Resist anti-SEZ pressures in Goa

EXIM MATTERS

The New Year gift from Goa was the decision not to allow any Special Economic Zones (SEZ) to come up in the state. The Commerce Secretary responded by pointing out that there is no provision under the law to denotify SEZs.

"The SEZs that have been notified have become legal entities and cannot be denotified," he said. He also pointed out that SEZ developers had already invested about Rs 500 crore in projects in Goa. The Commerce Minister, however, said that the Centre can review all SEZs in Goa "" irrespective of whether they had been notified or not.

Giving in to Goa's decision will mean amending the SEZ Act, 2005, to allow denotification. This will bring in uncertainty in the minds of prospective investors, who will have to keep the state governments happy. This can discourage prospective investors.

Whether the Commerce Minister has thought of that is not known. The best course appears to be let the notified SEZs in Goa carry on and hold off the others.

One of the reasons Goa has given is that the SEZs will not generate any income or employment for the locals and that the claims of the SEZ developers, who have misrepresented facts, are far-fetched.

Such a view can be taken by other state governments also. The Goa government's decision is a fall out of widespread protests on the grounds that the SEZ will damage the environment and hurt tourism. The same arguments could hold good in Himachal Pradesh, Uttarakhand etc.

Last week, the BoA granted formal approvals to 24 proposals and gave in-principle clearance to 4 more. So far, 404 SEZ proposals have been approved, of which 187 have been notified. It is possibly the proper time to call a halt to further approvals and see how the approvals granted so far play out.

The Director General of Foreign Trade (DGFT) has clarified that services not originating from India would not be entitled for duty credits under the Served from India Scheme (SFIS). Payment might have been made by a service provider in India to a Foreign Service Provider, who has provided some part service in the foreign country.

Such services provided abroad cannot be counted as 'Services originating from India', and hence would not be eligible for benefits under SFIS .Foreign Exchange earned would be mean 'receivables' minus 'payables' in a particular year, says the Circular no 25 dated January 1, 2008.

This clarification will affect telecom service providers, software service providers, airlines and others who take the services of Foreign Service Providers in the process of rendering services and earn foreign exchange.

The DGFT has also clarified (Circular No 24 dated January 1, 2008) the principles that will govern the grant of duty credits under the Duty Free Credit Entitlement scheme and Target Plus scheme, in cases where mergers or acquisitions of different companies have taken place.

He can follow it up with guidelines on the procedures to be adopted for even other licenses in cases of mergers, re-mergers, acquisitions etc. The Regional Licensing Authorities do not adopt uniform practices and the trade is generally left to tackle the authorities in the manner that they deem fit.

tncr@sify.com