SPECIAL ECONOMIC

ZONES IN INDIA
SEJAL VISAWADIA
WHAT IS A SEZ ?
The concept of SEZ is expected to bring large
dividends to the State in terms of economic and
industrial development and the generation of new
employment opportunities.
The SEZs are expected to be engines for economic
growth.
Special Economic Zone (SEZ) is defined as "a
specifically delineated duty free enclave and shall be
deemed to be foreign territory for the purposes of
trade operations and duties and tariffs".
SEZ: A BRIEF REVIEW
It covers a broad range of more specific zones
including :-

Free Trade Zones (FTZ)

Export Processing Zones (EPZ)
Free Zones (FZ)
Industrial Estates (IE)
Free Ports (FP)
Urban Enterprise Zones and others
History of Free Trade Zones
First Free Trade Zone in the world had started on 1st
January 1965 at Kandla Port , Kutch, India.

By 1978 India had another four free trade zones at

Mumbai , Chennai , Noida and Falta.

In 1978 China had gone through major economic

make over and they had realized power in concept of
Free Trade Zones.
Cont..
First Chinese Free Trade Zone became operational in
1984 Shenzhen

In year 2000 one zone of Shenzhen was Exporting

thrice of India.

As on today there are about 2000 operation free

trade zones spread over 150 countries in world
Kinds of SEZ
Fundamentals of SEZs
SEZs (special economic zones) are fundamentally
different from the traditional free zones.

They are much larger in size; offer broader range of

activities such as
a single-window management,
streamlined procedures,
duty-free privileges,
also access to the domestic market on a duty-
paid basis.
Cont..
Whether the enclave is termed an EPZ, FTZ or SEZ,
the cardinal factors are
appropriate infrastructure and transport facilities,
low factor cost,
flexible labour laws,
convertibility of currency,
stable legal and administrative regime, and
a commitment to the canons of an open economy
OBJECTIVES OF SEZ ACT
Generation of additional economic activity

Promotion of exports of goods and services

Promotion of investment from domestic and

foreign sources

Creation of employment opportunities

Development of infrastructure facilities

ROLE OF SEZ IN INDIAN ECONOMY
To provide internationally competitive
environment
To encourage FDI and enhance GDP
To increase share in global exports
SEZ exports accounting for 26% of Indias total
export in 2011.
SALIENT FEATURES OF SEZ
Self certification for export and import

Import and export movements of goods are based on

self declaration

No routine examination is made unless specific order

from Development Commissioner or authority.

Sub contracting

A SEZ unit may sub contract a part of its product or

production process to different units, even in abroad.
 Fiscal incentives-Tax

Exemption from excise and customers duty on

procurement of capital assets, consumable stores, raw-
materials from domestic market

Exemption from sales tax, import duty, Income tax,

minimum alternative tax and dividend distribution tax

Single Window Clearance

Submit regularity documents at single locations

Less proceedings and save time

SOME OF IMPORTANT SEZ IN INDIA
INDIA

Karnataka Biotechnology and Information Technology

Services - SEZ on biotechnology sector in Bangalore's
Electronics City, over an area of 43 acres

Shree Renuka Sugars Limited - SEZ on sugarcane

processing complex covering 100 hectares, comprising a
sugar plant, power station and distillery, at Burlatti in
Belgaum district
Ittina Properties Private Limited and three other - SEZs
in IT sector, covering electronics, hardware and
software sectors in Bangalore, over an area of 15.732
hectares

Wipro Infotech - SEZ on IT / ITES at Electronics City,

Sarajpur Bangalore

Hewlett Packard India Software Operation Pvt. Ltd. -

SEZ on IT
 Food processing and related SEZ services in Hassan,
over an area of 157.91 hectares

SEZs on pharmaceuticals, biotechnology and chemical

sectors in Hassan, covering of 281.21 hectares

SEEPZ - Andheri (East), Mumbai

Khopata - Multi-product, Mumbai
Navi Mumbai - Multi-product, Mumbai
Salt Lake Electronic City, West Bengal
Manikanchan - Jems and jewelery, West Bengal
Calcutta Leather Complex, West Bengal
Falta food processing unit, West Bengal
Area Allocation in terms of use.
Area Requirements
Entities in SEZ
Sectoral Focus
ADVANTAGES OF SEZ
Growth and development

Attracts Foreign Direct Investment

Exposure to technology and global market

Increasing GDP and Economic Model

Employment opportunities are created

DISADVANTAGES OF SEZ

Land acquisition at very low prices

Farmers loose their livelihood

Tax holidays affect GDP

Benefits & Incentives for SEZ Units
Benefits & Incentives for SEZ Units
SEZ Policy of 2000

New Policy in April 2000. SEZs permitted to be set

up in the public, private, joint sector or by the State
Governments

Minimum size of 1000 hectares (4 sq. miles)

Simplified procedures and more incentives

 Main measures were:
Conditions for automatic approval relaxed
considerably
Customs procedures simplified
Units could produce items reserved for SSI units in
domestic market
100% FDI investment for manufacturing
Profits could be repatriated fully
Freedom for sub-contracting
100% I.T. exemption for five years
Exemption from Central Excise Duty on capital
goods, raw materials, consumable spares from
domestic market
Reimbursement of CST paid on domestic
purchases
Positive Impacts
To Nation
World class business environment
Increased FDI
Higher economic growth
Infrastructural development
Export growth
Employment Opportunities
Exposure to technology and global markets
Positive Impacts
TO Business houses
Hassle free operating environment
Single window clearance
Simplified procedure for setting up business,
compliance proc with with self certification
Duty free import
Tax exemption- VAT, CST, ST, other levies
External commercial borrowings
100% profit reptriation from export earnings
Positive Impacts
To People
Employment opportunities
Impact on lifestyle and standard of living
Business infrastructure combined with social
facilities
Better work culture , good education, leadership
vision
Hurdles
To Nation
Loss of revenue

To Business
Land acquisition
Single window actually is not
No strategic planning for electicity, water
Hurdles
To People
Grabbing of fertile land
Water scarcity- Threat to access
Food scarcity
Exploitation of labour
Landless farmers

To Environment
Mangrove destruction
Destruction of ground water recharge system
Pollution
SWOT ANALYSIS OF INDIAN SEZ
STRENGTH
Based on Western model or SEZ in China
An established legal redress system
Relatively low labour costs
Employment opportunities
Indias large English speaking and skilled
workforce
Exposure to technology and global market
 Worldwide acceptance of capabilities in fields
like
Pharmaceutical manufacturing & research
Clinical trials
Manufacturing auto parts
Engineering designing & consultancy, IT & ITES
Malls and hotels
Hospital

Financial & other institutional Networks like

Insurance Companies
 WEAKNESS

Poor infrastructure and transport facilities

High cost of capital

Inadequate institutional support
Political changes
Inappropriate locations
 OPPORTUNITIES
An alternative manufacturing base, particularly compared to Chinese
SEZs
Investments in core strength areas like IT and software products and
services.
New small ports & airports are also being developed keeping SEZ
concept in mind
A large NRI base who have traditionally invested less in Greenfield
development in India
 THREATS

The pattern of buying & selling may not continue.

With relocations of industries in other third world
countries, new competitors will emerge
opposing interests
Prospect of even more restrictive labour laws being
introduced
Increasing rejection rate for proposals to establish
SEZs
Flow Chart for Setting up SEZ
Flow Chart for Setting up SEZ contd..
REASONS FOR FAILURE
SEZs in India

(ii) Inadequate infrastructure

(iii) Restrictive policies
(iv) Lengthy procedures No Single Window
(v) Locational disadvantages
(vi) Stringent labour laws

- In the 1990s, as a part of reforms, powers delegated to

zone authorities, additional fiscal incentives were given,
policy provisions were simplified and greater facilities were
provided leading to some, not very significant,
improvements.
SMALL SIZE OF EPZs
Current Status of SEZs in India
Performance of SEZs In India
The government does not provide
information on jobs lost, only on
jobs created.
Finance Minister P. Chidambaram wrote to
Cabinet colleagues saying: SPECIAL ECONOMIC
ZONEs per se will distort land, capital, and labour
cost, which will encourage relocation or shifting of
industries in clever ways that cant be stopped. This
will be further aggravated by the proliferation of a
large number of SPECIAL ECONOMIC ZONEs in and
around metros.)
Impact of the Special Economic Zone
Affluent of the industry will deteriorate physical
condition of soil.
The chemical affluents from the industries will also
effect the bio-resources.
The sub-surface and under ground water quality will
be impaired, because of heavy metals etc., through
the contaminated water from the surface.
The fertile land will become unproductive for the
agriculture.
The environment will be affected by such pollution.
The land value will be decreased.
The Socio-economic conditions of the people in the
area will be effected.
 Environment (Protection) Act is inapplicable to
SPECIAL ECONOMIC ZONEs. No environmental
clearance needed.
Violates Panchayat Raj Act (1996) for local self
government.
Violates laws granting rights and control to Adivasi
communities over their land.
Violates many international conventions on human
rights.
CONCLUSION
SEZ policy has no doubt given a boost to the Indian
Economy but comparison of implementation with
other countries brings out lacunas in Indias SEZ Policy.

The reasons for disparities can be attributed to many

reasons as listed below.
Improper SEZ policy
Irresponsible planning while locating SEZ
Ineffective Land Acquisition Policies
Improper Rehabilitation Policy
CONCLUSION
Key challenges in the SEZs programme will be

Due exercise of control while approving and locating SEZs.

Compensation for acquisition shall be on the basis of market prices .
Give share of acquired land in the developed area to the owners.
Provision of employment for Landless labourers .
Provision of revenue for ULBs on sharing basis to compensate their
withdrawal once the area is notified as SEZ.
Development of SEZs needs to be integrated with existing Master
Plans and Regional Plans.
There is need to develop regional/sub regional plan around the SEZ
areas.
Thank you