NEW DELHI: The commerce department has begun consultations on changing the norms to mandate that at least 51% of production in special economic zones (SEZs) should be physically exported, a move that is expected to further add to the inflexibility of units in the designated areas.
But the discussions have got experts and the industry worried as several sectors such as gems and jewellery would be adversely hit due to low-value addition, while others such as petroleum and information technology stand to be the major beneficiaries.
Senior government officials confirmed that stakeholders were being consulted on shifting from the current system of net foreign exchange for units in SEZs but added that the proposal was the result of a recommendation made by Parliament's Public Accounts Committee (PAC). The proposal to mandate such norms was first moved by the finance ministry over three years ago and found favour with the PAC headed by BJP's Murli Manohar Joshi. "These are merely consultations and no decision has been taken so far," an officer said.
The concerns are, however, visible. "The expenditure includes the outgo on royalty, consulting and foreign travel, which are often included in value addition. If you prescribe 51% of this then there is a problem," said P C Nambiar, chairman of the Export Promotion Council for SEZs and
EOUs. In addition, there is lack on clarity on whether the proposal is to prescribe the limit for revenue or for production.
In any case, experts suggested that there will be an additional burden on
SEZ units. Currently, the units have to export goods worth $101 on imports of $100 to be classified as a net foreign exchange earner. But if the PAC proposal is accepted, even if imports are zero and the entire raw material worth Rs 60,000 (or $1,000) is bought from Indian entities outside the SEZ, a unit will be required to export goods worth Rs 30,600 or $510.
Source : timesofindia.indiatimes.com