Even as the popularity of special economic zones (SEZs) wanes,the government is devising ways to encourage setting up of such zones in remote and undeveloped areas of the country by providing them incentives.
Sources told The Indian Express that the ministry of commerce and industry is looking at addressing issues of social infrastructure in non-processing area of SEZ through differential incentives regime that will favour establishing SEZs away from urban clusters.
The changes in SEZ policy are likely to be announced soon,a source said. According to the commerce ministry,the announcements made in the Budget 2011-12 along with the proposed provisions of Direct Taxes Code have had adverse impact on SEZs. The finance ministry withdrew both exemption from Minimum Alternate Tax (MAT) in the case of SEZ developers and units along with Dividend Distribution Tax (DDT) exemption for SEZ developers under the Income Tax Act.
While MAT at the rate of 18.5 per cent of the book profit is applicable after April 1,2011,DDT has been levied from June 1,2011 at 16.22 per cent,including cess. In the new policy,the ministry is also looking at providing special dispensation to IT SEZs and encouraging such SEZs to come up in Tier-II and Tier-III cities.
Apart from relaxing minimum land area requirement for different categories of SEZ along with reformed contiguity norms,the ministry is also looking at addressing the issue of sectoral broad-branding. This would allow similar manufacturing and services sector industries to tap into the synergies arising out of scale of operations,work force strength,and infrastructure requirements.
The ministry is also likely to issue free trade and warehousing zone guidelines to establish and operate such zones. It will help in creation of logistics infrastructure to facilitate import and export and international trade with logistical and consolidation hubs being established in India, the source said. Advance ruling provisions are also likely to be proposed so that clarifications regarding investment and regulatory matters are issued beforehand.
Ground-level operational issues like shifting or relocation of units in an SEZ,and more meaningful state government recommendations will also be addressed in the new policy being framed. The government has so far given formal approvals for setting up 589 SEZs,of which 389 have been notified. Exports from the SEZs increased from Rs 2,20,711.39 crore in 2009-10 to Rs 3,15,867.85 crore in 2010-11.