New Delhi: Developers of special economic zones (SEZs) may soon have to present a development plan for 20-25 years and ensure that at least 50% of the those employed in facilities inside these tax-free enclaves reside within them.
According to draft guidelines for the development of SEZs issued by the commerce ministry, developers would be required to use 10% of the nonprocessing area to build low-cost houses as per the National Urban Housing Policy, 2007; these houses are to be allotted to those employed in the zone.
SEZ developers have been asked to send in their comments on the draft guidelines by 15 September.
“Keeping in view the fact that a number of approved SEZs are at various stages of implementation and based on experience gained so far, formulation of certain broad guidelines to govern the development of SEZs has been considered appropriate to ensure environmentally sustainable, well-planned development of the SEZs,” the ministry said. The commerce ministry has recently also issued draft guidelines to make SEZs environment-friendly.
Self-contained? A file picture of a farmer working near an SEZ site in Baddi, Himachal Pradesh. Harikrishna Katragadda / Mint
L.B. Singhal, director general of the Export Promotion Council of Export-oriented Units and SEZs (EPCES), said the draft guidelines do not intend to change the existing SEZ Act. “The new guidelines will serve as a benchmark for SEZ developers and provide guidance regarding facilities that need to be provided in SEZs.”
The ministry is yet to decide on whether to make these guidelines mandatory. “Once we receive the feedback from the developers, the commerce ministry will take a final view whether to make it mandatory or to keep the guidelines advisory in nature,” Singhal said.
EPCES had organized a meeting in New Delhi on Monday to discuss the proposed guidelines. Singhal said SEZ developers who attended the meeting were “appreciative” of the government’s move.
“This is a welcome initiative. This provides a uniform scale for all SEZ developers and clears the grey areas, which were earlier open to various interpretations,” said Sameer Bhatia, senior director and national leader, SEZ advisory practice, Deloitte Touche Tohmatsu. “The emphasis under the new guidelines is to make SEZs self-contained entities and dependent on resources within the zone.”
Bhatia, however, added that the proposed housing requirement makes more sense for multi-product SEZs. “Its viability for sector-specific SEZs may be examined,” Bhatia said.
India was among the first countries in Asia to recognize the effectiveness of export processing zones in promoting external trade; Asia’s first such zone was set up in Kandla, Gujarat, in 1965.
With a view to overcoming shortcomings seen in that format, an SEZ policy was announced in April 2000 and a comprehensive SEZ legislation was enacted June 2005, which came into effect on 10 February 2006.
The country’s tax-free enclaves have attracted foreign direct investment of at least Rs10,900 crore in the past three years, minister of state for commerce Jyotiraditya Scindia told the Rajya Sabha recently. In 2008-09, exports from such zones were worth Rs99,689 crore.