In a move that will aid the revival of SEZs, which have lost attractiveness due to a withdrawal of tax sops provided earlier, the commerce ministry has expedited work on liberalising norms for allowing outside units to utilise the idle manufacturing and processing capacity located inside these zones.
This is expected to help the special economic zone (SEZ) developers to attract investment and utilise their capacities.
“There are a common infrastructure like affluent treatment plant, waste management plants and big machineries. This is all lying idle as there are no units in SEZs due to reasons like lack of incentives or better incentives outside the zone. With huge investment in such zones lying idle, there is a case for the government allowing units in DTA to use these common manufacturing and processing capacities,” an official source told The Indian Express.
The centre has notified 45,782.64 hectares of land for 365 notified special economic zones. However, 57 per cent of this area is lying vacant, thanks to the uncertainty in the SEZ policy of the government. The government, in 2011, did away with the fiscal sops including exemption from minimum alternate tax (MAT) and dividend distribution tax (DDT), provided to SEZ developers and units. Despite the repeated demands, these benefits have not been restored. Further, with schemes of export promotion like focused market scheme and focused product schemes available to units outside the SEZs, few are seeing merit in establishing units in an SEZ.
The official said that due to both external and internal reasons the SEZs have not been able to attract units. Currently, contract manufacturing and job work is missing and that can be allowed for optimal utilisation of the capacities, the official said adding that utilisation of manufacturing capacities in sectors such as textiles and auto components is sub-optimal and it can be used by DTA units.
According to the available data, SEZs attracted investment worth Rs 2.36 lakh crore in 2012-13 while providing direct employment opportunities to over 11 lakh people. Exports from SEZs grew by about 31 per cent.
Early this year, the government had allowed dual use of non-processing zones in SEZs, essentially permitting SEZ developers to use the support infrastructure like schools and hospital for people living outside the SEZs as well. The SEZ is divided into processing and non processing zones, wherein the production of goods and services takes place in processing zones while the non-processing zones is used for creation of support infrastructure.
Further, the commerce ministry is also working on resolving issues pertaining to free trade warehousing zones, which are enclaves inside the SEZs used for storage. “There are some tax issues and the issue is caught in crossfire between the customs and the commerce department. We are trying to resolve and have assured that the revenue department will be taken on board before a decision is taken,” the official said.