Kandla SEZ units seek duty benefit

Demand to rectify anomalies in disbursements under duty entitlement passbook scheme

Export-oriented units (EOUs) of the Kandla Special Economic Zone (KASEZ) have demanded that duty entitlement passbook scheme (DEPB) disbursements be made from supplies made from the domestic tariff area (DTA) to the SEZ.

They, however, agree that a marked disagreement exists between the ministry of finance and ministry of commerce over implementation of the special economic zone policy.

The units at KASEZ claim that despite a notification dated June 5, 2002, that domestic tariff area supplies will be eligible for duty entitlement passbook scheme benefits, the special economic zone units have not been able to avail of the same.

Earlier, the commerce ministry in its Exim policy has declared that supplies made from the domestic tariff area to the SEZ will be entitled for grant with effect from April 1, 2002.

S S Sajdeh, vice-chairman, regional governing council of the export promotion council of SEZ and EOU, in a letter to the chief secretary, ministry of finance, has demanded that this anomaly needs to be sorted out immediately.

He said in the letter that this anomaly has created doubts in the minds of units operating in the SEZ, and that many units have either decided to exit from the SEZ or temporarily shelve their projects.

Sajdeh said the development commissioner, KASEZ, has further worsened matters for the units by issuing a trade notice on December 11, 2003, stating that DEPB benefits will be given only for the supplies for which payments are made in freely convertible currency (FCC) and that payments for domestic tariff area supplies should be made in FCC from the foreign currency accounts in order to avoid delay.

"In other words, for domestic tariff area supplies, payments made in Indian currency will not qualify for DEPB. Why is this discrimination within the country, between payments made in FCC and Indian currency," he said in the letter.

Sajdeh said that as recently as February 5, the Customs department issued a notification, stating that supplies made from the domestic tariff area to the special economic zone will not be eligible at all for DEPB scheme, as the relevant chapter (chapter X-A) of the Customs Act has not been amended as yet.

The department further clarified that even if chapter X-A is amended, the DEPB scheme in respect of supplies made by domestic tariff area units to special economic zone units can only be allowed on and from the date when chapter X-A is amended.

"Several special economic zone units have planned well in advance and it is necessary for the government to provide a strong committed policy, valid for a reasonable period of time, whereby both the government and units can gain," Sajdeh said.

He added that it clearly appears that the government has erred in implementation of the SEZ policy, causing serious problems to units operating within the Kandla special economic zone.

Sajdeh further said despite bringing this issue to the notice of the authorities earlier, no cognizance has been taken so far affecting the exporting community.

He said that it is necessary to adopt corrective measures to make the climate more conducive for exporters.