Waning interest in SEZs: Govt has thin agenda

Uncertainty over tax exemptions to new special economic zones and units therein has led to declining interest in the special economic zones, as evident from just three fresh applications before the government panel on clearances, for its meeting on Tuesday.

Moreover, the inter-ministerial board of approval headed by Commerce Secretary Rahul Khullar is flooded with 24 applications seeking extension of time for implementation of the SEZ projects.

"Investors are very much apprehensive about the new draft Draft Tax Code. Less number of developers approaching BoA, clearly indicates this," a senior commerce ministry official said.

According to the revised DTC draft, which will replace the Income Tax Act of 1961, tax exemptions for SEZs will be confined to the existing units.

The DTC has not only dampened the spirit of new developers but also caused anxiety among those who have obtained approvals but are yet to implement the projects. Of the 580 approved SEZs, 111 are functional.

The BoA had approved six new SEZ projects in its last meeting on June 8 and another six on April 9.

Among those seeking extension include GMR Hyderabad International Airport Ltd, Unitech Kochi SEZ Ltd, K Raheja Corporation, Jubilant Infrastructure, Gujarat Industrial Development Corporation and Meditab Specialities.

The industry said the income tax benefits were the only major attraction for investment in SEZs, which accounted for about 25 per cent of the country's exports in 2009-10.

As per the latest data, SEZs have attracted investments worth Rs 1.5 lakh crore (Rs 1.5 trillion).

Three developers that have approached the BoA to set up tax-free zones include Videocon Industries Ltd for electronics hardware and software SEZ in Navi Mumbai and Infoparks IT/ITeS SEZ in Kerala.

The BoA would also consider the proposal of de-notification of Essar SEZ Hazira for its sector specific SEZ in Gujarat.

Tech Mahindra Limit, a unit in Mahindra World City SEZ, have requested for transfer of its unit to Sriram SEZ in Chennai.

The board would also take up the issue of making guidelines on establishing contiguity in SEZs and policy for setting up of units for recycling of plastics in the tax free enclaves.