The government on Thursday sought to re-kindle the sagging investor interest in Special Economic Zones (SEZs) by reducing the minimum land required for setting up these enclaves by half. It also extended the facility of duty-free import of capital goods to exporters from all sectors, as it unveiled the annual supplement to the five-year (2009-14) foreign trade policy (FTP).

Announcing the policy on a day when the trade data released by his ministry revealed that exports in 2012/13 fell 1.8% (a negative growth in exports was last seen in 2009-10), commerce, industry & textiles minister Anand Sharma refused to quantify the fiscal impact of the new incentives, but said these measures would help boost shipments and reduce the current account deficit.

The labour- and capital-intensive engineering and textiles sectors emerged as the major beneficiaries of the FTP measures. Sharma also promised incentives for the labour intensive gems and jewellery sector within a month, adding that he will review the performance of all sectors in October and announce more measures -? including reducing transaction costs ?- to increase exports.

Besides, the minister said the government was ‘actively considering’ the demand of exporters for a R10,000-R15,000 crore Market Development Fund to improve marketing of India’s exports overseas.

Though there was a demand from SEZ developers and units to abolish the Minimum Alternate Tax, the government did not accede to it, citing fiscal constraints and the Direct Taxes Code provisions to do away with profit-linked incentives. However, it permitted transfer of ownership of SEZ units, including sale, after taking into account the feedback from industry that the lack of an ‘exit policy’ was a great disadvantage to invest in SEZs.

Taking into account the acute difficulties in aggregating large tracts of uncultivable land for setting up SEZs, while ensuring vacancy and contiguity, the government reduced the minimum land area requirement for multi-product SEZ to 500 hectares from 1000 hectares and for sector-specific SEZ to 50 hectares from 100 hectares.

The government also did away with the 10-hectare minimum land requirement for IT/ITES SEZs and even relaxed the minimum built-up area requirements for such zones to promote such SEZs in tier-II and tier-III cities.

The new measures are expected to result in a revenue outgo of an additional R1,000 crore, and is expected to take the exports in 2013-14 to around $375 billion, according to Ajay Sahai, director general and CEO of the apex export body Federation of Indian Export Organisations.

The highlights of the FTP supplement included widening of the 2% interest subvention (which is now available till March 2014) to include some textile items and 134 sub-sectors of the engineering sector as well as addition of 126 new products (including from engineering, textiles, electronics, chemicals and pharmaceuticals) under the Focus Product Scheme; and addition of 47 new products (including from engineering, textiles and auto components) under the Market Linked Focus Product Scheme.

In addition to the market and product diversification measures, the FTP supplement included reduced export obligation for units in J&K, widening the scope of utilisation of duty credit scrip, ease of documentation and procedural simplification, incentives for exports of hi-tech products as well as widening of items eligible for import for handloom/made ups and sports goods.

Also, bringing cheer to the hospitality sector, the government permitted tour operators and hotels to import cars, SUVs and all purpose vehicles under the Served from India Scheme (SFIS). These service providers will be entitled to duty credit scrips under SFIS at 10% of free foreign exchange earned during a financial year.