Govt set to give SEZs a fresh lease of life
Some tax sops to be restored, greater freedom to developers
Sep 11, 2014
Source : The Financial Express
Special Economic Zone


New Delhi: India’s special economic zones (SEZs), stranded for want of state patronage over the past three to four years and which have plunged into a crisis, are likely to regain ground. Keen on infrastructure development and manufacturing-led export growth, the Narendra Modi government is planning to not only restore a couple of tax incentives for them but also practically give the developers of these zones the freedom to use the zones’ social infrastructure for commercial purposes.

Additionally, SEZs may be exempted from the Land Acquisition Act as part of the ongoing review of the legislation which has, for the short period of its existence, come to be regarded as onerous by the industry for its consent and social-impact assessment clauses.

Currently, over 21,000 hectares of land are lying vacant in notified SEZ processing area as investors find these zones unattractive, especially after the imposition of minimum alternate tax (MAT) on SEZ developers and units and dividend distribution tax (DDT) on developers in the FY12 Budget by then finance minister Pranab Mukherjee.

After the SEZ Act was notified in February 2006, exports from these tax-free enclaves had initially grown at a brisk pace (thanks partly to Reliance Industries’ export-focused Jamnagar refinery) to touch a peak of $87.5 billion in FY13, but shrank to $82.3 billion last fiscal. (The growth in exports from SEZs has plunged from a high of 115% in FY10 to -6% in FY14.)

At a press conference, commerce minister Nirmala Sitharaman said: “Decisions on modification of (MAT and DDT) as well as a proposal to allow dual use of infrastructure in non-processing areas (of SEZs) are under active consideration.” Allowing the general public to use the social infrastructure — such as schools and hospitals — in SEZs, currently meant only for those employed in those zones, was also being considered, she added.

An initial draft of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill proposed exempting 16 Acts including the SEZ Act from its purview.

But later, in deference of the opinion expressed by a parliamentary standing committee, SEZs were included in the purview of the Land Act, while reducing the number of exempted Acts to 13. The House panel was of the view that exempting SEZs would stymie the objective of the Act, as a large part of the land acquisition takes place for infrastructure and urbanisation.

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