From Jal Khambata

NEW DELHI: Taking a leaf from China's master strategy in
attracting very huge foreign investments, India announced
establishment of two Special Economic Zones (SEZs) at Pipavav in
Gujarat on the West Coast and at Tuticorin in Tamil Nadu in its
new import-export policy released on Friday.

Gujarat, in fact, will have two SEZs as Union Commerce Minister
Murasoli Maran made a policy announcement to convert
"immediately" four other Export Process Zones (EPZs) of Kandla
(Gujarat), Santa Cruz (Mumbai), Vizag (Andhra Pradesh) and
Cochin also into SEZs even while admitting that they do not have
much scope as they were already fully occupied.

The Pipavav SEZ will be in private sector in an area of about
3,500 hectares already samctioned while the minimum size of the
SEZs has been set at 400 to 500 hectares or more for permitting
more such zones in different parts of the country in the new
strategy planned on the Chinese model to achieve quantum growth
in exports.

Any state government or corporate entity or even an individual
can furnish proposals for setting up such zones. It can be in
public, private or joint sector. SEZs would be under the
administrative control of the Development Commissioner.

The Gujarat Government's original proposal was for a zone of 880
hectares only, Maran disclosed while stating that he would be
writing to the chief ministers to give special facilities to the
units located in SEZs.

Maran said a foreign investment policy announcement would be
made "very shortly" to permit 100 per cent foreign investments
in the units in these SEZs. The only condition for any unit,
foreign or Indian in SEZs, would be that they would have to
export 100 per cent.

Sale by any unit of SEZ in domestic tariff area (DTA), that is
the rest of India, will be permitted only on payment of full
Customs Duty. These units were free to undertake job works for
the DTA units or get their own goods processed in the DTA.

Units which can be for manufacture, trading, reconditioning,
repair, re-engineering or service activites shall be treated as
being outside the Customs territory of the country as SEZs are
not to be subjected to export obligation, pre-determined value
addition or any other restrictions.

The units in SEZs would be able to import capital goods and raw
materials duty-free and would be exempted from terminal excise
duty if the import is from any part of India. They can even make
inter-unit transfer of goods among the SEZ units without any
permission, except that they maintain proper records.

LABOUR LAWS: India, however, still may not be able to match the
biggest offer that China gave to the foreign companies by
setting up not just a few but a score of such special zones
where the labour restrictions of the communist country did not
apply at all.

The labour being the state subject in India, Maran admitted that
the Centre cannot help much as the labour laws of the concerned
state will apply to the SEZs. Asked specifically if the
Government contemplates any drastic changes in the labour laws,
he quipped: "So far no such thinking."

All that he said was that "I am convinced that we must fully
involve the state governments as in China in the export efforts"
and persuade them to review their fiscal policies that hinder
export."

Maran said he would be writing to the state governments to issue
notification under the Industrial Disputes Act to declare units
exporting more than 50 per cent of their turnover as public
untility services, which means ban on strikes, to enable them to
meet their global export commitments.

LURE TO STATES: Admitting that foreign trade being the Central
subject, Maran said the state governments see exports as a drain
on their revenue because they are by law exempt from all local
levies, though it helps in employment generation.

"Perhaps this is the reason why the states of Tamil Nadu and
Kerala have not been in a position to promote exports to the
extent of Sri Lanka has, despite having almost equal if not more
potential for exports," Maran said.

He saw "no reason that the highly developed states of Punjab and
the industrialised state of Gujarat should not be able to match
Pakistan in exports."

Maran is, therefore, trying to find ways and means to motivate
and involve the state governments in export promotion. An export
incentive scheme is the first step with a provision of Rs 250
crores, which will suitably increase in the subsequent years, in
this year's supplementary budget.

Like the Gadgil formula, the states would get funds under this
scheme on the basis of absolute export performance which in turn
they can utilise for complementing export-related infrastructure.

SEZ CONDITIONS: The Export and Import Policy released by Maran
at a Press conference at the Vigyan Bhawan lays down various
conditions for the SEZs. The minimum investment has to be Rs 50
lakhs in building, plant and machinery. The trading SEZ units
shall be required to achieve a turnover of US $1 million in five
years. Other SEZ units are also required to achieve positive
export earnings described as NFEP.

Except for gem and jewellery units, all other SEZ units will be
allowed to subcontract a part of their production in the DTA
(rest of India) with the permission of the custom authorities.
The gem and jewellery units will be allowed to obtain plain
gold, silver or platinum jewellery from DTA against exchange of
gold, silver or platinum of the same purity and quantity in
weight as that of the said jewellery. The DTA units will not be
entitled for deemed export benefits.

All activities of the SEZ unit will be through
self-certification procedure and shall be monitored by a
committee headed by the Development Commissioner.

As regards the units in EPZ which are to be converted into SEZs
like one at Kandla, they will have the option to either become a
SEZ unit or physically move out of the SEZ. END.
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