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Government’s Push: Boosting India’s Plastic Exports via SEZs

Overview

The Indian government has been pushing to boost the country's plastic exports through Special Economic Zones (SEZs) and incentives. The SEZ scheme was introduced in India on April 1, 2000, to enhance foreign investment and provide an internationally competitive and hassle-free environment for exports. The SEZ policy has been successful in promoting private investment in industrial activity, infrastructure investment, employment, and exports since its introduction. According to the Ministry of Commerce and Industry, SEZ exports increased by 3.3% between 2005-06 and 2020-21, from INR228.40 billion to INR7595.24 billion, and investment in SEZs increased by 15.3% during the same period, from INR40.355 billion to INR6174.99 billion.

The government's push to boost India's plastic exports via SEZs and incentives is expected to further increase the country's exports and attract foreign investment. The SEZs offer incentives to resident businesses, such as competitive infrastructure, duty-free procurements, tax incentives, and other measures designed to make it easier to conduct business than other regions within the same country. Incentives based on factors like investment in technology, job creation, and investment committed instead of export performance can provide a boost to the required economic activity alongside catering to the existing WTO dispute.

The SEZ policy needs to be revamped to bring in certain enablers and relaxations leading to SEZs in India being pushed as major vehicles for large-scale investments and export promotion. The Budget proposal announced to replace the existing law governing SEZs with new legislation, and reforms in the customs administration of these zones will help in further improving the ease of doing business, promoting growth, and boosting exports.

What are the benefits for the plastic industry?

The plastic industry in India has been a significant contributor to the country’s economy, providing employment opportunities and contributing to the country’s GDP. The industry has been growing at a CAGR of 8.4% over the past five years and is expected to continue growing at a similar rate in the coming years. The Indian government’s push to boost plastic exports via SEZs and incentives is expected to further increase the growth of the plastic industry in India.

In addition, the Indian government has been taking steps to promote sustainable plastic packaging and strengthen the circular economy of plastic packaging waste. The guidelines issued by the government will provide a framework to promote the development of new alternatives to plastic packaging and provide the next steps for moving towards sustainable plastic packaging by businesses. The government’s focus on promoting sustainable plastic packaging and strengthening the circular economy of plastic packaging waste is also a positive step towards a more sustainable future.

What are the challenges for the plastic industry?

The Indian plastic industry has been growing rapidly, but it faces several challenges. The main challenges faced by the Indian plastic industry include the availability of polymers at competitive prices in India, structural challenges faced by Indian plastic exports, and the need for reforms in the SEZ policy.

In addition, plastic waste management in India remains a significant challenge due to a lack of infrastructure, low waste collection rates, inadequate funding, and a lack of recognition of the informal recycling sector. The government has been taking steps to promote sustainable plastic packaging and strengthen the circular economy of plastic packaging waste as discussed above.

Here are some more details on the challenges faced by Indian exporters while exporting to Special Economic Zones (SEZs):

  • Restrictions on sub-contracting: Sub-contracting from the domestic tariff area (DTA) for the domestic market is restricted. This means that SEZ units cannot outsource production to units in the domestic market.
  • Complexities in undertaking domestic and international business from the same unit: There are restrictions and complexities in undertaking domestic and international business from the same unit. For instance, SEZ units are not allowed to sell goods in the domestic market.
  • Alignment of SEZ scheme with GST law: The alignment of SEZ scheme with GST law is a challenge. The GST law has provisions for refund of taxes paid on inputs used in exports, but the SEZ scheme does not provide for such refunds.
  • Customs duty and other import restrictions: Customs duty and other import restrictions are also a challenge. SEZ units are required to pay customs duty on goods imported from abroad, which increases the cost of production.

Despite these challenges, the Indian plastic industry is expected to continue growing in the coming years. The industry has been growing at a CAGR of 8.4% over the past five years and is expected to continue growing at a similar rate in the coming years.

What are the opportunities for the plastic industry?

Indian exporters have several opportunities while exporting via Special Economic Zones (SEZs). According to the Ministry of Commerce & Industry, SEZs in India have fostered opportunities to generate additional economic activity, attract domestic and foreign investment, create infrastructure facilities and employment opportunities, and enhance goods and services exports across sectors. Here are some of the opportunities that Indian exporters can leverage while exporting via SEZs:

  • Competitive infrastructure: SEZs offer competitive infrastructure, duty-free exports, tax incentives, and other measures designed to make it easier to conduct business.
  • Tax and other incentives: Businesses in SEZs in India can avail of tax and other incentives. For instance, SEZs offer a 100% income tax exemption on export income for the first five years, 50% for the next five years, and 50% of the ploughed-back export profit for the next five years.
  • Increased trade capabilities: SEZs in India continue to play an important role in improving trade capabilities within the country. The total value of exports from SEZs in India surpassed the US$100 billion mark in the current financial year.

I hope this article helped you to get insights about the Government’s push towards boosting India’s plastic exports via SEZs so that you can decide your business (import-export) strategy more dynamically and effectively.

If you have any questions or comments, please do not hesitate to approach me!
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