SEZ package in works to push exports

ExportSource: Times of India, Jul 14, 2014

NEW DELHI: Special Economic Zones (SEZs) may have missed out on tax concessions in the Budget but the government is working on a comprehensive package for the enclaves to boost exports, investment and overall economic activity.

Top government officials told TOI that the commerce department, which has been pushing for a revival of the zones, is going to make a fresh pitch for doing away with minimum alternate tax and dividend distribution tax. Unlike earlier, the finance ministry too is not rejecting the proposal right away. “It could not be included in the Budget since the government is working on a package of sorts for SEZs. We will take up the issue with the finance ministry,” said a senior tax department officer, who did not wish to be identified.

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Floundering SEZs to get a boost

Source: The Economic Times, Jun 17, 2014

NEW DELHI: Looking to give a new lease of life to special economic zones (SEZs), the commerce department has strongly pitched for allowing units in the taxfree enclaves to sell part of their production in the local market and the extension of benefits under the Focus Products and Focus Market export promotion schemes.

The department has also lobbied the finance ministry to scrap minimum alternate and dividend distribution taxes for SEZ units. The scheme needs to be overhauled to boost manufacturing in the country,” said a government official, confirming that the three measures cited above ranked high on the department’s agenda for reviving the programme.

More than 60 per cent of the total land notified as SEZs is vacant years after the scheme was launched in 2006. Of the total 47,803 hectares of SEZ land notified, only 17,689, or 37 per cent, has been put to use so far, according to ministry of commerce and industry data. And, of 389 SEZs, only 185 are functional.

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South Africa woos Indian investments in SEZs

Source: The Hindu Business Line, Mar 04, 2014

Mumbai: South Africa plans to offer special incentives to tap investment from India in the special economic zones being promoted across each of its nine provinces. The country currently has four Industrial Development Zones, primarily focusing on exports.

The South African government had already announced various incentives to attract investment, but it is studying various models adopted by different countries, including China and India, to woo more investment.

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Reduction in land area requirement to be game changer for SEZs

Source: Financial Express, Sept 10, 2013

New Zealand: Special economic zones (SEZs), once a major attraction for investors, lost their sheen following a combination of economic slowdown, adverse tax changes like the imposition of minimum alternate tax (MAT) and dividend distribution tax (DDT), and acute difficulty in aggregating large tracts of barren vacant land. A growing number of SEZ developers’ approaching the board of approvals (BoA) to denotify their existing SEZs or giving up their letters of approval has cajoled the BoA to revisit the policy and address investor concerns.

Sensing the need to revive interest in SEZ policy, the government has announced significant reforms by amending the SEZ rules in August. The significant amendment is in relation to the reduction in minimum area requirements. The minimum area required for setting up multi-product and sector-specific SEZs has been reduced to 500 hectares and 50 hectares, respectively. This is a 50% reduction from the earlier norm.

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Easing of rules sees some revival of interest in SEZs

Source: The Hindu Business Line, Aug 22, 2013

New Delhi: Special Economic Zone developers have started taking advantage of the recent relaxation in minimum area norms with three applications for setting up new zones coming in this month and single sector zones applying for change in status to multi-product zones.

But, requests for withdrawal of approvals and de-notification of zones continue unabated as developers say that the Government’s refusal to revoke or reduce the Minimum Alternative Tax and Dividend Distribution Tax imposed on SEZs was making operations unviable.

The three new applications for zones include one for a multi-product zone by Adani Ports in Mundra District, Gujarat, an IT/ITES SEZ by Transcendent Developers in Pune and an Electronics/ITES SEZ by iGate Global in Navi Mumbai.

“After receiving just one new application over the last 12 months, we have received three applications for new zones at one go this month. However, the number of requests for denotification of zones indicates that sentiments have not improved,” a Commerce Department official told Business Line.

The applications will be taken up by the Board of Approval for SEZs in its meeting scheduled on August 30.

The Government, on August 12, relaxed SEZ rules by reducing the minimum area requirement for zones across the board and easing exit norms. There was, however, no change in rules related to MAT of 18.5 per cent and Dividend Distribution Tax of 15 per cent imposed on developers and units three years back.

Discouraged by no changes in the taxation policy for SEZs, as many as seven developers, including a multi-product zone in Pune by Khed Economic Infrastructure, and sector-specific SEZs by Suncity Haryana in Gurgaon, Uttam Galva Steel in Raipur and Vatika Jaipur SEZ near Jaipur, have asked for denotification of their zones. Khed Economic Infrastructure, in its submission, said that it was forced to give up its multi-product zone “due to poor demand for plots in SEZs, adverse impact of MAT and DDT”.

Claridges SEZ Developers, too, has applied for withdrawal of its approval for multi-services SEZ in Raigar due to “changed economic scenario and imposition of MAT and DDT”.

“We are aware that MAT has to come down for a revival of interest in SEZs. The Commerce and Industry Ministry is continuing its talks with the Finance Ministry on the issue,” the official added.

SEZs: In standstill mode

Source: Financial Express, Aug 17, 2013

On Monday, the government rolled out the promised “package of reforms” to boost the country’s exports. The commerce ministry notified the Amended Rules, 2013, for special economic zones (SEZs) launched with much fanfare over seven years ago.

However, real estate developers are not very enthused by the amended policy. The reason, they say, is not just policy, but several other factors that have stifled the growth of a sector, which posted growth of over 121 per cent in exports in 2009-10.
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As per the amended policy, the minimum land requirement norms have been eased, graded scale for minimum land criteria has been introduced, an exit policy for SEZ units has been offered while minimum land requirement for setting up an IT/ITeS SEZs has been done away with.

The minimum area requirement for single-product SEZs has been halved to 50 hectares and that for multi-product SEZs to 500 hectares. The minimum land requirement norm for IT SEZs has been scrapped. They are now subject to only a minimum built-up criteria norm, which is 5 hectares for category B cities such as Jaipur, Ahmedabad, Chandigarh and Lucknow and 2.5 hectares for smaller cities and rural areas. According to the government, the incentive is aimed at pushing IT SEZs into cities with lower densities.

Sector-specific SEZs have also been given the option to add an additional sector for every 50 hectares of contiguous area added. This would allow sectoral SEZs to bring in similar or related sectors under the same zone. Further, SEZs being set up exclusively for electronics hardware, agro-based food processing, biotechnology, handicrafts, the minimum area required would be 10 hectares. The government has introduced agro-based food processing SEZs given the demands by agrarian states including Punjab and Haryana where land is very expensive.

However, despite the relaxed land requirement, analysts, developers and real estate sector watchers say that the move would not mean much in the existing economic scenario, especially with key legislations including the Land Acquisition bill, Real Estate bill, and Direct Taxes Code, pending with Parliament.

Manoj Goyal, director, Raheja Developers, one of the major investors in SEZs, told The Indian Express that SEZs are not struggling because of land size alone. There are several issues plaguing the industry.

“The easing of land requirement certainly helps, but there are other factors which play a major role. The market has been very negative and there are no tenants available. Relief from minimum alternate tax (MAT) was the biggest USP and that advantage is no longer available. Secondly, although the SEZ Act claims single window clearance, it is not being followed,” said Goyal.

He added that economic slowdown in the last couple of years has further deteriorated the industry. “However, small land parcels would be good but only for IT and ITeS sector because now they will be able to go phase-wise, small steps and the financial risk will also come down.

Getting funding for small proposals is much easier,” said Goyal. The government in Budget 2011-12 levied MAT of 18.5 per cent on the book profits of SEZ developers and units, which were enjoying an exemption under the Income Tax Act. Dividend distribution tax (DDT) was also imposed in the Budget. This, according to developers, clearly dented the interest in SEZs.

An official from a leading real-estate company, who did not want to be quoted, said that the relaxed norms will not attract buyers because of the forthcoming General Elections. “The policy uncertainty is at its peak and people are on standstill mode, essentially waiting for the election results. That will be a big decisive development after which they will see the policy direction and start the work,” the official said.

Developers however agree on one point – private equity funds are, for the time being, only saving grace for the real estate sector. For instance, private equity giant Blackstone has already invested around $1 billion in India’s commercial and residential assets in the last two years and is reportedly scouting for more opportunities. Analysts say that even though the PE funds are here to stay, the relaxed norms cannot help much given the moderate demand.

“It is a good move. But real estate here is largely dominated by residential projects.

Commercial demand isn’t much. For developers, this relaxation does not mean much right now,” said Abhishek Kiran Gupta, senior manager, Jones Lang LaSalle India.

With a view to attracting greater foreign investments, the government had announced SEZ policy in April 2000 and until February 2006, SEZs functioned under the provisions of the Foreign Trade Policy. Later, to provide a stable policy regime, the SEZ Act, 2005, was passed and implemented from February 2006 onwards.

The announcement saw frenzied moves from realtors and industries wanting to cash in on the plethora of fiscal sops and ease of doing business offered through the policy. Exports from SEZs saw exponential growth over the seven-year period from 39 per cent in 2003-04 to 122 per cent in 2009-10. However, perennial land acquisition problems, sudden U-turn on fiscal sops and administrative issues adversely impacted what was being seen as an open market within an economy marred by several distortions.

Vikram Bapat, executive director, PwC, said that the policy changes are too little and too late. “Liberalising the area requirement works but what is not clear is the policy direction. The units were coming due to cost arbitrage but now since there is no tax benefit, why would SEZs come up? MAT and DDT have adversely impacted the demand-supply situation. Further, an SEZ has to make commercial sense too,” said Bapat. The Direct Taxes Code had provided for deduction of profits for units commencing operations on or before March 31, 2014. “With no clarity on DTC, the so-called 2014 window is also not clear. There may be a spurt in demand with more clarity,” said Bapat.

Govt eases land requirement norms for SEZ to attract more investors

Source: The Economic Times, Aug 13, 2013

New Delhi: Government made the special economic zones attractive for the investors by notifying relaxations in the minimum area requirements and easing the exit clause for developers on Monday. In line with the announcement made by the commerce and industry minister in April, the amendment in SEZ rules will allow SEZ developers to add one product category on each additional 50 hectares of land.

There will be no minimum area required for IT SEZs, but only a minimum built up area of 1 lakh square meters for the top-7 cities, 50,000 square meters for the next 15 cities and 25,000 square meters for the rest of the cities. “The idea is to give incentives to push these IT SEZs out of the big cities and explore the less dense cities,” said a commerce department official.

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SEZ exports stood at Rs 1.3 lakh crores in first quarter of 2013-14

Source: IBEF.org, Aug 06, 2013

New Delhi: In addition to Seven Central Government Special Economic Zones (SEZs) and 12 State/Private Sector SEZs set up prior to the enactment of SEZ Act, 2005, formal approval has been accorded to 576 proposals out of which 392 SEZs presently stand notified. A total of 173 SEZs have commenced export. A list showing State-wise distribution of formally approved, notified and operational SEZs is annexed (Annexure-I). No proposal for setting up of an SEZ is pending for approval by Board of Approval.

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RBI reverses forex relaxation for SEZs

Source: Business Standard, Jun 25, 2013

Clamping down on the delays in repatriating foreign exchange earnings, the Reserve Bank of India (RBI) has tightened norms for special economic zones (SEZs), asking them to realise and bring back full value of goods and services to India within a year from the date of export. The sudden slide of the rupee prompted the regulator to notify the norm on June 11. The new directive would build pressure not only on SEZ units, but also on their clients abroad to make faster payments.

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Govt may scrap SEZ policy

Special-Econmic-zoneSource: Business Standard, Jun 24, 2013

New Delhi: Plagued by a series of controversies and scams, it seems, the government is finally planning to do away with the Special Economic Zone (SEZ) programme it had launched in 2006 with much fanfare.

While the existing SEZs will continue to remain operational, those approved might not be notified and developers be allowed to utilise the land for other purposes.

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