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Invest in Karnataka The Land of opportunities
1. Study on Developing a Multi product Agro
SEZ in Karnataka
Presented by ;
FAROOK A AZAM
MD, BIG
www.biginfra.net
1
2. Presentation flow
Why this project
Objective
Agricultural scenario in INDIA
Data Collection
Location considered for project
Project highlights
SWOT analysis
2
4. 4
QTY(2005-2006) QTY(2006-2007) QTY(2007-2008)
India Exports Statistics : Major Product Group 1,480,613.75 2,002,857.38 1,724,573.60
0.00
500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
Inlakhs
India Exports Statistics : Major Product Group
Source: MOSPI
5. Objective
Is to create employment in rural Karnataka
Generate Business opportunity for agriculture sector in
global market
To create demand and design a marketing strategy for
agriculture products
Setting up of Agro Multiproduct SEZ for Sustainable
development in Agriculture sector
5
6. Data Collection
National sample survey report
Economic survey reports
Ministry of commerce & Industry department of commerce
Directorate of economic and statistics , GOK
Planning commission (11th five year plan; vol -II)
India Agro Industry
Directorate of census Operations Karnataka
Karnataka statistics statement from GOK
site visit
SEZ
6
7. Location Considered for the project
Following district’s are the preferred location for the project :
Hubli / Hassan / Tumkur (Turuvekere) / Mandya (Nagamangala)
7
10. Why these 4 districts
• All the four are connected with National highways i.e. (NH-48 and NH-4)
• All the four are well connected with Rail link
• Hassan and Hubli districts are having airstrip
• Economical and well educated manpower available
• Number of Educational Institutions, polytechnics , Engineering colleges and
Technical training institutes
• All the four are having well irrigated land
• The agricultural output is good when compare to other districts in the state
• Favourable weather condition
• Favourable State Govt . Policies till date
• Situated midway to Mangalore and Bangalore
10
11. Highlight of Project
• Providing High end infrastructure for agro industries in SEZ like
roads, structures and facility , parking lots and weighing bridges and
cranes etc
• Services like power, 100 % power back up, treatment plants, HVAC
system, CCTV in common areas, BMS.
• More than 50 thousand direct employment will be created and indirect
employment more than 1.5 lakh.
• Amenities like Convention Halls, Business hotels & auditoriums , Hotel for
refreshments, Health clubs etc
• operation and maintenance of entire Infrastructure with in the
SEZ, Security in the open space and common areas will be done by the
developers
• Going to rope all the farmers to enjoy the benefits of the project to the
max.
• Hospitals , agricultural equipment industries, R & D centres for
agriculture sector etc will be housed in this SEZ
• Creating a Marketing Block for the Agricultural products and sales
* Conditions apply
11
12. AGRI Industries are considered an extended arm of agriculture
but in India they have not received as much attention as
agriculture.
While agriculture contributes about 25 per cent of India's GDP
the value added by the processing industry is only 8 per cent
of total food production.
For example,
only two per cent of horticulture products are estimated to be
processed and more than 30 per cent of production is wasted
due to lack of storage and processing facilities.
Agri industries help strengthen the farm
sector and stabilize rural incomes
12
13. Multiple Benefits
The focus on value addition in the agriculture sector is vital for
comprehensive development of the rural economy.
Since the food processing industry creates jobs, demand for agri
raw materials, leads to diversification and commercialization of
agriculture, enhancing the incomes of farmers and creating
surpluses for export of agro foods.
The broad-based development of the food processing industry
will improve both the social and physical infrastructure of rural
India.
13
14. Strength Opportunities
Agro Multi
product SEZ
• Supporting Infrastructure
• strategic locations
• well connected by road, rail , and Air
• excellent Business lease model
• Economical labour & Govt. initiative
• Skilled Manpower
• excellent supply of agri
products
• No regulatory framed work
available for Agro sector Specific
• Green field project
• untapped sector
• political and community attitude
Weakness Threats
• Hassan textile SEZ
• Mangalore Multi product SEZ
• Govt. Policies
• Nandhgudi SEZ near Bangalore.
• Generates employment & investment
• Enhance income of farmers
• leads to diversification and
commercialization of agriculture
• As there is no Agro Sector Specific
MSEZ in INDIA
• there exists a huge
opportunity for related
industry in agriculture
14
15. Recommendations
• To design the Sector specific policies for Agriculture sector.
• To give the unique permission to sell the products with INDIA
and should give all the incentive and tax holidays slightly
longer than the other commercial SEZ.
• Govt. Should ensure the process of approvals to be smooth
and single window clearance need to be ensured etc.
15
17. Overview
• Introduced by erstwhile Export Import Policy in April 2000 to provide internationally
competitive and conducive environment for exports
• Various fiscal/ non fiscal incentives/ benefits provided to developer and units in SEZ
• Earlier controlled by Foreign Trade Policy and Customs Act, 1962 and regulations
notified there under
• Special Economic Zone Act (‘SEZ Act’) enacted in 2005 to provide comprehensive
legislation in relation to SEZs
• SEZ – deemed to be territory outside the Customs territory of India in relation to
authorized operation
• Can be set up by private / public / joint sector or State Government or its
agencies, for manufacture of goods or rendering of services or both or as a Free
Trade Warehousing Zone
• Goods and services going into the SEZ from DTA treated as exports and goods and
services coming from the SEZ to DTA treated as imports
• SEZ deemed to be a airport, port, inland container depot, land customs station
under the Customs Act
17
18. Legislative Framework
SEZ Act 2005 SEZ Rules, 2006
• Basic framework for setting up and operation
of SEZs prescribed under the Act
• Rules lays down guidelines for giving effect to the
SEZ scheme prescribed under the Act
SEZ Rules, 2006SEZ Act, 2005
State SEZ Policy
• Lays down guidelines for giving effect to the SEZ scheme
prescribed under SEZ Act, 2005
• Policy provides for substantive and procedural benefits offered
by the State to Developer/ Units
State SEZ Policies
SEZ Act, 2005 & SEZ Rules, 2006 notified on 10 February 2006
18
19. Legislative Framework
• Chapter X-A of the Customs Act along with the SEZ Rules 2003 and
SEZ (Customs Procedure) has been rescinded with effect from 10
February 2006
• All the rules and notification under other laws in relation to the SEZ
shall remain in force to the extent they are not inconsistent with the
SEZ Act 2005 and Rules made there under
• Provisions of the SEZ Act, 2005 override inconsistent provisions of any
other law in force at the time of commencement of the SEZ Act, 2005
SEZ Act specifies exemption for the developer and units in the SEZ from
Customs, Excise, Service Tax, Central Sales Tax etc. However, it is not
clear as to whether this would require specific notification under the
respective legislations, or whether the specific exemption provided
under SEZ Act would suffice
19
21. Key Stakeholders
Developer
• Person who obtains Letter of Approval from the Central
Government to establish the SEZ and undertake authorised
operations
• SEZ Act also envisages ‘multiple developers’ for the SEZ.
When one Developer does not possess minimum contiguous
land to develop an SEZ, Central Government may approve
more than one Developer
• Co-developer is a person who intends to provide
infrastructural facilities in an SEZ along with a developer
• Co-developer enters into an agreement with Developer
and obtain requisite permission as per the SEZ Act and Rules
Co-Developer
21
22. Key Stakeholders
• Contractor can be appointed by developer / co-developer
to undertake authorized operations in SEZ
• Contractor can avail all exemptions, drawbacks and
concessions available to the Developer / co-developer
• All documents shall bear the name of developer/ co-
developer along with the contractor
SEZ Units
Units in SEZ can undertake
• Manufacturing
• Rendering of services
• Trading
• Warehousing
In relation to authorized operation of the SEZ
Contractor
22
24. Considers proposals for setting up SEZ and Units in SEZ
Considers proposals for setting up of Units in SEZ, monitoring
performance, and supervises import / procurement by
Developer/ Units in SEZ
Development
Commissioner
Board of Approval
For administrative control of the SEZ
Approval
Committee
Key Regulators
SEZ Authority
State Government
Receives and forwards the proposal with recommendations to
the Board of Approval
Overall authority for governing, notifying the SEZ and granting
the letter of approvalCentral Government
Undertakes measures for the development, operation and
management of the SEZ
24
25. Benefits Available
Available to Developer Available to Suppliers
Central Benefits
• Customs
• Other Miscellaneous Taxes and
Levies
• Income Tax
• Dividend Distribution Tax
• Minimum Alternate Tax
State Benefits
• Electricity
• Labour
Central Benefits
• Central Excise
• Service Tax
• Central Sales Tax
• Drawback/ DEPB
State Benefits
• Sales Tax/ VAT
• Entry Tax/ Octroi
25
26. Incentives and facilities offered to the SEZs
• The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including
foreign investment include:-
• Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ
units
• 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act
for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5
years.
• Exemption from minimum alternate tax under section 115JB of the Income Tax Act.
• External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity
restriction through recognized banking channels.
• Exemption from Central Sales Tax.
• Exemption from Service Tax.
• Single window clearance for Central and State level approvals.
• Exemption from State sales tax and other levies as extended by the respective State Governments.
* Source from www.sezindia.gov.in
26
27. Benefits Available (Contd.)
• Under the provisions of the SEZ Act, 2005 and the SEZ Rules, 2006 exemptions
are made available to Developer/ Unit and to their suppliers.
• The SEZ Rules, 2006 provide that state governments ‘shall endeavor’ to
provide exemptions/ concessions with respect to sales tax/ VAT, electricity
duty etc
• The exemption/ concession has to be refunded by developer if-
– Developer does not utilise the goods or services for authorised operations
– Unable to duly account for the goods and services for authorised
operations
• Duty drawback or any other export entitlement on DTA supplies to be paid
back by the developer in case of destruction of goods in a natural calamity
– Not required where payment made in foreign exchange
27
28. Exemption from payment of taxes, duties or cess on any export or import of goods or services from the SEZ or
on procurement of goods or services from the DTA, under the following legislations-
Agricultural Produce Cess Act, 1940
Coffee Act, 1942
Mica Mines Labour Welfare Fund Act,
1946
Rubber Act, 1947
Tea Act, 1953
Salt Cess Act, 1953
Medicinal and Toilet Preparations (Excise
Duties) Act, 1955
Additional Duties of Excise (Goods of
Special Importance) Act, 1957
Sugar (Regulation of Production) Act,
1961
Textiles Committee Act, 1963
Produce Cess Act, 1966
Marine Products Export Development
Authority Act, 1972
Coal Mines (Conservation and
Development Act, 1974
Oil Industry (Development) Act, 1974
Tobacco Cess Act, 1975.
Additional Duties of Excise (Textile and
Textile Articles) Act, 1978
Sugar Cess Act, 1982
Jute Manufactures Cess Act, 1983
Agricultural and Processed Food Products
Export Cess Act, 1985.
Spices Cess Act, 1986
Research and Development Cess Act,
1986
Miscellaneous Benefits – Central Laws
28
30. Key Concepts
Infrastructural
Facilities
Infrastructure facilities means industrial, commercial or social
infrastructure or other facilities necessary for the development of a
Special Economic Zone or such other facilities which may be
prescribed
Infrastructure
Infrastructure means facilities needed for development, operation
and maintenance of a Special Economic Zone and includes
industrial, business and social amenities like development of
land, roads, buildings, sewerage and effluent treatment
facilities, solid waste management facilities, port, including
jetties, single point moorings, storage tanks and interconnecting
pipelines for liquids and gases, Inland Container Depot or Container
Freight Station, warehouses, airports, railways, transport
system, generation and distribution of power, gas and other forms
of energy, telecommunication, data transmission
network, information technology
network, hospitals, hotels, educational
institutions, leisure, recreational and entertainment
facilities, residential and business complex, water supply, including
desalination plant, sanitation facility
30
32. Role of the Developer
Developer required to undertake authorised operations in relation to –
Development of SEZ: Creation of infrastructure (such as roads, ports, electricity, water, etc.)
and allocation of space / built up area for setting up and operating Units
Operation and Maintenance of SEZ: Day to day operation and maintenance of the SEZ and
providing infrastructure facility to the Units set up in the SEZ to ensure their smooth
functioning
• Authorized operations not defined in SEZ Act or Rules
Mainly role of Developer is to undertake development, operation and maintenance
of infrastructure and provision of infrastructure facilities
32
34. 34
Who can be a SEZ developer
• SEZ can be set up jointly or severally by
– Central Government
– State government
– Any person (incl. Private / Public limited
Company, Partnership or Proprietorship)
Section 3(1)
Approval Criteria – Applicant
35. Authorised Operations • Comprehensive
Approval Criteria – Multi product SEZ
Size
• Minimum contiguous area of 1,000 hectares
(200 hectares in specified states)
• Exclusive SEZ for Services to have a minimum
contiguous area of 100 hectares
Processing Area
• Minimum 25% of SEZ area to be demarcated as
processing area
35
36. 36
Authorised Operations
Indicative Sectors-
Engineering, textile/ garments, pharmaceuticals/
chemicals, handicrafts, gems & jewellery, electronic
hardware and software (incl. ITES), bio tech and non
conventional energy
Approval Criteria – Sector specific SEZ
Size
Processing Area • Minimum 50% area for processing area (for export related
activities)
• Minimum contiguous area of 100 hectares (50 hectares in
specified states)
• Electronic hardware and software including ITES – 10
hectares with min. built up processing area of 100,000 sq.
meters
• Bio tech, Non conventional energy (incl. solar energy
equipment) and Gems & Jewellery sector – 10 hectares
37. Authorised Operations Primarily trading and warehousing activities
Approval Criteria – Free Trade & Warehousing Zone
Size
Processing Area Not specified however minimum built up area
should be 100,000 sq meters
• Minimum 40 hectares
• No minimum area limit for setting up the SEZ
• Maximum area not to exceed 20 percent of
processing area
37
38. Approval Criteria
• Area identified for SEZ to be contiguous and vacant with no public
thoroughfare
(BOA may approve otherwise on a case to case on merits in case of
Multi Product SEZ only)
Term ‘contiguous’ not defined under the SEZ Act, 2005 or SEZ Rules, 2006
Concise Oxford English Dictionary defines contiguous to mean- ‘sharing
a common border; next or together in sequence’
• Additional area can be included in the existing SEZ. Minimum area of
additional area not specified
38
40. Application to State Government or Board of
Approval (BOA)
Section 3(2) & 3(3)/ Rule 3
Approval Process
Forwards proposal to BOA with recommendations
within 45 days of receipt of proposal
Section 3(6) and Rule 4
BOA approves proposal subject to such terms and
conditions as it may specify
Section3(7) & 3(9) / Rule 5
Approval
Communicates to the
Central Government
In case proposal is directly submitted to BOA, applicant to obtain
concurrence of the State Government within 6 months of
approval by BOA (Rule 4)
State Government
Applicant*
Board of Approval
2
1 1
3
Modification
Communicates to the
applicant
Rejection
Communicates the reasons to Central Government which shall
intimate the same to the applicant
*Applicant refers to applicant for the development of SEZ other than Central or State Government
4Cont…
40
41. Approaches DC for
demarcation of
Processing / Non
Processing Area
Applies to Approval
Committee for
permission of
procurement items
Submit details of
proposed operations
Approves authorized operations
Board of Approval
Ministry of Commerce grants a Letter of Approval
(LOA) to Developer
Section 4 / Rule 6
Central Government
Submit details of
identified area to
Ministry of Commerce
Developer
Notification
of SEZ by Central Government
(Ministry of Commerce)
4
5a
5b
6
7b
Approval Process – Post LOA
Developer
On agreement with Developers, to
apply for an LOA
Co-Developer
7a
8bCont…8aCont…
41
42. Approves import and procurement of goods
Rule 10
Approval Committee8a
Approval Process – Post Notification
Demarcates Processing / Non Processing Area
Rule 11
DC8b
9
Obtains IEC and executes Bond cum-Legal Undertaking and follows General
Conditions of import
Rule 12 & 14
Developer
Avails duty concession on import / procurement
and commence operation
Developer
For details refer to Annexure 3
42
43. Approval Process – Co-developer
Action steps for Co-developer
• Enters into an agreement with developer to provide infrastructure facilities or undertake
authorized operations in SEZ
• Approaches BOA to seek approval for status as a Co-developer
• Follows the procedure of approval as applicable to developer to obtain LOA from
Central Government (Ministry of Commerce)
• However, state government recommendations not required
Developer may specify the requirement of Co-developer at the proposal stage.
Although SEZ Act and Rules are silent on this aspect, specifying co-developers
requirement at proposal stage may expedite the process of obtaining LOA for co-
developer at a later stage
43
44. Initiative
Community attitude
Cleaner & greener facilities
Labor safety & medical care
Cleaner & greener facilities
Zero tolerance for pollution
Maintain natural resources
Creating opportunity for local people
For successful sustainable development
44
51. AGRI Industries are considered an extended arm of agriculture
but in India they have not received as much attention as
agriculture.
While agriculture contributes about 25 per cent of India's GDP
the value added by the processing industry is only 8 per cent
of total food production.
For example,
only two per cent of horticulture products are estimated to be
processed and more than 30 per cent of production is wasted
due to lack of storage and processing facilities.
Agri industries help strengthen the farm
sector and stabilize rural incomes
51
52. 52
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