There is good news in store for SEZ units. The government is likely to put on hold its plan of placing an export obligation on units operating in SEZs. The commerce department has suggested to the finance ministry that the government should consider imposing an export obligation only if exports from such zones fall below a threshold limit in the coming years. While the government was deliberating making it compulsory for all SEZs to export 51% of what they produce, the present average export figures of SEZs is much higher at 82%.
As per SEZ rules, units in SEZs have to be only net foreign exchange earners. This means that each unit’s exports should be more than its imports. The finance ministry, however, believes that the criteria is not enough to ensure that adequate exports would take place from units. This would hold true, especially if a unit’s import content is negligible. Then, a unit can be a net foreign exchange earner by exporting bare minimum.
The commerce department, on its part, argued that an export obligation should be imposed only if the SEZs were found to be selling mostly domestically. “If one is considering an export obligation of 51% and units, on an average, are exporting much more than that, there is no need to make the provision mandatory,” an official said.
The whole idea behind not imposing an export obligation was to give units the flexibility to settle down in business before starting exports, the official explained. Citing the example of Nokia’s SEZ in Tamil Nadu, which did not export anything in the first year of its establishment but has subsequently started exporting 53% of its production, the official said that the company would not have been able to set up an SEZ if it were to operate within the restrictions of an export obligation.
In a letter to the finance ministry, the commerce department has said that if in any year, it was found that exports from SEZs have dipped beyond a certain point, the government could consider imposing an export obligation. However, till the average exports from such units was high, the government shouldn’t impose additional obligations.