With the Finance Ministry cold-shouldering the proposals for giving incentives to special economic zones (SEZs) to revive investor interest in them, the Commerce Ministry is likely to approach the Cabinet on the issue in a last-ditch effort to revive the sagging fortunes of these SEZs.
The Finance Ministry and the Commerce Ministry officials have met a number of times on the issue but without any concrete solution emerging. “There has been no word from the Finance Ministry on the issue despite repeated reminders. Keeping in mind the importance of the issue, we are now contemplating going to the Cabinet directly. It is the Cabinet that will take a final call on the issue,” a senior Commerce Ministry official said.
The issue of granting concessions to SEZs is also likely to see strong opposition from the Rural Development Ministry which is against acquisition of land for such ventures that often leads to displacement of people and tardy relief and rehabilitation process. Of late, the SEZs have lost their attraction for the investors following the decision taken by the Finance Ministry to gradually withdraw tax incentives and impose levies such as Minimum Alternate Tax (MAT). The Finance Ministry is learnt to have strongly objected to reducing the minimum area for SEZs and other proposed incentives being contemplated by the Commerce Ministry.
Exports from SEZs touched Rs.3.65 lakh crore in 2011-12 against Rs.2.20 lakh crore in 2009-10. With an investment of Rs.2.02 lakh crore, over 8.45 lakh people have been employed in these zones, according to official figures. The Commerce Ministry has proposed relaxing minimum land area requirement for different categories of SEZs, besides extending the benefits of export schemes to these units. The initial phase of the SEZ scheme, launched in 2006, saw developers lining up in big numbers for projects. But soon after imposition of Minimum Alternate Tax and Dividend Distribution Tax on SEZs in 2010-11, investors started developing cold feet as tax incentives were the major attraction for setting up these enclaves. Also, the Direct Taxes Codes, being considered by Parliament, proposes to do away with the income tax exemption given to them and instead link tax sops to investments made in them. Profit-linked benefits were the main attraction of the SEZ scheme.
