Baba Kalyani-led panel suggests import substitution in manufacturing SEZs

Bharat Forge chairman Baba Kalyani-led committee on special economic zones (SEZ) has suggested that certain sectors such as electronics are showing high domestic demand and need to have a plan for import substitution. However, for SEZs focussed on services including information technology, medical tourism and financial services, it said the government may not have to completely overhaul its existing policies but devise measures to make them more attractive for investors.

The committee’s report was made public on Tuesday and the commerce department has sought stakeholders' views on it by January 30.

ET had reported in October that the panel wants SEZs to be converted into Employment and Economic Enclaves (3Es) with efficient transport infrastructure, uninterrupted water and power supply. The first draft of the report was submitted to the commerce and industry ministry in October. The group was setup in June.


“As gross SEZs and employment increased phenomenally in absolute terms, their growth rates were not encouraging over the last decade. In the current scenario, there is a situation of over capacity with many of the existing SEZs facing issues of low utilisation,” the committee said in the report.

Exports from SEZs grew about 15% to Rs 5.52 lakh crore in 2017-18 as compared to the previous fiscal.

The committee has talked of enablers for the SEZs based on job creation, investment committed, inclusivity, value addition and technology differentiation which are delinked from export performance. It has suggested that states and the centre together work on an incentive package for such enablers.

Swift resolution of disputes through arbitration, flexibility in the dual-usage norms for non-processing areas in SEZs, ] extension of sunset clause, simplification of processes, tax benefits to services sector, and extension of MSME schemes to these zones are some other recommendations of the panel.