For the first time since the formulation and enactment of the Special Economic Zone (SEZ) policy in 2006, the government has mooted the idea of disinvesting some of these zones owned by it to collect more funds that could be spent on social sector schemes.
The proposal was suggested in the Economic Survey 2010-11 tabled by Finance Minister Pranab Mukherjee in Parliament on Friday.
“The new SEZs have come up mainly in the private sector, with no funding from the government. Now, the time has possibly come to see whether some of the established state-owned SEZs could also be privatised. Disinvestment in these SEZs could not only add to the kitty of the government and release more money for social-sector development but could also make these SEZs more efficient,” the survey said.
Giving rise to hopes that the finance ministry might announce policy measures in favour of SEZ development, the survey said SEZs had shown “reasonably good” performance, even though they were severely criticised by different quarters of the society. The SEZ scheme had been primarily accused of being a land-grab policy, dislocating farmers and owners of the land for the sake of industrialisation.
The survey also quashed criticisms concerning allegations that exports were mostly taking place from old SEZs, earlier considered free trade zones.
In contrast woth the popular perception, the finance ministry this time also highlighted the fact that contribution of SEZs to the country’s total exports was growing leaps and bounds.
The share of SEZs in India’s total exports has increased consistently from 4.7 per cent in 2003-04 to 26.1 per cent in 2009-10 and 29.7 per cent in the first three quarters of 2010-11, according to the survey.
Currently, exports are taking place from 130 SEZs. Of these, 75 are in the IT space, 16 are multi-product SEZs involved in the export of various products — from electronic goods to leather items; and 39 are other specific SEZs. The total number of units spread across these SEZs is 3,139, employing 6,44, 073 people in total.
In the first three quarters of the financial year, exports from SEZs have reached Rs 2,23,132 crore. During the entire 2009-10, exports from these enclaves had exceeded Rs 2,20,711 crore.
SEZ developers and units have been constantly urging the government to keep the SEZ policy out of the provision of Direct Taxes Code (DTC) and not to take away the most lucrative incentive of relief from income tax.
SEZ units are given 100 per cent income tax exemption on export income under Section 10AA of the Income Tax Act for first five years, 50 per cent for the next five and 50 per cent of the ploughed-back export profit for next the next five years.
