Sezs (Special Economic Zones)

SEZs (Special economic zones)
INTRODUCTION
Special Economic Zone (refereed as “SEZs”) is a geographical region that has
economic laws that are more liberal than a country's typical economic laws.
An SEZs is a trade capacity development tool, with the goal to promote rapid
economic growth by using tax and business incentives to attract foreign
investment and technology.
Today, there are approximately 3,000 SEZs operating in 120 countries, which
account for over US$ 600 billion in exports and about 50 million jobs.
By offering privileged terms, SEZs attract investment and foreign exchange, spur
employment and boost the development of improved technologies and
infrastructure.
EVOLUTION-FROM EPZs TO SEZs
• The first EPZ in India was set up in Kandla, Gujarat in 1965.
• The Santacruz EPZ in Mumbai came into operation in 1973.
• However, the EPZ policy was deficient by several factors like limited
power of zonal authorities,absence of single window facility, rigid custom
procedures for bank guarantees, restrictive FDI policy, procedural
constraints and severe infrastructural deficiencies.
• Thus, the EXIM Policy (1997-2002) introduced a new scheme from April 1,
2000 for establishment of the Special Economic Zones (SEZs) in different
parts of the country.
The SEZs Policy
1. An SEZs may be set-up in the public, private, or joint sector and/or by

a state government.
2. The policy requires the minimum size of an SEZs to be 1000 hectares.
3. 3. Within these zones, units may be set-up for the manufacture of

goods, provisioning of services, and other activities including processing,
assembling, trading, repairing, reconditioning, making of gold/silver,
platinum jewellery etc.
NORMS FOR SETTING UP SEZ –
1. Every unit in an SEZ is required to make a minimum investment of Rs 5

million (around USD 100,000) towards plant & machinery.
2.Units within SEZs are required to be net foreign exchange earners,

cumulatively in the first five years of operation.
3. Trading units within SEZs are required to ensure a turnover of at least

USD 1 million within five years from the commencement of operation.
APPROVAL MECHANISM OF SEZS
• Any proposal for setting up of SEZ in the Private/Joint/State Sector is

routed through the concerned State government who in turn forwards
the same to the Department of Commerce with its recommendations for
consideration of the Board of Approval.
• On the other hand, any proposals for setting up of units in the SEZ are
approved at the Zonal level by the Approval Committee consisting of
Development Commissioner, Customs Authorities and representatives of
State Government.
• Approvals have so far been given for setting up over 180 new Special
Economic Zones spread over 15 States and 2 Union Territories in the
Private/Joint Sector or by the State Governments and its agencies.
BENEFITS TO UNITS
AND DEVELOPERS
1. Tenants within the SEZs can procure goods required for setting up of units, from
domestic or foreign markets, without payment of any customs/import duties.
2. No requirement of minimum net foreign exchange earning, as percentage of exports.
3. Duty-free material is permitted to be utilized over a period of five years, unlike

EOU/EPZ schemes where the period is limited to one year.
4. 100 per cent FDI to be allowed under the automatic route in the manufacturing sector.
5. Developers of SEZs will be granted full autonomy to develop townships within SEZs.
Allocation and pricing of land, facilities and services in SEZs are not governed by existing
regulation.
6. SEZ developers would be accorded infrastructure status, and thereby entitled to claim
all concessions and incentives available to infrastructure players, under the Income Tax
Act.
BENEFITS DERIVED FROM SEZ
1. Investment of the order of Rs.100,000 crores including FDI of US $ 5 – 6

billion is expected by the end of December 2007.
2. 500,000 direct jobs are expected to be created by December 2007
3. Exports from the functioning SEZs during the last three years are as
under:
Year Value (Rs. Crore) Growth Rate
( over previous
year )
2003-2004 13,854 39%
2004-2005 18,314 32%
2005-2006 22 840 24.7
2006-07 34,787 52.3%
4. Projected exports from all SEZs for 2007-08: Rs. 67088 crores
Investment and employment in the SEZs set up prior to the
SEZ Act, 2005:
• At present, 1087 units are in operation in the SEZs providing direct

employment to over 1.85 lakh persons; about 40% of whom are women.
• (c) Investment and employment in the SEZs notified under the SEZ Act
2005:

Current investment and employment:
– Investment: Rs. 43123 crores
– Employment: 35053 persons
• Expected investment and employment (by December 2009):
– Investment: Rs. 2,59,159 crores
– Employment: 17,43,530 additional jobs
• (d) Expected investment and employment if 341 formal approvals
becomes operational:
– Investment: Rs. 3,00,000 crores
– Employment: 4 million additional jobs
Special Economic Zones
Boon or Disaster?
1. The Commerce Ministry says it is a great real estate opportunity for
commercial complexes, offices, malls, golf courses and so on but SEZ’s
need land to build such a massive infrastructure but all the contiguous
land that is easily available and connected to the mainland is productive,
fertile, agricultural land.
2. SEZ’s are estimated to end up with the Finance Ministry losing revenue to
the tune of over Rs. 1,00,000 crore annually once the zones are up and
running,
with its huge fiscal deficit, India can hardly afford the loss.
3. The SEZ’s will mainly come up in Maharashtra, Gujarat, Uttar Pradesh,

Tamilnadu, Orissa, Karnataka and Haryana. Many backward states that
are underdeveloped will continue to be sentenced to remain so. This
could lead to regional imbalances that will throw up complicated
problems. NO SEZ for example, will come up in the north-east, which
already suffers from the problem of alienation and discrimination.
• The enthusiasm that the government has in setting up the SEZ’s underline
an ugly fact that even after five long decades of independence, we still do
not have the kind of decent infrastructure in the country that should have
normally been the case.
• Many of them are IT related software parks and technology hubs. The
argument put forward by critics is that there is no need for a SEZ for IT as
they would have done well.
• In India, farmers are emotional about the land that they have farmed for
years and just giving it up so that industry can be set up, is not something
that can be easily digested.
• Another argument being used to dent the critics is how farmers could be
rehabilitated with jobs in the zones. Most of them are going to be
Information Technology related and how are farmers going to do a nine to
six job at a desk or with machines they do not understand?
Nandigram SEZs controversy
• The Nandigram SEZs controversy started when the

West Bengal government decided that the Salim Group of Indonesia
would set up a chemical hub under the SEZs policy at Nandigram, a rural
area in the district of Purba Medinipur
• The chemical hub would require the acquisition of over 14,000 acres (57
km²) of land. The special economic zone would be spread over 29 mouzas
(villages) of which 27 are in Nandigram.
• Probodh Panda, a CPI MP from the district has said that most of the land
to be acquired is multi crop and would affect over 40,000 people.
• Expectedly, the villagers, who had been predominantly supporters of the
party in power, CPI(M), turned against it and organized a resistance
movement under the banner of the newly formed Bhumi Uchhed
Pratirodh Committee or BUPC (literally, Committee for the Resistance to
Eviction from Land).
• The differences soon heated up and from remaining a merely academic
debate on the right of a government to acquire land led to mutual
violence between the CPI(M) and the BUPC.
CONCLUSION
The establishment of SEZs has helped to increase international

trade,exports,employment in the country and boost the Indian
economy.
Due to the policy of SEZs India gain the foreign investment
technology in the country but their are still some arguments in
this policy which has to be clear by the Government.
It is better if we establish the SEZs in few places due to which no
crime or exploitation of peoples will be occur by SEZs.

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SEZs (Special economic zones)

• The first EPZ in India was set up in Kandla, Gujarat in 1965.

• The Santacruz EPZ in Mumbai came into operation in 1973.

1. An SEZs may be set-up in the public, private, or joint sector and/or by

2. The policy requires the minimum size of an SEZs to be 1000 hectares.

3. 3. Within these zones, units may be set-up for the manufacture of

1. Every unit in an SEZ is required to make a minimum investment of Rs 5

2.Units within SEZs are required to be net foreign exchange earners,

3. Trading units within SEZs are required to ensure a turnover of at least

• Any proposal for setting up of SEZ in the Private/Joint/State Sector is

2. No requirement of minimum net foreign exchange earning, as percentage of exports.

3. Duty-free material is permitted to be utilized over a period of five years, unlike

1. Investment of the order of Rs.100,000 crores including FDI of US $ 5 – 6

2. 500,000 direct jobs are expected to be created by December 2007

• At present, 1087 units are in operation in the SEZs providing direct

3. The SEZ’s will mainly come up in Maharashtra, Gujarat, Uttar Pradesh,

• The Nandigram SEZs controversy started when the

The establishment of SEZs has helped to increase international

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