Maran opposes export obligation on SEZ units

AMITI SEN & DEEPSHIKHA MONGA

TIMES NEWS NETWORK[ TUESDAY, FEBRUARY 13, 2007 05:04:06 AM]

NEW DELHI: Information technology minister Dayanidhi Maran has opposed
finance minister P Chidambaram’s suggestion of imposing an export
obligation on SEZ units. Mr Maran has argued that imposition of an
export obligation may act as a deterrent for SEZ investments in
IT-enabled services and telecom sectors. The FM had made a case for
imposition of export obligation on SEZ units in the meeting of the
empowered group of ministers (eGOM) on SEZs last month.

Meanwhile, the commerce department has brought to the notice of eGoM
chairman Pranab Mukherjee representations made by a number of formally
approved SEZs — Sri Lanka’s Brandix and domestic pharma firm Medilab —
which have bought machinery and employed people but couldn’t start work
because of the current freeze. The eGoM had put on hold fresh approvals
and notifications of SEZs in its meeting on January 22 till the time it
took a decision on necessary changes in regulations including imposition
of caps and ceilings. “The developers are worried about the future of
investments already made and are seeking an answer,” an official said.

At the eGOM meeting, Mr Chidambaram stressed the need to impose an
export obligation on the ground that while developers were getting
direct tax benefits, technically there was no obligation to export on
SEZ units if they did not import any capital goods or raw materials for
their units.

The present SEZ rules stipulate that all units in SEZs should be net
foreign exchange earners. Mr Chidambaram stated that there should be
some stipulation in the rules for mandatory exports from the SEZ and
developers should not get direct tax exemptions if the units do not export.

According to sources, Mr Chidambaram’s suggestion did not go down well
with the IT minister as he expressed apprehensions that an export
obligation could serve as a disincentive for future investments. Mr
Maran stated that his ministry was trying to attract big investments in
ITEs and telecom sectors from companies which may not focus primarily on
exports. The Nokia SEZ in Tamil Nadu, for instance, doesn’t have plans
to export but it is attracting investments from its ancillaries.

Of the 235 SEZs which have received formal approval from the government,
more than half are in the IT and ITES sectors.Interestingly, the
commerce department’s reaction to the finance minister’s proposal was
milder. While commerce minister Kamal Nath pointed out that an export
obligation cannot be imposed on developers as they only set up the basic
infrastructure, he said that units or SEZ as a unit could have an export
obligation.

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