Orissa seeks SEZ status for Posco plant

The claim that the 12 million tonne project of South Korean steel major Posco in Orissa will bring over Rs 1,11000 crore in revenues for the central and state governments, by way of taxes, appears to be tall considering that the project stands to gain huge tax benefits because of special economic zone (SEZ) status promised to it.

"The Orissa government shall recommend to the central government and facilitate granting of (SEZ) status as required by the company," states the MoU signed between the state government and Posco.

"This would include granting to the various aspects of the project, the status of 'SEZ developer' or 'SEZ unit', as the case may be, so as to receive the same incentives and benefits as an SEZ (as permissible under the policy of the central government)," it said.

"If the company applies for setting up its different facilities under the SEZ scheme of the Government of India, the Government of Orissa will direct the case to the Government of India and accord necessary facilitation with regard to the approved scheme of the Government of India as modified from time to time," the MoU stated.

If Posco is awarded an SEZ status, it is expected to get a few thousand crore rupees in tax rebates.

"The setting up of the steel plant by Posco is likely to benefit the central government to the tune of Rs 89,000 crore over a period of 30 years by way of excise and Customs duties, service taxes and corporate income tax," Orissa Chief Secretary Subas Pani had said while singing the MoU.

"The government of Orissa, on the other hand, is likely to get approximately Rs. 22,500 crore over a period of 30 years by way of sales tax and value-added tax , works contract tax, electricity duty, royalties, Orissa infrastructure tax and a share of central taxes," he added.

But, going by the SEZ policy of the Centre, the Posco project will enjoy the benefits of no-licence for import, exemption from Customs duty on import of capital goods, raw materials, consumables and spares, exemption from the central excise duty on procurement of capital goods, raw materials and consumable spares from the domestic market, reimbursement of central sales tax paid on domestic purchases, 100 per cent income tax exemption for a block of five years, 50 per cent tax exemptions for two years and up to 50 per cent of the profits ploughed back for the next 3 years.