Monday June 9 2008 11:53 IST

VISAKHAPATNAM: The growth path of information technology sector in Visakhapatnam seems not all that smooth, considering the recent controversies.

The Central Government’s declaration of Hill No. 2 at Madhurawada as IT Special Economic Zone (SEZ) has put the industry’s development in jeopardy as the IT companies in the zone continue to oppose the decision.

The IT firms have been quite vocal about their displeasure over the conversion of the area into an IT SEZ. Recently, a delagtion from the Union ministry of commerce has visited the site to review the situation in response to the constant representations made by the firms.

Despite the tax benefits offered by the government, the companies are reluctant to convert their ‘outright sale’ agreements into ‘lease’ agreements.

The nine IT units on the 16-hectare hill contend that they had bought the land on an ‘outright sale’ basis in 2005 and some of them even began construction.

The nine companies pooled in about Rs 5 crore and employed VUDA to develop infrastructure like roads, electricity, sewers and plug-and-play facilities in the area.

‘‘We made a lot of investment here and most of the companies are yet to begin their operations. The original business investment plans of most IT units have been affected by the government’s decision,’’

says the chief executive officer of one such company on the condition of anonymity. He claims that the government had signed the memorandum of understanding (MoU) with the companies declaring those as ‘outright sale agreements’ and now proposes to convert the land into an SEZ, throwing the managements into confusion.

But, according to officials of the AP Industrial Infrastructure Corporation (APIIC), there was a clause in the MoU stating that the companies would have to abide any directions of the Central Government on converting the area into a special economic zone.

‘‘A final decision on the issue has to be taken by the Union ministry of commerce. We are awaiting the government’s decision before proceeding further on the matter,’’ says APIIC zonal manager Harnath Reddy.