Eco Survey calls for privatisation of govt-run SEZs

The pre-Budget survey for 2010-11 today called for privatisation of the state-run special economic zones (SEZs) saying that the money raised could be used for funding social-sector schemes.

It said that the new SEZs have come up mainly in the private sector with no funding from the government.

"Now the time has possibly come to see whether some of the established SEZs which are state-owned could also be privatised," the survey said.

It said that disinvestment in these zones "could not only add to the kitty of the government and release more money for social sector development but could also make these zones more efficient".

Seven central government and 12 state/private sector SEZs were set up prior to the enactment of the SEZ Act 2005.

While exports from central government SEZs stood at Rs 58,037 crore in 2009-10, shipments worth Rs 44,729 crore were made during the same period from the 12 state/private sector SEZs, it said.

Exports from the zones, set up after the Act stood at Rs 1,17,946 crore in 2009-10.

"Exports from new SEZs notified under the SEZ Act 2005, have grown rapidly over the years resulting in the highest share of 53.4% for this category in 2009-10 compared to central government SEZs and state-private SEZs established prior to SEZ Act 2005," it said.

The survey also raised some issues concerning the zones like Direct Tax Code (DTC) and power generation and distribution.

As per the DTC, SEZ developers will be allowed profit-linked deductions for all zones notified on or before March 31, 2012 and units in SEZs that will commence exports by March 31, 2014 too will be given profit linked exemptions.

"Developers and units notified after these dates will only have investment-linked exemptions and not profit-linked exemptions. There is concern about these dates among developers and units particularly in the big SEZs with long gestation time," it said.

It further said that another area of concern is the generation and distribution of power by the SEZ developers or units.

While one opinion is that it should be left to the entrepreneurs to decide whether they would like to provide power as an infrastructure or set up a unit to see power as a good, another view is that power cannot be an infrastructure and can be only a good to be generated and distributed by the unit.

"It may be worth considering appropriate policy to encourage power generation and distribution," it said.