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SEZ tag may help Posco save Rs 10,718 cr in taxes
December, 18th 2006

Korean steel major Posco would save Rs 10,718 crore in tax revenues on its Indian investment plans, if the government approves its proposal to set up a special economic zone (SEZ) in Jagatsinghpur, the location of its 12 million tonne steel plant.

According to study conducted by National Council for Applied Economic Research (NCAER) on behalf of Posco India, the companys total tax liability would be Rs 1,74, 971 crore over a 35-year period. But this would still be Rs 10,718 crore less than the tax liability of the company in the event the steel plant comes up in a domestic tariff area (DTA). On an annual basis, this means the Centre and state governments could lose a total of Rs 300 crore from the Posco project, that proposes to invest $12 billion for setting up a steel production facility in Orissa.

According to sources, the tax forgone by the government does not justify granting the project SEZ status as the incentive schemes have been formulated for promoting export oriented activities, which help in generation of foreign exchange.

Though the Orissa government has cleared Korean steel makers SEZ proposal and board of approval in the union commerce ministry has given in-principle clearance to it, the final nod from the government is still awaited, for the proposed multi-product SEZ. According to the NCAER report, the state would be bigger losers from the project as the company may be able to save Rs 6,007 crore on state taxes if it gets the SEZ status. The state taxes includes tax on sales, tax on capital goods and on the sharing of union taxes.

As per the proposal given by Posco, the SEZ would come up in a land area of 4,004 acres. About 99% of the SEZ will be processing area allocated to Posco-Indias steel works units and other units. An additional area of 250 acres would be developed by the company for downstream activities.

The company has also proposed to develop massive infrastructure inside its SEZ and outside, including development of a minor port with raw material berth and product berths, a power plant of 1,300mw capacity, water facility to treat 99,000 tonnes per day (tpd) in first phase, railways and road inside the SEZ. It will also develop access to to the state railways and roadways network, from the project.

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