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G. Srinivasan

Since SEZs entail world-class infrastructure and the additional costs would be very high, infusion of investment on a massive scale including FDI is needed to make the scheme a success.

New Delhi , Feb. 12

THE Group of Ministers (GoM) on the Central legislation for special economic zones (SEZ) under the Chairmanship of the Defence Minister, Mr Pranab Mukherjee, has finalised its position, clearing the path for a unified and stable export-incentive and fiscal policy regime for units operating in these zones, designed to be a magnet for foreign direct investment and enhanced employment opportunities.

Sources in the Government told Business Line here that the minutes and views of the GoM which met once for all here would be forwarded to the Union Cabinet for its final nod, though no official explanation was forthcoming on the reported differences by the Finance Ministry over perpetuating fiscal incentives for longer period to these units operating in these zones.

Other Ministers who took part in the meeting included Mr Shivraj Patil, Mr P. Chidambaram and Mr Kamal Nath. Once the Union Cabinet accords its approval, a Bill would be prepared on the SEZs for introduction in the forthcoming Budget session itself.

Earlier, during the day, the Commerce and Industry Minister, Mr Kamal Nath, while presiding over the Parliamentary Consultative Committee attached to his Ministry, said that since SEZs entail world class infrastructure and the additional costs would be very high, infusion of investment on a massive scale including FDI was needed to make the scheme a success.

He said so far 36 new SEZs have been approved, out of which SEZs at Indore, Salt Lake, Kolkata and Jaipur have become operational and another two at Jodhpur and Moradabad are now ready for operation, while other SEZs are at various stages of implementation.

Stating that a single law was needed to impart stability to the legal framework as also to consolidate all SEZ-related rules and regulations, the Minister said, "FDI can be attracted only if foreign investors see a law in place, indicating a stable statutory backing." Besides, he said, many of the large-format multi-product SEZs have been unable to achieve financial closure, as domestic and foreign financial firms do not feel encouraged to finance SEZ projects in the absence of "a stable legal framework" of the Government as reflected in the form of a Central legislation. He said already six States had their own SEZ legislations.

He clarified in response to a query from members that all supplies to SEZs would be treated as exports.

A background note on the subject circulated to members of Parliament at the meeting said that with a view to achieving the larger objective of generating economic activity and employment through the establishment of SEZs, the important provisions outlined in the SEZ legislation include among others: special fiscal provisions such as exemption from capital gains on transfer of an undertaking from an urban area to SEZs, exemption from dividend distribution tax to SEZ developers, exemption to SEZ developer and units from minimum alternative tax (MAT), Central sales tax exemption to SEZ developer and units on inter-State purchase of goods and domestic clearance of goods up to 30 per cent by SEZ units on the basis of duty foregone on the inputs.

In order to administer the seven extant SEZs set up by the Government, an authority has been proposed to be set up for each SEZ to provide coherent administrative, financial and functional autonomy to these zones. But, no such authority is envisaged for an SEZ established by any person or State Government.

There would be designated courts and a single enforcement agency to ensure speedy trial and investigation of offences committed in SEZs. Alongside, state governments would liberalise state laws and delegate their powers to the Development Commissioners of the SEZs to facilitate single-window clearance.

Currently, 711 units are in operation providing direct employment to over one-lakh people.

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