Developers get a breather on the use of SEZ support infra

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New Delhi | Updated: Jan 10, 2015 10:45 AM

SEZs attracted investment worth Rs 2.36 lakh crore in 2012-13 while providing direct employment opportunities to over 11 lakh people.

India SEZ, India manufacturingThe government has been trying to bring the SEZs back to life to give a push to manufacturing. (Reuters)

In an attempt to revive the manufacturing sector, the government on Friday allowed the dual use of non-processing zones in special economic zones (SEZs), essentially permitting SEZ developers to use the support infrastructure like schools and hospital for people living outside the SEZs as well.

The SEZ is divided into processing and non processing zones, wherein the production of goods and services takes place in processing zones while the non-processing zones is used for creation of support infrastructure. The dual use of infrastructure for non-processing zones is a long-pending issue with the SEZ developers and units. Last year in November, the prime minister’s office had asked the commerce and finance ministries to address the concerns on a priority basis.

According to the notification issued by the commerce ministry, the non-processing area in SEZs would be divided into two parts wherein the social or commercial infrastructure part can be accessed by entities both within and outside the SEZ while the second part would be marked exclusively for SEZ entities. Also, no exemption or concession would be provided for creation of the infrastructure which would be used by entities both within and outside the SEZ. If central and state taxes were already availed for any infrastructure creation it will have to be refunded in full.

D Prabhu, secretary of Texpreneurs Forum, said, “This will help the SEZs in attracting big investment and will allow the companies to utilise their capacities fully”.

There had been concerns that though essential, the support infrastructure is often not viable due to low capacity utilisation as it was not allowed to be used by entities outside the SEZs. The developers had been arguing that these conditions were impractical.

The government has been trying to bring the SEZs back to life to give a push to manufacturing. According to the available data, SEZs attracted investment worth Rs 2.36 lakh crore in 2012-13 while providing direct employment opportunities to over 11 lakh people. Exports from SEZs grew by about 31 per cent in FY13.

Further, the infrastructure exclusive for SEZ entities will be “bonded and physically segregated from the Domestic Tariff Area (outside these zones)”. This will be eligible for exemptions, concessions and drawback subject to a go-ahead from the Board of Approval. The developers will have to clearly indicate the non-processing area where the social and commercial infrastructure is proposed for outsiders. For the housing purposes, the developer cannot use more than 25 per cent of the non-processing area while for the commercial infrastructure, the cap is 10 per cent of the area.

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