PAC calls for review of SEZ policy

The Public Accounts Committee (PAC) of Parliament has recommended a “serious reconsideration” of the Special Economic Zone (SEZ) policy, due to persistent complaints of it degenerating into a scheme for easy land-grabbing, coupled with tax incentives benefiting only a few.

In its 13th report, the PAC, headed by BJP leader Murli Manohar Joshi, has said SEZs had been blatantly violating laws and producing phony data on the number of exports done. Besides, the foreign exchange earned has resulted in huge loss of revenue for the government.

“In view of the persistent complaints that SEZ had degenerated into a scheme to garner land at advantageous prices and obviate taxes without expected multiplier benefits, the committee are of the considered opinion that continuation of the scheme in its present form needs serious consideration,” the report stated.

Highlighting concerns that were raised by the Comptroller and Auditor General, the report stated SEZs had resulted in a revenue loss of Rs 1,971.39 crore, which “could not be recovered in the absence of enabling provisions”.

The committee also found that of an overall export of Rs 7,149.23 crore made by 22 units, the actual content of export was Rs 1,999.27 crore, while the remaining Rs 5,149.96 crore has been earned on account of sales made to the area outside the SEZ or domestic tariff area (DTA). The committee said it negates the very provision of boosting foreign exchange earnings of the country, which is one of the main objectives behind SEZ development.

An effective mechanism to monitor the performance of SEZs and the earnings made by them need to be put in place, the committee said.

PAC also said development of SEZs had put DTAs in a spot, as units located within SEZs can sell their goods and services in DTA on payment of applicable duty with no requirement to payback the duty forgone on inputs that are used in the clearance of products into DTA. Units that are exporting from DTA do not get such an advantage.

“The committee strongly recommends that the SEZ scheme needs a thorough reappraisal with a view to provide a level playing field for the indigenous industry as well,” the report said.