New Delhi: Commerce Ministry ask the developers to set up SEZs in less developed states for setting up special economic zones in manufacturing sector and a user friendly regulatory environment to attract investment and ease post-operation investment, said Mr. Wadhawan.

Speaking at an ASSOCHAM-8th International SEZ convention, Mr. Anup, Wadhawan, Joint Secretary in the Commerce Ministry said that although the SEZs are contributing significantly to the country’s exports, there is a need to focus on improving investment climate in the tax-free zones.

Mr. Wadhawan said that “the achievements are below potential. There is huge gap between approved, notified and operational zones is more. SEZs are confined to only 6-7 states, while releasing an ASSOCHAM study titled ‘How to revive the attractiveness of SEZ's in India’.

Currently 589 approved SEZs, 389 are notified and only 153 are operational, added Mr. Wadhawan. The percentage of operational SEZs out of the total formal approvals has gone down drastically in the years 2010, 2011 & 2012 when compared to the previous years of 2008 & 2009, reveals the ASSOCHAM study.

There has been a drastic fall in the number of proposals for setting up new SEZs after 2008. Also, the proportionate requests for withdrawal of proposals before the stage of implementation have gone up since 2008, mentioned the study.

In order to understand the concerns of various stakeholders of the SEZ policy in India, ASSOCHAM done a survey on “How to revive the attractiveness of the concept of SEZs” a common questionnaire was prepared and circulated to all the necessary stakeholders including SEZ Developers, Co-developers, Units, Researchers, Academicians, etc.

In all 865 responses were received, out of which 40% were by SEZ developers, another 40% were by the units operating in SEZs and remaining 20% were from other interested parties, such as consultants, researchers, etc.

Nearly 46% of developers or co-developers have claimed that the policy has fully delivered on exemption of Custom/ Excise duty, while nearly 30% of the developers/ co-developers have claimed that the policy has failed to deliver on the parameter of attracting FDI investments to India.

From the point of view of units operating in SEZs, it was found out that approximately 30% of the units have claimed that the policy has failed to deliver on the parameter of ‘Real Estate cost benefits’, whereas 46% are of the opinion that the policy has fully delivered on the aspect of Custom/ Excise duty exemption. Similar trends were also observed in the responses collected from SEZ advisors, consultants, researchers, etc.

Overall, the stability of the policy is a major concern, with almost 57% of the stakeholders merely convinced about the intended stable policy framework of the SEZ policy.

Over 50% of the stakeholders are moderately convinced about the generation of additional economic activity and creation of sufficient employment opportunities through the SEZ policy. As high as 46% of the stakeholders are of the opinion that the SEZ policy has not been able to create the desired infrastructural facilities and 40% consider that the policy has been unsuccessful in promoting investments from domestic and foreign sources.

A staggering 70% of the respondents are most convinced that the single window mechanism should be a pre-condition for State governments for approval of SEZ projects in that State. This would rid the investors of all the delays in the process of setting up or development of SEZs and hence, would promote the SEZ policy in a strong way.

The cumulative responses from all the stakeholders reveal that almost 70% of the respondents believe that uninterrupted availability of tax incentives has been the single most important factor for the growth of SEZs.

Overall, 76% of the stakeholders believe that the amendment should be first introduced in the SEZ legislation and subsequent amendments should be done in the relevant fiscal statutes to give effect to the amendment made to the SEZ Act. This would provide more credibility and stability to the law relating to SEZs.

“Having a stable policy framework is of prime importance to majority of the stakeholders. The proposed implementation of Direct Tax Code has hampered the interests of various stakeholders who view such changes as a hindrance to the overall interest of a stable, long term, policy framework”, added Mr. Vinay R. Sharma, Co-Chairman ASSOCHAM SEZ Committee.

He also said that issues conforming and land- related aspects such as minimum area requirement, contiguity norms, processing/ non-processing zone stipulations etc. The government should be more liberal in issues relating to the land requirement and provide developers the flexibility to expand across all sectors. This will help in having balanced growth of all SEZ sectors rather than dominance of one particular sector.

 Ms. Anita Arjundas, Chairperson, ASSOCHAM Council said, “the SEZ policy should focus on providing benefits which would help in creating better infrastructure facilities. Hence, the SEZ policy should encourage investments by providing better interest rates than banks so as to make the sector more attractive to the investors. Loans should be made available to SEZ developers and units at cheaper rates which would lead to increased spending in the economy.

She also said that there should be broad-banding of SEZs by way of clustering of similar units to achieve economies of scale in creating and operating common facilities.

Others who spoke during the ASSOCHAM conference included: Mr. R.K. Sonthalia, Past Chairman, EPC for EOUs and SEZs, Dr. Adelhelm Meru, Director General, EPZA, Tanzania and Mr. D.S. Rawat, Secretary General, ASSOCHAM.