Audit points to land allotment bypassing rules at Mihan-SEZ

Nagpur: An audit observation points out that land parcels were allotted in Mihan-SEZ bypassing the special economic zone rules 2006. The rules call for first getting a letter of approval (LOA) from the unit approval committee (UAC), which comes under the ministry of commerce.
The UAC ascertains whether the entity demanding SEZ land would be fulfilling the requirement, especially registering net foreign exchange (NFE) earnings through operations. The LOA is granted after that. Land allotment by the developer happens only after the LOA has been secured.
The recent observation during the audit has led to an exercise by the Mihan development commissioner’s office to find the number of cases where allotment had happened before the LOA was granted. The papers of each and every land allotment would be scrutinized, said sources.
In the case of Mihan, Maharashtra Airport Development Company (MADC) — a state government company is the developer.
Sources say three scenarios can emerge out of this. There may be companies which may be merely sitting on land and have not secured the LOA. In such cases, the operations cannot be started because it needs an LOA to be secured first. Such units would be only blocking land in the Mihan SEZ which otherwise could be offered to serious players. There would be some units which may have got the land allotted first, but also secured LOA later and begun operations. However, even this contravenes the rules, said sources.
There are more than 30 units whose LOA has expired, yet these continue to hold land in the SEZ. However, LOA is the basic requirement for holding land in an SEZ, and such units are technically liable to be removed from the zone, said a source.
Among the companies whose LOA has expired include Patanjali Ayurved, which had taken up 100 acres of land in the SEZ. The LOA expires if the unit does not start operations within stipulated period. The development commissioner’s office has issued cancellation notice to such units, said sources. Even such companies are shown as land allottees in the SEZ, which otherwise need to have a valid LOA.
Each SEZ has a development commissioner through whose office investment proposals are routed. After approaching the developer, a proposal is put up before the commissioner, who in turn puts up the case before UAC which decides on the allotment of land subject to availability, said a source explaining the procedure.