SPECIAL
ECONOMIC
ZONE (SEZ)
SPECIAL ECONOMIC ZONE
(SEZ)
Liberal economical laws
Duty-free areas
Own infrastructure & support services
Conducive atmosphere to promote investment and exports
The category ‘SEZ’ includes following Zones:
Free Trade Zones (FTZ)
Export Processing Zones (EPZ)
Free Zones (FZ)
Industrial Estates (IE)
Free Ports
Urban Enterprise zones and others
OBJECTIVES
OBJECTIVES:
Creation of employment opportunities
Promotion of investment from domestic & foreign sources
Development of infrastructure facilities
Generation of additional economic activity
Promotion of exports of goods & services
HISTORY
SEZS IN INDIA
MAJOR REAL ESTATE
SEZ DEVELOPERS
MAJOR REAL ESTATE SEZ
DEVELOPERS
DLF Panchshil Realty Group
HDIL Adarsh Builders
Parsvnath Omaxe Reliance India
BPTP Real Estate CIDCO
Ansal API Raheja Developers
WHO CAN
SET UP SEZ?
WHO CAN SET UP SEZ?
Central Government State Government
Foreign Company Private/Public Company
Jointly by any of the above
APPROVAL
MECHANISM
APPROVAL
DEVELOPER
MECHANISM
Proposal
STATE GOVT
Recommendation
BOA
APPROVAL MECHANISM:
The developer submits the proposal for establishment of SEZ
to the concerned State government.
The State Govt. has to forward the proposal with its
recommendation within 45 days of the receipt of the
proposal to the Board of Approval (BOA)
Optional facility to submit the proposal directly to the BOA
ADMINISTRATIVE
SET UP
ADMINISTRATIVE SET
UP
BOARD OF APPROVAL
APPROVAL COMMITTEE
SEZ UNITS
ADMINISTRATIVE SET
UP
TERMS &
CONDITIONS
TERMS & CONDITIONS:
SEZ: Minimum area of 1000 hectares
Above condition will not be applicable to product specific and
port/airport based SEZs.
Unit should be approved under SEZ scheme
Security arrangements should be adequate as per standards
An Inland Container Depot (ICD) will be an integral part of SEZs
Abide Local laws, Rules and Regulations
ADVANTAGES &
INCENTIVES
ADVANTAGES &
INCENTIVES
OPERATIONAL FISCAL
INCOME TAX FDI
CUSTOM & EXCISE
OPERATIONAL ADVANTAGES:
Sectoral restrictions on manufacturing sector inapplicable
within SEZ
All SEZ activities on self certification basis
Single window clearance
Inter unit transfer of goods permitted
No routine customs examination of export and import cargo
Forward looking labor laws under consideration
FISCAL ADVANTAGES:
100% FDI for manufacturing units operating inside SEZs
through automatic approval route in almost every sector.
100% profit repatriation facility from export earnings
permission to sell within Domestic Tariff Area (DTA) and an
exemption from a Special Addition
Duty (SAD) subject to the company having a positive Net
Foreign Exchange Position (NFEP)
CUSTOMS AND EXCISE:
SEZ units may import or procure from the domestic sources,
duty free, all their requirements of capital goods, raw
materials, consumables, spares, packing materials, office
equipment, DG sets etc. for implementation of their project in
the Zone without any license or specific approval.
Duty free import/domestic procurement of goods for setting
up of SEZ units.
Goods imported/procured locally duty free could be utilized
over the approval period of 5 years.
Physical export benefit
100% IT exemption (10A) for first 5 years and 50% for 2 years there
Reinvestment allowance to the extend of 50% of ploughed back pro
Carry forward of losses
Foreign Direct Investment:
100% foreign direct investment is under the automatic route is
allowed in manufacturing sector in SEZ units except arms and
ammunition, explosive, atomic substance, narcotics and
hazardous chemicals, distillation and brewing of alcoholic drinks
supplies from DTAs to be
treated as exports while those
from SEZs to DTAs to be treated
as imports
investments in SEZ treated as
infrastructure development and
eligible for exemption
local inputs at reduced cost
without the excise, VAT and
other levies of India
duty free import of materials for
construction, capital goods and
BANKING / INSURANCE/EXTERNAL COMMERCIAL BORROWINGS:
Setting up Off-shore Banking Units allowed in SEZs.
OBU’s allowed 100% Income Tax exemption on profit for 3
years and 50 % for next two years
External commercial borrowings by units up to $ 500 million
a year allowed without any maturity restrictions
No time limit for export proceeds
Flexibility to keep 100% of export proceeds in EEFC account.
Freedom to make overseas investment from it.
SERVICE TAX:
•Exemption from Service Tax to SEZ units
ENVIRONMENT:
•Non-polluting industries in IT are allowed, facilities like golf courses, desalination
plants, hotels and non-polluting service industries in the Coastal Regulation Zone
area
•Exemption from public hearing under Environment Impact Assessment Notification
DRUGS AND COSMETICS:
•Exemption from port restriction under Drugs & Cosmetics Rules.
SUB-CONTRACTING/CONTRACT FARMING:
•SEZ units may sub-contract part of production or production process through
units in the Domestic Tariff Area or through other EOU/SEZ units
•SEZ units may also sub-contract part of their production process abroad.
•Agriculture/Horticulture processing SEZ units allowed to provide inputs and
equipments to contract farmers in DTA to promote production of goods as per
the requirement of importing countries.
COMPANIES ACT:
•Enhanced limit of Rs. 2.4 crores per annum allowed for managerial
remuneration
•Agreement to opening of Regional office of Registrar of Companies in SEZs.
•Exemption from requirement of domicile in India for 12 months prior to
appointment as Director.
DISADVANTAGES
DISADVANTAGES
SEZs would result in the Finance Ministry losing revenue to
the tune of over Rs.1,00,000 Cr annually due to various tax
concessions and exemptions.
The SEZs are mainly coming up in Maharashtra, Gujarat,
Tamilnadu, Karnataka, Haryana, Orissa. This could lead to
regional imbalances.
Eg: No SEZ has yet come up in the North-east region which
already suffers from the problem of alienation.
In India, farmers are emotional about the land that they have farmed for
years and just giving it up is not something that can be easily digested. They
are unhappy with the compensation.
Huge tracts of agricultural and forested land will be converted for industrial
purposes for the setting up of SEZs which affects the ecological system.
Clusters of development - promoting heightened economic activity can
widen the already existing gap between developed and impoverished areas.
Employee Working Conditions – Since relaxed labor laws are applicable in the
SEZs, workers enjoy no rights including the fundamental rights of association
and protests.
CONTROVERSIES
EXPORT
PERFORMANCE
EXPORT PERFORMANCE
OF INDIAN SEZS
Trend In Export performance of SEZs
140000
125950
120000
100000
80000
66638
Exports (In Cr)
60000
40000 34615
22840
18309
20000 13854
8552 9190 10053
0
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
EXPORT PERFORMANCE
OF INDIAN SEZS (%)
Percentage Growth in Exports
100%
92% 89%
90%
80%
70%
60%
52%
50%
Growth Rate (%)
39%
40% 32%
30% 25%
20%
9%
7%
10%
0%
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
SECTOR WISE PERFORMANCE
OF INDIAN SEZS (06 – 07)
Sector-Wise Exports (06-07)
Others
Textiles and Garments
14% Electronics
4%
19%
Trading and Service
7% Engineering
4%
Food and Agro
2%
Plastic and Rubber
1%
Chemicals and
Pharmaceuticals
3%
Gems and Jewellery
46%
SECTOR WISE PERFORMANCE
OF INDIAN SEZS (07 – 08)
Sector-Wise Exports (07-08)
Textiles & Garments
Others
2%
2% Electronics
23%
Trading and Service
31%
Engineering
3%
Plastic
and
Rubber
1%
Food and Agro
1% Drugs and
Gems and Jewellery
Pharmaceuticals
35%
2%
EXPORT PERFORMANCE
OF INDIAN SEZS
SEZ Exports As % Share of Total Exports
18%
16% 15.73%
14%
12%
10.17%
10%
8%
6.14%
6% 5.10% 5.13%
4.70%
4.20% 4.40% 3.90%
4%
2%
0%
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
FOREIGN DIRECT
INVESTMENT
FOREIGN DIRECT INVESTMENT
Foreign direct investment (FDI) has attracted over Rs. 10,900
Crore in the last three years
TOTAL INVESTMENT IN SEZ
Total investment in Special Economic Zones as of 30.6. 2008:
Rs. 81093 Crore
RECENT NEWS
RECENT NEWS
“Flaws in SEZ policy forcing major players to plan exit”
(10th Oct 09)
“SEZ exports doubles in first fiscal despite
contraction in World Trade”
(11th Nov 09)
(Ref.: www.indianrealitynews.com)
INDIA V/S CHINA
