SEZ Board allows GAIL to exit Kochi SEZ after repaying duty benefits

The Centre has allowed GAIL to exit as a unit from the Cochin Port Trust Special Economic Zone (CSEZ) in Puthuvypeen, Ernakulam, after repaying the duty benefits it has availed so far, as it failed to meet the requirement of being a net foreign exchange earner (NFE).

Cochin Port Trust, the developer of the SEZ, and the three co-developers — Petronet LNG, BPCL and IOCL — have been given a year’s time to bring another unit into the zone that has a direct relationship with their activities, failing which the zone will lose its SEZ status, per a decision taken by the Board of Approval (BoA) for SEZs, in a recent meeting.

It is necessary for a new unit to come up after the exit of GAIL as it was the only operational unit in the SEZ. Without a functional unit, the zone will cease to exist.

“Till such time a new unit is brought in, the developer/co-developer shall not be allowed any duty-free procurement import,” the BoA ruled.

The BoA, headed by the Commerce Secretary and comprising top officials from key ministries and departments, is the top decision making body for SEZs.

The Puthuvypeen SEZ was notified as an SEZ in 2006 over an area of 285.84 hectares. GAIL was issued a letter of approval in 2010 for the authorised operation of a ‘regasified LG transmission and distribution’ unit.

The unit’s activities took off in 2013, making the SEZ operational. An investment of around ₹10,000 crore had already been made in the zone with duty concessions.

The GAIL unit purchases LNG from co-developer Petronet LNG and supplies it to its customers, mostly located in the domestic tariff area (DTA), which lies outside the SEZ, after re-gasification.

Per the report of the Development Commissioner (DC), CSEZ, submitted to the BoA earlier, GAIL has been operating for the last five years but during the processing of its renewal application it was found that it has not achieved a positive NFE, a necessary condition for SEZ units.

Denotification petition

GAIL had also insisted on its denotification as an SEZ unit and had filed a writ petition before the Kerala High Court, which directed the BoA to finalise the the company’s application for exit and de-notification.

The BoA, in its meeting on February 26, directed the DC, CSEZ, to process the request of the developer, if any, for de-notification of the area occupied by GAIL in the light of the direction of the High Court.

Striking down the developers’ argument that a boundary wall was not needed as the goods were removed by pipelines, the BoA asserted that the SEZ rules do not permit such concessions.

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