The space transfer policy announced on 11th October 2021 by the Department of Commerce, Ministry of Commerce & Industry, has significantly eased doing business in Special Economic Zones (SEZ), which account for a 30% share in India’s total gem and jewellery exports.
The new policy has come on the heels of a marathon series of meetings between the GJEPC and the Commerce & Industry Minister Piyush Goyal and the Commerce Secretary. Following Goyal’s visit to SEEPZ, the Ministry has finally accepted GJEPC’s proposal and has come out with an alternative method for the transfer of space by an exiting unit in an SEZ. This will go a long way in rejuvenating the idle, un-productive space in SEZs.
Until 2013, there was no condition of surrendering the properties back to an SEZ, but with a condition being imposed that even the purchased premises have to be surrendered back to SEZ for auction was creating impediments in mortgages and getting loans. At least 50% of the property in SEEPZ was unutilised or underutilised for years.
The Ministry of Commerce & Industry, in order to facilitate the smooth operation of business activities by SEZ units, and for the ease of doing business, issued clarifications for the transfer of space under the extant provisions of Rule 74 of SEZ Rules, 2006.
Colin Shah, Chairman, GJEPC, said, “This announcement is historic for the units in SEZs. It will help exiting units to scale up at a time when exports are booming and will also enable new units to acquire space in SEZs. We thank the Hon’ble Commerce Minster for this timely space transfer policy.”
As per the notification, 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 identifies 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,” the notification stated.
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.
Benefits of the space transfer policy:
- Existing units can exit easily
- Transparency in the transfer
- Hybrid of auction and direct agreement
- Beneficial to buyers and sellers, and no loss to the Government