Reliance Industries (RIL), Parsvnath and Kalyani Group, among others, have denotified their SEZs, freeing up over 1,300 hectares which they can now develop for industrial or commercial purposes. The possibility of alternative use will depend on whether the land was acquired by the corporate or the government on their behalf and the policies of respective state governments.
With SEZs turning unattractive due to the withdrawal of incentives, states like Haryana and Maharashtra have framed specific policies allowing developers to denotify their SEZs, in part or full, and have provided them the alternative of developing the land for industrial purposes. So, in a way, states are incentivising developers to denotify SEZs and convert them to industrial areas, said Ajay Nijhawan, convener of SEZ Developers Panel.
At present, notified and approved SEZs cover 61,829 hectares while notified zones cover 46,707 hectares.
Corporates lost interest after the government brought SEZs under the minimum alternate tax (MAT) and dividend distribution tax (DDT) from April and June 2011.
While MAT is applicable at the rate of 18.5% of book profit after April 1, 2011, DDT was levied from June 1, 2011, on dividends distributed by SEZ developers at 16.22%.
Sources said RIL, which recently got its 440.7-hectare SEZ in Gurgaon denotified, is planning a township as per Haryanas industrial and investment policy for integrated township projects. A confirmation from RIL could not be obtained.
Of the 392 notified SEZs as on July 31, 2013, 58 have been denotified. Most were denotified in the last two years due to MAT and DDT. However, the reasons given by the developers for denotification include the global economic slowdown, poor market response, non-availability of skilled labour force, lack of demand for space and changed fiscal incentives regime for SEZs.
For instance, real estate developer Parsvnath sought de-notification of its 42-hectare SEZ on the grounds that it has not been able to acquire some small pockets within the notified area, thereby affecting contiguity.
If private land is being denotified, then it remains with the developer but if government land is being denotified, and it is not being used the way is was supposed to be in the stipulated time period, then it has to be surrendered, said a person familiar with the process.
Said PC Nambiar, chairman, Export Promotion Council for EOUs and SEZs (EPCES): Land is free after the denotification. However, sometimes, states do not allow developers to use it as per their needs as it may affect environment or tourism.