Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be
foreign territory for the purposes of trade operations and duties and tariffs
WHAT IS SEZ?
•A special economic zone (SEZ) is an area in which the business and trade laws are
different from the rest of the country. SEZs are located within a country's national
borders.
• Their aims include increased trade balance, employment, increased investment, job
creation and effective administration. To encourage businesses to set up in the zone,
financial policies are introduced. These policies typically encompass
investing, taxation, trading, quotas, customs and labour regulations. Additionally,
companies may be offered tax holidays, where upon establishing themselves in a zone,
they are granted a period of lower taxation.
• The benefits a company gains by being in a special economic zone may mean that it
can produce and trade goods at a lower price, aimed at being globally competitive.
Indian Special Economic Zone was structured with the establishment of the
H first Export Processing Zone (EPZ) at Kandla in the year 1965. Special
Economic Zone came in to existence because the economic reforms
incorporated in the early 1990s did not resulted in the overall growth of the
I Indian economy. The economic reforms incorporated during the 1990s did not
produce the desired results. The Indian manufacturing sector witnessed a
sudden dip in the overall growth of the industry, during the second-half of
S 1990s. The History of SEZs in India suggests that red tape, lengthy
administrative procedures, rigid labor laws and poor physical infrastructural
facilities were the main cause of deterioration of Foreign Direct Investments
T (FDI) inflow in to India. Further, the Indian markets were not mature enough
to facilitate easy entry of Foreign Institutional Investors (FIIs) in to the Indian
economic system. Furthermore, the legal framework of Indian economy was
O not strong enough to prevent misuse of Indian markets by the foreign
investors. Thus, the lack of investor friendly environment in India prevented
growth of Indian industry, in spite of implementation of liberal economic
R policy by the central government. This resulted in the formation of a much
larger and more efficient form of their predecessors with world-class
infrastructural facility.
Y The Special Economic Zone (SEZ) Policy was announced in April 2000. This
resulted in the formation of a much larger and more efficient form of their
predecessors with world-class infrastructural facility. The SEZ Act, 2005 and
SEZ Rules became effective on and from 10th February 2006.
NEED
FOR SEZ?
The prime objective was to enhance foreign investment and provide an internationally
competitive and hassle free environment for exports. The idea was to promote exports
from the country and realizing the need that level playing field must be made available to
the domestic enterprises and manufacturers to be competitive globally. SEZ are set up in
order to attract foreign investors to invest in India, SEZ are brought with world class facilities
, water , electricity , roads , transport , storage etc.. this foreign investment will help in
economic development of our country. SEZs play a key role in rapid economic development
of a country. In the early 1990s, it helped China and there were hopes (perhaps never very
high ones, admittedly) that the establishment in India of similar export-processing zones
could offer similar benefits -- provided, however, that the zones offered attractive enough
concessions.
Development of Generation of
infrastructure facilities additional economic
activity
Creation of
OBJECTIVES Promotion of
exports of goods
employment
opportunities
OF SEZ and services
Promotion of investment
from domestic and foreign
sources
ADVANTAGES OF SEZ
• 15 year corporate tax holiday on export profit – 100% for initial 5 years, 50% for the
next 5 years and up to 50% for the balance 5 years equivalent to profits ploughed
back for investment.
• No license required for import made under SEZ units.
• Exemption from customs duty on import of capital goods, raw materials,
consumables, spares, etc.
• Exemption from payment of Central Sales Tax on the sale or purchase of goods,
provided that, the goods are meant for undertaking authorized operations.
• Since SEZ units are considered as ‘public utility services’, no strikes would be
allowed in such companies without giving the employer 6 weeks prior notice in
addition to the other conditions mentioned in the Industrial Disputes Act, 1947.
• Has host of Public and Private Bank chains to offer financial assistance for business
houses.
• In –house Customs clearance facilities.
• Abundant supply of technically skilled as well as semi-skilled
manpower.
• Well connected with network of public transport, local railways and
cabs.
• Simplification of procedures and self-certification in the labor acts.
• Full authority to provide services such as water, electricity, security,
restaurants, recreational, facilities within the zone on purely
commercial basis.
• Pollution free environment with proper drainage and sewage system.
DISADVANTAGES OF SEZ
• Loss of revenue to government
Generally government gets huge tax from industries. But, as government is providing
tax holidays for industries, it loses most of the revenue from it. This reason government
has to lay more burdens on common man. If it is not laid government may not fulfill its
stint properly. Even government fails to give subsidies, it falls on poor and middle class.
Hence, there is criticism on government that it is helping the rich.
• Land grabbing
Lands are grabbed from poor and middle class people on the pretext of development.
Generally, the land is considered to be an asset to these people and they invest on it
working their entire life. But, government with its simple G.O., it evacuates people. This
is the reason in so many states there are widespread movements by people.
• Regional disparity
The places which are near to SEZs get good facilities and good infrastructure is available.
This produces disparity among places. There may be tensions prevail like new states
movements.
• Loss of agricultural land
As land grabbing is going on, there are instances that fertile
agriculture lands are being taken in order to provide way for
industries. This is not only keeping agriculture at stake but also food
crisis may arise in near future.
• Compensatory problems
Government provides compensation. But it is not equal to the loss rendered.
People have to sacrifice their lands for private persons which they have earned
with years of their hard work. In land related issues, agriculture land loss due to
SEZs is more problematic as farmer loses his livelihood and his asset. He has to
search for another livelihood which is not easier. He has to work as a labour in
another farm or has to leave his village.
• Deindustrialization
SEZs attract many industrialists in other places in India and they show interest as
there is tax exemption. This process enables deindustrialization in already existed
places and migration starts. This is not a good omen. There should be development
equally.
Types of SEZ
•Manufactures one or more good in a
Sector-Specific SEZ particular sector like gems and jewellery,
electronic hardware or software = 10 or more
hectares
•Manufactures one or more services=100 or
more hectares
SEZ
Multi- Product SEZ Manufacture multiple goods or rendering
multiple services in one sector or across
multiple sectors.
And land used is 1000 or more hectares
SEZ in a port or SEZ in an existing port or airport for
airport ; or for free manufacture of goods falling in two or
trade and more sectors including trading and
warehousing warehousing
Land used is 40 or more hectares
ROLE OF SEZ IN INDIAN ECONOMY
• To provide internationally competitive
environment
• To encourage FDI and GDP
• To increase share in global exports
• Generate employment opportunities
• Boost infrastructure development
• Growth in the manufacturing sector
Few SEZ in India
• 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
• M/S. Apiic Ltd., Naidupeta, Nellore
• Sricity Pvt. Ltd., Chittoor
• Rajiv Gandhi Technology Park, Phase-1
Chandigarh
• Surat Special Economic ZoneSachin, Surat
