site before it applied for the SEZ status.

Essar officials, however, claim that the Rs 60-crore spent on the land before the SEZ was applied for was related to activities such as project planning, awarding of contracts, grant of advances and piling of the coastal area land by pouring concrete.

This, they say, does not amount to building of structures. Essar, in a letter to the commerce ministry, had pointed out that while some construction had happened on the land, the area was devoid of economic activity.