Even as the Centre has approved a record 513 special economic zones (SEZs) in the country, the developers continue to confront with several key financial issues. According to a report titled ?SEZs in India: Major Leap Forward? by PricewaterhouseCoopers, the developers cannot source funds internationally at much lower costs as SEZ is currently not included in the list of ?infrastructure? or? real sector? for the purpose of raising external commercial borrowings (ECBs).
Besides, the Reserve Bank of India (RBI) classification of SEZ as real estate for the purposes of prudential norms has adverse effect on the cost and availability of finance. In the absence of export of services rules, certain sectors?though earning foreign exchange are currently not entitled to corporate tax benefits (education, medical tourism, travel and tourism and training services).
Moreover, since goods sold from SEZ to domestic tariff area (DTA) are considered import by DTA, full import duty is levied on such sale. Instead of import duty, duty foregone should be levied to make SEZ units more competitive against the DTA. By levying full import duty on such sale, value addition done by unit in the SEZ is also charged to import duty. The PwC report, which was released at the international SEZ seminar organised by Maharashtra Economic Development Council, observed that though the SEZ policy aims at creating world class infrastructure within SEZs, the need for connecting these islands of excellence with other ports, airports and other social infrastructure is not addressed.
According to PwC, the SEZ policy across the globe has been fined tuned over a period of time to meet foreign investors? requirement and has been an important catalyst to FDI success. ?If we want to make India a Global Manufacturing Hub, we need to improve the environment for manufacturing. Given the current political and economic set up, improving conditions nationwide for manufacturing will be difficult,? the report said. The report suggested that it may be a better strategy for India to create an enabling environment in pockets through SEZs with high-quality infrastructure, a liberal and supportive business environment, providing necessary push which the manufacturing sector urgently requires.