Evaluating SEZ & SIRas Economic - Growth Engines

1. Evaluating SEZ & SIR
as Economic -
Growth Engines
International Conference – ICCRIP 2016
October 21-21, 2016
NICMAR, Pune
Dr. Neha Bansal
Associate Professor
D C Patel School of Architecture

3. Boosting Economy!
• $2.25 Trillion dollar economy
• 26% of GDP is from industry
• 57% of GDP is from service sector
• World’s 7th largest economy
• Avg. growth of 7.1% during economic slowdown
Source: Economic Survey of India, IMF World Economic Outlook Database, Oct ‘16

5. Foreign Direct Investment
Vision Ahead!

6. FDI
• Higher standard of living
• Allows a country to specialize
• Increase manufacturing efficiency
• Greater diversity of goods and services
TRADE

8. Special Economic Zone – SEZ
• Means an area that is duty free & is treated as
foreign territory for purposes like tariffs, trade
operations & duties
• Economic laws are more liberal than countries
economic laws
• It transforms local economy in to export oriented
bringing with it expertise which is as important
as the capital itself
• These exports grow nation’s brand popularity &
gives continued economic growth by attracting
new players
FTZ
UEZ
EPZ FZ
UEZ
IE
SEZ
Include

9. Broad categories of SEZ

10. Salient features of SEZ
• Single window Clarence
• Self certification for export – import
– No routine examination & goods movements are self declared
• Sub contracting
– SEZ unit may sub contract a part of it’s production to different units
• Fiscal & Tax Incentives
– Excise and custom duty exemption on capital assets, consumable and raw
material from domestic stores
– Sales tax, import duty, income tax, minimum alternative tax and dividend
distribution tax are exempted

11. FDI in Special Economic Zone
• 100% foreign capital investment is approved
• Investment is freely allowed in manufacturing
sector in SEZ under automatic route, except
prohibited items
• No cap on foreign investments for SSI reserved
items
• Sectorial norms, as notified by Government,
apply to foreign investment
• Cases not covered under automatic routes are
considered and approved by the board

12. SEZ Worldwide

13. SEZ Chronology
Export
Processing
Zone (EPZ)
policy 1965
1st EPZ was
set up in
Kandla
Gujarat
In 1990s, as
a part of
reforms,
powers
delegated to
zone
authorities
New policy in
April 2000
Special
Economic
Zone Act
May 2005
Full laws and
rules
effected
February
2006

14. Role of SEZ in Indian Economy
• To provide internationally competitive market
• To attract FDI and enhance GDP
• To increase share in global exports
• SEZ exports accounting for 26% of india’s total
export in 2011
• India has 412 formally approved SEZs with an
export of Rs. 3.1 Lakh Crore (in Year 2010-11)
• Total investment of Rs. 2.1 Lakh Crore (Yr 2013)
along employment to 8.4 lakh people

15. SEZs of India
Source: Ministry Commerce
& Industries, GoI
Important SEZ of India
Karnataka Biotechnology and Information
Technology Services - SEZ
Renuka Sugars Limited – SEZ – Belgaun
District
Ittina Properties Private Limited – Bangalore,
15.732 hectares
Wipro Infotech – Sarajpur Bangalore
Hewlett Packard India
Food processing and related SEZ services in
Hassan, 157.91 hectares
SEZs on pharmaceuticals, biotechnology and
chemical sectors in Hassan, covering of
281.21 hectares
SEEPZ - Andheri (East), Mumbai
Navi Mumbai - Multi-product, Mumbai

16. Sectoral distribution

17. SEZ Organizational Structure
SEZ
Special Economic Zone
Developer
A person or a Sate
Govt. with GoI
approval. Include
Authority & Co-
developer for setting
up SEZ
Co-Developer
A person or a Sate
Govt. with GoI
approval. Will provide
infra. Facilities or
carrying out authorized
operations in a notified
SEZ
Unit
A unit approved by unit
approval committee to
engage manufacturing
or services activities
from within the SEZ

18. SEZ Organizational Structure
SEZ
Application to
State Gov. (SG)
SG forwards the
application to BoA
GoI shall issue letter of
approval to developer
Developer shall area info to GOI
GoI will notify the area as SEZ
Obtain the
concurrence of SG
Application to
Board of Approval
(BoA)

19. SEZ Organizational Structure

20. Incentives to SEZ
• Direct & indirect
employment 2.5L &
5.0L respectively
• Almost 15L job
created till 2010
Employment
Generation
• Labor force acquire
skill
• Job requirement
increase firm level
activity
Skill formation
• No tax during
development and
operational stage
• 100% income tax
exemption for 5 yr
and 50% thereafter
Attract
investors
• Collaboration betn
local & MNC firm
• Attract export
oriented FDI
Technology Up
gradation
• Export increased
from Rs. 100 billion
to 2500 billion from
2002 to 2010
• 26% of growth rate
Exports
• Share of
manufacturing
industry grew from
negligible % to
above 6% from 1970
to 2005
Manufacturing
Sector
Source: Ministry Commerce & Industries, GoI, www.sezindia.nic.in

21. Benefits & Incentives of SEZ

23. Incentives for SEZ
100% FDI through automatic
routes
Freedom from industrial licensing
100% capital account convertibility
Local sales are allowed on
payment of full fees
No minimum export obligation
Declared foreign territory for duties
& taxes
No fixed value addition norms
(except diamonds)
Facilities of offshore banking units

24. SEZ to Gujarat SIR
SEZ
SIR

25. DMI Corridor
• Focus on ensuring high impact
developments within 150 km
distance on either side of DFC
• Area under project influence is 14%
and population is 17% of the
country
• 174 million – total population under
influence area
• 68 million – total worker in influence
area

26. DMI Corridor

27. Gujarat – A Promising State
With 5% of India’s population
Gujarat has 16% of Industrial
production.
Gujarat had achieved a
growth rate of 12.1%
highest geographical area of
29,423.9 hectares under SEZ
development
Source: Rajiv Gandhi Institute for Contemporary Studies, India Brand Equity Foundation
• In budget 2015-16, state government has announced plans to
invest US$ 458.97 million for the growth of industrial sector of
Gujarat.

28. DMIC lead Industrial Revolution
Special
Economic
Zone Act
May 2005
Full law and
rules effected
February
2006
Proposed Delhi-
Mumbai
Dedicated
Freight Corridor
August 2007
New Industrial
Policy for Gujarat
State
January 2009
Gujarat Special
Investment
Region Act
2009
Phase 1
83 product
clusters
Phase 2
257 Industrial
estates
Phase 3 -
SEZ
Multi product
Single
product
Multi Service
(IT/ITES)
Phase 4 -Large scale
developments
•Special investment regions
•Industrial Areas
•Delhi Mumbai Industrial Corridor
•GIDC Estate
•Petroleum, chemical and
petrochemical investment regions
•Knowledge corridor
•Logistics parks
•Theme towns

29. Special Investment Region – SIR
• Concept evolved in concurrence with DMIC, a high impact
industrial area within 150 km distance on both side of DFC
• Created with a vision create large size Investment Regions and
develop them as Global Hubs for economic activity supported by
world class infrastructure
• the Government of Gujarat has enacted ‘The Gujarat Special
Investment Region Act-2009’ which came into force on 6th
January, 2009

30. SIR in Gujarat
PCPIR – Bharuch – 453 Sqm
Halol-Savli SIR – 123 Sqm
Santalpur SIR – 186 Sqm
Changodar SIR – 319 Sqm
Pipavav - 147 Sqm
Simar IA – 84 Sqm
Navlakhi SIR – 182 Sqm
Okha SIR – 206 Sqm
Anjar SIR – 237 Sqm
Viramgam SIR – 109 Sqm
Aliya-bet SIR – 169 Sqm
• 8 SIRs lie within the immediate
influence area of DMIC
• 60% of Total Investment in the DMIC is
likely to be in Gujarat
• 36% of network fall within the state of
Gujarat
Source: www.sezindia.nic.in

31. SIR Organizational Framework
GIDB is an apex
body
GICC is a
coordinating
agency
GICC in
coordination with
RDA identifies
projects within
SIR
Source: Gujarat Industrial Development Board (GIDB)

32. How SIR different than SEZ
• SIR is bigger and is not merely export-oriented; instead offers a
range of services.
• In Dholera, for instance, a residential city to grow vertically based
on digital planning will coexist with industrial estates, a hub of
financial and banking services and educational institutions
• SIRs are global investment destinations, with the objective of-
achieving high economic growth for the country with massive;
employment generation.

33. Anticipated benefit of SIR

34. SEZ & SIR – Boon or Bane!

35. Issues
• Big tax incentives to industries erode governments’ revenue
which is directly affecting the economy in a negative way
• SEZs have been mired in protests over forced land acquisition,
inadequate compensation to land-owners and trampling of citizen
rights
• SEZs are located on agricultural
lands which results into destitution
of farmers usurping of arable land,
which is short in supply in a
populated country like India.

36. Issues
• Farmers have been committing suicide – The biggest challenges
faced in today’s scenario are the taking away of agricultural land
from the farmers
• Shift of labor from agriculture to industry – Moreover SEZ’s are
leading to decrease in crop production
• Forced land acquisition at times turned into violent protests, as in
Singur and Nandigram
• SEZs lead to concentration of
industries rather than disbursal of
industrialization
• Violation of Public rights

37. Concerns
• SEZ approach criteria should include land use considerations
and avoid involving real estate developers who might be
interested in land speculation
• Concern to bridge the widening gap between rich and poor
• Concerns for deleting localized industries require retrospection of
the development of SEZs
• Policymakers appeared unprepared
to respond to the widespread
criticism, and the government
seemed to be a house divided

38. Concerns

39. Way forward

40. Conclusion
• SEZ policy has no doubt given a boost to Indian economy but
comparison implementation with countries bring out lacunas in Indian
SEZ policy
• Key Challenges
– Provision for revenue sharing with ULBs
– Provision for employment to landless owners
– Integration with existing Master & Regional Plan
– Give share of acquired land to original land owners
– Compensation shall be on the basis of market price
– Due exercise of control while approving and locating SEZ
– Need to develop regional/sub regional plan around SEZ area

41. Thank You !