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Informist, Thursday, Sep 26, 2024

 

By Krity Ambey and Sagar Sen

 

NEW DELHI – Considering the delay in the amendment to the Special Economic Zones Act, the government is exploring alternate policy measures to facilitate ease of doing business in special economic zones, a commerce ministry official said. Finance Minister Nirmala Sitharaman had announced over two years ago that the government would introduce a new bill to tweak the SEZ Act.

 

An operational measure that the government is planning to ease business in the special economic zone is to allow rupee payment for procurement of services by units set up in the Domestic Tariff Area from the units in special economic zones, the official told Informist. Currently, units in the domestic market can pay only in foreign currency to procure services from SEZ units. "Doing it in foreign currency is cumbersome and expensive," the official said.

 

The government is also looking to allow manufacturing units in special economic zones to sell in the domestic market without paying customs duty on finished goods, while charging duty only on the raw material, the official said. Currently, such sales attract customs duty on the finished goods.

 

In addition, the government wants to facilitate SEZ units to do jobwork for units in the domestic market, the official said. Currently, domestic units can do jobwork for SEZ units but not vice versa. "So we want to allow reverse jobwork also," the official said.

 

The main objective behind tweaking the SEZ Act is to allow the units set up in the area to smoothly do business with those in the domestic market. "A draft bill is prepared, but it has been under consideration for the last six-seven months," the official said. "We are now trying to make the policy changes through ways other than the amendment-way."

 

"We want to enable maximum utilisation of the capacity installed in the SEZ units," the official said. "Export orders are pretty unpredictable. Sometimes the SEZ units get orders that can be completed using only 30-40% of the capacity, in that case, the capacity goes underutilised," the official said. The SEZ units can optimally utilise their capacity if they can sell in the domestic market as well, the official added. 

 

The commerce ministry had last year prepared the Development of Enterprise and Service Hubs or DESH Bill to replace the SEZ Act. However, the finance ministry was not on the same page as the commerce ministry and the DESH Bill had to be scrapped before it could see the light of the day. 

 

"We thought it would be more efficient to make changes to the existing act, than to replace the entire act," the official said. The commerce ministry is hopeful that the draft SEZ Bill may be introduced in the Winter Session of Parliament, the official added.

 

India had enacted the SEZ law in 2005 with the aim of creating hubs for export-oriented industries, and making India a globally competitive manufacturing and services destination. The units in such zones manufacture primarily for export markets, and these manufacturers enjoy several tax privileges, including duty-free import of goods for development, operation and maintenance of the SEZ units. 

 

There are 375 special economic zones in the country with a total investment of 6.93 trln rupees, according to the data available with the commerce ministry. The units in the special economic zones exported goods worth $163.69 bln in the last financial year ended March, accounting for 37.5% of India's total merchandise exports.  End

 

US$1 = 83.64 rupees

 

Edited by Aditya Sakorkar

 

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