Partial denotification of SEZs, single window clearance mechanism in DESH draft

New Delhi: The draft law to revamp the Special Economic Zones (SEZ) into Development of Enterprise and Service Hubs (DESH) has met the services industry's long standing demand to allow partial denotification to free up the area not in demand.

It has also proposed to set up an integrated single window clearance mechanism for the grant of time-bound approvals for the establishment and operation of these hubs, including the single application forms and returns.

Permitting partial notification of IT and services SEZs, it said that "the built up area in a services hub shall not be required to be contiguous".


"This would be huge relief to the IT SEZs as they had been seeking partial denotification for long," said an official.

The commerce and industry ministry has begun the process to ease the process of denotifying empty spaces of above 100 million sq ft built-up area, worth ₹30,000 crore in the 250-plus SEZs in the country so that the areas that have no more demand can be used for industrial or other purposes.

Further, to give a boost to ease of doing business, the draft DESH bill also provides for establishment and maintenance of an online portal within six months from the date of commencement of the Act.

"The online portal shall serve as the single window clearance mechanism for the grant of time-bound approvals for the establishment and operation of Development Hubs, including the single application forms and returns," it said.

These proposals are part of the overhaul of India's SEZs into DESH which may be allowed to sell in the domestic market, and also contract manufacture for those outside these zones. At present, sub-contracting is allowed with annual permission and certain conditions such as the value of the sub-contracted production of a unit in any financial year to not exceed the value of goods produced by the unit within its own premises in the immediate previous fiscal.

While the draft law allows for disputes to be resolved through mediation, it also states that arbitration to be the route "where the commercial dispute could not be settled or has been settled only in part by mediation". It also suggests the state boards to also have private sector participation with one representative nominated by the developer concerned.

"Company representation on the board is not desirable as it can lead to confusion. We have suggested the government to stick to the concept of Development Commissioner only," said an industry representative.

SEZ exports fell to $102.3 billion in FY21 from $112.3 billion in FY20.

A relook at the SEZ Act came after the government last year adopted a sunset clause, suggesting that only those units that started production on or before June 30, 2020, would be granted a phased income-tax holiday for 15 years.