Covid takes heavy toll on SEZs; exports plummet 50 per cent\, over a third of orders get cancelled

Economy

Covid takes heavy toll on SEZs; exports plummet 50 per cent, over a third of orders get cancelled

Amiti Sen New Delhi | Updated on June 02, 2020 Published on June 02, 2020

Units ask government to help ease movement across borders, sort out operational issues

Exports from units in special economic zones (SEZs) fell over 50 per cent in April, while more than a third of the orders placed were cancelled, due to Covid-led disruptions, revealed an internal survey carried out by the Export Promotion Council for EOUs and SEZs (EPCES).

Although the government allowed operations in SEZs to resume in May, albeit with a number of restrictions, manufacturers said the onerous guidelines and the sealing of State borders made it difficult for most units to restart work. Without adequate relaxations, exports would continue to plummet, they added.

“Recently, we sent a circular to all our members asking them to send us information on the exports from their units in April 2020 and the percentage of orders that got cancelled,” Anand Giri, Deputy Director General, EPCES, told BusinessLine.

“We got responses from 104 members. There has been a 51.64 per cent decline in export orders while 36.6 per cent of orders have been cancelled during the month,” he added.

The export data collected by EPCES match the zone-wise data released by National Securities Depository Ltd (NSDL) on IT/ITES services exports and manufacturing exports. According to NSDL data, while exports from IT/ITES zones in April 2020 increased 7.25 per cent to ₹34,022 crore (compared to April 2019), those from manufacturing units fell a sharp 58.63 per cent to ₹10.089 crore.

Operational issues

“There is an urgent need to resolve the operational issues of EOUs and SEZs that are contributing one-third of the national export basket. It has the potential to bounce back from the hit taken during the pandemic, as was demonstrated at the time of the global recession, but needs special attention,” Giri said.

Some requests have already been made, such as allowing SEZ units to sell in the domestic tariff area (domestic market) without paying duties, giving lease rent exemptions and expediting GST refunds. SEZs are now seeking permission for senior employees to move seamlessly across State borders to reach their work places.

EPCES recently wrote to Prime Minister Narendra Modi, pointing out that due to the sudden sealing of State borders, it was very difficult to operate businesses.

“In the NCR industrial areas adjoining Delhi, including Noida in UP and Faridabad, Gurugram and Kundli in Haryana, most of the owners and senior staff live in Delhi...Owners of the factories are unable to get travel permission and find it difficult to reach their factories in the above industrial areas,” the letter stated.

It added that without experienced hands, the risk of defective production increased and, with units already facing losses because of a fall in production and exports, this would could be “suicidal”.

Sealed borders

EPCES now plans to take up the issue of sealed borders with the Ministry of Home Affairs and the Lieutenant General of Delhi, Giri said.

Exports from SEZs increased 12.24 per cent in FY20 to ₹7,87,017 crore, although overall exports from the country declined 4.78 per cent to $314 billion.

Published on June 02, 2020

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