Guwahati: None of the Special Economic Zones (SEZ) proposed and approved for Northeast India have become operational, resulting in no additional economic activity, promotion of export of goods and services or development of infrastructure facilities.
The main objectives of SEZ Act are generation of additional economic activity, promotion of investment from domestic and foreign sources, creation of employment opportunities and development of infrastructure facilities.
“As far as the North Eastern Region is concerned, it may be noted that there are 5 formally approved SEZs in the North Eastern States of India, out of which 4 are notified. As on date, none of them is operational,” says a report of the parliamentary standing committee on Commerce, tabled in the current session of Parliament.
While Nagaland has two notified SEZs, Manipur and Tripura have one apiece. The two SEZs in Nagaland are spread over an area of 340 hectares, the one in Manipur is spread over an area of 10.85 hectares, the Tripura SEZ is spread over an area of 16.25 hectares.
The SEZ rules provide for simplified procedures for development, operation and maintenance of the Special Economic Zones, single window clearance, simplified compliance and documentation with an emphasis on self-certification.
The report notes that SEZ is an attractive proposition for investors due to availability of fiscal and regulatory incentives as well as quality infrastructural support by the Government in these zones. The zones are also crucial for boosting shipments from the country and augmenting job creation.
“The delay in setting up of and operationalising SEZs could be attributed to several reasons, including time taken in getting approvals from statutory and state government bodies, adverse business climate due to changed global economic situation, changes in fiscal incentives, etc,” the Committee states in its report.
The Committee says that setting up of units in SEZs are primarily private investment driven initiatives. As such, the office of jurisdictional Development Commissioners regularly reviews the status of all SEZ and interfaces with developers on a regular basis to provide necessary coordination and facilitation, as required.
The Committee notes that infrastructure-based industrial development, including establishment of SEZs in Northeast states, would get the needful drift through targeted policy that mainly focuses upon the strengths and weaknesses of the Northeast region. It feels that galvanising trade and commerce in the region by leveraging the Act East policy, thus perceiving it as a gateway to East and Southeast Asia, should be the course of action.
The Committee also recommends that the proposed Act of Development of Enterprise and Service Hub (DESH) in place of SEZ Act should be dedicated towards exploring and earmarking export zones in industrially backward states of India, especially the states in the Northeast region and simultaneously promote expansion of trade and trading activity in the region.
It noted the inter-state disparity with major concentration of SEZ activities being located in certain developed states of India. It is also worrisome that merely 268 SEZ units are functioning in the country out of the total number of 358 SEZ units that have been notified so far.
The Committee has stressed on the optimum utilisation of the existing and notified SEZs by making them fully operational and addressing the hitches that undermine their performance. It also recommended an inclusive approach by the Government in establishing SEZs in the country, wherein the areas of core strength of all states should be identified and promoted as avenues with a view to attract investments for establishing SEZ units.
The Committee is of the view that SEZ is an attractive proposition for investors due to availability of fiscal and regulatory incentives as well as quality infrastructural support by the Government in these zones. The zones are also crucial for boosting shipments from the country and augmenting job creation.
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“Termination of direct tax benefits to investors from the sunset date of 1st April, 2021 and imposition of 15 per cent of Minimum Alternate Tax (MAT) would diminish the sheen of SEZs to a considerable effect thereby affecting the growth of these zones. Further, the fate of approved SEZs which are yet to become operational would hang in balance owing to the exhaustion of fiscal incentives,” it says.
The Committee, therefore, recommends the Government to refrain from withdrawing direct tax benefits being provided in these zones until the new legislation replaces the extant SEZ Act of 2005. It also urges the Government to consider extending the sunset clause, especially for those SEZs that have been approved before the sunset date to avoid any adverse impact on the development of these zones.
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