This file photo shows Special Economic Zone Authority signing agreement with NIFRA. Photo Courtesy: SEZA

February 6: The government is preparing to amend laws related to the Special Economic Zone (SEZ) after realizing that the weak policy of the state has drawn lukewarm response from the industrialists towards the government initiative.

According to the Special Economic Zone Authority (SEZA), the government is currently reviewing the drawbacks in the Act related to SEZ  and is planning to make the concept more attractive by providing additional facilities to the industrialists through amendment of the laws.

Initially, the laws related to SEZ had a provision requiring the industries to export 80 percent of the products but that was later revised to 60 percent after opposition from the industrialists. The government is planning to further reduce this threshold as the industrialists are still not happy with the provision. Therefore, the government is planning to amend the related laws to facilitate the industries.

Executive Director of the Special Economic Zone Authority Chandika Prasad Bhatta admitted that the main reasons for lack of interest among the industrialists include the provision for export and the charge for using the plots, which the government intends to address through amendment of laws.

According to Bhatta, the government is preparing to amend the laws to facilitate the provision of exports. Discussions are currently being held in this regard while additional facilities are being incorporated for the operation of SEZ, he added.

“Homework is being done to facilitate the operation of SEZ. For this, a sub-committee has been formed already,” said Bhatta.

According to Bhatta, the sub- committee has recommended zero export in the first two years. As per the recommendation of the sub-committee, the exports should be increased to 20 percent in the third year, 40 percent in the fourth year and 60 percent in the fifth year.

If the industries fail to meet the target in the given timeframe, they will be allowed to sell the products in the domestic market after paying fines.

“Earlier, the industries were not allowed to sell the products in the local market. But now they are allowed to do so. The fine charged will be equal to the profit they make,” said Bhatta.

He said that the industries will be given two years’ time initially to find international market and to seek quality assurance certificate. He added that this time period will be enough for the industries.

The government is also planning to reduce the charge for operating industries in the SEZ to facilitate small industries. Initially, the government had fixed a rate of Rs 150 per square feet to operate industry in the SEZ. Due to stiff opposition from the industrialists, the rate was dropped to Rs 20 per square feet.

As the industrialists complained that the reduced rate was still high, the government is preparing to further reduce the charge, informed the authority. The government is holding discussions if the charge for operating industries can be fixed at Rs 10 per square feet but a final decision has not been taken in this regard.

The government had decided to set up Special Economic Zones in 2060 to facilitate export business. Although the government has announced to waive income tax, VAT and customs duty for industries set up in the SEZ, the industrialists are not much keen to operate industries in SEZ.

Bhairahawa-based SEZ is the perfect example. Set up five years ago, it has not been able to achieve expected results.