“The SEZ Act of 2005 has significantly achieved its objectives which are compatible with the National Foreign Trade Policy of India. Much needed investments in new activities have been generated leading to income and employment generation and other positive multiplier effects on local economies,” said Pradeep Mehta, Secretary General of CUTS International.
He was reacting to the Discussion Paper on Potential Reform of the SEZ Policy and Operating Framework, prepared by the Department of Commerce, Government of India. CUTS has prepared a set of comments and suggestions on this Policy and submitted it to the Department of Commerce.
“A major concern is that states usually consider Special Economic Zone a central government issue having no or insignificant role for them”, Mehta said. “Studies indicate high correlation among state level socio-economic development, industrialisation and number of SEZ units in a state and this might have some bearing on states’ approach to SEZs,” he added.
There is a myth on account of export obligations under SEZs. That they need sea ports to operate and in the absence of them, SEZs might not be successful or might not fulfil their objectives. Out of 143 operational SEZs in India, more than 125 are in states where there are sea ports.
In the past, the Department of Commerce, Government of India commissioned CUTS to do two studies on the impact of SEZs on local economies, etc. Critically examining the factors impacting the success and non-success of SEZs, CUTS studies argued that frequent changes in policy can be a major factor deterring investors from continuing and making fresh investments in SEZs.
Among others, CUTS has recommended that “a centralised mechanism including a dedicated portal should be created at the central level with sections on each of the states.” “The formation of a state level system/mechanism to ensure smooth functioning of SEZs should be made mandatory. This is especially needed for those states which are yet to create mechanism such as empowered committee for the grant of various state government approvals to SEZs.”
In this submission CUTS has urged the central government “to convince states and take them into confidence on any issue relating to SEZs. For this purpose, a National Coordination Committee on SEZs should be formed with direct involvement of all states and union territories and such as body should come under the supervision of the Prime Minister’s Office.”
CUTS International is a policy research and advocacy think-tank working on economic policy issues of national interest. It is a member of the Working Group on Business Regulatory Framework constituted by the Planning Commission of India under its Steering Committee on Industry for the 12th Five Year Plan. It is also a member of the Planning Commission’s Committee on Boosting Manufacturing Exports.
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