The Shift from SEZ to DESH and its Economic Impact
The proposal to move from a completely export-oriented manufacturing to allow local sales was proposed in this year's Union Budget
India’s desire to create a global manufacturing hub that could challenge the best in the world is all set to kick-off with the government coming out with draft laws that would replace the existing ones related to the fully export-oriented Special Economic Zones with a more inclusive Development of Enterprise and Service Hubs (DESH) that manufactures for local sales as well.
The move from export-focused centers to comprehensive economic hubs would entail several concessions and ease of restrictions being offered to attract investors who would be able to sell in the domestic markets and do contract manufacture for businesses outside of these hubs, a draft note circulated by the government says.
In addition to fiscal incentives, the discussion note also lists some measures to enhance the ease of doing business as part of the package for the hubs that could be set up by the central government, the state government or as a collaboration between the two. It could also be set up and run by private individuals for both goods and services.
Finance Minister Nirmala Sitharaman had outlined the need to replace the SEZ Act of 2005 during her Budget Speech last February. The draft note also suggests a possible equalization levy on goods or services supplied to the domestic tariff area in order to bring taxes on par with those functioning outside of these hubs.
Based on the inputs from various stakeholders, the government proposes to bring legislation on the move from SEZs to DESH in the monsoon session of the Parliament. According to the note, states would be able to set up boards responsible for the oversight of such hubs.
The draft note takes into account the industry’s long-pending demand to partially denotify areas within an SEZ to free up space in case of reduced demand. The note also emphasizes on a single window integrated clearance mechanism for time-bound approvals for setting up and running these hubs.
The IT SEZs have been demanding partial denotification for a long time as it would free built-up areas within the hub. Media reports also suggested that the union commerce and industry ministry has already started easing the process around denotification of empty spaces beyond 100 million sq.ft built-up area across 250 SEZs in the country.
