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Government okays Adani SEZ merger

February 24, 2009 02:13 IST

The Board of Approval (BoA) on Special Economic Zones (SEZs), the apex decision-making body for such tax-free industrial enclaves, today approved a proposal to amalgamate three separate zones, effectively lifting the 5,000-hectare limit on such zones that the government imposed in 2007.

The combined zone, which is promoted by the Adani group, will create India's largest SEZ with an area of 6,100 hectares in Mundra, Gujarat, making it the first zone to exceed the 5,000-hectare limit.

These three zones, which have been notified and were situated next to each other, include two multi-product SEZs and a power-based zone. The clearance to consolidate the zones was given today at the last meeting of the BoA under the present government.

"The amalgamated zone is likely to see investments of over Rs 1,00,000 crore and employ over 500,000 people in the next 10 years," said a government official.

The Board, which will meet again only in June after a new government is elected, also formally approved nine SEZs, including one being developed by a company promoted by Anand Jain, a close associate of Mukesh Ambani, chairman and managing director of India's largest private sector firm Reliance Industries Ltd.

Adani had cited reduction in operating costs as one of the reasons for consolidation.

The three SEZs were notified separately because the developer bought the land in separate tranches. A public utility road runs between the two multi-product zones, which prevented the consolidation of the SEZs. This road will now have bridges connecting the two zones.

The power-based SEZ will have to produce 2,300 Mw of electricity. "The first unit of 300 Mw will start producing power next month," the official said.

The merged SEZ was allowed to exceed the 5,000-hectare limit after an Empowered Group of Ministers headed by External Affairs Minister Pranab Mukherjee, in October 2008, permitted zones to be amalgamated. There was, however, a condition that each zone could not be more than 5,000 hectares.

Significantly, the same group of ministers had capped the maximum size of SEZs at 5,000 hectares in April, 2007, against the backdrop of public outrage against the zones.

The board also cleared Essar's steel-based SEZ to export its products to an adjacent steel plant of the same company through a conveyor belt. "There were some apprehensions that some goods from the SEZ were being diverted to the domestic tariff area next to it, but on inquiry it was found that there was no such case," the official said.