Amendments to Special Economic Zones (SEZ) Rules, 2006
Recent changes have been made to the SEZ Rules, 2006, aimed at attracting more investments and enhancing operational flexibility.
Key Amendments
- Minimum Land Requirement:
- Reduced from 50 hectares to 10 hectares for SEZs focusing on manufacturing semiconductors and electronic components.
- In Gujarat, SEZs for textiles can now be established with a minimum of 4 hectares.
- Land Encumbrance Relaxation:
- Board of Approval can relax encumbrance-free area conditions for land mortgaged or leased to government agencies.
- Finished Goods Export:
- Can be exported, transferred to customs bonded warehouses, or supplied to domestic tariff areas with applicable duties.
- NFE Calculations:
- For semiconductor manufacturing services, the value of goods received and supplied on a free basis included in NFE calculations.
- Procurement Flexibility:
- SEZ units can procure capital goods and raw materials on their own, not necessarily from overseas entities.
Current SEZ Scenario in India
- 276 operational SEZs with 6,275 units.
- Total investment: ₹7.07 trillion.
- Employment: Approximately 3.19 million persons.
- Exports: $172.28 billion, accounting for 21% of total exports.
- Service sector contributes 60% of exports, IT and IT-enabled services make up 61% of units.
- 41% of merchandise exports are from the petroleum sector.
- 52% of services exports and 40% of merchandise exports are to the US.
SEZ Scheme Observations
- SEZ scheme provides infrastructure concessions to developers.
- Income tax exemptions were available for new developers and units.
- Initial expectations of world-class infrastructure and growth have not been fully met.
- Analysts suggest investments were diverted to SEZs largely due to fiscal incentives.
- Government auditors note performance shortfalls compared to projections.
- Continuous amendments to SEZ laws to enhance operations.
Conclusion
There's a need for a cost-benefit analysis of the SEZ scheme to determine its future viability.