Govt relaxes outsourcing norms for manufacturing units in SEZs

Manufacturing units have stated that the move will help facilitate manufacturing processes and augment exports

Manufacturing units in SEZs can now sub-contract work for up to three years, instead of just one year allowed so far, as the government has relaxed the norms to help boost shipments from special economic zones.

The request for relaxation came from large manufacturing units which have stated that the move would help facilitate manufacturing processes and augment exports.

"It has been decided that sub-contracting of production or any production process by large manufacturing SEZ units to domestic tariff area (DTA) units may be granted for a period up to 3 years at a time," the commerce ministry has said.

However, the relaxation would apply to only those manufacturing units that have substantial exports with average annual shipments of Rs 1,000 crore or more in at least two out of four years.

"The units should have an annual average export of not less than 51% of its total turnover in the block of 5 years. The Units should have an un-blemished track record and no penalties against the unit for any violations...Should have been imposed," it said.

It also said that the DTA unit (unit outside SEZ) to which the sub-contract is to be awarded should be registered with the central excise department.

Special Economic Zones (SEZs) which emerged as major export hubs and investment destinations started loosing sheen after the global economic crisis and imposting of minimum alternate tax.

Exports from these zones declined by 4.1% during the first quarter of the current fiscal. The decline has impacted job creation in these zones.

However, the government is taking steps to revive interest of investors for SEZs. Recently, it had unveiled a package of reforms including easing of land norms to revive investments in SEZs.