The seven government-owned special economic zones across the country are likely to be given autonomy, resulting in greater financial flexibility for these tax-free enclaves. The move will help these zones compete with the private sector SEZs, which are attracting investment from companies.
The government SEZs, which were earlier known as export processing zones, are located in Kandla, Chennai, Falta, Cochin, Noida, Santacruz and Vishakhapatnam. These zones are currently under the supervision of development commissioners.
In the new dispensation, the zones will come under an SEZ authority, which will be responsible for their development.
Moreover, the zones will be able to use income from the land and building rentals to sustain themselves and at the same time invest in infrastructure development.
"The financial autonomy of these government zones, if accepted, will result in better management of resources and greater investments," said Yogendra Garg, director general, Services Export Promotion Council and former development commissioner of Kandla SEZ.
SEZ expert Tapan Sangal, senior manager, PricewaterhouseCoopers, says the move is timely. "With the private zones coming in to operation, an autonomous government zone will be in a better position to face competition. Many government zones need to beef up their infrastructure and the proposed autonomy will help them in doing so."
Experts also point out that the autonomous zones will be able to take many decisions on their own, which cannot be taken at the moment. For instance, if a company wants to set up base in the government zones and asks for some discount, the development commissioner will be able to take a call on the proposal. Currently, government norms on renting and leasing have to be followed.
The commerce ministry had sent the proposal to various ministries for consideration. While the law ministry has already cleared it, comments are being awaited from the finance ministry.
The finance ministry is keen on knowing if the government SEZs will be able to sustain themselves as autonomous bodies. The issues which needed to be sorted out include salaries of the employees of the development authority as well as the estimation of revenue loss to the exchequer.
Significantly, many government zones are full at the moment, and are planning to add more area. "Zones like Kandla are adding 300 acres. After the SEZ Act came in to force in 2006, many units rushed to these zones to set up base, as a result of which most zones are full," said LB Singhal, director general, Export Promotion Council for EoUs and SEZs.
Private investments in the seven government zones stand at Rs 3,900 crore (Rs 39 billion), while the government has pumped in Rs 630 crore (Rs 6.3 billion). Exports from these zones posted an annual increase of 55 per cent at Rs 41,171 crore (Rs 411.71 billion) in the last financial year.