Centre studying proposal to convert single-product SEZs to multi-product zones

Amiti Sen New Delhi | Updated on September 18, 2019

Over the last few years, a number of SEZ developers have pulled out of their projects citing various reasons, including the economic slowdown   -  THE HINDU

Move could help developers attract more units, increase viability of projects

In a move that could make investments in Special Economic Zones (SEZs) more attractive and increase the viability of projects, the government is considering a proposal to allow all single product SEZs to be converted into multi-product ones.

“The proposal to allow single product SEZs to be converted into multi-product ones has been examined by the Commerce Ministry and a draft notification on the necessary changes in SEZ Rules on minimum area requirement has been sent to the Director General of Export Promotion under the Central Board of Indirect Taxes and Customs for its inputs,” a government official told BusinessLine.

“If the government allows single product zones to be converted to multi-product ones, it is likely to give more flexibility to developers to invite units. Suppose if a particular sector is not performing well, they would have the freedom to invite units from other sectors. But the area requirement norms would need to be changed,” pointed out Hitender Mehta, Managing Partner, Centrum Legal.

At present, multi-product SEZs’ minimum land requirement is 500 hectares while the requirement for single product ones is just 50 hectares. Both will need to be brought on par if a conversion is allowed.

“Amendment has to be made to Rule 5(2) of the SEZ Rules, 2006 which specifies minimum area requirement. If the Finance Ministry is on board, it could be done through a notification,” the official said.

Over the last few years a number of SEZ developers have pulled out of their projects citing various reasons including economic slowdown and lack of interest from units because of non-viability of their zones. Many developers who have got formal approval for their projects have failed to complete their projects on time and have been seeking extensions. Of the 370 SEZ units that have been notified, only 232 are operational.

“If the restrictions on the kind of units that a sector-specific SEZ can attract is eased, it is hoped that developers would get proposals from a larger number of interested units and more zones will become operational,” the official said.

SEZs have, so far, attracted a total investment of ₹5,07,644 crore and have provided employment to 20,61,055 persons, according to government figures.

Earlier this year, the SEZ (Amendment) Bill 2019 was passed by Parliament allowing “trusts or any entity” to set up units in the zones.

Published on September 18, 2019

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