New norms to boost shipments from SEZs

Seeking to boost shipments from Special Economic Zones (SEZs), the government has allowed manufacturing units in SEZs to sub-contract work for up to three years.

The decision was taken after representations received from large manufacturing units which have stated that the move would help facilitate manufacturing processes and augment exports. ``It has been decided that sub-contracting of production or any production process by large manufacturing SEZ units to domestic tariff area (DTA) units may be granted for a period up to 3 years at a time,’’ according to the revised norms of the Commerce Ministry.

However, the Ministry made it clear that the relaxation would apply only to those manufacturing units that have substantial exports with average annual shipments of Rs. 1,000 crore or more in at least two out of four years. ``The units should have an annual average export of not less than 51 per cent of its total turnover in the block of 5 years. The units should have an unblemished track record and no penalties against the unit for any violations should have been imposed,’’ it said.

The new norms also stated that the DTA unit (unit outside SEZ) to which the sub-contract is to be awarded should be registered with the Central Excise department. Special Economic Zones (SEZs) which emerged as major export hubs and investment destinations started losing sheen after the global economic crisis and imposition of minimum alternate tax (MAT). Exports from these zones declined by 4.1 per cent during the first quarter of the current fiscal which has impacted job creation in these zones.

The government has been in the recent months taking steps to revive interest of investors for SEZs. Recently, it had unveiled a package of reforms including easing of land norms to revive investments in SEZs.