Introduction• 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".• SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package with the minimum possible regulations.• Government of India have notified Special Economic Zones (SEZs) Act 2005 and notified Special Economic Zone Rules 2006 with a view to augmenting infrastructure facilities for export.
Chronology of SEZ framework Export In 1990s, as a Processing part of Zone (EPZ) Special reforms, Full law and policy 1965. New Policy in Economic powers rules effected April 2000 Zones Act MAY 1st EPZ was set delegated to February 2006. 2005. up in Kandla zone (Gujarat) authorities.SEZ Categories» Free Trade Zones (FTZ)» Export Processing Zones (EPZ)» Free Zones (FZ)» Industrial Estates (IE)» Free Ports» Urban Enterprise Zones
History of SEZ’s in India• During the past four decades many developing countries have been creating special zones to promote their exports and earn foreign exchange.• The term Export Processing Zone (EPZ) was first coined to identify the Shannon zone set up in Ireland in 1958.• India established its first EPZ in 1965 in Kandla (Gujarat)• In 1984 EPZs were established in Cochin (Kerala), Falta (Calcutta,now Kolkata), Madras (now Chennai) and NOIDA (Uttar Pradesh).• The Visakhapatnam EPZ (Andhra Pradesh) was established in 1989 and the Surat EPZ (Gujarat) in 1997.
SEZ Act, 2005With a view to overcome the shortcomings experienced onaccount of the multiplicity of controls and clearances; absence ofworld class infrastructure, and an unstable fiscal regime and aview to attract larger foreign investments in India,the Special Economic Zones (SEZs) Policy was announced inApril 2006.• The main objectives of the SEZ Act are: 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
Status Of State SEZ Act/PoliciesStates where SEZ Act has been enacted & is in forceStates where SEZ Policy has been enacted & is in force
Economic BenefitsSEZ policy has directly benefited economy in following ways:1. Employment Generation : SEZs generate direct employment for skilled and unskilled labour ;indirect employment and employment for women workers.2. Skill Formation: Formation of SEZs and new job requirements increase firm level activity wherebythe labour force acquires skills from within the firm through training and learning.3. Attract investors:: SEZs offer a highly conducive investment scenario for developers. No taxduring development and operational stage. At profit stage 100% income tax exemption for Ist 5 yrs,50% for next 5 yrs.4. Technology Upgrading: SEZs attract export-oriented FDI and promote other forms ofcollaboration between local firms and MNCs.5. Exports: EPZ exports registered an impressive growth rate over the period 1966 to 2002. EPZexports increased in India from less than Rs.1 million in 1966 to over Rs. 97727 million in 2002.6. Manufacturing Sector: Share of manufacturing industry in the exports grew from negligiblepercentage in 1970 to above 6 % in 2005.(Sources: Ministry of Commerce, Economic Survey)
SEZs as vehicle for Job Creation Reaping the demographic dividendIndia’s demographic profile is a boon for creatingproductive jobs for rising work force with highersavings and eventually investments for economicgrowth. India’s median age is just under 25 years withover 500 million people below 25 years of age.Two-thirds of these are supported by theagricultural sector which contributes just 21percent to the GDP.These people have rising aspirations and mustfind jobs in manufacturing and services sectors,failing which there would be serious social andeconomic implications for the country.SEZs are job creators - it is estimated that closeto 15,00,000 jobs by end of 2010 would becreated by SEZs.
SEZs Typology• SEZs can be categorized on basis of sector, function or location and required to have processing as well as non-processing area. Sector – Specific Manufacture goods or render services in a particular sector. SEZ SEZ Manufacture multiple goods in one Multi – Product sector or across multiple sectors. SEZ Trading and warehousing included SEZ in a port or SEZ in an existing port or airport for manufacture of goods falling in two or airport more sectors . Trading and warehousing included
SEZ LAYOUT Processing Area Non- Processing Area•Processing area is the demarcated area in SEZ Non-processing area is intended to providewhere units can be located for manufacture of support facilities to SEZ processing area andgoods or rendering of services may include:•Minimum processing area has been uniformly • Educational institutionsfixed at • Hospitals 50% for Multiproduct SEZs • Hotels Upto 90 % for product specific SEZs • Recreation and entertainment facilities • Residential and business complexes Land Use Distribution (%) Multi Product Sector Specific ( IT/ITES ( Min. 10 Ha) ( Min. 1000 Ha) Min. 100 Ha) Residential 35 50 50 Public Utility 15 10 10 Recreational 10 15 Transport & Communication 15 15 Green Belt 10
Sector specific SEZs• Pharma • Telecom Equipments• IT/ITES • R& D• Gems & Jwellery • Processed food & Bio eqp.• Bio Technology • Entertainment & Recreation• Chemicals• Consumer appliances• Medical equipments• Engineering Based• Apparel & Readymade• Automotive components
Development Norms for Non ProcessingAreas in SEZs.Permissible FAR and land area is based on the following assumptions• The area permissible for the non processing use is Max 50%• The norms are based on 100 FAR on total area under non processing zone• Min area for Sector Specific SEZ – 100 ha• Min area for IT/ITES, Biotechnology, Gems and Jewellery SEZ- 10 ha• Min area for Multi Product SEZ – 1000 ha.
Development Norms for Non Processing Areas in SEZs.Development guidelines – Multi Product SEZFAR – 100Total Floor Space – 50,00,000 sqmtsFloor Space utilizationActivity Percentage of floor Area in Sqmt spaceResidential – All types of housing typologies like villas, plotted housing 50 250000apartments, condominiums etc as per the demand and needCommercial – This includes retail commercial, hotels, service apartments, 25 125000multiplex etcFacilities – This includes schools college, social cultural institutes, 25 125000hospitals, medical centers etcLand UtilizationActivity Percentage of land Land in Ha AreaResidential, commercial and facilities 55 27.5 (ground coverage 30%)Open spaces 20 100Circulation 25 125Note: The overall ceiling in each category will be revised upwards inproportion with the available FAR and area.
Development Norms for Non Processing Areas in SEZs.Development guidelines – Sector Specific SEZMaximum area permissible for Non Processing Zone 50 Ha.FAR – 100Total Floor Space – 5,00,000 sqmtsActivity Percentage of floor Area in Sqmt spaceResidential – All types of housing typologies like villas, plotted housing 50 250000apartments, condominiums etc as per the demand and needCommercial – This includes retail commercial, hotels, service apartments, 25 125000multiplex etcFacilities – This includes schools college, social cultural institutes, 25 125000hospitals, medical centers etcLand UtilizationActivity Percentage of land Land in Ha AreaResidential, commercial and facilities 55 27.5 (ground coverage 30%)Open spaces 20 10Circulation 25 12.5Note: The overall ceiling in each category will be revised upwards inproportion with the available FAR and area.
Development Norms for Non Processing Areas in SEZs.Development guidelines – IT/ITES, Biotechnology, Gems and Jewellery SEZMaximum area permissible for Non Processing Zone 5 ha.FAR – 100Total Floor Space – 50,000 sqmtsActivity Percentage of floor Area in Sqmt spaceResidential – apartments, condominiums etc as per the demand and need 60 30000Commercial – this includes retail commercial, hotels, service apartments, 15 7500multiplex etcFacilities – This includes schools social cultural institutes, medical 25 12500facilities such as dispensary nursing home etcLand UtilizationActivity Percentage of land Land in Ha areaResidential, commercial and Facilities 75 3.75 (ground coverage 30%)Open spaces 10 0.5Circulation 15 0.75Note: The overall ceiling in each category will be revised upwards inproportion with the available FAR and area.
SEZs in IndiaAt present there are Eightfunctional SEZs located at:• SantaCruz (Maharashtra),• Cochin (Kerala),• Kandla and Surat (Gujarat),• Chennai (Tamil Nadu),• Visakhapatnam (Andhra Pradesh),• Falta (West Bengal) &• Nodia (Uttar Pradesh)Further a SEZ at Indore(Madhya Pradesh ) is nowready for operation.
Sector AllocationFORMAL IN PRINCIPAL Source: SEZ India *(As on 29.08.2007)
Sectoral Focus As many as 439 SEZs have been approved in principle, out of which 198 have been notified till 8 March, 2008.
SEZ’S India vs China• By the end of the 1990s, it was found that India’s EPZs were not performing as well as China’s SEZs.• Major reasons behind poor Indian SEZ’s performance w.r.t China. Limited scale and overcrowding. Inadequate logistic supports. Poor infrastructure. Governments indifference and red tapism in matters of foreign direct investment. Lack of clarity in incentive packages. Poor coordination between state and municipal governments with central government, in the design, set up, and functioning of the zones.
SEZ’S India vs ChinaIssue China IndiaSize Typically in hundreds of Even 10 hectares will do hectares.Location located only on coasts. Anywhere. No restrictionLabour laws Relaxed Flexibility is totally absentPolicy regime Experimentation of liberal Based on fiscal sops policies in the specified areasInvestors Basically foreigners who are Basically locals. Not foreign investor wooed with sops and promise of driven stability in policy.Commencement In 1979 In 1969 with the export processing zone concept, but it failedNumber Only six: Shenzhen, Zhuhai, So far 28 operational. About 200 Shantou, Xiamen, Hainan and received approvals PudongTax holidays Present Longer and steeper than in China
Falta SEZ• Set up by the Government of India in the year 1984.• Subsequently, two other SEZs were set up. They were MANIKANCHAN SEZ for gems and jewellery and WIPRO SEZ for IT and ITES, located at Salt Lake, Sector-V, Kolkata. – It is about 55 kilometres from Calcutta city and 45 kilometres from the southern suburbs. – It is well connected by a developed network of roads including a State highway, two ports at Calcutta and Haldia and International airport at Dumdum.• Infrastructural Facilities available at FALTA SEZ Gross area 280 acres (acquired 87acres and transferred from CPT 193acres). Location - Panchayat area. Area Developed- 253 acres (full infrastructural facilities) Area under development 27acres Built - up space - SDF-15570 sq.m.(2nos.) - fully allotted. Industrial shed- 15350sq.mtr.(7 nos) - fully allotted. 1 million liters per day water supply with drainage facilities. Electric sub-station for dedicated power supply for all categories, supplemented by local sub-stations.
Falta SEZ Total Valid Approvals – 182 Units in operation – 101 Units under implementation -30 Investment by Govt. of India - Rs 60.50 Crores (cumulative). Revenue Expenditure - Rs 02.27 Crores. (FY 2005 - 06) Revenue Earned - Rs 4.19 Crores (FY 2005 - 06). Investment Units - Rs. 317.45 Crores NRI - Rs. 8.89 Crores. Foreign - Rs. 13.71 Crores.STRENGTHS Effective investment host for the industry in the traditional manufacturing sector. Foreign trade profile consistent with local factor endowments. High rate of growth and rising share of this sector in the overall exports from the states of W. B. as well as the Country. Low cost of operation. Ease of entry and lower cost of operation for commodity / volume driven products. ease of operation for niche products. Resource efficient scheme for export enhancement. Strong linkage with industrial capacity in the command and catchment area.
Falta SEZ Social and Economic Infrastructure• Telecommunication services, Post office including Courier Services.• Residential accommodation for Staff• Container Handling Jetty - Capacity 5 containers per hour.• Community Polytechnic for skill development and training.• Inland Container Depot (ICD). Infrastructural Facilities• Developed land & Built-up area at affordable and attractive rates.• Quality and Stable Power Supply• Efficient road network• Container Handling Jetty
Indore SEZIndore SEZ was notified prior tothe enactment of the SEZ Act2005 and became operationalW.e.f. 15.08.2003.This SEZ is the only Green Fieldmulti product SEZ of India as ondate and is spread over an areaof more than 1100 hectaresof land in Phase I & IIIndustries of various sectorssuch as Plastic, Engineering,Pharmaceutical, Metal, Textile &Food processing etc. are locatedin the Zone.
Indore SEZLocationAdjacent to the Pithampur/Kheda industrial growth central complex which is one of theleading growth centers of India and is situated near Indore the most advanced and developedindustrial town of M.PIndore provides all the social infrastructure, civic facilities and other benefits to the growingcenters.Connectivity of Indore to all major parts of the country is also a boon to the industries.
Indore SEZSalient featuresLand is allotted on lease. Thelease is renewable. Allotment isdone by MPAKVN Indore Ltd.The power is made available bythe developer. MPAKVN (I) Ltd.has a direct power purchaseagreement with NTPC. Theprovisional tariff is presently Rs.2.70 per unit, plus Rs. 124 perKVA as fixed charges.ISEZ has a Customs wing, so thaton-site Customs clearances etc.are available. Formalities forCustoms clearances for imports& exports are completed withinthe zone.
Conclusion• SEZ policy has no doubt given a boost to the Indian Economy but comparison of implementation with other countries brings out lacunas in India’s 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• Key challenges in the SEZs programme will be • Due exercise of control while approving and locating SEZ’s. • 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.