"SEZs Accounted For A Third Of India's Exports" : Dr Vinay Sharma, Officiating Chairman, EPCES
More than a decade after special economic zones (SEZs) were set up in the country, investors are losing interest in these zones of excellence. With simplified rules and business-friendly environment, SEZs can be an ideal platform for boosting the country's manufacturing, trade and commerce. In a brief, yet informative, interview, Dr Vinay Sharma, the vice-chairman of the Export Promotion Council of EOUs & SEZs (EPCES) - the Central government agency involved in promoting exports from the zones - and its officiating chairman, talks about SEZs and their challenges and opportunities.
What is your take on the present status of SEZs in the country, in general, and in Maharashtra, in particular?
There are 223 functional SEZs in the country as on March 31, 2018, and there are 5,146 units in these SEZs. Exports from SEZs were 15 per cent higher in 2017-18 than their exports in 2016-17. Besides, exports from these special zones accounted for a third of India's total exports in the past financial year. SEZs are still a better bet, and there is increase in exports, employment and investment due to sheer hard work and commitment of all the stakeholders.
When we talk of Maharashtra, many of the SEZs have opted for denotification, and the ones that are still working are doing well. But there could have been a better scene, if the State government had ensured a better ecosystem for SEZs.
Despite taking off in a big way over a decade ago, what were the reasons for SEZs losing sheen in the past few years?
SEZs have passed through good and bad times but have survived the rough weather. In 2006, when the SEZ Act was introduced, everyone wanted to get in because the Act was clear, and benefits were visible. About 678 SEZs were approved in principle. Then came bad times and the MAT (Minimum Alternate Tax) and the DDT (Dividend Distribution Tax) were imposed. The downfall started. It was not that the industry did not want to pay these taxes that were not in the original Act, but there were two main reasons. One, the new taxes put an additional burden on SEZ promoters as they were not factored into the project cost earlier. As a result, funding the additional cost of the project became difficult. Two, SEZ developers saw these two taxes as a breach of trust. If these two taxes could be introduced mid-way, what if there were more taxes in the future or major changes in the policy, they feared. Thus started the downwards journey, and many promoters opted out of the business.
Is there any move by the government to address the grievances of SEZs?
The government has constituted a committee of eminent personalities, consisting seven industrialists, who have stakes in SEZs to suggest ways and means to make these zones more vibrant. This committee is headed by Baba Kalyani (the CMD of Bharat Forge) from Pune. I am also a part of this committee as a representative of the trade as the chairman of the council.
What role can SEZs play in the government's Make In India initiative?
They can play an exceptional role. Union ministers go abroad to seek investments in India. However, land for projects can be allotted only by States, and there are major issues regarding land allocation. But the same set of investors can be brought to SEZs, where land is readily available and can be allotted quickly to establish manufacturing set-ups.
"SEZs have passed through good and bad times but have survived the rough weather."
DR VINAY SHARMA Officiating Chairman, EPCES
What are the major challenges faced by SEZs, including the sunset clause of 2020 that is hanging like a Democles' sword?
There are many challenges, but we all are hopeful that the committee's recommendations will be adhered to by the government. That could help SEZs become engines of growth to create more employment. This committee will also recommend for removal of the sunset clause.
What are your views on the future of SEZs in India under the GST regime?
The GST will help the industry grow. Alignment of GST with SEZ rules is going on, and we hope that there will be no major hurdle for SEZs to grow under the GST.