BUSINESS ECONOMICS-1 PROJECT

SCOPE OF SEZs IN INDIA

Submitted by: Nitesh Choudhary(50100) Nishant Motwani(50098) Submitted to: Ms.Shalini Prakash

INDEX

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. Incentive/Facilities……………………………………………………… Location of SEZ’s………………………………………………………. Challenges ……………………………………………………………… Conclusion ……………………………………………………………… Special Economic Zones (SEZs) were established in many countries as instruments enhancing the acceptability and credibility of transformation policies. Statewise Distribution of Projects…………………………………….Introduction…………………………………………………………….. SEZs in India seek to promote the value addition 2 .. Objectives……………………………………………………………… Approval Mechanism and Administrative Setup……………………. attracting domestic and foreign investment and also for the opening upon the economy.

Over 234 companies received formal approval.561 crore (USD 13274 million) and an additional job creation for 15. They have formulated policies. China. In India. The Indian government is expecting an investment to the tune of Rs. SEZ development has become the most controversial issue for India today.53. It is very important to understand all aspects of SEZs such as basic concepts. its various models and the life cycle of its business before initiating any policy or investments for these projects. reviewed them occasionally and also ensured that ample facilities are provided to the SEZ developers as well as the companies setting up units in SEZs. Iran. Despite all the efforts.452 individuals in SEZs by july 2010. will help us to understand their success stories and thereby implement those factors. 162 companies received in-principle approval and 100 companies received notification to set up SEZs. The Shenzhen SEZ in China is a perfect example of a SEZ success story. generate employment as well as mobilize foreign exchange. These favourable conditions resulted in the biggest ever corporate rush for the development of SEZs in India. 3 .component in exports. UAE and Jordan.75. in order to curb the SEZ bottlenecks faced by India today. A close examination of the evolution of SEZs in countries with similar economies as India eg. the government has been proactive in the development of SEZs.

Free Ports. Government of India. Export Processing Zones (EPZ). 4 . In India. 100% FDI is allowed in setting up of SEZs. The category 'SEZ' covers a broad range of more specific zone types. as of 2007 there are more than 3. Urban Enterprise Zones and others. the Special Economic Zones (SEZs) Policy was announced in April 2000. in which the public sector provides some level of support to enable a private sector developer to obtain a reasonable rate of return on the project. including Free Trade Zones (FTZ). Approval for setting up of new SEZs is given by Department of Commerce. The Foreign Trade Policy of Government of India provides for setting up of Special Economic Zones (SEZ) in the country with a view to provide an hassle free environment for exports . In many cases. SEZs have been implemented using a variety of institutional structures across the world ranging from fully public (government operator. The government of India has also converted existing Export Processing Zones into SEZs. For setting up units in SEZs. A large number of new SEZs have come up in private sector in India including SEZs set up by foreign companies. For setting up a unit in SEZ. Free Zones (FZ). application in prescribed format should be submitted to the development Commissioner. The minimum size of the SEZs shall be 1000 hectares except in product specific and port/airport based SEZs. public sector operators and developers act as quasigovernment agencies. joint sector or by State governments.000 projects taking place in SEZs in 120 countries worldwide. public regulator). SEZs are specifically demarcated areas within the country where raw materials and capital goods can be imported duty free from abroad or the domestic market and a special package of tax holiday and incentives are given with a view to boost exports from the country. SEZs are often developed under a Public-Private-Partnership arrangement. Manufacturing and Services operations are allowed in an SEZ. INTRODUCTION A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws. private. all approvals are given by a Committee headed by Development Commissioner of the concerned SEZ. private developer.Special Economic Zone (SEZ) is a duty free area which is meant for the purposes of trade operations. government regulator) to 'fully' private (private operator. According to World Bank estimates. duties and tariffs for investors.SEZs could be set up in public. Industrial Estates (IE). government developer.

Department of Commerce. SEZ could be set up either jointly or severally by the Central Government. Approval mechanism The developer submits the proposal for establishment of SEZ to the concerned State Government. (d) Creation of employment opportunities. or · for rendering services. 5 . The Board of Approval has 19 Members. The State Government has to forward the proposal with its recommendation within 45 days from the date of receipt of such proposal to the Board of Approval. partnership or proprietorship): for manufacture of goods. The applicant also has the option to submit the proposal directly to the Board of Approval. or · for both manufacturing of goods and for rendering services. All the decisions are taken in the Board of Approval by consensus.MAIN OBJECTIVES OF THE SEZ ACT (a) Generation of additional economic activity (b) Promotion of exports of goods and services. The Board of Approval has been constituted by the Central Government in exercise of the powers conferred under the SEZ Act. State Government. Administrative set up The functioning of the SEZs is governed by a three tier administrative set up:  The Board of Approval is the apex body and is headed by the Secretary. (e) Development of infrastructure facilities. or any person (including a private or public limited company. - APPROVAL MECHANISM AND ADMINISTRATIVE SET UP OF SEZS Under the Act. The Approval Committee at the Zone level deals with approval of units in the SEZs and other related issues. (c) Promotion of investment from domestic and foreign sources. or · As a Free Trade and Warehousing Zone.

and another 169 had been granted in-principle clearance by the government.  The performance of the SEZ units are periodically monitored by the Approval Committee and units are liable for penal action under the provision of Foreign Trade (Development and Regulation) Act. 263 companies had received formal approvals to set up SEZs. All the proposals for setting up of units in the SEZ are approved at the Zone level by the Approval Committee consisting of Development Commissioner. units are allowed to be set up in the SEZ.  100% profit repatriation facility from export earnings  permission to sell within Domestic Tariff Area(DTA) and an exemption from a Special Addition Duty(SAD) subject to the company having a positive Net Foreign Exchange Position (NFEP)  supplies from DTAs to be treated as exports while those from SEZs to DTAs to be treated as imports 6 . Once an SEZ has been approved by the Board of Approval and Central Government has notified the area of the SEZ. Consequent upon the SEZ Rules. INCENTIVE/ FACILITIES TO SEZ ENTERPRISES Operational advantages:  Sectoral restrictions on manufacturing sector inapplicable within SEZ  All SEZ activities on self certification basis  Single window clearance  Inter unit transfer of goods permitted  No routine customs examination of export and import cargo  Forward looking labour laws under consideration Fiscal advantages:  100% FDI for manufacturing units operating inside SEZs through automatic approval route in almost every sector. Customs Authorities and representatives of State Government. in case of violation of the conditions of the approval.

duty free. DG sets etc. raw materials. capital goods and goods required for O&M Customs and Excise:  SEZ units may import or procure from the domestic sources.  OBU’s allowed 100% Income Tax exemption on profit for 3 years and 50 % for next two years. 7 . narcotics and hazardous chemicals. investments in SEZ treated as infrastructure development and eligible for exemption local inputs at reduced cost without the excise. consumables.  Reinvestment allowance to the extend of 50% of ploughed back profits Foreign Direct Investment:  100% foreign direct investment is under the automatic route is allowed in manufacturing sector in SEZ units except arms and ammunition. office equipment. cigars and manufactured tobacco substitutes. VAT and other levies of India  duty free import of materials for construction.  Goods imported/procured locally duty free could be utilized over the approval period of 5 years. distillation and brewing of alcoholic drinks and cigarettes . all their requirements of capital goods.  Domestic sale of finished products.  External commercial borrowings by units up to $ 500 million a year allowed without any maturity restrictions. explosive. by-products on payment of applicable Custom duty.  Domestic sale rejects and waste and scrap on payment of applicable Custom duty on the transaction value. packing materials. atomic substance. spares. Banking / Insurance/External Commercial Borrowings  Setting up Off-shore Banking Units allowed in SEZs.  Duty free import/domestic procurement of goods for setting up of SEZ units.  No cap on foreign investments for SSI reserved items. Income tax  100% IT exemption (10A) for first 5 years and 50% for 2 years thereafter. for implementation of their project in the Zone without any license or specific approval.

9 63 263. Moradabad and Greater Noida (U. Kanpur.2 21 153.P.1 50 1257. Flexibility to keep 100% of export proceeds in EEFC account.6 Gujarat Tamil Nadu Uttar Pradesh West Bengal 40 850.4 62 379.  Exemption from interest rate surcharge on import finance.)  Vishakhapatnam and Kakinada (Andhra Pradesh)  Vallarpadam/Puthu vypeen (Kerala)  Hassan ( Karnataka)  Jaipur and Jodhpur ( Rajasthan) Statewise Distribution of outstanding SEZ projects State No of SEZs Investment (Rs bn) Maharashtra Karnataka Andhra Pradesh Haryana 70 610. 18 approvals have been given for setting up of SEZ at  Positra (Gujarat)  Navi Mumbai and Kopata (Maharashtra)  Nanguneri (Tamil Nadu)  Kulpi and Salt Lake (West Bengal)  Paradeep and Gopalpur (Orissa)  Bhadohi.  · SEZ units allowed to ‘write-off’ unrealized export bills. Location of SEZ in India At present there are 8 functional special economic zones located at:  Santacruz (Maharashtra)  Cochin (Kerala)  Kandla and Surat (Gujarat)  Chennai (Tamil Nadu)  Visakhapatnam ( Andhra Pradesh)  Falta (West Bengal)  Noida ( Uttar Pradesh)  Indore (Madhya Pradesh) In addition. Freedom to make overseas investment from it.4 8 .5 23 66.2 30 86.

3 9 .4 Rajasthan 11 0.Orissa 13 605.

CHALLENGES The biggest challenges faced by SEZ’s in today’s scenario are the taking away of agricultural land from the farmers. Moreover SEZ’s are leading to decrease in crop production (arable Land Grabbing!) thus slowing down of agricultural activity in the country.SEZ Institutional Framework – Overview transshipment hub. (Though it may help 10 . The best example could be seen in the case of farmers from Kalinganagar in Orissa where the money given was disproportionate to as high as 1:10 with respect to the market rates. The farmers are being paid disproportionate money which is not in lieu of the current land prices.

Moreover the greatest problem that seems to be emerging out is that arable land is being used for non agricultural purpose which could lead to food crisis and loss of self sustenance in future. SEZ’s could also lead to income disparities with divide between the rich and poor increasing if not properly planned. both processed and non-processed). while these have been at the helm of economic development most of the interior hinterland is vastly underdeveloped.boost it in other ways by increased export of local goods. But FDI could also help in providing our farmers to gain access to technological better farming methods. but in the long run such laws must be made more stringent once the confidence is reposed so as to hedge the workers from hostile company policies. For example most of the SEZ’s in China are in proximity to the ports and also close to each other. More and more farmers are moving towards the lucrative manufacturing side in search of greater economic security. Moreover improper planning could lead to unbalanced growth in the region giving an impression of pseudo-development. This Hire or Fire policy initially helped in sustaining foreign investors’ confidence in the Chinese domestic labor competence. For example: Nandigram district of West Bengal. SEZ’s in China were initially exempted from national Labor Laws. This model sustained initially because the foreign investors were given the leverage to train the workers and even fire them if incompetent. The SEZ’s if not properly located could lead to Supply Chain Management problems as well. 11 .

Land grabbing and real estate mafia should be properly regulated so that the common man is not the net sufferer to get the net foreign exchange earner up and running. But this should not be done at the cost of bringing down the agricultural activities. be net foreign exchange earner and provide immense employment opportunity. To be economically viable SEZ’s should be approved over a particular land area (greater than 1000 acres) for rapid economic growth in the area and for it to be profitable and self sustainable. if not fully it should be a public-private partnership and regulatory bodies should be properly managed to weed out fallacies. Relaxed Tax norms. Labor laws and DTA regulations will surely attract foreign investment and major industries to setup industries in the SEZ’s making it profitable and meeting its desired results! 12 . As compared to china where majority of the SEZ’s were setup by the government.CONCLUSION The SEZ’s could drastically improve the economic activity in the country. similar should be adopted in India. make the country’s export competitive and globally noticeable.

BIBILIOGRAPHY  www.com 13 .google.in  the economist magazine  internet  ministry of commerce and industry department of commerce india  www.wikipedia.sezindia.com  www.nic.

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