Need clear signal to revive economic zones: Eco Survey

The Economic Survey today pitched for giving a "clear signal" to the developers and units of Special Economic Zones as fresh investments have slowed down in SEZs in the recent years.

Once major export and manufacturing hubs, SEZs started losing sheen after the imposition of Minimum Alternate Tax and Dividend Distribution Tax in 2011 on them.

"A clear signal needs to be given for Indian SEZs as fresh investments are slowing down in recent years and the greenfield (new) SEZs have not really taken of full swing," said the pre-Budget document, tabled in Parliament.

It said while the new national investment and manufacturing zones (NIMZs) are being planned, a lot of investment has already been made in SEZs "waiting to be tapped to the full potential".

It added: "There are also areas where SEZs are worse off than domestic tariff area (DTA) units as in case of non- applicability of FTA concessions when SEZs sell in DTAs."

The Commerce Ministry has already asked the Finance Ministry to roll-back the MAT on SEZs, saying that the levy has suppressed the potential of these zones as a tool to promote exports and generate employment.

The Finance Minister is expected to announce some steps to revamp these zones.

The industry too has been complaining that that MAT and DDT on SEZs have dented the investor sentiment as also implementation of the scheme.

In 2011, government had imposed 18.5% MAT on book profits of special economic zone developers and units.

Although government last year announced an incentive package to revive these zones, several developers are surrendering their projects as imposition of taxes has eliminated the incentives for setting up SEZs and units in those zones.

The Export Promotion Council for EOUs & SEZs (EPCES) has said that MAT on SEZs should be exempted or at least reduced to 7.5%.

The Commerce Ministry is struggling to increase exports as the country's shipments in the last three years have been hovering around USD 300 billion.

SEZs contribute about one-third to the country's total exports. They provide employment to about 15 lakhs people.

Of 566 formally approved SEZs, only 185 are in operation. Exports from these zones increased from Rs 22,840 crore in 2005-06 to Rs 4.94 lakh crore in 2013-14.