'Loosing relevance of SEZs may affect economic growth'

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SME Times News Bureau | 03 Dec, 2014
Operating in Domestic Tariff Area (DTA) has become more beneficial as compared to operating within SEZs especially after withdrawal of exemption for Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) for the SEZs, said a survey conducted by PHD Research Bureau, a research arm of PHD Chamber of Commerce & Industry.

Research Bureau of PHDCCI has conducted the survey for the Comptroller and Auditor General of India (CAG) for industry feedback on the performance of the Special Economic Zones.

The survey found that the approach of SEZs developers/Units towards SEZs has become pessimistic in the present times. They felt that operating in DTAs has become more beneficial as compared to operating within SEZs especially after withdrawal of exemption for MAT and DDT for the SEZs.

Signing of more Free Trade Agreements (FTAs) by India which enabled Indian exporters outside the SEZs to import duty free imports of inputs also acted as a disincentive for exporters operating within SEZs, said the survey findings.

Almost all the SEZs' developers/units unanimously felt that, hardly there is any significant export benefits are left to operate within the SEZs in India over to operate within its DTAs.

However, on the administrative processes and procedures almost all of the respondents' experiences with respect to different processes for getting approvals for setting up SEZs are found quite satisfactory during the survey.

According to the survey, almost all of the respondents' expressed 'satisfaction' with respect to different processes for getting approvals for setting up SEZs. With respect to coordination between Central ministries, between Central and State Governments also, almost all the respondents' have not encountered with any problems finds the survey.

The experience of almost all the respondents are also found satisfied with respect to the acquisition of land process for SEZs (prior to the implementation of the LARR Act - Land Acquisition, Rehabilitation and Resettlement Act), notification process of the government and redressal of grievances by UAC(Unit Approval Committee)/BOA (Board of Approval).

However, around 40% respondents' expressed 'dissatisfaction' with respect to getting permission from the custom authorities or DC (Development Commissioner) and to get sanctions of claims; process of de-notification& exit.

With respect to prescribing fixed time period for different processes, almost all the respondents felt that a fixed time period needs to be prescribed for getting approval by BOA.

The survey found that 88% of the respondents avail the stamp duty exemption and with respect to discontinuation of MAT/DDT almost all the respondents felt that MAT/DDT should be discontinued so as to keep the developers/units encouraged.

With respect to 'shortfall' between the projections and actuals ports/employment/investment in the SEZs, almost all the respondents considered global recession as the major reason of this shortfall while 66% felt cumbersome land acquisition process is 'not' reason for the several instances of shortfall. While, 55% of the respondents considered end of tax holiday, too many restrictions and frequent changes in policies viz. MAT are the next major reasons for this shortfall.

About 60% of the respondents reported that single window clearance mechanism exists in their respective States and it integrates all the required clearances envisaged in the Act. 45% of them reported that the clearances are not given timely.

With respect to monitoring and control, almost all the respondents are satisfied the most with the sufficient time given for submitting APRs (Annual performance Report). Most of the respondents (88%) considered present format of APRs relevant and user-friendly; however 40% of the respondents reported redressal of grievances by UAC/BOA inefficient and unsatisfactory.

In the light of these existing issues, the government should undertake sound policy measures to regain the confidence of SEZs units/developer's.

PHD Chamber endeavors to inculcate the best industrial practices amongst its members and welcomes progressive legislations and regulations in this regard so that we can augment our contribution to the national growth manifolds, said Mr. Jaipuria, President of the PHD Chamber of Commerce & Industry.

Export benefits accrue to DTA units should also be extended to SEZ units, reimposition of MAT/DDT should be reconsidered and some additional benefits such as period for 100% tax exemption should be increased to 10 to 15 years from 5 years presently.

Procedures relating to exit mechanism should be speedy, clear and transparent and should be devised so as to tackle the exit cases effectively.

The new LARR Act needs to be revisited once again.

Single window clearance mechanism should be devised in all States so as to reduce the unnecessary botheration and time involved in taking approvals from different authorities.

It is vital to reconsider this change so as to keep the MSME exporters motivated and encouraged going forward.

The rules pertaining to Non Processing Area (NPA) should be relaxed in a way to permit the development of more social/other infrastructure for dual SEZ/DTA, said the PHD chamber of Commerce & Industry.