New SEZ law soon: Units can produce for domestic & international markets

The government is all set to overhaul the SEZ Act of 2005. Over the last 17 years the government gave clearance to 426 SEZ units and as of today only 268 are operational. The move is also aimed at making rules governing special economic zones more WTO compliant.

The primary focus of SEZ Act 2005 is promotion of exports. The units in SEZ's were evaluated based on net foreign exchange criteria. This is set to be replaced by development of enterprises and services hubs bill or DESH.

The new law will allow units to produce both for domestic and international markets. Evaluation based on net foreign exchange and direct tax incentives have been done away with in order to comply with WTO rules. According to the new bill net positive growth criteria will be used to judge performance.

Current SEZ Act 2005 did not classify different types of SEZ's. The new bill will classify development hubs into enterprise and service hubs.

So is the DESH bill a step in the right direction? CNBC-TV18 spoke to Mohammad Athar, Partner, at PwC India; and Mahesh Jaising, Partner, at Deloitte India.