The government, on Thursday, allowed manufacturing units in special economic zones (SEZs) to sub-contract work for up to three years, instead of just one year at present.
The decision was taken following representations received from large manufacturing units, which have stated that the move would help facilitate manufacturing processes and augment exports.
“It has been decided that sub-contracting of production or any production process by large manufacturing SEZ units to DTA (domestic tariff area) units may be granted for up to three years at a time,’’ according to the revised norms of the Commerce Ministry.
However, the Ministry made it clear that the relaxation would apply only to those manufacturing units that have substantial exports with average annual shipments of Rs.1,000 crore or more in at least two out of four years. “The units should have an annual average export of not less than 51 per cent of its total turnover in the block of five years. The units should have an unblemished track record, and no penalties against the unit for any violations should have been imposed,’’ it said. The new norms also stated that the DTA unit (unit outside SEZ) to which the sub-contract is to be awarded should be registered with the Central Excise Department. SEZs which emerged as major export hubs and investment destinations, started loosing sheen after the global economic crisis and imposition of minimum alternate tax (MAT). Exports from these zones declined by 4.1 per cent during the first quarter of the current fiscal which has impacted job creation in these zones.
The government has been in the recent months taking steps to revive interest of SEZ investors. Recently, it had unveiled a package of reforms, including easing of land norms, to revive investments in SEZs.
