SEZ, engineering, textiles sectors get sops in Foreign Trade Policy

Last Updated: Thu, Apr 18, 2013 20:25 hrs

The government today announced relief for special economic zones (SEZs) by tweaking the minimum-land-area requirement and allowing change in ownership.

In its last supplement to the Foreign Trade Policy (FTP), 2009-14, the commerce department, however, did not meet the much-awaited demand for doing away with the minimum alternate tax (MAT) on SEZs. Commerce & Industry Minister Anand Sharma said the issue did not fall under his purview and he had conveyed exporters’ concerns to the finance ministry.

The supplement stressed on measures to boost high-value exports of engineering products and the labour-intensive textiles sector. Though the department did not officially put a figure to it, the package announced today could be to the tune Rs 1,500-2,000 crore.

Sharma made changes to the popular export promotion capital goods (EPCG) scheme by merging the zero-duty EPCG scheme, which expired last month, with the three-per-cent EPCG scheme.

Besides, textile exporters also got the combined scheme — a merger of zero-duty EPCG scheme and the technology upgradation fund scheme. The two-per-cent interest subvention scheme for textile made-ups and engineering sectors was also extended.

The government today came to the rescue of exporters facing tough external headwinds by giving a major policy boost to Special Economic Zones (SEZs). Aiming to spur outbound shipments by 10 per cent this financial year, significant measures to propel the engineering and textiles sectors were announced.

Commerce & Industry and Textiles Minister Anand Sharma, while announcing the measures, declined to specify an estimate of the dole. He expressed hope that the measures would boost outbound shipments and help control the spiralling trade deficit, which had reached a record level of $190.9 billion in 2012-13 from $183.4 billion in 2011-12.

The annual review to the Foreign Trade Policy (FTP) 2009-2014 announced today could be Rs 1,500-2,000 crore.

It reduced the minimum land criteria to fulfill the contiguity criteria for SEZ developers. The requirement was reduced by half for multi-product and sector-specific SEZs. For multiproduct SEZs, the minimum land area requirement has been reduced to 500 hectares, from 1,000 ha. For sector-specific SEZs, this has been reduced to 50 ha, from 100 ha.

For information technology (IT) SEZs, which contribute the most to SEZ exports, the minimum land criteria has been done away with. However, SEZ developers would have to fulfill a minimum built-up area criteria. These measures will be applicable for new SEZs.

The government allowed transfer of ownership of SEZ units, including sale, for players who want to opt out. This has been done as the SEZ policy does not have a clear exit route.

The government also tweaked the popular Export Promotion Capital Goods Scheme (EPCG) by merging the zero-duty EPCG scheme, which expired last month, with the three per cent one. This is expected to give a fillip to investment inflows in capital goods. Additionally, for the benefit of textile exporters, the government has merged zero-duty EPCG scheme with the Technology Upgradation Fund Scheme. "This, I hope, will provide a push to our labour-intensive textile industry," Sharma added.

The government also extended the two per cent interest subvention scheme to the textiles and engineering sectors. The Incremental Export Incentive Scheme, introduced in December 2012, was extended till 2013-14.

Sharma said the government would conduct a mid-year review of the export sector, where more measures could be announced.


Minimum land requirement for SEZ developers
  • Reduced to 50 hectares from 100 hectares for sector-specific units
  • Reduced to 500 hectares from 1,000 hectares for multi-product SEZs
  • Minimum land criteria done away with for information technology zones

Export Promotion Capital Goods scheme
  • Zero-duty scheme merged with 3% one; expected to boost investment inflows in capital goods
  • Zero-duty scheme merged with Technology Upgradation Fund Scheme; to help textile industry

SEZ exit route
  • Promoters can transfer ownership of SEZ units, including via sale

  • 2% interest subvention scheme extended to textiles and engineering sectors
  • Incremental Export Incentive Scheme extended till 2013-14; expected to increase exports to the US, Europe, Asia, Latin America and Africa

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