As one company after another, after lapping up SEZ or special economic zones in the past like hot cakes, are queuing up to get their licences cancelled, the government has commissioned a study to assess the reasons for the waning interest in such zone. The government has asked economic think-tank Icrier to look into the issues affecting free trade agreements on these zones. "We have asked Icrier to look into various facets of SEZs. In some quarter people have raised that free trade agreements are affecting these zones. So how does the FTA environment affect the SEZ. This is also one of the mandate which we have given to them," joint secretary in the commerce ministry Rajeev Arora said.
The study will also look at the various schemes available for exporters outside the special economic zones (SEZs). The SEZ developers and units have demanded from the government that the export promotion schemes should be extended to the units in these enclaves as well. SEZs are loosing sheen because of global economic slowdown and imposition of minimum alternate tax (MAT) and dividend distribution tax (DDT). Hundreds of developers have sought more time to execute their projects while several of them have surrendered their zones.
Arora said manufacturing activities in these zones are declining because of the overall deceleration in the sector. He said infrastructural bottlenecks are also impacting the zones besides issues related with land acquisition. Many of the SEZs have not fulfilled the contiguity norms, which is an important (factor to set up any zone)," he said, adding the commerce ministry will again take up few matters with the finance ministry to enhance interest of foreign investors. "Things which will be on our agenda and which we will try to take it up with the finance ministry include extension of benefits under chapter 3 (which is related with foreign trade policy). We would also see in what way we can help units to get better finance from different institutions," he said.
Further, he added that the government is planing to organise road shows in different parts of the country to attract investors. He said on the back of the decision to allow FDI in retail, sectors like agro-processing holds huge business potential. "In the days to come, defence sector will also see huge business potential in these zones," Arora said. In April, the government unveiled a package of reforms including easing of land norms to revive investments in SEZs, but refrained from accepting a major demand of developers for MAT waiver due to fiscal constraints.
Exports from SEZs grew by about 31 per cent year-on-year to Rs 4.76 trillion in FY13. Shipments from these zones stood at Rs 3.65 trillion in FY12. Meanwhile, Arora also said, "we also want to know whether emergence of SEZs has led to any kind of diversion of land by promoting a lot of activity in the real estate sector. These are some of the things that we do at our own level to see to what extent we can tweak the policy to make it more suitable for developers and units simultaneously and to see how SEZs in India can continue to flourish and contribute extensively to India's exports," he added. Talking about the further scope for growth and development of SEZs across India, he said agro processing, electronic hardware, defence and defence-related industries are certain sunrise areas that would see more investment in the SEZs.
