Govt allows BoA to issue industrial licences

Special Economic Zone (SEZ) units producing defence related items will no longer have to go to the Department of Industrial Policy & Promotion (DIPP) for an industrial licence.

The Board of Approval (BoA) for SEZs, which approves proposals for setting up these zones and takes decisions on matters related to their operation, will now also issue industrial licences for producing defence related goods.

“The move is aimed at speedier approval of such projects and is also another step towards single-window clearance promised to SEZs,” a Government official told Business Line.

The BoA is headed by the Commerce Secretary and includes senior officials from key ministries including Finance, Revenue, Home, Urban Development and Micro, Small & Medium Enterprises.

This move could be seen as another effort by the Government to make life easier for investors in SEZs in the absence of any assurance from the Finance Ministry that the minimum alternate tax (MAT) and the dividend distribution tax (DDT) imposed on the supposed “tax-free enclaves” three years ago would be withdrawn.

The Commerce Ministry recently slashed the minimum area requirement for setting up SEZs in an attempt to revive interest in the zones. Investments in SEZs have reduced to a trickle over the last two years due to imposition of taxes and the overall dull investment climate in the country.

Interestingly, the SEZ Act of 2005 gives the BoA the authority to issue industrial licences, but it had not been exercising it for the last seven years since the rules were approved. It was only in last meeting of the Board earlier this month that it took up for the first time the responsibility of issuing industrial licences to three pending proposals for producing defence items.

“Although the SEZ Act allowed it, the old system of issuing industrial licence by the DIPP was being followed as defence is a sensitive area. However, the BoA will be equally careful and follow all rules before issuing a licence,” the official added.

When a SEZ unit has to go to other departments for clearance, the entire coordination takes a long time, points out Hitender Mehta, Co-Chairman Assocham’s Group on SEZs. “Even after a licence is issued and the file lands up with the BoA, it could be a while before it is taken up because there is often a considerable time gap between two meetings,” Mehta said.

3 proposals

The three proposals that have been taken up by the BoA for issuing licences include Pipavav Defence and Offshore Engg Co’s application for manufacture and development of C4I systems, electro-optical systems, underwater systems and avionics, Syrma Technology’s application for producing defence products such as radio and satellite communication equipment and Data Patterns’s application for design, development and manufacture of radar, sonar and electronic warfare systems.

(This article was published on November 17, 2013)
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