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Industry body Assocham has urged the Centre to extend drawback benefits in Special Economic Zones (SEZs) against payment in rupees for encouraging units to procure from domestic suppliers and ensure that they are able to maintain export competitiveness.
The industry body said exporters are currently entitled to duty-drawback benefit only if exports are made in freely convertible currency. However, reimbursement of duties is available in case of supply to an SEZ developer or co-developer even if the payment is realised in rupees.
In a press release it said several manufacturers in SEZs prefer to source some of their inputs from the domestic tariff area (DTA) when suppliers are competitive and can adhere to stringent global standards, instead of going in for duty-free imports.
When inputs are sourced domestically, they are not affected by movements in foreign currency. The realisations become volatile if sales are denominated in foreign currency due to fluctuating exchange rates, the Assocham observed.
Needs to be encouraged
“Inputs sourced domestically should be encouraged by the Government since the country saves foreign exchange involved in import of goods which the SEZ would have resorted to in the absence of appropriate domestic supplies,” said the Secretary-General, Mr D. S. Rawat, in a representation to the Finance Ministry.
Despite these obvious benefits, supplies made by DTA units to SEZ units against rupee payments are not eligible for drawback benefits at present.
Though there has been a slowdown in notification of new SEZs, there are 124 in India at present. Most of them are concentrated in Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, Maharashtra and Gujarat.
Exports out of SEZs in 2010-11 rose by around 43 per cent to Rs 3.16-lakh crore. Nearly 6.77 lakh workers are directly employed in these zones that have attracted investments worth Rs 2.03-lakh crore. The Government allows 100 per cent foreign direct investment through automatic route, the trade body said.
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