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The Government has given greater operational flexibility to Special Economic Zones by reducing the minimum area required for setting up such zones and easing exit norms.
But developers and unit owners say that fresh investments, particularly from abroad, will remain elusive unless income-tax relief and extension of export incentives are restored.
“Relaxation in area norms will encourage small IT zones come up in the rural areas and provide employment to locals. It would also help developers downsize their zones and put land to alternative use. But, the norms would not help attract large investments,” said P. C. Nambiar, Chairman, Export Promotion Council for EoUs and SEZs.
After Minimum Alternate Tax (effective at 22.5 per cent) and Dividend Distribution Tax (at 15 per cent) were levied by Finance Ministry on SEZs, new applications have reduced significantly and 216 notified SEZs have not started operations. Today, there are 173 operational SEZs in the country.
The amended SEZ rules, aiming to put some sheen back into the policy, have reduced by half the minimum land required for setting up multi-product and sector-specific SEZs to 500 hectares and 50 hectares, respectively. Sector-specific SEZs have been given the freedom to add an additional sector for every 50 hectares of contiguous area added. The rules also allow sectoral SEZs to bring in similar or related sectors under the same zone.
IT SEZs are now subject to only a minimum built up criteria norm which is 50,000 square metres for category B cities such as Jaipur, Ahmedabad, Chandigarh and Lucknow and 25,000 sq. mt for even smaller cities and rural areas.
Unit owners contend that to stay competitive, the Government has to revoke Minimum Alternate Tax and Dividend Distribution Tax and extend to them the incentives given to exporters in the domestic tariff area.
“We do not get any incentives and we also have to face competition from countries with which India has signed free trade pacts as their goods come in at preferential tariffs. The compounding effect of these disadvantages is about 10 per cent which makes SEZ units non-competitive,” said R. K. Sonthalia, a Kolkata-based SEZ developer and unit owner.
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