The Hindu Business Line : Denotifying SEZ: Centre tells States to pay cost to developer

New Delhi, Jan 1 The Goa government’s latest move to seek permission to de-notify the special economic zone (SEZ) from the Centre is not all that easy since the cost of any such move is to be borne by the State concerned as it involves compensation to the developers.

Compensation

Talking to Business Line here on the implications of this controversial move, the Commerce Secretary who is also the Chairman of the Board of Approval (BoA) for SEZs, Mr Gopal K. Pillai, asked whether the State is prepared to pay the compensation? He said since the land has been sold to the developer or leased to him, it is for the State Government to compensate the developer by refunding the amount he sustained in the purchase or lease charge for the land.

Developer’s dilemma

He said that the developer would have made a detailed project plan, engaged consultant and made a couple of visits to the site or begun construction or fencing by engaging contractors which he should duly cancel as otherwise he would be sued by the contractor. Hence, to denotify SEZ is not ‘just a paper cancellation’ and both the State Government and the developer must come to an ‘amicable settlement’ before they seek annulment of the SEZ, he added.

Denotifying issue

Stating that if the request comes from the State Government to the Union Government, Mr Pillai said that he would have to consult with the developer who might be prepared for denotification “provided you reimburse all the expenses he has borne and compensate him for all the cost. The State Government is not going to get denotification without cost”.

Mr Pillai said the developer might try at least to persuade the State Government that what is notified should be allowed to proceed further. Where there is a formal approval only for SEZs, “I will not notify and so long as I have not notified it is fine”.

He said that whether the developer wants to contest the State Government or not is a different issue “but he will definitely have to be compensated” as otherwise he would go to the court. Prima facie, he said, the Centre would not cancel until there is an agreement between the State Government and the developer of the SEZ.

The State Government could ask anything but the Centre would not de-notify an already notified SEZ because the State itself has recommended in writing in the first instance for notification after satisfying itself with the removal of all encumbrances about the land and verifying the land record, he added.

Settlement

Where the State admits that it has given the land and proposes an agreement with the developer that it does not want the SEZ but the developer could do something else — set up a housing colony, they could still come out with a settlement to that effect because “all consequences of compensation will have to be paid by the State” to the developer and not by the Centre.

Reversals

Asked whether such reversal of SEZs would not dent the sustainability of SEZs policy in the long-run, Mr Pillai said that Goa is an isolated and individual case and out of 404 SEZs if a few SEZs are lost this is not going to make a big difference to their magnetic role in transforming the industrial map of the country.

He said that the twice-postponed SEZs meeting in the last month has already resulted in a record 56 proposals, both in-principle and formal, to come up before the Board at its Wednesday meeting here.

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