Special economic zone
On the on-set of change of regime at the Centre, the commerce department is all set to inject a big push to the SEZ projects with the withdrawal of taxes like minimum alternate tax (MAT) and dividend distribution tax (DDT), which floundered the special economic zones (SEZs), conceived as specialized enclaves to push country's exports. In this connection, the department is adopting the model of Gujarat, which has the largest notified SEZ land, as a bigger strategy by effecting policy change to revive them and boost manufacturing. The original program provided for a complete tax holiday to SEZs for the first five years and tax at a discounted rate for the next five years. It may be recalled that the 2011-12 Union budget imposed MAT at 18.5% on the book profits of these developers and units located inside SEZs, which made them virtually financially unviable and unattractive for investment. With the change of the government there is going to be stability in the official policy. The Kandla special economic zone in Gujarat has 33 notified SEZs spread over 12,890 hectares of land - the largest notified land area among SEZs. Jubilant Infrastructure, Larsen & Toubro, Adani Power and Reliance are among the SEZs in the Kandla duty-free enclave.

According to sources, the matter was also flagged by the commerce department at a recent Cabinet secretary meeting. The commerce department has asked the export promotion council to list out a five point strategy to make SEZs attractive. With former Gujarat chief minister Modi as the new prime minister and with the change of guard at the centre the manufacturing and job creation will be the key focus areas and this was also made crystal clear in the party's poll manifesto. As per available stats of the total 47,803 hectares of SEZ land the government notified only 17,689 hectares, or 37%, has been put to use so far. Only 185 of the 389 notified SEZs are operational. More over the imposition of MAT and DDT is just the tip of the iceberg as the entire SEZ policy in letter and spirit has been vitiated over the years. The focus-market program helps offset high freight cost and other externalities to select international markets to enhance India's export competitiveness in these markets, but it is not applicable to SEZs. Though SEZs enjoy zero import tariffs they can sell to the domestic tariff area only at full Customs duty of the final product, making their products uncompetitive, a situation that, EPCES says, needs to be assessed. Currently, SEZs enjoy duty-free import and 100% income-tax exemption on export income for the first five years, 50% for the next five years and thereafter 50% of the ploughed back export profit for another five years.