NEW DELHI: Special economic zones that had slipped down the government's priority list are back in favour as desperate government looks for ways to revive exports. The upcoming foreign trade policy is likely to extend sops such as focus market scheme and focus product scheme to make SEZs attractive.
So far, these incentives were available only to domestic tariff areas or DTA, an area outside the SEZs.
"SEZs are generally not a part of the foreign trade policy. However, in these times of sagging exports we are planning to announce a set of incentives like extending focus market scheme and focus product scheme to boost exports and make SEZs attractive," said a commerce ministry official.
Focus market scheme helps offset high freight cost and other externalities to select international markets to enhance India's export competitiveness in these markets.
The objective of the focus product scheme is to promote products that have high export intensity / employment potential, to offset infrastructural inefficiencies and other associated costs involved in marketing these products. Focus markets scheme covers Africa, Latin America and large parts of Oceania and there are over 1,000 focus products.
Industry has also been demanding abolition of Minimum Alternate Tax levied on SEZs. "SEZs have become unviable due to minimum alternate tax and dividend distribution tax, so we have requested the government to incentivize these by extending the FMS and FPS to them and also cut Minimum Alternate Tax /Dividend Distribution Tax," said Sanjay Budhia, chairman, CII export chairman, CII National Committee on Exports.
The government was of the view that SEZs already get tax benefits, unlike the domestic tariff areas, said Ajay Sahai, director general and CEO of Federation of Indian Exports Organization. "Also there were budget constraints. However this time, the finance minister has indicated full support to the commerce ministry," he added.
Sahai also said there may be investment-linked I-T deduction for SEZs. "It may also form a part of the FTP announcement for 2013-14", he said. In his budget speech, finance minister P Chidambaram had said, "I look forward to the changes that will be made to the Foreign Trade Policy next month and I assure my support to measures that will be taken to boost exports of goods and services."
Interest subsidies allotted for export promotion is 1,200 crore for 2013-14, against 1,000 crore last fiscal, a 20% increase.
According to a study by Federation of Indian Exports Organization in 2009, overall export compound annual growth rate or CAGR was at 20% whereas for the focused markets it stood at 36%. Similarly, the CAGR for exports before the announcement of the scheme stood at 16%, which increased to 36% post scheme.
Last year, the commerce ministry had discussion paper on
SEZ reforms had noted that SEZs are less viable compared with DTAs, as benefits such as Focus Product Scheme, Focus Market Scheme, Duty Drawback, etc. were unavailable to SEZ units.
Source : economictimes.indiatimes.com