This project is a humble attempt to explore the relatively new issue of Special Economic Zones in our country.

Our objective is to bring to the readers notice some fundamental concepts and aspects associated with the topic as well as to analyse that whether SEZs, which are being touted today as the next big thing in the Indian economy by some, really deserve the glory. Though we do not claim to be experts in the topic but this project represents our best efforts in bringing together the relevant information to give some useful insight into the topic within the limitations of time and our ability to collect and process all the information. We hope that our project is able to do justice to he objectives for which it has been prepared and proves worthy of the attention of those who devote their precious time and effort in going through it.

This project has been brought to fruition through the efforts of some very special people. First of all, we are deeply grateful to our Economics teacher, Ms. Shalini Prakash, for providing us the opportunity to explore the Indian Economy and expose ourselves to its hitherto little known dimensions & developments thereby Defining SEZ giving us a platform to test our analytical and creative abilitiesOrigin ofas the unique experience of working as a as well the Idea team. We also owe her the successful completion of our project Evolution of Indian SEZ the light the day without which wouldn’t have seen her approval and encouragement. Her recognition of only the best has acted as a great stimulus to push us beyond our Tempting the Private Sector limits to live up to her expectations. We are also grateful to our college authorities for stocking a rich collection of books & magazines in the library Growth Engines or Revenue Drains which has acted as great oasis of knowledge amid the vast desertsCurrent Scenario of our ignorance. Last but not the least, credit is also due to our friends and well-wishers whose useful suggestions have gone a long Navi our project its way in givingMumbai SEZ practical outlook.

CONTENTS

Analysis Conclusion references

00

A Special Economic Zone (SEZ) is typically an enclave of units operating in a well defined area within the geographical boundary of the country where economic activities are promoted by a set of policy measures that are generally not applicable to the rest of the country. These zones are known by different names such as Free Trade Zones (FTZ), Export Processing Zones (EPZ) & Special Economic Zones (SEZ).These zones offer high quality infrastructure facilities, support services & allow duty free imports of capital goods & raw materials. In addition attractive fiscal benefits, relaxed labour laws & simpler procedures are also offered in such zones. Over the years this concept has expanded & evolved to encompass larger areas, higher levels of integration with defined geographical boundaries & increased integration with local economy. SEZ today are not only a tool for export development but also contain in them the potential of generating economic spin off of enormous proportion leading to regional development. The international experience of SEZs lend credibility to the fact that countries like China, Ireland & Philippines have achieved high economic growth supported by

At present there are 5 functional SEZs in China. Of these four-Shenzhen, Xiamen, Shantou & Zhuhai- were founded in 1979-80 & the 5th Hainan SEZ was set up in 1988. The Chinese model of SEZ was based on EPZs that have been used by various countries since the first EPZ was established in Ireland in 1957.The idea behind EPZ was to set aside a region of the country & exempt it from local policies such as import, export taxes & domestic taxes. Thus, an economic climate is established that is conducive to the growth of export oriented industries. The Chinese leadership was aware of the advantages of EPZs & they based formation of SEZs on this model. Chinese SEZs were established to have specific functions:• To attract foreign investment, advanced technology & to train the personnel in advanced technology. • • • • To promote competition among regions. To collect foreign exchange. To serve as an experimental model for market system. To increase employment.

SEZs were a result of the economic reforms in China of the late 1970’s led by Deng Xiaoping in 1978, Chinese exports grew by 28% & the imports grew by 50%. This caused foreign reserves to fall from $2.89 billion to $2.14 billion. These economic concerns prompted reform minded leaders like Deng to suggest that the time was right to change Chinese economic system. Deng’s leadership opened the way for establishment of SEZ. The big decision was finally taken in Dec, 1979 when the Guangdong Provincial People’s Congress passed a resolution to establish SEZ in Shenzhen, Zhuhai & Shantou. This resolution was the first time the word SEZ was used. Later on Xiamen SEZ came up in Fujian Province & Hainan SEZ was set up in 1988.

In Guangdong, the Shenzhen SEZ was immediately successful: about 300 new factories had been built & put into operation by the end of 1981; annual revenue in 1981 was 5 times the amount generated in 1971. Today, SEZ lead economic growth in China. The average growth rate for SEZ from 1980 to 1994 is 35.9% & despite losing some of the concessions originally given to SEZ, the 1994 growth rate was 22.4%, twice as high as the national average. In 1995, SEZ accounted for 12% foreign capital. The SEZ performance in China has not faded despite the opening barriers across the economy.

SEZs were first proposed in the Exim Policy of 2000-01 by the erstwhile Commerce Minister, Mr. Murasoli Maran.Indian government became enamored with the idea after witnessing the success of Chinese SEZ such as Shenzhen in bringing about the overall economic development. The Indian government overwhelmed by the success of China’s SEZ experiments has reposed much faith in them not only for export growth but also to boost FDI which has become imperative especially as the domestic investments are sagging. Foundation of India’s SEZ can be traced back to the laying down of Export Oriented Units (EOUs) which were industrial units specializing in the manufacture for the purpose of exports. The first zone was set up in Kandla (Gujarat) as early as 1965.It was followed by the Santacruz Export Processing Zone which came into operation in 1978.The government of India set up 5 more zones during the late 1980’s.These were Noida (U.P.), Falta (West Bengal), Cochin (Kerala), Chennai (Tamil Nadu) & Vishakhapatnam (A.P.).The EPZ in Surat became operational in 1998. EPZ Policy was deficient in several factors such as limited power of zonal authorities, absence of single window facility within the zone, rigid customary procedures for bonding & bank guarantees, FDI Policy constraints & severe infrastructure deficiencies. During 1991-2000 wideranging measures were initiated by the government for revamping & restructuring EPZ. In 2005, the SEZ Act was passed by government of India & came into force from Feb 10, 2006.Following this policy existing EPZs were converted into SEZs. At present there are 11 functional SEZs located at Santacruz (Maharashtra), Cochin (Kerala), Kandla & Surat (Gujarat), Noida (U.P.), Indore (M.P.), Jaipur (Rajasthan), Vishakhapatnam (A.P.), Manikanchan & Falta (West Bengal) & Chennai (Tamil Nadu).

One of the main functions of SEZs was to attract investment from the private sector. For this it was essential to provide them such benefits which make the investment irresistible to them. To achieve this objective SEZ Act was created to incorporate policies & procedures for quick & hassle free establishment of SEZ. The Act also confers special fiscal & non-fiscal incentives such as tax-holidays, 100% FDI etc. to the developers. Even the Insurance Act, the Banking Regulation Act & the Indian Stamp Act were amended to provide for concessions to units in SEZs. The objective was to make available goods & services, free of taxes & duties & a package of incentives to attract foreign & domestic investments for promoting export-led growth.

SEZ Policy Framework- India
The policy for SEZ provides for setting up of SEZs in public, private, joint sector or by State government. Following are the salient features of SEZ policy:-

SEZ would be specifically delineated duty free enclave & shall be deemed to be foreign territory for the purpose of trade operations, duties & tariffs.

Goods going into SEZ from Domestic Tariff Area (DTA) shall be treated as exports & goods coming from SEZ into DTA shall be treated as if the goods are being imported.

SEZ units can be set up for manufacture of goods & rendering of servies, production, processing, assemblin, trading, repairing, remarking, reconditioning & engineering including making gold, silver, platinum jewellery & articles thereof or in connection therewith.

• •

SEZ may be set up by public, private, joint sector & State government. SEZ should have area preferably of 1000 hectares.

SEZ units would have to be positive net foreign exchange earners & would not be subject to any minimum value addition norms/ export obligations.

• • • •

100% FDI would be permitted for activities under SEZ. No fixed wastage norms. Duty free goods to be utilized within the approval period of 5 years. The Ministry of Commerce & Industry through issue of a notification can also convert the existing SEZ into EPZ.

The development Commissioner would be responsible for administration of the zone. Simplified accounting procedures & SEZ units to maintain accounts in format of their choice.

Fiscal Incentives
• 100% income tax exemption for a block of 5 years, 50% tax exemption for 2 years & up to 50% of the profits ploughed back for the next 3 years. • • • Supplies from DTA to SEZ to be treated as exports. Carrying forward of losses. 100% tax exemption for 3 years & 50% for 2 years for offshore banking units. Exemption from Central Excise duty on procurement of capital goods, raw materials, consumer spares etc. from the domestic market. • • Reimbursement of Central Sales Tax paid on domestic purchases. External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restrictions through recognized banking channels. • Facility to retain 100% foreign exchange receipts in Exchange Earners’ Foreign Currency Account.

Non Fiscal Incentives
• Exemption from industrial licensing for manufacture of items reserved for Small Scale Industries. • • • • • • • • 100% FDI investment under automatic route to manufacturing SEZ units. Facility to realize & repatriate export proceeds within 12 months. No cap on foreign investment for SSI reserved items. Write off of unrealised export bills upto 5%. Profits allowed to be repatriated freely without any dividend balancing requirement. Full freedom for subcontracting including subcontracting abroad. No import license requirements. Job work on behalf of domestic exports for direct export allowed.

Facilities offered
• SEZ units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials etc. for implementation of their project in the zone without any license. • Exemption from Custom/Excise duty for Import/Domestic procurement of goods for setting up of units. • Supplies from domestic sources to SEZ units are treated as deemed exports and the domestic suppliers are eligible for deemed export benefits. • Central Sales Tax paid on domestic purchases is reimbursed to the units by the Development Commissioner. • • SEZ units are eligible for a Corporate Tax holiday upto 2010. SEZ units could dispose of rejects & waste/scrap generated during the manufacturing process in the domestic market on payment of applicable duties.

Part of production or production process may be permitted to be undertaken in the domestic area by SEZ units.

• •

Goods imported/procured locally duty free could be utilized over a period of 5 years. All support facilities like banking, post office, clearing agents provided in the service centres located in the zone.

Export performance of SEZs
Exports from SEZs grew by 16.4% from 2000-01 to 2004-05. In the same period, total exports in India grew by 12.1%.This clearly signifies the importance of SEZs in India. Exports from SEZs have a steady increasing trend over the period. However, the share of exports from SEZs in the total exports of the country has only increased from 4.2% in 2000-01 to 5.1% in 2004-05.

Trend of export performance of SEZs
export fom SEZs( in crores) 20000 15000 10000 5000 0 2000-01 2001-02 2002-03 year 2003-04 2004-05

SEZs exports as % share of total exports in India
% share of exports by SEZs 6.00% 4.00% 2.00% 0.00% 2000-01 2001-02 2002-03 2003-04 2004-05 Years

Sector wise performance of SEZs
In the 1990s, the engineering sector accounted for the largest share of exports followed by drugs, electronics and gems& jewellery. In 2002, the share of engineering goods came down to 5% of the total SEZ exports. The share of drugs & pharmaceuticals also fell from 26% in 1990 to around 6% by 2002. The textile sector has also shown a marginal decline of 2% over the period. In contrast, the gems& jewellery sector which had only a share of 11% in 1990 rose rapidly and accounted for 42% of total SEZ exports in 2002. The share of electronics sector also grew from 25% in 1990 to 34% in 2002. This is to be noted that 50% of the electronics sector is software. Thus in 2002, the electronics and gems & jewellery sectors accounted for more than 75% of total exports from SEZs in India and can be named as the key performing sectors in India.

Sectoral performance of SEZs in 1990 & 2002
% share in exports 50% 40% 30% 20% 10% 0% engineering goods 1990 2002 gems & jewellery drugs & pharmaceut icals textiles electronics others

sectors

SEZ contribution in investment & employment

SEZs have been fairly successful in attracting investment and FDI. While the investment in SEZs has increased from 980 crores in 1998 to 1700 crores in 2003, the FDI has grown from 17% to 25% as the percentage of total investment over this period. Employment has also seen a rise from 77,795 to 88,520 crore people from 1998 to 2003 respectively.

Investment in SEZs
1800 1600

% share of FDI in investment
30.00% 25.00%

1400 investment(in crores) 1200 1000 800 600 400 5.00% 200 0 year 1998 year 2003 0.00% year 1998 year 2003 % share 90000 88000 86000 no. of people 84000 82000 80000 78000 76000 74000 72000 year 1998 year 2003 20.00% 15.00% 10.00%

No. of persons employed in SEZs

/
Reliance, Wipro, Infosys, Mahindra, Biocon, Bharat Forge...........the list goes on; corporate India is in a hurry to invest in Special Economic Zones. The lure seems to be the promised fiscal, tax & regulatory incentives. Against the background of this rush, the commerce & finance ministries are sparring over what many believe are turf issues. Commerce ministry officials expect over Rs 100,000 crores to flow into SEZs over the next 3 years generating half a million jobs. SEZs are supposed to become key export hubs & reduce big chunks of FDI in key manufacturing and services. According to economists, SEZ will lead to creation of new infrastructure, boost manufacturing & create more economic activity to generate jobs. But one cannot overlook the revenue blues. As per the estimates, the government may have to forgo revenue of Rs 70,000 crores over the next 3 years. As per a Morgan Stanley estimates, the revenue foregone would be even more at over Rs 93,000 crores in the next few years. A Finance Ministry report shows that it had to forego Rs 16,572 crores of revenue on account of incentives for export promotion schemes including SEZs in 2004-5.Government will lose taxes to the tune of Rs 1 lakh crores due to the tax sops. There is also the fear that SEZ turn property hot spots rather than investment drawers. The Finance Ministry suspects that the rush to develop SEZs I a function largely of the incentives on offer & is not a pointer to any inherent interest in the sector. Leading property developers have evinced keen interest in building SEZs on account of cheap land, zero taxes & high anticipated returns on investment but if the world class infrastructure facilities are exploited only commercially by charging sky-high prices, then barring some investors with deep pockets, the rest will hardly enjoy the facilities.

Mukesh Khendelwal, VP, Feedback Ventures, a leading infrastructure advisory firm, says several firms are jumping into the fray in the belief that SEZs are a real estate play. The entry of too many players can skew the field for genuine investors. There is already the problem of uneven growth across various States. SEZ will result in the creation of oasis of development amid vast deserts of undeveloped rural & under-developed urban areas. The BIMARU (Bihar, Madhya Pradesh, Rajasthan & Uttar Pradesh) states have long been considered a drag on the uniform development of India. These states account for more than 40% of the country’s population but get a mere 15% of the total bank loans. They lag in poverty alleviation, job creation & promotion of services sector. Promotion of regional disparities will only encourage fissiparous tendencies & result in a large scale decline in revenues to the state. Both the finance and commerce ministries are at loggerheads over the matter of SEZs. While the commerce ministry is very optimistic about SEZs because of its potential for generating employment & contribution to economic development the finance ministry wants to contain the number of SEZs to minimize the revenue losses.

INITIAL SITUATION
The limit of 150, as established on SEZs by the Empowered Group of Ministers (EGoM), had already been exhausted and the Board of Approval (BoA) for SEZ was flooded with scores of fresh applicants.The Board of Approval (BOA) for Special Economic Zones had approved 45 proposals including Genpact India’s IT SEZ in Bhopal, Essar’s power SEZ in Gujarat, orient craft textile SEZ in Gurgaon, Pondicherry SEZ Company limited and Andhra Pradesh’s industrial infrastructure corporation’s multi-product SEZ in Vishakhapatnam.However, the limit to 150 imposed on the number of new SEZs by the (EGoM) had forced the BoA to put on hold scores of proposals which included Moja shoes application for SEZ in Nellore, TCG refineries application for an SEZ in Haldia. . Since the board had confined the limit to the number of SEZs, it had hard time in choosing 45 out of the 167 applicants being considered. The commerce ministry was quite hopeful that the GOM would agree to an expansion in the limit which would enable it to consider the proposal on hold.The government had received close to 400 proposals from both public and private sector players including NOKIA, RELIANCE, WIPRO and ONGC. When the limit was set, the government had decided to review the situation once reached the 150 mark. Commerce & Industry minister, Mr. Kamal Nath, said that the SEZ act does not put any limit to the number of SEZ that can be setup across the country and the limit was set to see the response. Some states including Haryana and Andhra Pradesh had written to the centre seeking lifting of cap. This request was considered by Empowered Group of Ministers whether there should be an increase in the ceiling and to what extent should it be increased. The finance ministry wanted to restrict the number of SEZ as it felt that it would lead to a huge drain on its resources but the commerce ministry wanted the cap to be removed.

SEZ CAP LIFTED
Giving in to increased pressure from state governments and commerce and industry minister Mr. Kamal Nath, the EGoM removed the cap of 150 on the number of Special Economic Zones. The EGoM, chaired by defence minister Pranab Mukherjee, has decided to review the situation after 75 SEZs become operational. At present there are 28 operational SEZs. The decision came as a relief to companies like Posco, TCS, Moja Shoes and Sterling, which have SEZ proposals waiting in pipeline. The removal of cap will now give them an opportunity to be in the fray again. For a long time, the finance ministry had been opposing the raising of cap on the number of SEZs as it believed that tax sops given to SEZs would lead to serious revenue loss for the government. The EGoM also rejected left parties’ demand for land acquisition norms to prevent the mafia from grabbing land in the name of building SEZ. The finance ministry’s bid to staunch the loss of revenue through SEZs had not been a complete failure either. The commerce ministry said that it would not allow existing units to relocate to SEZs to avoid tax. Only fresh investments would qualify for location in SEZs

IN THE MEANTIME......
Government instructed customs and excise officials to play by SEZ act
Units located in SEZ found it easier to avail of fiscal incentives provide through the SEZ act. The government had issued instructions to all customs and excise commissioners emphasizing that all activities relating to SEZs shall be guided by the provisions contained in the SEZ act of 2005 and the SEZ rules of 2006.

CONSTRAINTS that department had to face

commerce

In the last few months, commerce department was flooded with complaints from SEZ units claiming that excise officials were not wiling to allow them duty-free procurement of goods from the domestic tariff area. The official instructions stated that specific representations were received regarding non implementation of rule 30 of the SEZ Act, 2006 which provides the procedure for procurement of goods by the SEZ units from the DTA without payment of central excise duty. The instructions pointed out that since the SEZ Act had been enacted by the parliament, all activities relating to SEZs shall be guided by the provisions contained in the Act. The provisions of section 20, 21 and 22 of the SEZ Act relating to single agency, single enforcement officer and inspection, search and seizure had not yet been operationalised. Hence, so long as these sections are not operationalised, different agencies and officers, as empowered under the relevant acts before enactment of the SEZ Act, will continue to operate till such time these provisions of the SEZ act take effect.

RELATED ISSUES

Political
While Congress has been at the forefront of the support for SEZs even BJP is not opposed to the idea. In its resolution on food security and agriculture, the party has made it clear that it is not opposed to acquisition of agricultural land for setting up of SEZs. It seemed reconciled to giving up the agricultural land, even if it talked of stringent conditions that government must fulfill to have SEZs. The Left has almost a similar stand on SEZ. Party’s general secretary Prakash Karat said that the CPM was not saying ‘no’ to SEZs but wanted the government to incorporate some changes in the Act.

Financial
The Reserve Bank of India (RBI) doesn’t want to pamper SEZs. It has made it less attractive for banks to lend to SEZs. A new directive issued by RBI ill require banks to earmark more capital and make extra provisioning out of their earnings for loan to SEZs. Treating SEZs on par with real estate projects, it has ruled out any concessional finance to developers and units in the zone. RBI guidelines are expected to make the funding for SEZs costlier.

Social
The political storm over land acquisition for special economic zones (SEZs) gathered momentum with agriculture minister Sharad Pawar insisting on adequate compensation for farm land and the Left Front run West Bengal government deciding to limit SEZs to non-productive farm lands. With Congress president Sonia Gandhi also voicing her concern for the displaced farmers whose lands are likely to be acquired by SEZ developers along with strong opposition from states such

as Haryana, Mr. Kamal Nath acknowledged that the centre would have to urgently frame guidelines for acquisition of farmlands by SEZs. Industry is already in discussion with various stakeholders, including state governments & farmers, to evolve ways to include displaced people in the development process. Some of the suggested measures include jobs for at least one member of each displaced family and stakes in SPVs floated to develop the SEZ.

NEW RULES

Relocation
Units that had planned to relocate to SEZ to take advantage of tax sops were in for some disappointment. The commerce ministry has introduced amendments in the SEZ rules to check diversion of exports and production activity to SEZs. The amendments seek to introduce conditions to qualify for tax benefits. As per the amendment rules:• Companies operating in SEZs will have to make fresh investment in plant and machinery. Those that plan to install or used plant or machinery will run the risk of being disqualified. • Trading shall only mean import for the purpose of re-export. This means, only those companies that import goods to re-export can claim an income tax rebate on trading activities.

Investment Criteria
In a bid to rule SEZ applications from financially unsound entities, the BoA for SEZs has fixed investment and net worth criteria for promoter companies. To qualify for developing multi-product SEZs, the net worth of the applicant has to be at least Rs 250 crores and the minimum investment in the project Rs 1000 crore. For sector-specific SEZs, the applicant’s net worth has to be a minimum of Rs 50 crore while the minimum investment criteria is Rs 250 crore. For applying for IT SEZs, net worth of the applicant has to be Rs 100 crore. Sector-specific SEZs will be allowed to have additional operations including hotels, schools & technical institutions. Multi-product SEZs will also be allowed to have ports, airports& golfcourses.

Union Commerce Minister Mr. Kamal Nath, the man pushing SEZs, tells Shekhar Gupta, Editor-in-Chief of The Indian Express, why he’s bullish on this. (Some extracts from the interview)
SEZs as an engine of What is your next economic growth is a mission after SEZ? tiny as compared to what I would like to see that is being planned and it India is a country that. has exports worth more provides first-class than a billion dollars.... education. Today Indian Absolutely. And we must professors are all over the remember that exports is world. We must make it incremental to what is attractive for them to come absorbed in the economy. You are a politician. You Know back to India. We have done studies to politicians only do things find out how many jobs are translate into vote. Do you see this created by exports and today, translating into votes? in 16 functional SEZs, we Of course. The success of any political party are exporting Rs 22,000 today depends on the trust you can get from. the younger generation. And when they crores. We are employing see that our party is creating opportunities 1.23 lakh people, of which for them , they will believe that the policies 35-40 % are women. of the Congress are right. If it is so elementary Just explain for dummies: 75 SEZs, Why did this idea run 150SEZs, no limits now but further

into so much opposition? decisions after 75? What have you Well, there is a view that there people been doing?. is tax foregone and I think it is Well, the SEZ Act doesn’t say there will be imaginary. What happens in a cap. How many SEZs should we have? SEZ? They were paying excise Some people have said that at various stages, and customs duty and then somebody comes and gets an inprinciple getting a refund. Now they approval. This means before he gets the land don’t pay t and don’t get a he makes sure his project is worthy of being refund considered as a SEZ. He may not come back, What do we see one year he may not find the investment. Then there from now? is formal approval. Then there is notification. I see that in the next one & a uptil now 21 SEZs have been notified. In this half year we’ll create employment one view was , this is a new Act , we don’t for 5 lakh people. And by 2010, know how it will work. So let’s review this after we’d have created 15 lakh new we have given both in-principle and formal jobs. approvals for 150.

Are Special Economic Zones an attempt to create world-class exporting zones or just tax havens and land grabs?-is a billion dollar question that everyone is asking about SEZs these days.

Our analysis seeks to further explore this question and try to find some answers. So much is being said about SEZs these days and almost everyone seems to have a point. There are those who consider SEZs as engines of economic growth due to their potential for generating revenue & employment, attracting investment, building infrastructure. And their arguments stand well defended by the performance of existing SEZs and the future projections which show that SEZs units are expected to attract investments to the tune of 100,000 crore and help create 500,000 jobs in the next few years. But there are also those who argue that SEZs will be more of a burden on the economy in the face of the innumerable fiscal incentives that have been granted to them. Finance department has already projected a revenue loss of 20,000 crore. Others believe that several players are jumping into the fray in the belief that SEZs are a real estate play. Though no one is completely opposing SEZs but most of them would like them with certain restrictions or additions. For instance, RBI has voiced concern that growth of SEZs could aggravate uneven development by pulling out resources from less developed areas. It says that revenue loss suffered on account of tax breaks can be justified “only if SEZs units establish forward and backward linkages with the domestic economy.” Some believe that SEZs can succeed only if backed by proper infrastructure i.e. in they are in favour of large SEZs which are in effect composite cities with their own ports, power stations, water supply etc. as according to them mini-SEZs can’t take India on path of economic progress. They will only be tax havens and will further add to road congestion, power & water shortages in the country. The size and numbers of SEZs are other major drawbacks that some experts are worried about. They think it is unlikely that 150 plus SEZs can attract such a large number of companies to come and operate in their zones. Globally, SEZs have been successful because of their large size and fewer numbers.

Since the new Act has denied relocation to the already existing exporters to SEZ unless they set up new units with fresh investments in plants & machinery, it is being said that this is unfair to domestic players who have been exporting for a long time without any sops or tax holidays. In nothing short of a miracle, none of the political parties, including Left, are saying ‘no’ to SEZs but they have several reservations on the issue. They want a cap on the maximum limit of land allotted to SEZs as well as adequate compensation to farmers along with the implementation of labour laws in all SEZs. As a result, SEZs have become prone to frequent changes in policy to cater to the demands of different parties and groups within the country but despite this fact they have been able to attract hundreds of corporates and gain general acceptance. All-in-all everyone seems to agree that SEZs can help take Indian economy to the next level but the guidelines need to be fine tuned further.

The feasibility of any idea rests on the benefits and limitations associated with it. If the pros and the cons of SEZs were to be weighed we are sure that the merits would have outweighed the demerits but in spite of this fact they cannot be overlooked. Without reiterating these merits & demerits but keeping them in mind we hereby conclude that undeniably SEZs are capable of giving the required push to our economy in the right direction but if these zones remain oasis of development which will only further reinforce the regional disparities within the country then it would be difficult to realize the dream of taking our economy to new highs of development. This goal can be better accomplished by not restricting these zones to the relatively prosperous states such as Maharashtra, West Bengal, Tamil Nadu etc. but also setting them up in the BIMARU states (Bihar, M.P., Rajasthan & U.P.) which have long been considered a drag on Indian economy and are in urgent need of some economic progress. We also believe that the interest of farmers shouldn’t be sacrificed to fulfill the requirements of corporate sector. The farmers whose land is being allotted for SEZs should be either given adequate monetary compensation or be provided with jobs in the SEZs units. It is only when the whole economy can reap the rich fruits of Special Economic Zones that we may truly call them the drivers of India’s economic growth and progress.

 THE ECONOMIC TIMES  THE INDIAN EXPRESS

 THE TIMES OF INDIA  BUSINESS TODAY  BUSINESS WORLD  THE HINDU  INTERNET

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