The regulation, it suggested, should be based on trust that punishes violators quickly and effectively. In a bid to accelerate economic growth and achieve 8 per cent gross domestic product growth rate during the Plan period, the draft report said, the government should introduce new labour laws in SEZs incorporating work ethics. It made a case for abolition of contract labour restrictions and introduction of multiple and night shifts for workers of both sexes.
According to the draft report, which will be modified before being placed before the National Development Council (NDC) for approval, there should be an integrated unified regulator in SEZs. The regulator should deal with all aspects of regulation including pollution, environment and labour safety.
The report said that in SEZs there should be no reservation for the Small Scale Industries (SSIs) and government should allow entry of private companies in all areas including those reserved for the public sector.
The report further said that there should be no government control of essential services like supply of power in the SEZs. These zones should also be freed from state and local restrictions like urban land ceiling, retail trade norms and real estate guidelines.
On the fiscal side, the report said, SEZs should be exempted from minimum alternative tax (MAT) and dividend tax. It added that export profits should also be exempted from corporate income tax for a specified period.
The draft report has also pleaded for removal of all capital account restrictions and control, and the need for prior permission of government for undertaking business within the zones. However, it said, the reporting requirements and regulations relating to inflow of foreign exchange, debt etc. into the domestic tariff area be retained.
International and domestic financial institutions operating with the zones, the draft report said, should be subject to international regulatory norms and not the one which are unique to India. In practical terms this means that FDI limits on banking, insurance and non-banking finance companies should be done away with. Also these institutions should not be subject to directed credit guidelines and statutory liquidity ratio (SLR) norms. The cash reserve ratio (CRR) for these institutions should be brought down to internationally comparable levels.
The report also suggested that customs, excise and service tax laws be modified so that all transactions within the SEZs are exempt and transactions of DTA with the SEZ can be treated as if they are with a foreign country. Similarly, it said, the state sales tax laws be modified, so that within the SEZ only sales of resident consumers (not producers/traders) are taxed.