The Modi government is preparing a blueprint to revive the manufacturing sector, including a new framework for making special economic zones (SEZs) more attractive to investors by easing various restrictions, said minister of state for commerce, corporate affairs and finance Nirmala Sitharaman. Some of the changes to the SEZ scheme may be announced in the forthcoming foreign trade policy.
In an interview with FE, Sitharaman said the government was comprehensively reviewing policies guiding the manufacturing sector as well as the existing treaties governing foreign trade. In addition, it was attempting to fix the problems affecting availability of affordable energy, which has a direct bearing on manufacturing growth, the minister said. “Measures are needed to spur all manufacturing activities, not just those relating to exports from SEZs,” she said. The manufacturing sector had contracted 0.7% last fiscal.
“There are a lot of such issues, big and small, all of which will be looked into to see how best the government would want to handle them. SEZ-related issues are not just one or two, but several, which need to be addressed comprehensively. We have heard all stakeholders. We are working on it. We will soon come to some kind of decision,” Sitharaman said.
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The rate of growth in exports (in dollar terms) from SEZs have plunged from a high of 115% in 2009-10 to -6% in 2013-14. During the same period, the rate of growth in incremental investments in these zones also fell from 23% to 13.4%. Reviving these zones is crucial as they provide employment to about 13 lakh people. Only 185 SEZs are operational out of the 566 granted formal approval. Now about 21,000 hecatres of land stay vacant in areas where units are to be set up in SEZs.
The minister said the immediate requirement was to revive the business environment. “We have to bring in an environment, wherein the manufacturing sector perceives ease of doing business. We have to ensure that this sector is not burdened with outdated compliance requirements, where their attention to core business activity gets diluted,” said the minister.
The Centre is holding discussions with the opposition to ensure support for the passage of the Insurance Bill, but will not dilute it to get political support, she said.
“The Bill is ready and we are talking to every party. It is essentially the same bill that the UPA government failed to bring in even after the Parliamentary standing committee’s report. All those amendments were taken on board and the Bill was ready to be tabled, but it was not. It is the same Bill. Where is the objection and where is the need for dilution?,” she said.
Sitharaman said inputs were being sought from experts and the industry on the manufacturing sector. “We are reviewing all FTAs to see how it can help Indian manufacturing,” she said.
“I must say my colleague Piyush Goyal (Minister of State with Independent Charge for Power, Coal and New & Renewable Energy) is spending a lot of time to see how best to ensure that the energy demand could be met,” added the minister.
Some of the decisions regarding SEZs could be announced in the forthcoming foreign trade policy. One key proposal before the government is to remove the difficulties faced by developers due to the new Land Acquisition Act in establishing contiguity of land in large SEZs. 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, is another suggestion before the government.