NEW DELHI: The UPA government's special economic zone (SEZ) scheme, aimed at creating infrastructure to facilitate exports, doesn't seem to have succeeded in doing so and may instead end up turning into a real estate play as had been feared, said analysts and critics of the way in which the plan has been implemented.
More than 60% of the total land notified as SEZs is vacant years after the scheme opened in 2006. So far, the government has notified 389 SEZs, envisaged as enclaves of export excellence.
Of the total 47,803 hectares of
SEZ land notified, only 17,689, or 37%, has been put to use so far, according to ministry of commerce and industry data. Only 185 of the 389 notified units are functional, defined as at least one working export unit.
Commerce and industry minister Anand Sharma had, in an internal meeting, expressed concern over the large gap between notified and operational SEZs and asked officials to bridge this.
"There are some developers who are simply sitting on land and not doing anything. We plan to weed them out and will send them show-cause notices," said a commerce department official. The government will pursue those who aren't even applying for de-notification or extension of approval.
The land was, in many instances, allotted by the state government to the developer and if the SEZ is de-notified, the states would have to take a call on the land use.
get three years after they are notified to become operational, which is the setting up of at least one unit. However, they can apply for extensions at board of approval meetings. The official said the department has collated data for each SEZ and cases will be evaluated separately.
Not all SEZs have been deliberately delayed though. "Many of the notified SEZs do not have full approvals while others are in the process of setting up infrastructure before units can be set up. In a lot of other cases, the units are not coming in. We will review it in the development commissioners' meeting," the official said.
A number of approvals are stuck due to issues such as environmental clearance, among others. Changes in tax laws have also made these zones less attractive.
Former finance minister Pranab Mukherjee imposed a minimum alternate tax of 18.5% on the book profits of SEZ developers and units located in such zones in 2011-12, which saw drew strong protests.
The original scheme provided for a complete tax holiday for SEZs, including exemption from MAT and dividend distribution tax.
However, these units still get 100% income-tax exemption on export income for the first five years, 50% for the next five years and 50% of the ploughed back export profit for another five years.
SEZs registered a 31% growth in exports in 2012-13 when India's overall outbound shipments contracted. In the April-December period this year, exports from SEZs have only grown 7% from last year while overall exports have grown 6%. Arpita Mukherjee of Icrier said , "Land is not the problem in SEZs, else there would not have been such a large area lying vacant.
The government needs to assess where its policy went wrong as units do not want to get in," Mukherjee said.
Source : economictimes.indiatimes.com