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Baba Kalyani committee submits report on India’s SEZ policy

The Baba Kalyani led committee constituted by the Ministry of Commerce and Industry to study the existing SEZ policy of India submitted its report to Commerce Minister Suresh Prabhu, in New Delhi on November 19, 2018.

The key objectives of the committee included:

- To evaluate the SEZ policy and make it WTO compatible

- To suggest measures for maximising utilisation of vacant land in SEZs

- To suggest changes in the SEZ policy based on international experience

- To merge the SEZ policy with other Government schemes such as coastal economic zones, Delhi-Mumbai industrial corridor, national industrial manufacturing zones and food and textiles parks.

Key Highlights

The Committee’s chairman, Baba Kalyani, while submitting the report to the Commerce Minister said that if India is going to become a USD 5 trillion economy by 2025 then the current environment of manufacturing competitiveness and services has to undergo a basic paradigm shift.

The report notes that the success seen by services sectors like IT and ITES has to be promoted in other services sector like health care, financial services, legal, repair and design services.

The Union Government has set the target of creating 100 million jobs and achieving 25 per cent of GDP from the manufacturing sector by 2022, as a part of its flagship ‘Make in India’ programme.

The Government also plans to increase manufacturing value to USD 1.2 trillion by 2025.

While these are ambitious plans to propel India into a growth trajectory, it requires an evaluation of existing policy frameworks to catalyse manufacturing sector growth.

At the same time, the policy needs to be compiled with the relevant WTO regulations.

Speaking on the same, Commerce Minister Suresh Prabhu said that the suggestions of the committee are very constructive and that the Commerce Ministry will immediately begin formal consultations with the Finance Ministry and other Ministries so that implementation of the committee’s recommendations may be done without any delay.

Background

In June 2018, the Union Commerce Ministry set up a committee headed by Bharat Forge chairman Baba Kalyani to make its special economic zone (SEZ) policy compatible with World Trade Organisation (WTO) rules after the US challenged India’s export subsidy programme at the multilateral trade body.

The group was given three months time to submit its recommendations.

India’s SEZ Policy was implemented from April 1, 2000. Subsequently the Special Economic Zones Act, 2005 was passed by Parliament in May 2005 and received presidential assent on the June 23, 2005 and the Special Economic Zone Act was enacted.

The SEZ Act, 2005, supported by SEZ Rules, came into effect on February 10, 2006.

The commerce ministry has been consistently lobbying with the finance ministry to exempt units in the SEZs from the minimum alternate tax (MAT), imposed on them in 2011.

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