IT exports pip manufacturing at Vizag SEZs

| Updated on: Feb 15, 2011

The Special Economic Zones (SEZs) in Andhra Pradesh are unobtrusively but resolutely transforming the topography of this resource-rich State as most of them are located in rural and backward areas, bringing benefits to the rural and unskilled people in terms of access to basic amenities and better connectivity.

One of the seven zonal offices under the Ministry of Commerce and Industry, the Visakhapatnam Special Economic Zone (VSEZ) — comprising Andhra Pradesh, Chhattisgarh and Yanam — has emerged as a major beneficiary with as many as 109 SEZs coming under its umbrella out of 579 SEZs approved all over the country till end-December 2010. Out of the 109, 74 SEZs have been notified; out of that 31 private SEZs became operational and are exporting goods.

Interacting with a group of journalists from the capital during a sponsored tour by the Ministry of Commerce and Industry to explain the steady progress made by the export enclave, the Development Commissioner, VSEZ, Mr M.S. Rao, said that though there has been a lopsided growth in the zone — with informational technology and IT-enabled services exports dominating in recent years — the situation would turn before long with manufacturing activities becoming the mainstay of operations.

He said that exports from 21 operational SEZs (20 private SEZs plus VSEZ) were Rs 5,554 crore in 2009-10 (with IT sector's share at Rs 2,726 crore). The number has increased to Rs 8,029 crore during the first three quarters of the current fiscal as the number of SEZs rose to 32 (31 private SEZs plus VSEZ).

He pointed out that as the fiscal year is about to fold, the SEZs in the State would crank up a 100 per cent growth to reach an export turnover of Rs 11,000 crore. Incidentally, in the 74 SEZs as many as 44 were IT and electronic hardware and they earned Rs 4,222 crore out of Rs 8,029 crore during April- December 2010.

Mr Rao is confident that as exports from manufacturing segment SEZs take shape and clip in the coming years with Dr. Reddy's Laboratories, Ramky Pharmacity SEZ P Ltd, Brandix (garments), Apache Footwear, Pokarana Ltd (pre-engineered granite slabs), Uniparts India (heavy engineering equipment), Confidence Petroleum(I) Ltd (CNG Cylinders) and Sri City housing multi-product SEZs getting off the ground, “this will push the overall figure” and narrow down the gap between IT SEZs and the rest. Once this level is reached, he said, the share of manufactured goods in the aggregate export turnover from the VSEZ would account for 70 per cent.

He said the VSEZ has so far provided direct employment to 68,150 people and attracted investment of Rs 13,981 crore.

A cross-section of developers and the units located in VSEZs with whom Business Line spoke expressed reservations over the realistic possibility of these zones getting converted into a manufacturing hub in the near future in the face of continued glitches and withdrawal of extant benefits.

A major apprehension assailing them relates to the likely withdrawal of exemption from Minimum Alternate Tax (MAT). This will have “a great impact on their business prospects” with many a unit looking for locations outside the country for expansion. High-tech industries in pharmaceutical and manufacturing are concerned over the possible withdrawal of benefits of exemption from MAT in the Budget. This might result in loss of FDI worth $50 to $100 million, sources in these companies said.

Another worry is that the State Government has accepted the proposal for withdrawing the benefit of stamp duty and registration fee to SEZ units, which would have a deleterious impact on enticing further investment into the zones.

As most of the units located are in frontier areas of technology, both the Centre and the State Governments should consider grant for the creation of advanced technological amenities to render the SEZ a world-class destination so as to get further FDI.

They also seek the power infrastructure to be developed to the next level or generation such as upgrading the nearest main substations to access 132-KV lines directly to the industry's doorsteps.


Published on February 16, 2011

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