SUBMITTED BY SAKSHI GARGSUBMITTED BY SAKSHI GARGSUBMITTED TO D.R BALRAJ SUBMITTED TO D.R BALRAJ

SIRSIRDATE -11DATE -11THTH

NOVEMBER NOVEMBER

SPECIAL ECONOMIC ZONESPECIAL ECONOMIC ZONE

Concept and Meaning of SEZConcept and Meaning of SEZ► India was one of the first in Asia to recognize India was one of the first in Asia to recognize

the effectiveness of the Export Processing the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla in 1965.Asia’s first EPZ set up in Kandla in 1965.

► With a view to overcome the shortcomings With a view to overcome the shortcomings experienced on account of the multiplicity of experienced on account of the multiplicity of controls and clearances; absence of world-controls and clearances; absence of world-class infrastructure, and  an unstable fiscal class infrastructure, and  an unstable fiscal regime and with a view to attract larger regime and with a view to attract larger foreign investments in India, the Special foreign investments in India, the Special Economic Zones (SEZs) Policy  was announced Economic Zones (SEZs) Policy  was announced in April 2000in April 2000

3 SEZ in India

Definition of SEZDefinition of SEZ

SEZ in India4

► Special Economic Zone means an area that has been Special Economic Zone means an area that has been specified as an enclave that is duty free and is treated as specified as an enclave that is duty free and is treated as a foreign territory for various purposes such as tariffs, a foreign territory for various purposes such as tariffs, trade operations, and duties.trade operations, and duties.

► A Special Economic Zone (SEZ) has economic laws that are A Special Economic Zone (SEZ) has economic laws that are more liberal than a country's typical economic laws.more liberal than a country's typical economic laws.

► The category 'SEZ' covers a broad range of specific zone The category 'SEZ' covers a broad range of specific zone

► SEZ includes Free Trade Zones (FTZ), Export Processing SEZ includes Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others.Ports, Urban Enterprise Zones and others.

History of Special Economic ZonesHistory of Special Economic Zones

► From 1965 onwards, India experimented with the From 1965 onwards, India experimented with the concept of such units in the form of Export concept of such units in the form of Export Processing Zones (EPZ).Processing Zones (EPZ).

► But a revolution came in 2000, when Murlisone But a revolution came in 2000, when Murlisone Maran, then Commerce Minister, made a tour to Maran, then Commerce Minister, made a tour to the southern provinces of China. After returning the southern provinces of China. After returning from the visit, he incorporated the SEZs into the from the visit, he incorporated the SEZs into the Exim Policy of India. Five year later, SEZ Act Exim Policy of India. Five year later, SEZ Act (2005) was also introduced and in 2006 SEZ Rules (2005) was also introduced and in 2006 SEZ Rules were formulated.were formulated.

►

5 SEZ in India

objectives of setting up objectives of setting up SEZ in IndiaSEZ in India ► Generation of additional economic activity Generation of additional economic activity ► Promotion of exports of goods and services Promotion of exports of goods and services ► Promotion of investment from domestic and foreign sources Promotion of investment from domestic and foreign sources ► Creation of employment Creation of employment ► Development of infrastructure facilities Development of infrastructure facilities ► Simplified procedures for development, operation, and Simplified procedures for development, operation, and

maintenance of the Special Economic Zones and for setting up maintenance of the Special Economic Zones and for setting up units and conducting business units and conducting business

► Single window clearance for setting up of a SEZ and an unit in Single window clearance for setting up of a SEZ and an unit in SEZ SEZ

► Single window clearance on matters relating to Central as well Single window clearance on matters relating to Central as well as State Governments as State Governments

► Easy and simplified compliance procedures and Easy and simplified compliance procedures and documentations with stress on self certificationdocumentations with stress on self certification

6 SEZ in India

Benefits from SEZsBenefits from SEZs► Investment of the order of Rs.100,000 crore Investment of the order of Rs.100,000 crore

including FDI of US $ 5-6 billion by the end of including FDI of US $ 5-6 billion by the end of December 2007, and December 2007, and

► 500,000 direct jobs by December 2007. 500,000 direct jobs by December 2007. ► At present, 1016 units are in operation in the At present, 1016 units are in operation in the

SEZs, providing direct employment to over 1.79 SEZs, providing direct employment to over 1.79 lakh persons; about 40 per cent of whom are lakh persons; about 40 per cent of whom are women.women.

► Exports from the SEZs during the 10-year period Exports from the SEZs during the 10-year period could touch 352 billion dollars, nearly half of could touch 352 billion dollars, nearly half of India’s total annual exports, with IT and ITeS India’s total annual exports, with IT and ITeS SEZs contributing 30 per cent at 105 billion SEZs contributing 30 per cent at 105 billion dollarsdollars

7 SEZ in India

Facilities of SEZ in IndiaFacilities of SEZ in India

SEZ in India8

► Facilitated with out-sourcing of subcontract capacities for export production against Facilitated with out-sourcing of subcontract capacities for export production against orders secured by other SME units orders secured by other SME units

► All SEZ units, (excluding gems and jewelry units) may sell goods up to 50% of FOB All SEZ units, (excluding gems and jewelry units) may sell goods up to 50% of FOB value of exports subject to fulfillment of positive NFE on payment of concessional value of exports subject to fulfillment of positive NFE on payment of concessional duties. Within the entitlement of domestic tariff area (DTA) sale, the unit may sell in duties. Within the entitlement of domestic tariff area (DTA) sale, the unit may sell in DTA its products similar to the goods, which are exported or expected to be exported DTA its products similar to the goods, which are exported or expected to be exported from the units from the units

► Facilitated with out-sourcing of subcontract of production or part of production Facilitated with out-sourcing of subcontract of production or part of production process to Indian or any foreign units process to Indian or any foreign units

► Sale to direct tariff agreement is subject to mandatory requirement of registration for Sale to direct tariff agreement is subject to mandatory requirement of registration for pharmaceutical products and inclusive of bulk drugs pharmaceutical products and inclusive of bulk drugs

► For Software services units, the sale in the DTA in any mode, including on line data For Software services units, the sale in the DTA in any mode, including on line data communication shall be permitted up to 50% of FOB value of exports and / or 50% of communication shall be permitted up to 50% of FOB value of exports and / or 50% of foreign exchange earned through exports of such services, where the payment of foreign exchange earned through exports of such services, where the payment of such services offered to its overseas clients, is received in foreign exchange such services offered to its overseas clients, is received in foreign exchange

► SEZ units associated with manufacturing gems and jewelry may sell up to 10% of FOB SEZ units associated with manufacturing gems and jewelry may sell up to 10% of FOB value of exports of the preceding year in direct trade agreement and subject to value of exports of the preceding year in direct trade agreement and subject to fulfillment of positive NFE. Further, in case of sale of plain jewelry, the recipient of fulfillment of positive NFE. Further, in case of sale of plain jewelry, the recipient of such trade shall pay concessional rate of duty as applicable. Furthermore, in case of such trade shall pay concessional rate of duty as applicable. Furthermore, in case of studded jewelry, duty shall be payable as recommended and amended from time to studded jewelry, duty shall be payable as recommended and amended from time to time time

► Total exemption of duties / taxes on scrap or waste or remnants in case the said crap Total exemption of duties / taxes on scrap or waste or remnants in case the said crap or waste or remnants are destroyed as per the approval of the customs authorities of or waste or remnants are destroyed as per the approval of the customs authorities of India India

► If the end products is a by-product and it is included in the LOP, then it may also be If the end products is a by-product and it is included in the LOP, then it may also be sold in the direct tariff area, subject to achievement of positive NFE on payment of sold in the direct tariff area, subject to achievement of positive NFE on payment of applicable duties within the provisions of such laws. The sale of such by-products by applicable duties within the provisions of such laws. The sale of such by-products by units those are not entitled to direct tariff area sales units those are not entitled to direct tariff area sales

► Facilitated with out-sourcing of subcontract capacities for export production against Facilitated with out-sourcing of subcontract capacities for export production against orders secured by other unitsorders secured by other units

SEZ in India9

The main objectives of The main objectives of the SEZ Act arethe SEZ Act are::

► Generation of additional economic activity; Generation of additional economic activity; ► Promotion of exports of goods and services; Promotion of exports of goods and services; ► Promotion of investment from domestic and Promotion of investment from domestic and

foreign sources; foreign sources; ► Creation of employment opportunities; and Creation of employment opportunities; and ► Development of infrastructure facilitiesDevelopment of infrastructure facilities

SEZ in India10

The salient The salient features/provisions of SEZ features/provisions of SEZ RulesRules

► Different minimum land requirement for different class of SEZs; Different minimum land requirement for different class of SEZs; ► Every SEZ is divided into a processing area where alone the SEZ Every SEZ is divided into a processing area where alone the SEZ

units would come up and the non-processing area where the units would come up and the non-processing area where the supporting infrastructure is to be created; supporting infrastructure is to be created;

► Simplified procedures for development, operation and Simplified procedures for development, operation and maintenance of the Special Economic Zones and for setting up maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs; units and conducting business in SEZs;

► Single window clearance for setting up of an SEZ; Single window clearance for setting up of an SEZ; ► Single window clearance for setting up a unit in a Special Single window clearance for setting up a unit in a Special

Economic Zones; Economic Zones; ► Single window clearance for matters relating to Central as well as Single window clearance for matters relating to Central as well as

State Governments; State Governments; ► Simplified compliance procedures and documentation with an Simplified compliance procedures and documentation with an

emphasis on self certification.emphasis on self certification.

SEZ ControversySEZ Controversy

SEZ in India11

► In spite of the strong objectives of the Indian In spite of the strong objectives of the Indian Government The SES policy is in following Government The SES policy is in following controversycontroversy

► Generation of little new activity as there may be Generation of little new activity as there may be relocation of industries to take advantage of tax relocation of industries to take advantage of tax concessions, concessions,

► Revenue loss Revenue loss ddue to Tax exemption .ue to Tax exemption .► Large-scale land acquisition by the developers, Large-scale land acquisition by the developers,

may lead to displacement of farmers with meager may lead to displacement of farmers with meager compensation, compensation,

► Acquisition of prime agricultural land, having Acquisition of prime agricultural land, having serious implications for food security, serious implications for food security, Misuse of land by the developers for real estate Misuse of land by the developers for real estate

► Uneven growth aggravating regional inequalities.Uneven growth aggravating regional inequalities.

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