SEZ AT INDIA India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone

(EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes. To instill confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through the establishment of SEZs, a comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. The main objectives of the SEZ Act are: (a) generation of additional economic activity (b) promotion of exports of goods and services; (c) promotion of investment from domestic and foreign sources; (d) creation of employment opportunities; (e) development of infrastructure facilities; It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities. The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and creation of related infrastructure. A Single Window SEZ approval mechanism has been provided through a 19 member inter-ministerial SEZ Board of Approval (BoA). The applications duly recommended by the respective State Governments/UT Administration are considered by this BoA periodically. All decisions of the Board of approvals are with consensus. The SEZ Rules provide for different minimum land requirement for different class of SEZs. Every SEZ is divided into a processing area where alone the SEZ units would come up and the non-processing area where the supporting infrastructure is to be created. The SEZ Rules provide for : " Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs; Single window clearance for setting up of an SEZ; Single window clearance for setting up a unit in a Special Economic Zone; Single Window clearance on matters relating to Central as well as State Governments; Simplified compliance procedures and documentation with an emphasis on self certification. Some of the important SEZ in India are as follows Karnataka Biotechnology and Information Technology Services - SEZ on biotechnology sector in Bangalore's Electronics City, over an area of 43 acres Shree Renuka Sugars Limited - SEZ on sugarcane processing complex covering 100 hectares, comprising a sugar plant, power station and distillery, at Burlatti in Belgaum district Ittina Properties Private Limited and three other - SEZs in IT sector, covering electronics, hardware and software sectors

in Bangalore, over an area of 15.732 hectares Wipro Infotech - SEZ on IT / ITES at Electronics City, Sarajpur Bangalore Hewlett Packard India Software Operation Pvt. Ltd. - SEZ on IT Food processing and related SEZ services in Hassan, over an area of 157.91 hectares SEZs on pharmaceuticals, biotechnology and chemical sectors in Hassan, covering of 281.21 hectares SEEPZ - Andheri (East), Mumbai Khopata - Multi-product, Mumbai Navi Mumbai - Multi-product, Mumbai Salt Lake Electronic City, West Bengal Manikanchan - Jems and jewelery, West Bengal Calcutta Leather Complex, West Bengal OBJECTIVES OF SEZ AT INDIA Generation of additional economic activity across all the states Promotion of exports of goods and services across all Indian sates according to their indigenous capabilities Promotion of investment from domestic and foreign sources Creation of employment opportunities across India Development of world class infrastructural facilities in these units Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting such business activities Single window clearance cell for the establishment of Special Economic Zone Single window clearance cell within each and every Special Economic Zones Single window clearance cell relating to formal requirements of Central as well as all State Governments Easy and simplified compliance procedures and documentations with stress on self certification THE SALIENT FEATURES OF THE FIRST SEZ POLICY OF INDIA Exemption from duties on all imports for project development Exemption from excise / VAT on domestic sourcing of capital goods for project development Freedom to develop township in to the SEZ with residential areas, markets, play grounds, clubs and recreation centers without any restrictions on foreign ownership Income tax holidays on business income Exemption from import duty, VAT and other Taxes 10% FDI allowed through the automatic route for all manufacturing activities Procedural ease and efficiency for speedy approvals, clearances and customs procedures and dispute resolution Simplification of procedures and self-certification in the labor acts Artificial harbor and handling bulk containers made operational through out the year Houses both domestic and international air terminals to facilitate transit, to and fro from major domestic and international destinations Has host of Public and Private Bank chains to offer financial assistance for business houses A vibrant industrial city with abundant supply of skilled manpower, covering the entire spectrum of industrial and business expertise Well connected with network of public transport, local railways and cabs Pollution free environment with proper drainage and sewage system In-house Customs clearance facilities Abundant supply of technically skilled manpower

 Abundant supply of semi-skilled labor across all industry vertical Easy access to airport and local Railway Station 10-year tax holiday in a block of the first 20 years Full authority to provide services such as water, electricity, security, restaurants and recreational facilities within the zone on purely commercial basis No foreign ownership restrictions in developing zone infrastructure and no restrictions on repatriation

1. Special Economic Zones (SEZs):1(a) Offshore Banking Units (OBUs) shall be permitted in Special Economic Zones (SEZs). 1(b) Units in SEZ would be permitted to undertake hedging of commodity price risks, provided such transactions are undertaken by the units 'on stand alone basis. 2(c) Units in SEZ shall be permitted External Commercial Borrowings (ECBs) for a tenure of less than three years. 3(d) Four existing EPZs have been converted into SEZs and 13 New SEZs have already been given approval. 2. Employment Oriented Measures:- Exim (2002-07) policy initiated a number of measures which would help employment orientation. Among them were the following: (a) Agriculture : 1 Removal of quantitative and packaging restrictions on wheat and its products, butter, pulses, grain and flour of barley, maize, bajra, ragi and jowar. 1Removal of restrictions on export of all cultivated (other than wild) varieties of seed, except jute and onion. 2 20 Agricultural Export Zones have been notified. 3Transport subsidy for export of fruits, vegetables, floriculture, poultry and dairy products. 43% special DEPB rate for primary and processed foods exported in retail packaging of 1 kg. or less. b) Cottage Sector and Handicrafts : 1 An amount of Rs. 5 crore under Market Access Initiative (MAl) has beenearmarked for promoting cottage sector exports coming under the Khadi and Village Industries Commission (KVIC). 2 Market Access Initiative (MAI) scheme for the development of website for virtual exhibition of products from the handicrafts sector. , 3 Entitlement for Export House Status at Rs. 5 crore instead of Rs.15 crore for others. 4 Entitlement to duty free imports of an enlarged list of items as embellishments upto3% of FOB value of exports (c) Small Scale Industry: With a view to encouraging further development of centres ofeconomic and export excellence such as Tirpur for hosiery, woollenblankets in Panipat, woollen knitear in Ludhiana, following benefits would be available to small-scale sector. 1 EPCG facility for the common service providers in these areas. 2 Market Access Initiative (MAl) for creating focused technological services and marketing abroad to the recognised associations of units in SSI. 3 Entitlement for Export House Status at Rs. 5 crore instead of Rs.15 crore for others. (d) Leather:- Duty free imports upto 3% of f.o.b. value combined to leather garments has been extended to all leather products. (e) Textiles : 1 Sample fabrics permitted duty free within the 3% limit for trimmings and embellishments. 2 Additional items such as zip fasteners, inlay cards, eyelets, rivets, toggles,Velcro tape, cord and cord stopper included in input output norms. 3 Duty Entitlement Passbook (DEPB) rates for all kinds of blended fabrics permitted.

(f) Gem and Jewellery : 1 Import of rough diamonds is allowed freely at 0% customs duty. 2 Licensing regime for rough diamond is being abolished. 3 Value addition norms for export of plain jewellery reduced to 7% and for all merchandised unstudded jewellery to 3% 4 Personal carriage of jewellery allowed through Hyderabad and Jaipur airport as well. TECHNOLOGY ORIENTED (a) Electronic Hardware:1 Conversion of the Electronic Hardware Technology Park (EHTP) into zero duty regime under the ITA (Information Technology Agreement)-I 2 Net Foreign Exchange as Percentage of Exports (NEEP) to be made positive in 5 years. 3 No other export obligation for units in EHTP. (b) Chemicals and Pharmaceuticals : 1 65% of DEPB rate for pesticides formulations. 2 No limit on export of samples. . 3 Reimbursement of 50% of registration fees on registration of drugs. (c) Projects: 1 Free import of equipment and other goods used abroad for more than one year. GROWTH ORIENTED (a) Strategic Package for Status Holders: 1 License, certificate, permissions. and customs clearances for both imports and exports on self-declaration basis. 2 Priority finance for medium and long term capital requirement as per conditions notified by the RBI. 3 Exemption from compulsory negotiation of documents through banks, However, the remittance would continue to be received through banking channels. 4 100% retention of foreign exchange in Exchange Earner's Foreign Currency 1EEFC) account. 5 Enhancement in normal repatriation period from 180 days to 360 days, (b) Diversification of Markets : 1 Setting up of "Business Centre" in Indian missions abroad for visiting Indian exporters/businessmen... 2 ITPO portal to host a permanent virtual exhibition of Indian export products. 3 Focus Latin American Countries (LAC) has been extended upto March 2003. 4 Focus Africa has been launched for developing trade relations with the Sub-Saharan African region. The exporters exporting to these markets shall be given Export House Status. on export of Rs. 5 crore. 5 Links with the Commonwealth of Independent States (CIS) countries to be revived. (c) North Eastern States, Sikkim and Jammu and Kashmir :

1 Transport subsidy for exports to be given to units located in North East, Sikkim and-Jammu and Kashmir so as to offset the disadvantage of being far from ports. (d)Neutralising High Fuel Cost:1 Fuel costs to be rebated for all export products. This would enhance the cost competitiveness of our export products.. PROCEDURAL REFORMS (a) DGFT: 1 The new 8 digit commodity classification for imports introduced by the Director General of Foreign Trade (DGFT) would also be adopted bythe Customs and Director: General of Commercial Intelligence andStatistics (DGCI&S) shortly. This will eliminate the classification disputesand hence reduce transaction costs and time. 2 The maximum fee limit for electronic application under various schemes has been reduced from Rs. 1.5 lakh to Rs. 1.00 lakh. 1 Same day licensing introduced in all regional offices.

(b) Customs : 1 Adoption and harmonisation of the 8 digit Indian Trade Classification (ITC) Harmonised System (HS) code.

2 The percentage of physical examination of export cargo has already been reduced to less than 10% except for a few sensitive destinations. 3 Fixation of special brand rate of drawback within 15 days.

(c) Banks : 1 2 3 Direct negotiation of export documents to be permitted. 100% retention in Exchange Earners Foreign Currency (EEFC) accounts. Enhancement in normal repatriation period from 180 days to 360 days.'

TRUST BASED 1(a) Import and export of samples to be liberalised for encouraging product up gradation 2(b) Penal interest rate for bonafide defaults to be brought down from 24% to 15%. 3(c) No penalty for non-realisation of export proceeds in respect of cases covered. by ECGC insurance package. 4(d) No seizure of stock in trade so as to disrupt the manufacturing process affecting delivery schedule of exporters. 1(e) Foreign Inward Remittance Certificate (FIRC) to be accepted in lieu of Bank Realisation Certificate for documents negotiated directly. (f) Optional facility to convert from one scheme to another scheme. In case the exporter is denied the benefit under one scheme, he shall be entitled to claim benefit under some other scheme. (g) Newcomers. to be entitled for licences without any verification against execution of Bank