Developers have been misusing the Special Economic Zone (SEZ) policy to buy land for the stated purpose of setting up such zones and later de-notifying these and gaining from the price appreciation, according to the latest CAG report on SEZs.

“Land appeared to be the most crucial and attractive component of the scheme. Of the 45,636 hectares of land notified for SEZ purposes, operations commenced in only 28,488 hectares, which was 62.42 per cent of the allotted land,” the report released on Friday points out.

Corrective measures

The system of according extensions without appropriate corrective measures or deterrent action, led to de-notification and diversion of the land for commercial purposes which called for a review, it added.

The report further criticised the ‘preference for urban agglomeration’ by industry which undermined the objective of promoting balanced regional development.

“Another significant trend in the SEZ growth has been the preponderance of IT/ITES industry. About 56 per cent of the country’s SEZs cater to IT/ITES sector and only 9.6 per cent were catering to the multi product manufacturing sector,” it said.

Tax assessments

The review of tax assessments carried out by the CAG indicated several instances of extension of ineligible exemptions and deductions which added up to ₹1,150.06 crore, the report said. Systemic weaknesses in direct and indirect tax administration accounted for ineligible exemptions of ₹27,130.98 crore.

Total tax concessions availed by SEZs in India amounted to ₹83,104.76 crore between 2006-07 and 2012-13.

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