Ministry may change policy on SEZs

The commerce ministry wants to change its present policy of confining special economic zones to designated areas, instead it wants to expand them to cover a larger geographical area.

As SEZs have not taken off even three years after their introduction, the ministry is now thinking of emulating China and increasing the size of SEZs to extract benefits on a large scale.

During a presentation to the Planning Commission Deputy Chairman, KC Pant, the commerce ministry said SEZ-type policies implemented over a relatively large area were the need of the hour.

Till now, the focus has been on a localised approach. But, this view is changing and many now feel that a wide-area approach will be more successful. Such an approach envisages leveraging existing infrastructure to cover a larger geographical area rather than building new infrastructure to serve a limited area.

The SEZ policy is shifting from augmenting infrastructure facilities for export production and  monitoring physical material to one which focuses on overall growth and employment, private provisioning of infrastructure services and scrutiny of financial accounts.

As there is a widely held belief that it is not possible to provide efficient infrastructure services in the public sector, the ministry has suggested that even if the financial backing has to come from the public sector, the provisioning should be handed over to the private sector.

A more liberal labour policy along with a more transparent mechanism that allows unviable firms to close down has been recommended.

In its presentation, the ministry also pointed out that the removal of domestic regulations and restrictions did not require resources but a broad-based political will and a commitment towards growth and employment.

The SEZ policy, announced by the government in the Exim Policy 2000, was aimed at carving out self-contained areas supported by world-class infrastructure. This was expected to facilitate exports. Since then, 15 SEZs have been accorded approval in principle and the government has permitted conversion of all eight existing export processing zones into SEZs .

However, even three years after the announcement of the policy a number of issues is yet to be addressed. These include the operationalisation of provisions of the Customs Act relating to SEZs, duty-free material for setting up SEZs and exemption from service tax for developers of SEZs.

The department had also asked for an exemption from foreign travel tax and inland air travel tax to airports coming up in SEZs.