"Our preference will be for companies putting up the units with participation by the state industrial development corporations", said director-general of foreign trade NL Lakhanpal.

Lakhanpal who is in charge of SEZs told The Financial Express that he had so far given an in-principle nod to set up SEZs in three more states- Maharashtra, West Bengal and Orissa, adding that the scheme had evoked an encouraging response from the states with more expected to join the fray.

He said following the announcement of the scheme by the commerce and industry minister, Murasoli Maran on March 31, permission had already been accorded to set up SEZs in Tamil Nadu and Gujarat. The objective of the scheme was to create a healthy competition among all the state governments and union territories, Maran had said. Lakhanpal said SEZ units could be put up even in the joint sector or private sector with the state governments'participation. They could undertake manufacturing, trading, reconditioning, repair or service activity.

All import/export operations would be on a self-certification basis and units would have to be net forex earner, but they would not be subjected to any pre-determined value-addition or minimum export performance requirements.At present, four existing export processing zones (EPZs)-at Mumbai (SEEPZ), Kandla, Visakhapatnam and Cochin-are being converted into SEZ on the basis of positive response from them. The remaining three EPZs-at Noida, Chennai and Falta-are not being considered for conversion at present due to reservations expressed by them that sale in the domestic tariff area (DTA) would attract full customs duty. Consultations however are on.

As on March 31, 2000, there were 708 units in operation in the seven EPZs with the Central government's investment in land and infrastruture at Rs 291 crore and private sector investment at Rs. 1,783 crore.

Among the concessions available to EPZs are exemption from customs/excise duty on raw materials, machinery and consumables, Central excise duty on goods brought from domestic tariff area,tax holiday for ten years up to 2010 on a sliding scale, 100 per cent foreign equity, facility to sell up to 50 per cent of the fob value of exports on payment of 50 per cent of customs duty or applicable excise duty whichever is higher.

In addition, they are eligible for reimbursement of Central sales tax on domestic purchase and the facility to retain up to 70 per cent of foreign exchange earning in the EEFC account.

Exports by the EPZs increased from Rs 4817.30 crore in 1997-98 to Rs 5252.48 crore in 1998-99 and to Rs 6,707.44 crore in 1999-2000 (provisional), going by the data available with the commerce ministry. The data show that these exports constituted 3.70 per cent, 3.71 per cent 4.12 per cent respectively of the country's total.