Date:14/09/2005 URL: http://www.thehindubusinessline.com/2005/09/14/stories/2005091403450900.htm

Back SEZs offer good scope for FDI, local industry: PwC

Our Bureau

The Andhra Pradesh Chief Minister, Dr Y.S. Rajasekhara Reddy, with the Chairman of the Surat SEZ, Mr S.N. Sharma, at the PricewaterhouseCoopers seminar on Special Economic Zones in Hyderabad on Tuesday. Also seen is the Principal Secretary, Industries & Commerce, Ms Lakshmi Parthasarathy. — P.V. Sivakumar

Hyderabad , Sept. 13

THE Centre's thrust on creating special economic zones with public and private partnership will create a trouble-free and internationally competitive environment, according to consultancy firm PricewaterhouseCoopers (PwC).

The Executive Director of PwC India, Mr Vivek Mehra, said though the SEZ concept was not new to the country, in the current form, it offered immense scope for the growth of the domestic industry and for attracting foreign direct investments.

Speaking at an interactive meeting on special economic zones, Mr Mehra said the policy for setting up of SEZs had undergone various refinements and modifications since its introduction in the 2000-01 Exim Policy.

However, the first free trade zone was set up 25 years ago at Kandla and the then Singapore Prime Minister, during his stay in India, visited it and introduced the concept in his country. . In fact, they had created one of the best possible models in the world, and India was now trying to take this forward, Mr Mehra said.

The overriding effect of the SEZ Act in relation to other enactments enabled Governments to set up the zones without hassles.

Referring to different types of SEZs — the multi-product SEZs, specialised SEZs and free trade warehouse zones — Mr Mehra said each came with certain distinct specifications and relative advantages in terms of what they offered to developers and companies.

However, in the case of multi-product SEZs, non-processing zones around these SEZs offered immense scope for growth in areas such as housing, shopping, entertainment and infrastructure projects.

For instance, a power project or a hotel in the zone, would be entitled to tax concessions while it is being established. While this brings down the overall cost due to the tax benefit, they may not have the advantage over the long term, as this is confined to the period of construction.

Significantly, a power project in the non-processing zones may enjoy the advantage of dual pricing, he said.

Referring to services, Mr Mehra said as prescribed under the General Agreement on Trade in Services (GATS), banks and financial institutions could locate centres in SEZs. This is just the beginning of what could be an interesting trend where both Governments and private companies will set up such zones in various parts of the country.