The Union government, in an important decision, has said that three Special Economic Zones notified in Goa cannot be denotified by the state government. Earlier, the state government in Goa had issued an order to denotify SEZs including pharma major Cipla’s Meidtab Specialities, Raheja’s IT/ITeS SEZ and Peninsula Pharma’s biotech SEZ. Now, the Centre’s order may result in direct confrontation between the Union government and Goa government over the SEZ policy.

Now, the state government would find Centre’s stand as foul tasting. The Centre has also said that the onus is on state governments for compensating promoters of notified SEZs if states take decisions to cancel the SEZ projects. Goa chief minister Digambar Kamath may meet commerce & industry minister Kamal Nath on Thursday in New Delhi to discuss the issues over SEZs projects in Goa.

On Wednesday, commerce secretary G K Pillai said that there was no provision under law to denotify SEZs already notified by the Union government. He said after granting formal approval to 24 SEZ proposals and in-principle clearance to four SEZs.

He said:

The SEZs that have been notified have become legal entities and cannot be denotified.

According to him, there could be legal consequences if the state governments attempt to denotify the notified SEZs because an investment has already been taken place in the notified zones. He further said that Meditab has already invested more than Rs 500 crore in one of the three SEZs. These investors may even go to court against the decision of the Goa government.

However, Pillai said that the four remaining approved SEZs - Inox Mercantile’s biotech SEZ, Paradigm Logistics IT/ITeS SEZ, Panchbhoomi Infrastructure’s IT SEZ and Planetview Mercantile’s gems & jewellery SEZ - might be cancelled because those SEZs were not notified till yet.

Earlier, the Goa government had issued order to scrap all SEZs in the state after protests initiated by the BJP and supported by the Congress, NCP and the Catholic Church. Several other states such as West Bengal, Maharashtra and Haryana also opposed the SEZ policy but Goa went one step further and challenged the policy by scrapping the SEZs notified by the Centre.

According to the report, the Union government has formally granted approval 404 SEZs and 187 out of 404 SEZs have been notified till date. The SEZ Act 2005 and SEZ rules notified in 2006 grants several tax sops including income tax exemption for a specified period to the SEZs.