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Govt to follow Chinese model on SEZ

Sidhartha

Taking a cue from China, the Indian government is planning an array of measures, including simplification of labour laws and treating inputs from domestic tariff areas as exports, to give a fillip to exports and attract more investment in special economic zones.

Commerce and Industry Minister Murasoli Maran would have a special section devoted to SEZs in his Exim Policy speech, officials said. The minister had announced creation of the SEZs as part of the last Exim Policy.

An important announcement expected to be made in this year's policy pertains to treatment of inputs sourced from the domestic tariff area (DTA) as exports by the units in the DTA.

"SEZ units which source inputs from units in the DTA will be eligible to avail his benefit," an official said.

The commerce department has made a proposal in this regard to the finance ministry, which is considering the same.

The commerce department is of the opinion that the existing labour laws are hindering investment in the SEZs and therefore there is a need to simplify the legal framework.

Though this year's Budget proposes simplification of labour laws, the department wants this to be done within the existing legal framework.

In this regard, the commerce department is approaching state governments for simplification of rules in certain matters, like reduction in the number of returns the units are required to file and flexibility in recruitment and rightsizing. The department is also writing to state governments on improvement of infrastructure and sorting out of some state-specific problems.

Also on the anvil are simplified external commercial borrowing (ECB) norms and extension of export earner's foreign currency account benefits for SEZ units. Officials said the Reserve Bank of India had already sent draft guidelines to the finance ministry and a formal notification by the government would follow.

Though Maran may not announce simplification of tax procedures, the plan prepared by the commerce department envisages some measures in this regard. Officials, however, said the changes would be introduced with the next round of sops to be announced for SEZs.

Finance Minister Yashwant Sinha has already announced tax holiday benefits for SEZ developers in this year's Budget. Units in SEZs have also been exempted from anti-dumping and safeguard duties.

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