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The Board of Approval for Special Economic Zones (SEZs) has postponed a decision on GAIL Ltd’s request to be allowed to exit from the port-based SEZ in Puthuvypeen and has decided to focus on recovery of dues which the unit owes for not meeting its net foreign exchange (NFE) obligation.
“The Board, after deliberations, directed Development Commissioner of CSEZ (Cochin SEZ) to first work out the settlement of NFE status and the necessary recovery of dues,” as per the minutes of the meeting.
The BoA, which met recently, directed that the matter may be deliberated on file based on receipt of necessary inputs from the DC and from the parties concerned including Cochin Port Trust, GAIL and Petronet LNG. GAIL is the largest state-owned natural gas processing and distribution company in India.
“The BoA wanted that once the ground work was done and all the parties involved in the matter including the developer had put forward their views, the matter should be brought before it for further consideration,” a government official told BusinessLine .
As per the report of the DC submitted to the BoA, the Puthuvypeen SEZ has many irregularities including lack of compound wall and no contiguity. GAIL India, which is the only unit in the SEZ, has been operating for the last five years but it recently got revealed during the processing of its renewal application that it has not achieved a positive NFE. A positive NFE is a mandatory requirement for units in SEZs.
Subsequently, GAIL requested the government that it be allowed to exit from the zone and and also its unit should be de-notified so it could operate it as a unit in the Domestic Tariff Area (area outside the SEZ).
The DC’s report stressed on the adverse economic implications from GAIL’s exit and pointed out that an investment of approximately ₹10,000 crore had been made in the zone with duty concessions. In a letter to the Cochin Port Trust, the company had said that disruptions in the working of the zone may have far reaching repercussions for the petroleum and natural gas sectors. The co-developers of the zone are IOCL and BPCL.
Recently, the Kerala High Court, in its ruling on a writ petition filed by GAIL, said the government should give opportunity of hearing to GAIL India and the developers and co-developers. In case of any adverse orders passed by the BoA, the same should be kept in abeyance for two weeks.
De-notification
The DC, in its recommendations, suggested that GAIL’s request for de-notification of the area may be rejected by the BoA as it is not in conformity with SEZ rules, which stipulates that application of the developer is required for de-notification or decrease in area.
It, however, added that the BoA should give opportunity of hearing to GAIL India and the developers and co-developers, as per the direction of the Kerala High Court.
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