October 18, 2021

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Commerce ministry provides alternate method for transfer of space by exiting unit in SEZ

The Commerce Ministry on Monday provided an alternate method for the transfer of space by an exiting unit in a spe
cial economic zone (SEZ), a move aimed at promoting ease of doing business. According to an instruction given to all zonal development commissioners of SEZs, the ministry said it has received representations from stakeholders expressing difficulties in following the procedures to exit from a zone as the exiting units are not able to recover the value of their financial assets.

“The matter has been examined in consultation with concerned stakeholders. In order to facilitate the smooth operation of business activities by SEZ units and for the ease of doing business….clarifications are issued for the transfer of space under the extant provisions of Rule 74 of SEZ Rules, 2006,” the instruction said.

Rule 74 deals with the exit of units from a zone.

As per the laid out procedure now, the SEZ authority will engage an independent valuer to assess the current value of the physical assets as well as financial assets, in the nature of unutilised portion of any upfront lumpsum payment, if any, in the nature of premium, advance lease rentals made by the exiting unit paid at the time of issuance of letter of approval.

“When the exiting unit identified a potential buyer, such potential buyer shall be required to indicate the periodic lease rent for the space that they are prepared to pay to the authority for the space being vacated by the exiting unit,” it said.

After that, the SEZ authority will advertise the availability of space and conduct an e-auction among eligible bidders for allocation of the said space based on bids to be submitted by eligible bidders.

It added that while this arrangement entails the transfer of assets of an exiting unit to an eligible incoming unit, the exiting unit will continue to remain liable for any liability pertaining to the period of its operations that may arise in the future.

Commenting on the move, Gems and jewelry Export Promotion Council (GJEPC) Chairman Colin Shah said that it is a historic decision for the units in SEZ as it will help existing units to scale up at a time when exports are booming and will also enable new units to acquire space in SEZ.

“Till 2013, there was no condition of surrendering the properties back to SEZ, but with a condition being imposed that even the purchased premises have to be surrendered back to SEZ for auction which was creating impediment in mortgage and getting loans. At least 50 per cent of the property in SEEPZ (Santacruz Electronics Export Processing Zone) was unutilised or underutilised for years,” the council said.

Benefits of space transfer policy include existing units can exit easily, transparency in the transfer, hybrid of auction and direct agreement and benefit to buyer-seller and no loss to the government, it added.

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