Despite recent reforms, SEZs need further policy push, writes JR Tanti.
Compared with the country’s overall export growth of 23 per cent, exports from SEZs grew just over 15 per cent in 2011-12. Besides, while there has been a fall in India’s investment rate in recent years, SEZs witnessed an even higher reduction in new fund flows. Cumulative SEZ investments showed a flat growth (-0.46 per cent) in 2011-12 and the SEZ empÂloyment generation has fallen. The Finance Act, 2011 has levied Minimum Alternate Tax (MAT) on SEZ devÂelopers and units.
Together with the global recession, these factors have adversely impacted SEZs in India.
Some of the measures to correct the situation are:
• The prescribed minimum area for sector specific SEZs should be reduced from 100 to 50 hectare, in order to enable SEZs to utilise the excess, idle land for purposes other than permitted purposes for SEZs.
• Non processing areas in SEZs should be allowed to be used as a normal Industrial Park (not being subject to SEZ regulations including Rule 11(9) of the SEZ Rules, 2006, which prohibits sale of land in SEZ by the developers). This area should be allowed for providing services and facilities such as educational institutions, hotels and hospitality services, hospitals and health care, etc.
• Given additional duty implications on sale to Domestic Tariff Area (DTA) units as compared to sale by Export-Oriented Units (EOUs), units have excess idle capacity resulting in slow recovery of return on investment. SEZ units should be allowed to sell to DTA units at a duty structure similar to what is curÂrently applicable for sale by EOU to DTA.
The current SEZ policy of sale to DTA units without any limit (in the form of percentage of export sales as apÂplicable to EOUs) should continue to be applicable.
The author is MD, Synefra Engineering and Construction, which operates three SEZs out of eight operational sector specific SEZs in India.
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