Ministries sparred over SEZ control

It now emerges that the commerce ministry's special economic zone policy, notified earlier this week, saw a tussle for control with the communications and information technology ministry.

The latter wanted that IT-specific zones be brought under the framework of the existing software technology parks policy and be under its overall monitoring and control.

However, the commerce ministry rejected the idea as it felt that such a move will lead to similar demands from other ministries.

"Every other ministry ""from textiles to bio-technology "" would have wanted to exert control on the SEZs related to their ministries. This would have diluted the objective of the scheme and led to absolute chaos," sources told Business Standard.

In fact, the IT ministry was not alone in trying to muscle in on the SEZ policy. The finance ministry had also objected to some provisions.

The commerce ministry had also rejected the department of information technology's proposal to provide greater tax benefits to software exporters under the STPI scheme, in order to bring parity with the benefits offered in the SEZ scheme. At present, while the SEZ scheme offers tax benefits for 15 years, under the STPI scheme, software exporters get 100 per cent tax exemption only till 2009.

While both the schemes allow for exemption from octroi charges and central sales tax, the tax benefits offered under the SEZ scheme are acting as a deterrent to exporters opting for STPI scheme.

"The huge incentives offered under the SEZ scheme have ensured that there are fewer takers for the STPI scheme. While this augurs well for the big players in the software industry, the 4,400 small exporters are at a disadvantage as they do not have the wherewithals for SEZ infrastructure," ministry official said.

The commerce ministry also rejected the DIT's demand of having an IT-specific park in 5 acres as against the minimum area size if 10 acres.

"The concept of SEZ is to have a large area with world-class infrastructure and 5 acres would be an extremely small area. It will not make the software exporters more competitive as against a large area of 25 acres servicing several software units with common infrastructure," sources said.