The revamped Special Economic Zone (SEZ) law is unlikely to see the light of the day before the upcoming Lok Sabha elections, two people aware of the matter said.
The commerce department had sought the Union Cabinet’s nod to bring amendments to the existing SEZ Act, 2005 late last year.
The plan, thereafter, was to introduce the Bill in the winter session of Parliament. Cabinet’s approval remains pending.
“The changes in the SEZ law will be possible only after the Lok Sabha elections.
"The exact time will depend on the priorities of the new government,” one of the persons cited above told Business Standard.
The commerce department had prepared an SEZ (Amen-dment) Bill, as the government believed that a revamp was needed to develop a fresh framework, in-line with the emerging order of global trade, to support the building of industrial parks with world-class infrastructure, and to attract investment in manufacturing.
The idea was also to enable easier integration of SEZs with the domestic market so that firms in the special zones don’t lose out due to restricted market access.
It started with finance minister Nirmala Sitharaman’s 2022 Union Budget announcement that the SEZ Act will be replaced with a new legislation – Development Enterprise and Services Hubs (DESH) Bill – that would cover all large existing and new industrial enclaves to optimally utilise available infrastructure and enhance competitiveness of exports.
While SEZ exports contribute to almost a fifth of the total exports, the government believes that its performance has not been up to the mark and has not been able to attract investments in the manufacturing sector.
This is because of unitary focus on exports, lack of integration with the domestic market as well as the kicking-in of the sunset clause for income tax exemptions.
It is for these reasons that the Centre is trying to overhaul the existing law.
However, the DESH Bill faced tough criticism from the finance ministry’s revenue department over several clauses proposed by the commerce department.
During April-December, exports of goods witnessed a 5 per cent contraction at $45.03 billion and that of services declined by 2 per cent year-on-year at $68.55 billion, according to government data.
Goods exports, in comparison, contracted 5.6 per cent to $317.12 billion during the first nine months of the current fiscal.
Services exports grew 3.5 per cent to $249.92 billion during the same time period.
At a glance
- In Feb 2022, Finance Minister announced that SEZ Act, 2005 will be replaced with DESH law
- Commerce department prepared DESH Bill but faces serious objections from revenue department regarding few clauses
- In 2023, the commerce department then decided to revamp SEZs by amending the existing, instead of a new DESH Bill
- Cabinet approval to bring amendments in the existing SEZ Act, 2005 remains pending
