Central Govt Implements Kalyani Committee Recommendations for SEZ

There were 7 Central Government Special Economic Zones (SEZs) and 12 State/Private Sector SEZs prior to the enactment of the SEZ Act, 2005. In addition, 421 proposals for setting up of SEZs in the country have been accorded formal approval under the SEZ Act, 2005. Presently, 354 SEZs are notified, out of which 240 SEZs are operational.

However, between 1st April, 2008 and 29th February, 2020, the Board of Approval (BoA) on SEZs on request of SEZ Private Developers, has approved 101 cases of de-notification of SEZs, subject to the refund of all duties and tax benefits availed by the SEZ Private Developer and on receipt of ‘No-objection’ from the concerned State Government. The reasons given for these request for de-notification include poor market response, lack of demand for SEZ space and change in the fiscal incentive regime for SEZs, etc.

The Government had constituted a Group of eminent persons under the Chairmanship of Baba Kalyani, Chairman M/s. Bharat Forge to study the Special Economic Zone (SEZ) Policy of India on 04.06.2018. One of the terms of reference for the Group was to make the SEZ Policy WTO compatible. The Group submitted its report to the Government on 19.11.2018. A number of recommendations of the Group have already been implemented are as follows:

·      Review specific exclusions proposed in NFE computation in light of “Make in India” initiative, especially projects of economic importance - The recommendation sought that the status quo prior to 19.09.2018 should be retained. Accordingly, the same was implemented through a suitable amendment to the SEZ Rules in March-2019.

·      Sharing of duty exempted assets/ infrastructure between units to be allowed against specific approval – This recommendation was implemented through a suitable Clarification issued on 11.06.2019 for allowing usage of common infrastructure like canteen / data centres etc. among SEZ units against specific approval.

·      Inclusion of indigenous goods in NFE computation should be excluded as there is no foreign exchange outflow on procurement of indigenous goods and same is contrary to the objective of NFE and principles followed for EOUs - The same was implemented through a suitable amendment to the SEZ Rules in March-2019.

·      Formalize “de-notification” process for enclaves and delink its present mandatory usage for SEZs purpose only - This recommendation was implemented through a suitable Clarification dated 28.01.2019 issued to all DCs with copy to State/UTs which relaxed the mandatory usage requirement that stipulated that the denotified land shall be used for SEZ purpose only.

·      Support to enable servicification of manufacturing zones. Allowing manufacturing enabling services companies e.g. R&D services, engineering design services, logistics service – This recommendation has been implemented through a suitable amendment to Rule 5 of the SEZ rules on 17.12.2019 which rendered all existing and future SEZs as multi-sector SEZs thereby allowing for the co-existence of SEZ units of any sector with any other sector.

·      Broad-banding definition of services/allowing multiple services to come together - This recommendation has been implemented through a suitable amendment to Rule 5 of the SEZ rules on 17.12.2019 which rendered all existing and future SEZs as multi-sector SEZs thereby allowing for the co-existence of SEZ units of any sector with any other sector.

·      Review/relax minimum land/built-up area requirement - This recommendation has been implemented through a suitable amendment to Rule 5 of the SEZ rules on 17.12.2019 which relaxed the minimum land area requirement for setting up a multi-sector SEZ from the erstwhile requirement of 500 hectares to 50 hectares.

·      Developer should be allowed flexibility to enter into a long term lease agreement with stakeholders in Zones in line with the State policies - This recommendation was implemented through an instruction No. 98 dated 29.08.2019 which relaxed the earlier stipulation of maximum lease period of 30 years to allow flexibility in lease tenure which would be in line with the maximum tenure allowed under the State / Local Government law / regulations.

·      The application for constructing minimum built up area by Developer or Co-developer beyond a period of ten years from the date of notification of the Special Economic Zone to be considered by BOA on merits of each case - This recommendation has been implemented through a suitable amendment to Rule 5 of the SEZ rules on 17.12.2019 thereby empowering the Board of Approval to consider proposals for extensions for period beyond earlier stipulated ten years based on the merits of each case.

·      Enabling provisions for transfer of approval from one co-developer to other co-developer – This recommendation has been examined and is being implemented through the mechanism of Board of Approvals which examines and approves such proposals on the merits of each case.

·      Funding mechanism for last mile connectivity for SEZs - A mechanism for funding such requirement of last mile connectivity infrastructure has enabled through the existing scheme of TIES which has been clarified through suitable instruction to Development Commissioners in Jan-2020.

Besides the following steps have also been taken towards enabling ease of doing business and enhancing flexibility:

·      Delegation of powers to Development Commissioner for shifting of SEZ unit from one SEZ to another within their jurisdiction – Earlier such proposals for shifting of SEZ units from one SEZ to another were processed and approved at the level of Commerce Secretary which has now been delegated to the level of jurisdictional Development Commissioners.

·      Enable a trust to be considered eligible to set-up a unit in a SEZ, including a unit to be set-up in the International Financial Services Centre (IFSC). This will also provide flexibility to GoI to include any entity that may be required to be notified from time to time to set-up a unit in a SEZ

·      Setting up of cafeteria, gymnasium, creche and other similar facilities / amenities allowed to SEZ units – The request of SEZ units to set up facilities such as cafeteria, gymnasium, creche and other similar facilities / amenities were allowed through a suitable Instruction dated 11.06.2019.

·      Revised guidelines for Work from Home policy – The revised guidelines were enabled through an amendment to the SEZ Rules in March-2019 to allow for employees of SEZ units to work from home.

·      Uniform list of services to SEZ – This provides for a broad list of input services that could be utilized by SEZ units for their day-to-day operations, thereby avoiding the requirement of the units to seek permission of Development Commissioners for each such instance.

This information was given by the Minister of Commerce and Industry, Piyush Goyal, in a written reply to the Rajya Sabha on 20 March 2020.