Proposal to ease out norms for‘Special Economic Zones’

The requirement to obtain and set up a unit in a Special Economic Zone (SEZ) is laid out in the Foreign Trade Policy. SEZ can be set up in areas where export production could take place free from all rules and regulations governing imports and exports and to give them operational flexibility. Currently, one of the most important aspects for a unit to be categorised as an SEZ is that the net foreign exchange (NFE) which is determined by subtracting the value of imported inputs, input services and capital goods along with the value of all payments made in foreign exchange from the value of exports should be positive. The Government of India has proposed to bring about some changes in the eligibility criteria for SEZ units and link them to investments in research and development, innovation and employment generation rather than the existing NFE in order to align it with global trade norms.

The Government is exploring various alternatives to NEF as it lost a dispute at World Trade Organisation (WTO) when it was challenged by a panel led by industrialist Baba Kalyaniregarding its eligibility criteria for SEZ. A suggestion to revamp the existing policies was made. Though they have appealed the ruling, they will have to replace the scheme with something that complies with the multilateral trade rules.