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New SEZ policy bats for easy exits and flexibility in leases

India had 232 SEZs, of which 25 are multi-product ones and the rest are sector-specific ones, with 5,109 approved units, as of March 31.

, ET Bureau|
Updated: May 26, 2019, 10.53 PM IST
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The overhaul plan comes as the US has challenged the SEZ scheme at the World Trade Organization.
NEW DELHI: India is set to revamp the special economic zones (SEZs) framework to house a wider range of companies, allow flexible long-term leases and make exits easy to lure investment. Apart from this, non-processing areas in such enclaves can be used to boost exports and employment generation.

“We need bold measures to revive investment, promote manufacturing and exports from SEZs, and boost job creation,” said a senior government official aware of the deliberations. “The new SEZ policy needs to be future-ready, investor-friendly and correspond to global market needs.”

India had 232 SEZs, of which 25 are multi-product ones and the rest are sector-specific ones, with 5,109 approved units, as of March 31. The sector-specific SEZs are meant for IT and IT-enabled services. Under the proposed policy, these could be opened up to sectors such as tourism and multimedia services.

The policy will seek to provide ease of operation and exit, procedural relaxations, and uniformity in administrative and financial matters among all SEZs. It could also provide easier subcontracting for customers outside the zones. The units now need permission to subcontract any part of their production or production process to units in other SEZs.

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The government is also looking to create an integrated online portal for processing new investment requests.

“These proposals have been under consideration. The government is keen to ensure the productivity of SEZs increases,” said another official aware of the details. Exports from SEZs rose 21% to Rs 7 lakh crore in FY19.

A committee set up by the commerce and industry ministry under Bharat Forge chairman Baba Kalyani to look into the SEZ policy framework had suggested that the government devise measures to make them focussed on services including information technology, medical tourism and financial services to draw investors.

The committee has suggested SEZs be converted into employment and economic enclaves (3Es) with efficient transport infrastructure, uninterrupted water and power supply.

“There is a long-felt need to reform the current SEZ system to simplify the procedures,” said Bipin Sapra, partner at EY. “The administrative reforms of SEZ should be coupled with reforming the goods and services tax compliances required for claiming the zero-rated benefits.”

The overhaul plan comes as the US has challenged the SEZ scheme at the World Trade Organization.
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