SEZ 2.0: Regional boards to track development hubs on the cards

The Centre has proposed to set up regional boards in states and Union Territories to monitor procurement of goods from domestic tariff areas (DTAs) and take a call on building industrial units in ‘development hubs’, according to a Bill that aims to revamp Special Economic Zones (SEZs).

The Development Enterprise and Services Hubs (DESH) Bill, 2022 — expected to be tabled in Parliament’s monsoon session — aims to set up ‘development hubs’ to promote economic activity, attract investment, export competitiveness, and build robust infrastructure facilities. Such hubs will also include existing SEZs.

The Bill, announced in the Union Budget, will replace the existing law governing SEZs when passed in Parliament. The commerce and industry ministry is drafting a legislation for the next chapter for SEZs that will see development of large manufacturing and investment hubs. The idea was to go beyond the export-oriented approach and use SEZ infrastructure for domestic industrial activities as well.

According to people aware of the matter, these development hubs can be set up by the Centre, state, or jointly by them or by any manufacturer of goods and services. After identifying the area, anyone who intends to set up such a hub will have to make a proposal to the relevant regional board, they said.

Manufacturers in these hubs will be allowed to sell in the domestic market, as well as export goods from such regions.

Regional boards will also have the power to approve or reject proposals for setting up of manufacturing units in the development hubs, enabling easy entry and exit of units in such hubs, among others, they said.

Experts said setting up of regional boards is a significant departure from the present administration under the SEZ law.

“SEZ being a central Act is governed by central authorities. Establishment of regional boards and hub directors under the draft DESH Bill, for oversight of development hubs located in such states, is a significant departure from the current administrative structure,” said Harpreet Singh, partner, indirect tax, KPMG.

“This is likely to assist in faster approvals for setting up units in the development hubs, facilitating exit of the developer or unit from the hubs and better coordination between state and Central officers,” Singh said.

Regional boards will be set up by a separate ‘integrated development hubs board’ that will be entrusted with the responsibility to promote and orderly development of such hubs. The integrated development hubs board will replace the ‘board’ that had similar functions and duties under the SEZ Act, 2005. Such a board will comprise secretary-level officials from the Centre, senior state officials, as well three government-nominated experts in the field of trade policy and economic planning.