Stable political environment plays a vital role

GHIAL established the FTZ at Rajiv Gandhi International Airport (RGIA) with a vision to set up an Aerotropolis in Hyderabad. SGK Kishore, Chief Executive Officer, GHIAL, shares his views with Janaki Krishnamoorthi.

What were the reasons behind GHIAL establishing an FTZ at RGIA? What are its unique features and opportunities?
GHIAL established the FTZ at RGIA with a vision to set up an Aerotropolis in Hyderabad that would generate significant economic benefits. Located strategically with less than two hours flying time to all the major GDP producing areas of the country and within a four hour radius from all major GDP producing areas of the Middle East and South East Asia, Hyderabad is positioned as a cargo hub. The airport-based multi-product FTZ, spread over 20 acres, is an ecosystem having Aerospace Park and MRO (Maintenance, Repair and Overhaul) which provides facilities such as aircraft parts repair, aerospace supply chain, manufacturing/sub-assembly and training.

Its unique features are, highly secured and safe zone for business operations, close proximity to air cargo terminal for logistics facilitation, availability of two runways for uninterrupted operations, and 24 x 7 power and water supply. The opportunities available here include re-export/re-import, re-sale and re-invoice of goods without any restriction which can also be traded in Domestic Tariff Area by payment of duties; facilities that would help logistics companies to warehouse their commodities for both short and long term without impact on import duty, packaging and labelling, assembly of complete knockdown and semi-knockdown kits, etc. Companies can leverage the facilities not only for Indian distribution but also for international end users.

What benefits does the FTZ offer to its members?
The members will be able to avail of benefits as stipulated by the Government of India like duty-free import/domestic procurement of goods for development, operation and maintenance of FTZ units; 100 per cent Income Tax exemption on export income under Section 10AA of the Income Tax Act for first five years, 50 per cent for next five years and 50 per cent of the ploughed back export profit for subsequent five years; external commercial borrowing up to $500 million in a year without any maturity restriction through recognised banking channels; exemption from Central Sales Tax and Service Tax; single-window clearance for Central and State level approvals; exemption from State Sales Tax and other levies as extended by the state government.

What factors contribute to the success of FTZ?
General success factors for FTZs around the world encompass some basic features for both investors and developers. A stable political environment plays a vital role as investors always prefer stability and assurance that the privileges of the zone will not be violated. A move towards free markets is essential in attracting foreign companies to invest. With the rise in privatisation, countries moving in this direction have been successful in attracting investors. Joint venture with local partners is another factor as foreign investors acquainted with local customs are successful in dealing with other local businesses and government officials. Creating awareness about the FTZ benefits, operational efficiency with seamless operational processes, compliances and procedures are the other factors.

What specific structure/format of airport FTZ that you think would be more suitable for India?
A plug-and-play facility where all the infrastructure comprising roads, utilities (power, water, drainage, and IT) provisions and security are available for seamless setting up of operations would be an ideal format for airport FTZ.

GMR Hyderabad International Airport Pvt Ltd (GHIAL) established India’s first airport-based Free Trade Zone (FTZ) at Rajiv Gandhi International Airport Hyderabad (RGIA) in August 2010.