Free Zones in the UAE and industry clusters such in China have been a huge success. However, free zones here still have a long way to go to reach this level of success. The government has taken some steps in this direction by announcing some measures to strengthen the SEZ policy. Talking with Garima P, EM Sudarsana Natchiappan, Minister of State for Commerce & Industry, Department of Industrial Policy and Promotion, elaborates on the government initiatives in this direction.
Although SEZs in India have grown in export volumes, developer interest has palpably declined. How your recent measures address this problem?
In order to further strengthen and promote investments, the government has recently announced a package of reform measures for the SEZ policy and operational framework which was subsequently amended vide GSR No 540 dated 12 August 2013. The highlights of the measures are given in the table.
What opportunities exist for investors in the existing Free Trade Warehousing Zones (FTWZs) in India?
The scheme envisages duty-free import of all goods (except prohibited items) for trading and warehousing. Such goods are permitted to be re-sold/re-invoiced or re-exported. Goods warehoused by FTWZ units are also permitted to be sold in the DTA on payment of applicable customs duties. Value added services such as pick and pack, kitting, assembly of CKD and SKD kits, packing or re-packing with or without processing, labelling, quality control, bar-coding etc, as per customer or marketing requirements may be undertaken within the FTWZ.
Further, FTWZs are envisioned on one hand to augment exports by making exports easier with reduced procedures and single window clearance leading to lower transaction costs, while on the other, support growth of domestic manufacturing industry by way of 'Just In Time' (JIT) deliveries for local manufacturers leading to savings in inventory carrying costs, as also enable global vendors to store and manage inventories, closer to Indian and regional markets, thereby creating regional hubs in India leading to additional job creation and investment in our country. Goods in FTWZ have nearly similar tax concessions as for bonded, EOD and SEZ goods. Movement of goods from DTA to FTWZ unit is considered an export eligible for all export entitlements.
Free Zones in the UAE and industry clusters such as Shenzhen in China have turned out to be hugely successful. Can India replicate their success? Has the government taken any steps in the direction?
FTWZs guidelines are under consideration. This would help in creation of logistics infrastructure to facilitate import and export and international trade with logistical and consolidation hubs being established in India.
India's SEZs and (lately) FTWZs have seen some initial success but policy flip-flops and taxation issues have recently deterred developers and exporters. What are those issues and what are the new trends?
Several representations have been received by Department of Commerce from its stakeholders requesting to further streamline and simplify the provisions laid under SEZ Act and Rules, especially in view of the ongoing economic slowdown. However, FTWZ guidelines would help in creation of logistics infrastructure to facilitate import and export and international trade with logistical and consolidation hubs being established in India.
Highlights of SEZ policy measures