Budget 2019: No support for CEZ, fiscal allocation to ship min down by 2%

India may have to wait before it sees its first Coastal Economic Zone (CEZ) taking concrete steps as the government didn’t announce any major fiscal incentive for them during the interim budget of 2019-20.

Even as Piyush Goyal, interim finance minister presenting the budget on February 1, praised India’s blue economy, no measures were announced.

“India’s long coastline has the potential of becoming the strength of the economy, particularly through exploitation of the Blue Economy, to ensure better standards and quality of life for a large number of people living in the coastal areas,” Goyal said.

Sector players were hoping for tax exemption to CEZs on the lines of exemptions given to industries set under Special Economic Zones (SEZ).

According to section 10AA of the Income Tax Act, as incorporated by SEZ Act, 2005, units in SEZ will be eligible for a deduction of 100 percent of export profits for the first five years, 50 percent of the export profits for the next five years and deduction up to 50 percent of profits as is debited to the profit and loss account and credited to the Special Economic Zone Reinvestment Reserve Account will be allowed for the next five years. The exemption, however, is allowed to units that start working after 2005.

Sector players were waiting for announcement to boost CEZ as the government had, during the last fiscal, pitched them as “coastal employment zones”.

“For CEZs, we are in the process of finalising a policy on how these zones should come up,” a senior government official from Shipping Ministry told Moneycontrol on condition of anonymity.

He had said that the government was renaming coastal economic zones to coastal employment zones in order to show its intent to create jobs in the economy.

As part of Sagarmala Programme, more than 400 projects have been identified for implementation, during 2015-2035, across the areas of port modernisation and new port development, port connectivity enhancement, port-linked industrialisation and coastal community development. Out of these, 199 focus projects are phased out up to 2019.

According to government data, 415 projects will be undertaken of which 189 will be for port modernisation, 170 will be for connectivity enhancement, 33 will be for port-linked industrialisation and 23 will be for coastal community development.

While CEZs would be spatial economic regions comprising of a group of coastal districts or districts with a strong linkage to the ports in that region, CEUs would be specific industrial estate projects with a demarcated boundary similar to the Delhi Mumbai Industrial Corridor (DMIC) nodes. The CEUs will house the industrial clusters and projects proposed within the CEZ.

According to the government, each CEZ will consist of multiple CEUs and more than one industrial cluster can be housed within a CEU. Within each industrial cluster, there can be several manufacturing units. To accelerate the CEU development process, it is proposed that CEUs be prioritised in locations where land parcels are available in areas close to a deep draught port and with strong potential for manufacturing.

As part of the ‘National Perspective Plan’, 14 CEZs have been proposed across all coastal states that are Kachchh, Suryapur and Saurashtra in Gujarat; North and South Konkan in Maharashtra; Dakshin Kanara in Karnataka; Malabar in Kerala; Mannar, VCIC South and Poompuhar in Tamil Nadu; VCIC Central and North in Andhra Pradesh; Kalinga in Odisha; and Gaud in West Bengal.

“Our efforts in the Sagarmala programme will be scaled up and we will develop other inland waterways faster. Our coastline and our ocean waters powering India’s development,” Goyal said.

Centre has proposed to allocate a total budgetary support of Rs 550 crore towards Sagarmala for 2019-20. This is up by 44.32 percent against last year’s budgetary support of Rs 381.08 crore.

The Sagarmala Programme envisages reducing logistics cost and time for domestic as well as exports and import transactions. The government has planned CEZs, Coastal Economic Units (CEUs) and Port-Linked Industrial Clusters under its umbrella Sagarmala Programme.