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BENGALURU: The government will introduce a new legislation that will replace the Special Economic Zones (SEZ) Act to enable states to become partners in “development of enterprise and service hubs", Union finance minister Nirmala Sitharaman said on Tuesday while presenting the Union Budget for 2022-23.
“This will cover all large existing and new industrial enclaves to optimally utilise available infrastructure and enhance competitiveness of exports," the finance minister said while presenting her fourth budget.
“We will also undertake reforms in customs administration of SEZs and it shall henceforth be fully IT driven and function on the Customs National Portal with a focus on higher facilitation and with only risk-based checks. This will ease doing business by SEZ units considerably," Sitharaman added.
This reform shall be implemented by 30 September 2022.
SEZs have played a vital role in the growth of the IT services sector and have enabled the country’s economic growth. Analysts believe reviewing the laws to make them more flexible and business friendly is a positive as it needs to be reimagined with the current situation.
“Overall, the intent of driving better efficiency and competitiveness, creating new domestic and foreign opportunities, and removing some of the existing challenges is good for the success of SEZs. We need to wait and watch how it unfolds before we can comment fully on the overall benefits and pitfalls of the new legislation. But prima facie, this can complement our IT Services growth," said D.D. Mishra, senior director analyst, Gartner.
“Replacing SEZ act with the new legislation should support the state's participation in driving India’s export engine in the SEZ’s for its next phase," said Nitin Kunkolienker, president, MAIT, the apex body representing India’s IT hardware sector.
The Parliament had passed the SEZ Act in 2005, aimed at attracting foreign direct investment (FDI) and creating a conducive environment for companies engaged in export of goods and services. Since then, the government has approved setting up of 425 SEZs and given in-principle clearance to 35 SEZs under the Act. But only 268 of these are operational, employing as many as 2.36 million people. As the pandemic hit business operations and changed the nature of business in many sectors, changes to existing SEZ rules is seen by the industry as a step in the right direction.
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