Dear Members,

I am sure most of you, rather, almost all of us, were expecting some immediate reforms in our SEZ Act in the budget. EPCES was following up with the Ministry on a daily basis for the proposed amendments which would benefit the industry significantly and encourage more units into SEZs. Globally, manufacturing SEZs in one form or another are flourishing not because of tax exemptions but due to the flexibility of operations within their zones. In the past, EPCES suggested to the MOCI the necessity of allowing SEZ units to function as per global standards and permitting units to sell their products in DTA by paying taxes on a duty foregone basis. This will help the units to utilize their capacity fully. The same applies to IT SEZ units.

Presently, most of the IT SEZs are half-filled. Post-COVID, a maximum number of IT units are working from home and are reluctant to return to the offices. Nevertheless, some larger companies are insisting that employees return to offices. However, the main challenge of transacting in DTA by SEZ IT units remains. Unless the government amends the rules, it will be very difficult to attract units into IT/ITES SEZs. The recent introduction of Rule 11B of SEZ Rules, 2006 read with Instruction No. 115 dated 09.04.2024 has few takers. The amendment in SEZ rules allowing IT units to service domestic businesses in INR will attract more IT units into SEZs.

I personally attended a couple of meetings organized by the Ministry where I had the opportunity to interact with the Hon’ble Minister. I emphasized the need to fulfill the wish list outlined in SEZ 2.0, DESH Bill. Further, for the benefit of the export industry, I requested the CIM to address a few issues. Among the main issues are to keep EOUs and SEZs outside the purview of DGFT notifications for changes in import policy from “FREE” to “Restricted” in view of specific provisions in SEZ rules and FTP, and export duty should not be levied on DTA supplies to SEZs as these inputs are used for manufacturing export products on which there is no export duty. Besides a few operational issues, it was also requested to encourage “One District One Product” which will contribute to regional development and create good employment.

The Economic Survey 2024 outlined that India’s real GDP grew by 8.2% in FY 2023-24 and predicts a growth rate of 6.5%-7% conservatively for FY 2024-25. Retail inflation declined to 5.4% in FY 2023-24 as global issues, supply chain disruptions, and monsoon effects have been contained through effective policy and administrative mechanisms. India’s global share of goods exports is at 1.8%, and the trade openness indicator rose to 45.9%, contributing significantly to our growth. This underscores the importance of the government’s PLIS in boosting our exports in electronics and other sectors. While the services sector continues to be a significant contributor to India’s growth, accounting for about 55% of the total size of the economy in FY 2023-24.

I also wish to share that the World Free Zones Organization is celebrating its 10th anniversary in a very big way in Dubai. The event will take place in Dubai from 23 – 25 September 2024 under the new name World FZO 10th World Congress. This decision was made in the best interest of the event and its participants. EPCES is planning to organize an International Workshop on Realizing the Economic Potential of Free Trade Warehousing Zones in India in the second or third week of August. It will be a good opportunity to network with global export houses and units. I will share more details shortly once we hear from World FZO.