CHENNAI: Special economic zones (SEZs), by definition, were meant to be regions developed to generate more employment and focus on production for exports. But now, SEZs seem to be a burden for the developers themselves. The number of requests for de-notifications and extension of time to commence operations of SEZs has been rising at every meeting of the board of approvals for these zones.
For instance, at the August 30 meeting of the board, there were seven de-notification requests and 12 for extension of timeline to begin operations and one for cancellation. There were only two requests for new SEZs. At the previous meeting held on June 12, there were three de-notification requests and 23 extension requests and none for new SEZs.
Exports from SEZs are also falling. Of the Rs 4.05 lakh crore worth exports from India in the April-June quarter, only 27.97% came from SEZs. For fiscal 2012-13, SEZs had contributed 29.12% of all exports worth Rs 4.77 lakh crore.
"There are no great advantages in setting up a
SEZ in India anymore, especially after change in tax laws post 2011-12," the CEO of a multi-product SEZ on the outskirts of Chennai said. The introduction of 18.5% minimum alternate tax or MAT and the dividend distribution tax or DDT has spooked investors from setting up new export zones.
"Sentiments on SEZs have been muted for a variety of reasons, including curbing of exemptions, MAT and DDT, perceived regulatory concerns around migration, aggressive tax administration and other business issues such as higher costs of operations, operational flexibility, ever-changing visa norms and a general slump in demand for goods and services," Aravind Srivatsan, executive director, tax and regulatory services, PwC India, said.
During April, the commerce ministry reworked SEZ rules, whereby land requirements were reduced. In August, the official notification of this said that the minimum land area requirement was halved to 500 hectares for multi-product and for sector-specific SEZs, it was halved to 50 hectares. There will be no minimum area requirement for SEZs by information technology firms. They will, however, have to adhere to minimum built-up area requirements varying from 25,000 sqm to 100,000 sqm, depending on the location of the zone.
"Today, SEZ as a concept is terribly skewed in favour of IT/ITES sectors. Of the nearly 392 notified SEZs, only 173 are exporting, of which less than 20 are multi-product while the rest are focused on IT/ITES," an industry official said.
Source : timesofindia.indiatimes.com