The commerce ministry is planning to relax norms governing special economic zones (SEZs) — the tax-free industrial enclaves — to tide over the slump in demand from major export markets because of the ongoing financial crisis.
The details, which are being worked out, will cover sectors that have been adversely affected. The package will include relaxing foreign exchange earning obligations and permitting units in SEZs to sell in the dometic market without paying Customs duty.
“Gems and jewellery and some manufacturing-related zones will get these benefits. The details are being worked out. These will be for a maximum period of one year,” said Commerce Secretary Gopal K Pillai.
The steps being contemplated include easier “net foreign exchange” criteria for gems and jewellery SEZs as well as some other manufacturing units based in these zones. Currently, SEZs have to earn more foreign exchange by selling goods overseas than in the domestic tariff area (DTA). A relaxation will mean that the SEZs that get the benefit will be able to sell more goods in the domestic tariff area. In addition, SEZs will also be able to sell 25 per cent of their finished products in the DTA without paying Customs duty. At present, SEZ have to pay Customs duty on domestic sales. “But the units will have to pay the duty saved on duty-free imported inputs,” Pillai said. The measures come in a backdrop of estimates by the government that exports from these industrial enclaves will fall 25 per cent short of the targeted Rs 1,25,950 crore in 2008-09. Exports from the country dipped for two consecutive months ending November 2008 as global recession shaved off demand in many developed nations.
Accepting that the ongoing recession in the US and Europe has hit exports from SEZs, Pillai agreed that the target would not be met. “Till December 2008, exports from SEZs stood at Rs 70,000 crore. Total exports from the zones are likely to be about Rs 1,00,000 crore in 2008-09,” he added. Total exports from SEZs stood at Rs 66,638 crore in 2008-09.
New SEZs to create 65,000 jobs by April 2009 despite economic slowdown:
Pillai said 65,000 jobs would be created in the new SEZs that would be up and running in the next four months, despite the economic slowdown. “Of 278 zones, 87 have become operational. The work is going on in about 52. In IT zones itself, 40,000 jobs are expected (to be created) in the period up to April. So while the zones are getting impacted because of unavoidable global factors, job-creation will carry on in many of the zones,” he added. But Pillai accepted that many of the 150 notified zones where construction activity is still to begin might not become operational.
“Investments in the zones have slowed in the past three months but they have not stopped. In fact, JP Morgan Chase has invested Rs 160 crore in an IT zone being developed by Canton Buildwell Pvt Ltd.
