SEZ rules may be tweaked to let excess land be used for factories

M Ramesh Chennai | Updated on August 22, 2019

An aerial view of IT SEZ in Andhra Pradesh. Representative image   -  The Hindu

The government is warming up to an idea mooted by the industry to relax rules to enable excess land with various Special Economic Zones (SEZs) to house factories that need to be set up quickly, Ajay Sahai, Director-General and CEO of the Federation of Indian Export Organisations (FIEO), told Business Line here on Wednesday.

The idea that excess land with SEZs could be allocated to exporters, against the backdrop of difficulties and long lead times in acquiring land, was suggested by the FIEO to the government on July 31.

“The government is favourable,” Sahai said. He was here in connection with a seminar on ‘MSME Exports from Tamil Nadu – Opportunities and Challenges’, organised by the FIEO.

Units set up in the zones enjoy certain tax concessions. There are 232 operational SEZs in the country. The industry has invested ₹5.07-lakh crore in setting up plants inside the zones. These plants provide employment to 2 million people and exported goods and services worth ₹7.01-lakh crore in FY19.

Industry-specific SEZs

Some of these SEZs are industry-specific. For example, some can house only units engaged in the manufacture of electronic products. They can’t allow other products even if they have vacant land unless they get themselves approved as ‘multi-product SEZs’.

The plea before the government now is to make it easy for any SEZ to house any unit. This plea has been made in the context of India losing out on business opportunities that could come in its way following the trade war between the US and China.

Indian companies lack the scale to quickly start supplying to, say, the US. This is particularly true of the leather footwear sector, where Indian units simply do not have the capacity to cater to US orders, which are typically large.

It takes a lot of time for these manufacturers to buy land and set up factories.

But some SEZs that may have adequate land and infrastructure (like electricity, water, security) are not in a position to accommodate them because they are not “multi-product” SEZs.

A case in example is that of a Chennai-based exporter, Super Auto Forge Ltd, which produces auto components. This company got an order from a vendor of Ford in the US for suspension assemblies. The business is potentially worth ₹200 crore a year, which is a big deal for a ₹550-crore company.

Super Auto Forge has a unit in the Madras Export Processing Zone, but there is no room for a new factory there. It couldn’t get space in other neighbouring SEZs. After battling for eight months, the company set up shop in the Sri City industrial estate in Andhra Pradesh, north of Chennai. It got its problem thus solved, but the company officials told Business Line that it would have been a lot better for the company if it had got lands near its existing facilities.

Published on August 22, 2019

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