Jawaharlal Nehru Port Trust, has planned a multi-product Special Economic Zone on 277 hectares of land near the port. Neeraj Bansal, Chairman In-Charge, JNPT, shares his insights on overall SEZ scenario across India, prospects for the port apart from the economy, measures for revival of investors interest in SEZ, etc. Excerpts:
Please tell us the objective of JNPT behind setting up SEZ?
Jawaharlal Nehru Port´s overall development objective and vision focusses on diversification of cargo handling operations, thus giving a thrust to national maritime trade. Apart from this, it also concentrates on improving logistics efficiency at the port, a move that will contribute to a quantum leap in the port´s performance and global competitiveness. In line with the overall growth vision, the port is keen on enhancing productivity and throughput by creating a complete supply-chain for value-added services for the EXIM trade through the proposed SEZ.
Can you please apprise us about the status of the project? Has any consultant been appointed for the project? Has any tender been floated for the development of the project?
The Ministry of Commerce & Industry granted formal approval for setting up the SEZ at JNPT on 16th July 2014. Further, the project also got the much necessary environmental clearance in December 2014.
JNPT along with M/s Ernst &Young LLP is working on the overall SEZ project structuring, planning, marketing, and developer selection. The detailed master plan consisting of engineering design prepared by M/s L&T Infrastructure Engineering Ltd for the project is ready.
The process for selection of an EPC contractor for development of the planned infrastructure is in progress and is expected to be completed by September 2015. The project is currently being expedited on fast-track basis. We expect it to be commissioned by the end of 2017.
How will this project help the port to bring in more revenue?
JNPT´s goal is to make the port one of the top ten global container ports by 2020-2021. For that, we are looking forward to giving a new facelift to the port infrastructure, and elevating the overall container handling capacity at the port. Ultimately, these plans of port modernisation will generate job opportunities. As part of the objective, the cornerstone for the first phase of the multi-product Special Economic Zone (SEZ) project was laid on 16th August 2014. The JNPT SEZ will be developed on more than 277 hectares of land near the port as a self-sustainable integrated development project. We expect that the proposed SEZ will create about 150,000 direct and indirect jobs.
The SEZ envisages housing export-oriented units in the focus sectors of engineering, electronics, IT or ITeS, healthcare, apparels, and free trade warehousing zone (FTWZ). These units, by nature of their operations, would contribute to augment overall traffic at the port, ultimately helping to capture demand growth. It would also help to capitalise on the model of integrated business. The future expansion plans of JNPT such as the fourth container terminal and Multi-Modal Logistics Park would provide the capacity bandwidth to the private players for fostering unhindered growth.
What quantum of investments do you require for development of JNPT SEZ? Please tell us about the financial model and the stakeholders involved in the project?
We have estimated capital expenses of approximately Rs 500 crore for developing foundation framework and basic infrastructure for the SEZ. The project would be outsourced to an EPC contractor and will be funded by JNPT. Further, we have planned a total investment of Rs 4,000 crore that will come from private investors as well as public sectors. The investors and stakeholders involved in the project include an array of business houses- ranging from shipping to manufacturing- operating on a global scale.
What kind of opportunities will the project generate for the port as well as for the economy?
The SEZ project is one of the key infrastructure development plans of the Ministry of Shipping. As I mentioned earlier, apart from creating direct and indirect job opportunities of around one lakh to 1.5 lakh, the project will provide further scope for upgradation of local resources aligned with the requirements of the units being set up. JNPT will benefit from the development of a complete eco-system of self-sustainable logistics value chain. Ultimately, it will give an impetus to the port´s throughput, capacity utilisation, and turnaround time.
After the imposition of MAT on SEZ developers and units, many developers are surrendering their projects. In such a scenario, will JNPT´s proposed SEZ project prove successful?
The proposed SEZ at JNPT has a very unique pro¡position in terms of logistic connectivity to the largest container port of India, proximity to centres of pro¡duction & consumptions and financial capital of India. The benefits of this SEZ are further multiplied by its nodal position in India´s mega infrastructure projects such as Delhi-Mumbai-Industrial Corridor (DMIC) and Dedicated Freight Corridor (DFC), so as to offer easy and hassle-free access to various industrial nodes of the country.
Post the foundation stone of the SEZ being laid by Prime Minister Narendra Modi in August 2014, the project has gained national importance and visibility within the entire investor fraternity. In spite of dwindling interest of investors across the country, the initial market pulse for JNPT´s SEZ looks positive, especially due to its geographical advantage. In addition to the existing tax exemptions and duty waivers already available to SEZ developers or units, this SEZ by virtue of being a port-based development, shall ensure a unique operational cost-saving benefit for unit holders; thus giving more confidence to the investors or units.
Do you think SEZ as a concept is economically viable in India? If yes, then why has it failed in India?
We understand that SEZs in India are going through a rough patch. Investments in new SEZs have come to a standstill, and the existing ones are not attracting tenants or units the way they did earlier. Of the 577 SEZs that received in-principle approvals so far, only 246 SEZs have acquired or purchased land and received the necessary clearances. Among them, only 170 are operational. In other words, not even a third of the approved SEZs are operational. And, of those in operation, few are running at full capacity. However, the National Democratic Alliance (NDA) Government has initiated steps like key economic decisions in order to revive investors´ interest in SEZs. I hope that it will change the scenario in the medium to long-term. In January 2015, the government allowed the dual use of social infrastructure in the non-processing zone of an SEZ.
Further, the operational hassles related to use of duty free scrips have been eased out and consolidated in the recently announced Foreign Trade Policy of 2015. With more foreign companies willing to kick-start operations in India under the ´Make in India´ campaign, monetary landscape is expected to be more investor-friendly in the near future coupled with non-congenial policy. I think all these initiatives definitely make the concept of SEZ more feasible in terms of investment returns and skill development.
SEZ developers are facing many issues like land acquisition, tax and regulatory hurdles. So, according to you, what measures should the government take to revive the interest of developers in SEZ projects?
JNPT is in a unique position with regard to land acquisition for the SEZ. The entire tract of 277 hectares of land is owned by the port. Further, JNPT is in the process of developing the same. On the policy side, few issues and concerns of the trade associations and private players operating in the sector have already been communicated to the Ministry. These concerns include relaxation on goods for re-export purpose, removal of VAT on transhipment goods, easing of refund process for Special Additional Duty (SAD) and other levies by Customs department, relaxation in applicability of permanent establishment (PE) rules of the SEZ Act, etc. We are aware that these concerns have been raised at various discussions and relevant platforms, and these are being actively considered by Ministry of Shipping, Ministry of Commerce, and Finance Ministry for feasible changes or modifications. Even as the Finance Ministry continues to re-evaluate the clauses, the Commerce Ministry has once again begun stakeholder consultations after having relaxed some SEZ provisions in its annual foreign trade policy (FTP). Any move towards positive consideration and implementation of the above concerns will further boost the viability and acceptability of the SEZ.
- Supriya Abhijeet Oundhakar