Kochi: The new rules and regulations framed by the Indian finance ministry for the special economic zones (SEZs) are likely to hit hard the industries in the Cochin Special Economic Zone (CSEZ) that depend on the local market for the purchase of raw materials.

The Special Economic Zones Rules 2003 announced by the finance ministry through the notification no 52/2003 dated 22 July 2003 will come into effect on 15 August. According to the notification, goods for industrial use or for personal use and consumption by officials, workers, staff or owners of SEZ units or developer shall not be admitted into the zone without the payment of duty.

However, the assistant commissioner or deputy commissioner of customs, for the reasons to be recorded in writing, can permit goods that are not required for carrying out authorised operations, without payment of customs duty.

The industrialists in CSEZ have to go through several procedures even for buying articles like bulbs, grease, paper, stapler pins, tea and brooms from the local market. As per the provisions of Rule 5(5) of the notification, the supplier of the goods should have the importer/exporter code number (for which he will have to approach the director general of foreign trade).

The supplier should have to file an export bill before the deputy commissioner of customs inside the zone and the former has to go back to the deputy commissioner of customs, under whose jurisdiction he falls, and submit it and get the approval.

Only after completing all these formalities can the supplier sell his goods to the industries at the CSEZ. However, the industrialist is permitted to pay for the goods only in free foreign exchange.

"No trader will be ready to supply any article to the industries in this zone if they have to complete all these formalities for selling their goods. It will also be difficult for the trader to exchange the small amount of the foreign money for the goods he has sold," says an owner of a firm.

He adds: "Apart from effectively cutting off our supply of spares and other items, these rules and regulations will make it difficult for the SEZ units to procure raw materials from domestic market, especially from those local suppliers who are not interested in the export benefits available for deemed exports to SEZ units. The units that deal with agricultural products will be the worst hit and they will be forced to down shutters forever."

Some of the industrialists point out that most of the purchases are from farmers and traders in rural areas. "How can the farmers get themselves an import/export code number and then go through all the formalities and finally get paid in foreign exchange?"

It is ridiculous, they say, on the part of the finance ministry to draft new rules that retard the development of the SEZs when the commerce ministry has stated that it will simplify things for the units. They also allege that the notification was issued without consultation with the SEZ units or the Export Promotion Council.