The government will treat sales from domestic tariff area to Special Economic Zones as exports in a bid to attract more foreign direct investment, which could turn out to be an engine of growth.

Domestic suppliers would now be eligible to entitlements like drawback and duty entitlement pass book benefits, service tax and central sales tax exemption, Union Commerce and Industry Minister Arun Jaitley said on Monday while announcing the Exim Policy for 2003-04.

"We have great hope for attracting foreign direct investment and increasing our export through this scheme", he said.

With a view to integrate production and processing and help promote SEZs specialising in agro exports, the policy has allowed agriculture and horticulture processing SEZ units to provide inputs and equipment to contract farmers in DTA.

This would promote production of goods as per the requirement of importing countries, it says.

The policy has exempted domestic sales by SEZ units from Special Additional Duty.

While removing the restriction of one-year period for remittance of export proceeds from SEZ units, the new policy has taken a step forward in permitting netting of export for SEZ units, provided it is between the same exporter and importer over 12 months.

The government in the policy has also allowed SEZ units to take jobs abroad and export goods from there.

The Exim Policy has permitted SEZ units to capitalise on import payables while making the value of capital goods imported by such units amortised uniformly over 10 years.

In the new policy, the government has allowed duty-free import of goods required for operation and maintenance of SEZ units.

Export and import of all products through post, parcel and courier by SEZ units, which was earlier not permissible, would now be allowed, Jaitley said.

"We are considering a central legislation. The draft is ready", Jaitley said adding the purpose behind it was to free SEZs from certain statutory provisions and create a deemed foreign territory.

The worldover SEZs contribute 15-20 per cent of country's exports and in the case of China it was as high as 40 per
cent, Jaitley said emphasising the need for evolving a political consensus on the issue.

The idea behind the legislation is to free SEZs from complying with certain municipal requirements to create a competitive regime, he told PTI.

Stressing the need for infrastructural bottlenecks, Jaitley maintained no constitution amendment would be required
to have liberal contract labour regime in SEZs.

To a question on the progress of SEZs, Jaitley said it was for the state governments to ensure speedy development and the Centre could only act as a facilitator.     

"If the state government is not willing to speed up the process, it is a loss to the state and its people," he said.

The Exim Policy 2003-04