With exports from special economic zones (SEZs) seeing a sharp decline and the number of applications for denotification of approved SEZs on the rise, the commerce ministry plans to revisit the SEZ policy to make establishment of such zones easier over smaller parcels of land, encourage optimal utilisation of land and help set up information technology SEZs in smaller cities and towns.
The policy seeks to address the issue of sectoral broad-banding of SEZs to allow similar manufacturing and services sector industries to tap into the synergies arising from scale of operations and infrastructural requirements. According to the ministry, this approach balances the need to optimally use land with the requirements of economies of scale. It would cut transaction costs and time involved in setting up of units.
In another proposed amendment, the ministry is mulling a differential incentives regime favouring the SEZs? movement away from urban agglomerates and encourage such zones in the rural areas.
With IT exports contributing over a quarter of the SEZ exports, the reforms proposed by the ministry involve streamlining the incentives for such SEZs to come up in tier-II and tier-III cities.
The SEZ Act and Rules were notified in 2006 and since then approvals have been granted for setting up of 589 SEZs out of which 389 have been notified. Further, physical exports from the SEZs have increased from R2.2 lakh crore in 2009-10 to R3.1lakh crore in 2010-11, registering a growth of 43.11%.
The need for a re-look at the policy became essential as the growth in exports from SEZs showed a sharp slowdown from over 121% in 2009-10 and 43.11% in 2010-11 to only 15.39 % in 2011-12. Moreover, there has been a significant increase in the last two financial years of the number of applications for de-notification of approved SEZs. Out of the total 47 requests for de-notification of SEZs, 37 have been approved in 2010-11 and 2011-12. This is in addition to the number of withdrawal applications for formal and in-principle approvals granted to SEZ projects.
The policy will also look at reducing the land requirement norms for setting up SEZs over smaller plots of land.