SEZ units selling 70% products in domestic mkt: report

Units in Special Economic Zones (SEZs) are selling over 70% of their products in the domestic market, said a Parliamentary committee report today.

Pointing out that the main objective of the SEZ scheme was to augment exports and boost foreign exchange earnings, the Public Accounts Committee, headed by BJP MP Murli Manohar Joshi, said only 28% of the produce is being exported.

"The committee in the course of examination found that out of an overall export of Rs 7,149.23 crore made by 22 SEZ units, the actual export content was only Rs 1,999.27 crore (28%) and the remaining Rs 5,149.96 crore (72%) related to domestic tariff area earnings," the committee said.

It also found that actual physical exports, which augment foreign exchange earnings, were quite dismal.

Beside, it said that the detailed examination of the scheme revealed a number of deficiencies, including compliance weakness relating to policy and procedures governing the management and functioning of SEZ units.

"An additional amount of Rs 1,724.67 crore was foregone or could not be recovered in the absence of enabling provisions," the committee said.

It has recommended that the SEZ scheme needs a through reappraisal with a view to providing a level playing field for domestic industry.

It further said that in view of the persistent complaints that the 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 the continuation of the scheme in its present form needs serious reconsideration".

SEZ units are eligible for 100% tax exemption for first five years, and 50% for the next five. The developers of the zones also avail 100% income tax exemption for 10 years.

Out of the 582 SEZs approved till now, 130 zones are operational in different parts of the country. Exports from SEZs during April-December this fiscal grew by 47% to Rs 2,23,132 crore over the same period last year.