Nokia SEZ caught in ministries' turf war

Only the Board of Approvals can change conditions for a SEZ.

Nokia India's special economic zone at Sriperumbudur in Tamil Nadu continues to be in the eye of a "letter storm" between the finance and commerce ministries.

The latter has now demanded that the department of revenue amend its condition regarding the minimum area requirement of 100 hectares for the zone being set up by the Finnish mobile phone major.

Stressing that conditions for a special economic zone cannot be changed by any other arm of the government, barring the recently-constituted Board of Approvals, Commerce Ministry Additional Secretary G K Pillai wrote to Central Board of Excise and Customs member (Customs) A P Sudhir on February 16, asking for necessary action to be taken to amend the minimum area requirement condition.

This is not the only "jurisdictional" issue between the two ministries. In fact, even as this issue is being sorted out, the department of revenue has stuck to its guns on granting of extension of export obligation period under the exports promotion capital goods (EPCG) scheme.

Referring to Finance Minister P Chidambaram's letter to Commerce Minister Kamal Nath on the issue, the CBEC has said the grant of such extensions does not fall within the purview of either the Directorate-General of Foreign Trade or the commerce ministry.

One such missive on the subject, this time from Sudhir to Pillai, makes the succinct point that granting extensions of export obligation periods beyond 10 years would render this clause illusory.

"Ten years is a sufficiently long period and extensions would reduce the possibility of recovery of Customs duty in case of default," the missive states.

In his letter to Nath, Chidambaram referred to his ministry's "strong reservations" on the extension of the export obligation period under EPCG.

He added that the reservations were both on the ground of revenue considerations as also on the ground that the new provisions created severe difficulties for the Customs authorities in monitoring such schemes.