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The commerce ministry has called for a meeting with India Inc. on 27 Jan, to try and rationalize procedures for setting up special economic zones in India. The attempt is to draw investors to these enclaves who had caught investor fancy when they were announced five years ago but subsequent policy changes and other hurdles made them a non-starter.

When launched, the SEZ s were to be free of tax impositions but the Finance Minister had slapped a 18.5% MAT (minimum alternate tax), on SEZ units and a 15% dividend distribution tax in last year's budget, leading to a sharp drop in new proposals and an increase in the number of withdrawals.

The issues likely to be addressed are land acquisition, bringing out simplified norms to increase their operational efficiency; easing contiguity norms to remove the difficulties in procuring land; permitting a broader category of types of units that can come up in a sector-specific SEZ; providing incentives to attract investments towards manufacturing-oriented SEZs and to ensure that more SEZs are set up in backward areas.

Land acquisition has been one issue that corporate India is struggling with. It is likely that rules related to purchase and size of land could be relaxed. Right now the minimum land requirement for multi-product SEZs is 1,000 hectares for multi-services and 100 hectares for sector-specific ones. It is proposed that these be reduced to 250 hectares and 40 hectares respectively. A lower size threshold will allow SEZs to begin operations with smaller land parcels and expand as and when more land is available. The definition of vacant land, the type of land on which SEZs have to be built, is also likely to be relaxed. Flexibility in contiguity norms in areas where production activity is not taking place is also in the offing.

The Ministry is also seeking suggestions to make sure that SEZs get more or less similar incentives as being given to exporters in the Domestic Tariff Area (area outside the SEZs) so that the units do not suffer any disadvantage. Unlike their counterparts in the DTA, SEZ units do not get the benefits of duty drawback, focused product and focused market schemes.