Odisha SEZ policy in limbo due to objection to tax doles

Odisha’s proposed Special Economic Zone (SEZ) policy, aimed at attracting investors in non-metallurgical sectors has hit the wall of uncertainty. Though the draft of the policy was framed two years back, it has hardly moved ahead.

Sources said, the finance department was not keen on doling out tax sops and incentives in line with the prevailing SEZ policy of the Government of India and this has presumably delayed any progress on policy making.

“The finance department is of the view that only incentives incorporated in the Industrial Policy Resolution (IPR)-2007 should be extended to the SEZs. The department of finance fears revenue loss if tax sops are offered to such zones. But there is no way we can frame any state specific SEZ policy without including a set of exclusive incentives,” said an official of the state industries department.

Finance department sources said, no call was taken yet on offering tax incentives to the SEZs but views of the directorate of commercial taxes were sought.

As per the draft SEZ Policy of the state, the import of goods and services made to SEZ units located within the processing zone from the domestic tariff area shall be exempted from Value Added Tax (VAT), entry tax, electricity duty and other cess payable on sales and transactions.

Gujarat was the first state to formulate a state specific SEZ policy in 2002 and enacted legislation to this effect in 2004. Besides Gujarat, Jharkhand, Uttar Pradesh, Karnataka, Punjab, Kerala, West Bengal, Maharashtra and Madhya Pradesh have formulated SEZ policies.

Exports from all SEZs across the country grew 15 per cent in 2011-12 to Rs 3.6 lakh crore.

The Odisha government’s SEZ policy was aimed at widening its investment horizon and attract more investors in sectors like information technology, biotechnology, electronics, automobiles and auto component manufacturing, ship building, gems and jewellery and pharmaceuticals.

Under the proposed SEZ Policy, the state government shall not encourage SEZs based on mining and minerals like iron ore chrome ore and bauxite. However, SEZs based on the use of intermediate products like alumina for smeltering, primary metals for further processing on the value chain and rare minerals like tin, limenite, nickel, platinum and vanadium will be allowed.

Moreover, the state shall not encourage SEZs based on activities like mining that cause pollution. The State Pollution Control Board was to prepare a list of such industries and the same would be notified by the state government as a negative list.

Till now, four SEZs have been notified in the state- the sector specific IT/ITes SEZ at Chandaka Industrial Estate in Bhubaneswar developed by Idco, sector specific SEZ for stainless steel and ancillary downstream industries at the Kalinga Nagar Industrial Complex being developed by JSL, aluminium and aluminium products SEZ at Lapanga near Sambalpur being developed by Hindalco Industries and another aluminium SEZ with Captive Power Plant being developed by Vedantal Aluminium Limited at Jharsuguda.