An Indication of Continued Confusion?

According to two developers who recently attended a (small!) conference on investment opportunities in India, the lack of clarity about the way in which rules related to SEZ are to be interpreted is one of the factors that is slowing down the completion of SEZs under construction as well as the establishment of business units within SEZs. (Obviously the global economic downturn and the reduced availability of credit are the most important variables.)

The policy ambiguities most cited concern taxation matters -- sales tax, duration of various concessions, categories of expenditure that attract tax breaks, etc. But there are other unresolved issues as well, most notably those related to land acquisition and the nature of the regulatory regime -- particularly the applicability of labour laws and the functioning of special tribunals stipulated in the SEZ Act. The lawyers for American firms in the auto-parts and energy sectors are especially worried about how such tribunals will deal with questions relating to collective bargaining (should trade unions make a big push for representation in a given SEZ).

Apparently, Development Commissioners who are responsible for overseeing much of the administrative infrastructure of SEZs have been seeking clarification on the rules governing these and other questions at an increasing rate. It is therefore no surprise that Ministry of Commerce and Industry in Delhi has felt obliged to notify these and other officials of a procedure for dealing with such queries. Below is the text of the Instruction (No. 43, F.No.C.8/6/2009-SEZ) was issued by the Additional Secretary in the Commerce Dept in late November. Since the text is a little vague on the precise modalities for operating this decentralized system for addressing policy questions, it will not be surprising if further clarification is sought on how to go about seeking clarification pursuant to this Instruction.

Procedure for seeking clarification on policy issues relating to SEZ Act and Rules from Department of Commerce

Instruction No. 43

F.No.C.8/6/2009-SEZ

Government of India
Ministry of Commerce & Industry
Department of Commerce
Udyog Bhawan, New Delhi


Dated the 23rd November, 2009

To: All Development Commissioners

Sub: Procedure for seeking clarification on policy issues relating to SEZ Act and Rules from Department of Commerce

Sir/Madam,

I am directed to say that references are received from Development Commissioners in this department seeking clarification on various provisions of SEZ Act and Rules. It has been decided that such clarifications may first be considered for a decision in the meetings held by Zonal DC.


2. Meetings of all Zonal Development Commissioners under the chairmanship of AS (SEZ) would be held after BOA meeting in the Department of Commerce to discuss and clarify policy matters which required further discussion. Therefore, if Zonal DCs need any clarifications on SEZ Policy issues, they may bring up such matters along with full details of the case in these meetings.

3. This issues with the approval of AS (SEZ).