SEZ Policy and Operating Framework - Discussion Paper

SEZ Policy and Operating Framework - Discussion Paper

OBJECTIVES of the SEZ:

++ Generation of additional economic activity
++ Promotion of exports of goods and services;
++ Promotion of investment from domestic and foreign sources;
++ Creation of employment opportunities;
++ Development of infrastructure facilities

The SEZ sector has grown significantly since the enactment of the SEZ Act 2005 and Rules in 2006, in terms of the number of SEZs, investment attracted, and employment and exports generated. While these achievements are irrefutable and significant, a comprehensive analytical assessment of the performance of the sector and certain key developments in the politico-economic environment in recent years reveals aspects of the SEZ Policy and Operational framework that perhaps require a re-look with a view to possible reform.
Challenges facing the SEZs:

++ Issue of availability of land for SEZs and difficulties involved in procuring / acquiring land.
++ Issue of maintaining attractiveness of the SEZ scheme in face of fiscal regime e.g. imposition of MAT/ DDT;
++ Issues related to effectiveness of the Single Window Mechanism and coordination across departments at the Central and State Government level.
++ The issue of a large number of States not having an SEZ Policy / Act to enable provision of the benefits envisaged under the SEZ Act and Rules.
++ Issue of constraints leading to slow pace of development of infrastructure within the SEZs and their operationalisation, as also inadequacies in the timely and adequate provision of external support infrastructure related to connectivity, provision of public utility services etc.
++ Increasing unattractiveness of the SEZ incentive package vis-a-vis DTA units receiving benefits under schemes such as Focus Product Scheme, Focus Market Scheme, DPEB, Duty Drawback, VKGUY etc., which are unavailable to SEZ units.

In this context, Ministry of Commerce requests actionable responses from stakeholders by way of suggestions for possible reform of the SEZ framework. Some of the key questions that require resolution are:

++ What are the reasons for lack of spread of SEZs to States other than a select few? How can they be addressed? How can SEZ investments be attracted in backward regions within the States?
++ What are the constraints coming in the way of greater manufacturing investments under the SEZ scheme and how can we overcome them?

++ What are the reasons for lack of operationialisaton of many approved SEZs? How can we overcome these problems and what are the incentives and disincentives that can be created towards this end?

++ What are the categories of SEZs that should ideally be envisaged? What should be the minimum area requirements in each case and what should be the sectoral broadbanding permissible in each case?

++ How can contiguity norms / practices be revised to facilitate easier fulfillment of land requirements without compromising regulatory concerns?

++ How can vacancy norms be revised to facilitate easier fulfillment of land requirements without compromising the requirement that SEZs should not result in diversion of existing investments from DTA areas?

++ What should be the norms for permitting social/other infrastructure for dual SEZ / DTA use to balance the considerations of availability of quality infrastructure for SEZ use, viable scale / operation and avoidance of grant of undue benefits for non SEZ purposes?

++ How can broad parity be maintained in the quantum of benefits permissible to SEZ units vis a vis non-SEZ exporters? What specific adjustments can be considered?

++ How can better coordination be ensured between the Centre and the State Governments to ensure that elements of SEZ framework related to State level benefits and infrastructure provision etc. are smoothly implemented?

++ How can the SEZ framework attract FDI and other investment by leveraging the large domestic market, within the SEZ framework?

++ How can various specific operating procedures and processes related to approvals, reporting requirements etc. be simplified and made more transparent and user friendly? (Specific suggestions may be made)

Source: TIOL