Millennium Post

Ministerial differences may delay SEZ guidelines

The new guidelines to revive Special Economic Zones may get delayed as Commerce and Finance Ministries have differences over several proposals.

‘Finance ministry has objections on every issue... on land, on setting up of power plants, incentives to units in under-developed states,’ a senior official said.

The official said exports from special economic zones (SEZs) have increased significantly and accounts for about 30 per cent of the country's total exports.

‘Increasing exports, huge investments and lakhs of people getting employment clearly reflects that these zones are contributing to the country's economy. We need to revive them,’ the official added.

Exports from SEZs increased to Rs 3.65 lakh crore in 2011-12 from Rs 2.20 lakh crore in 2009-10. With an investment of Rs 2.02 lakh crore, over 845,000 people have been employed in these zones.

To boost investors confidence in SEZs, the Commerce Ministry is planning to provide incentives for developers who want to set up SEZs in remote and undeveloped areas.

The Commerce ministry has proposed to relax minimum land area requirement for different categories of SEZs, besides extending the benefits of export schemes to the units, that are already available to entities outside the zone.

The initial phase of SEZ scheme, launched in 2006, saw developers lining up in big numbers for projects.

But after imposition of Minimum Alternative Tax and Dividend Distribution Tax on SEZs in 2010-11, investors started developing cold feet as tax incentives were the major attraction for setting up of these enclaves.

Also, the Direct Taxes Codes being considered by Parliament proposes to do away with the income tax exemption given to them and instead link tax sops to investments made in them. Profit-linked benefits were the main attraction of the SEZ scheme.

Out of 389 notified SEZs, 153 are operational.
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