Navhind Times on the Web: Business

Navhind Times on the Web: Business

AP set to follow China in SEZs

UNI Hyderabad May 10: Taking a cue from China, the Andhra Pradesh government is planning to enact a legislation shortly to establish special economic zones (SEZ) in the state to provide a globally competitive and hassle-free environment for exports.

Informing this to UNI here yesterday, government advisor for economic affairs and policy implementation, Mr D A Somayajulu said initially SEZs, deemed to be foreign territory for the purposes of trade and tariff, would be set up in Vishakapatnam and Kakinada on an extent of 1000 hectares each.

One more SEZ near Tirupati with an inland container depot (ICD) was contemplated during the second phase, he informed.

Necessary approvals had been received from the Centre and as much as 25 per cent of the area would be earmarked for developing industrial area for setting up units.

On foreign direct investment (FDI), Mr Somayajulu said 100 per cent FDI under the automatic route was allowed in manufacturing sector in SEZ units except for those making, among other things, arms and ammunition, explosives and narcotics.

There was no ceiling on foreign investments in units making items reserved for SSIS.

Townships with residential, educational and recreational facilities and franchises for basic telephone services in SEZ were also allowed 100 per cent FDI.

Mr Somayajulu said the SEZ units could raise upto $ 500 million US a year. However, no exemption from labour laws was proposed to be given.

Powers under the Industrial Disputes Act and other related labour laws would be delegated to the development commissioner.

Besides, these units would be declared a public utility service under the Industrial Disputes Act.

A single window clearance mechanism would be put in place by delegating appropriate powers to development commissioners of SEZs.

There would no environmental restrictions in SEZs. The units would be provided with water, electricity and other services as sought by them.

The SEZ units would also enjoy full exemption from electricity duty and tax on sale of electricity for self-generated and purchased power, he explained. The units were free to generate, transmit and distribute power within the zone.

No sales tax, octroi, mandi tax, turnover tax and any other duty/cess or levies were payable on supply of goods from domestic tariff area (DTA) to SEZ units.

Turning to obligation of SEZ units, Mr Somayajulu said they had to be net foreign exchange positive. Any company set up with FDI had to be incorporated under the Indian Companies Act for undertaking operations within the country.

Referring to customs and excise duties, he said SEZ units were free to import or procure from domestic sources, duty free, all their requirements, including capital goods and raw materials.

Goods imported or procured locally, duty free, could be utilised over a period of five years.

On income tax, cent per cent exemption was given on exports during the first five years and 50 per cent for two years thereafter.

Reinvestment allowance to the extent of 50 per cent of ploughed back profits and carry forward of losses were also allowed.

Offshore banking units can be set up in these zones.

The units can enjoy the freedom of bringing in the export proceeds without any time limits. Besides, they could also ‘write-off’ unrealised export bills.

SEZ units might sub-contract part of production or production process through units in the domestic traiff area (DTA) or through other EOU/SEZ units.

They can also sub-contract part of their production process abroad, the official said adding that agriculture/horticulture processing units would be allowed to provide inputs and equipment to contract farmers in DTA to help production of goods as per the requirements of importing countries.