NEW DELHI: The "India-specific'' rules and legislation for setting up special economic zones come into effect on Friday, giving rise to hopes that investment of over Rs. 100,000 crore will flow into these areas to provide employment for over five lakh people. This upbeat outlook on the SEZs was given here on Thursday by Commerce and Industry Minister Kamal Nath, who said exports from these areas were likely to rise by 25 per cent in the current fiscal.

The Minister felt that the coming into effect of the SEZ Act and the rules would provide comfort and instil confidence in prospective investors. Till now, SEZs had been operating under the provisions of the foreign trade policy and were eligible for fiscal incentives.

"With the Act and Rules in place, it is expected that many large format, multi-product SEZs that have so far been unable to achieve financial closure will now quickly move towards such closure,'' he said.

Besides, he said, the SEZ rules provided for drastic simplification of procedures and single window clearance on matters relating to Central and State governments along with income-tax exemptions for 15 years. They also provided for setting up multi-product and product-specific zones while also making provisions for services sector SEZs.

Addressing a press conference here, he said it was expected that this would trigger a large inflow of foreign and domestic investment in SEZs in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities. Already, he said exports from the existing SEZs were $4.08 billion during 2004-05 and were expected to cross $5 billion in the current fiscal. Over the next five years, he said, exports were expected to reach $10 billion.

Mr. Kamal Nath clarified that there would be no relaxation of labour laws in these zones though some States had sought relaxation of these provisions. Other laws of the land would also prevail, but for the purposes of customs duty levies, he said the zones would be treated as foreign territory. Products from these zones could also access the domestic tariff area (on payment of appropriate duty), he said.

India-specific rules

Replying to questions, he expressed confidence that foreign direct investment flows would rise in the SEZs now that the rules and the Act had come into effect. In fact, he expected "heavy investments'' in sectors like IT, pharma, bio-technology, textiles, petrochemicals and auto components. Apart from direct employment potential, he said, there would be indirect employment during the construction of these SEZs.

Regarding approvals, he said 51 SEZs had been given formal approval while another 66 had been given "in principle'' approval, bringing the total to 117 SEZs.

He noted that there was a difference between the Chinese SEZs and the Indian ones, including in regard to size. It was not possible to have zones covering thousands of hectares, he pointed out, owing to density of population plus other factors in this country. In this context, he said the rules had to be made "India-specific," taking into account conditions prevailing here rather than in China.

UNI reports:

The minimum area requirement for multi-product SEZs would be 1,000 hectares and for the service sector zones 100 hectares.

However, SEZs for specific industries like gems and jewellery, bio-technology and IT can be set up on 10 hectares.

The minimum area requirement for multi-product zones has been reduced to 200 hectares and for sector-specific SEZs to 50 hectares in the case of certain States like Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu and Kashmir and Goa.

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