Narendra Modi plans booster shot for SEZs

Jun 20 2014, 15:20 IST
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SummaryThe Narendra Modi government, whose 100-day agenda is set to be finalised next week, may attempt to reverse the special economic zones' (SEZ) journey downhill, a move in conformity with its prioritisation of urbanisation, infrastructure and defence projects.

The Narendra Modi government, whose 100-day agenda is set to be finalised next week, may attempt to reverse the special economic zones' (SEZ) journey downhill, a move in conformity with its prioritisation of urbanisation, infrastructure and defence projects.

Principal secretary to the PM, Nripendra Misra, is meeting revenue and commerce secretaries on Saturday to discuss ways to revive the SEZs, which apparently lost patronage of the UPA government during the last leg of its tenure, although the relevant law was made by the UPA-I in February 2006.

The Prime Minister's Office is weighing the revenue implications of the commerce ministry's proposal to remove 18.5% minimum alternate tax (MAT) on SEZ developers and units and dividend distribution tax (DDT) on developers (both imposed by FY12 Budget by then finance minister Pranab Mukherjee).

The revenue department, which had in the UPA regime begun to see SEZs as drain on the exchequer, has been made to reconsider its stand, sources said.

The commerce department has long argued that the gains from SEZs to the economy (in terms of infrastructure creation, employment generation and exports) outweigh the notional revenue foregone. With more seamless interaction between the finance and commerce ministries now (commerce minister Nirmala Sitharaman is also minister of state for finance), the task has become easier for the PMO.

Any tax relief for SEZs could, however, come only in the Budget.

The move, pertinently, comes ahead of the second round of meeting called by Modi with secretaries of all central departments next week to give final shape to the NDA government's agenda for the first 100 days.

The meeting is expected to be held after Modi returns from his two-day visit to Bhutan, which begins on Sunday, sources said.

Commerce secretary Rajeev Kher, sources said, would impress upon Misra at Saturday's meeting the worrying facts: that over 21,000 hecatres of land are lying vacant in notified SEZ processing area, the fall in the rate of growth of investment in zones and the shrinking of their exports as also their share in the country's total exports.

After the SEZ Act was notified in February, 2006, exports from these tax-free enclaves had initially grown at a brisk pace (thanks partly to Reliance's export-focused Jamnagar refinery) to touch a peak of $87.5 billion in FY13, but shrank to $82.3 billion last fiscal (The growth in exports from SEZs has plunged from a high of 115%

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