1. Indo arab chamber of commerce
Special Economic Zones Engines of Growth Sanjeet Singh, Director (SEZ) Dept of Commerce, Govt. of India

2. Rationale for Special Economic Zones in India
Indo arab chamber of commerce
Rationale for Special Economic Zones in India
To overcome the hurdles to export oriented investment on account of:
multiplicity of controls
absence of world-class infrastructure, and
an unstable fiscal regime
….was not possible to achieve immediately on a country wide basis.

3. Indo arab chamber of commerce
Evolution of SEZs
Evolved from the Export Promotion Zones initiative of the 70’s Special Economic Zones (SEZs) Policy was announced in April Parliament passed the Special Economic Zones Act, 2005 which supported by SEZ Rules, came into effect on 10th February, 2006.

4. Key Objectives of SEZ Policy
Generation of additional economic activity
Promotion of exports of goods and services;
Promotion of investment from domestic and foreign sources;
Creation of employment opportunities;
Development of infrastructure facilities

5. The SEZ Policy Simplified procedures for setting up SEZs
Single window clearance
A designated duty free enclave
Simplified compliance procedures
Enhanced investment inflow
Enhanced export infrastructure and productive capacity
Generation of additional economic activity
Creation of employment opportunities.

6. Fiscal Incentives Regime
Indo arab chamber of commerce
Fiscal Incentives Regime
Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units
External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction, as per the guidelines of the Ministry of Finance.
Exemption from Central and State levies (Sales Tax, Service Tax, some other levies).
Single window clearance for Central and State level approvals.
Income Tax exemption on income of SEZ Developers and Units has been severely curtailed through imposition of measures like MAT and DDT etc.
Net foreign exchange earnings by Units within five years;
Domestic sales subject to full customs duty

7. SEZ Administrative Structure
Indo arab chamber of commerce
SEZ Administrative Structure
Department of Commerce, Govt of India
The Board of Approvals
Apex: Govt of India
SEZ Development Commissioner
Unit Approval Committee
Operational Level: SEZ
State Governments
Department of Revenue (CBEC, CBDT, DGEP)
Ministry of Environment, etc
Other Key
Departments

8. SEZs at a Glance (As on 25.10.2012) Number of Formal approvals 586
Number of notified SEZs
385
(incl 7 Central Govt State/Pvt. SEZs)
No. of In-Principle Approvals 49
Operational SEZs
158
(17 are multi product SEZs)
Units approved in SEZs
3,482

9. Indo arab chamber of commerce
Exports from SEZs
Years
Exports
( Rs. Crore)
Growth Rate
34,787
52%
66,638
93%
99,689
50%
2,20,712
121%
3,15,868
43.1%
3,64,478
15.4%
(April – June, 2012)
1,18,322
64%

10. Major Sector-wise Exports from SEZs (2006-07 to 2011-12)
Financial Years
Computer/ Electronic software
Gems and Jewellery
Chemicals and Petroleum Refinery
Other Mfg sectors
Total Exports
507
16,069
1,106
16,933
34,615
3,985
23,006
1,423
38,224
66,638
16,228
33,436
6,386
43,639
99,689
45,784
43,829
73,972
57,126
2,20,711
84,700
47,849
1,06,558
76,761
3,15,868
81,017
74,617
1,52,516
56,327
3,64,478
(export figures in crores)

11. Employment and Investment in SEZs (as on 30.6.2012)
(no. of persons)
Incremental Employment
(after Feb, 2006)
Total Employment
Total
7,85,539
9,20,243
INVESTMENT
Incremental investment
(after Feb, 2006)
Total Investment
Total
Rs.2,09, cr.
Rs.2,13, cr.

13. The Imperative for Enhanced Exports and FDI Growth
India’s Balance of Trade is in deficit, which is a fairly high proportion of GDP.
While exports have growth over the past decade, imports have also risen sharply, resulting in a growing adverse balance of trade position.
This gap is financed in part through net services income and net remittances.
The Current Account remains in deficit, the remaining gap is covered through net inflows on the Capital Account
There is no option other than promoting enhanced export and FDI growth.
The SEZ program is a promising instrument for achieving both these objectives .

15. Impact of SEZs Direct and indirect employment
Studies commissioned by the Department of Commerce have indicated that SEZs have had a positive local area impact in terms of
Direct and indirect employment
CChanges in consumption pattern and social life
Emergence of new economic activities ,
Human development facilities (such as for education, healthcare etc.)

16. Some Significant Trends in SEZ Sector Growth
Geographical Concentration of SEZs: Six States, Andhra Pradesh, Kerala, Maharashtra, Gujarat, Karnataka and Tamil Nadu, account for a major proportion of SEZs and 92% of total exports from them.
Urban centric growth of SEZs – Even within these six States, SEZs are largely concentrated around existing urban agglomerates, leaving the hinterland virtually untouched.
Sectoral Dispersion of SEZs: There is a pre-dominance of IT SEZs in the sector, and multi sector SEZs are few and far between. Of the 153 operational SEZs, only 17 are multi product SEZs.
Skewed Export Pattern: IT/ITES SEZs and Petroleum sector contribute to the roughly two-thirds of SEZ exports. Non-petroleum manufacturing contributes the balance minority share.
Inadequate progress of Manufacturing activity: As reflected above, the SEZ sector has not fully addressed the concern of boosting the manufacturing sector in India.
Limited number of Operational SEZs: While 589 SEZs have been formally approved as on 31st May 2012, only 389 have been notified, of which only 153 SEZs are exporting i.e. only % of the approved SEZs.

17. Distribution of SEZs in the Country

19. State wise Approved, Notified and Operational SEZs (as in Aug, 2012)

24. Some Success Stories in SEZs
New generation SEZs which have made significant progress in terms of Exports, Employment and Investment generation:
Apache SEZ Development India Private Ltd, Andhra Pradesh (Footwear SEZ)
Nokia Special Economic Zone in Tamil Nadu (Telecom equipments SEZ)

25. Some Success Stories in SEZs
Mahindra City SEZ, Tamil Nadu
(Apparels and fashion accessories; IT / Hardware; auto ancillary)
Sri City, Nellore/Chitoor,
Multi Product SEZ

26. Some Success Stories in SEZs
Brandix Apparel, SEZ, Vizag
Serum Bio Pharma Park, Pune

27. Some Success Stories in SEZs
Reliance Jamnagar SEZ, Refinery
Quark City, Mohali, Punjab

28. Challenges facing the SEZs
Non availability of non-double cropped, contiguous and vacant land for SEZs
Changed fiscal regime - imposition of MAT/ DDT; possible changes through DTC.
Single Window Mechanism and coordination across departments at the Central and State Government level.
Large number of States not having an SEZ Policy / Act
Slow pace of development of infrastructure within the SEZs and external support infrastructure
Non availability of incentives for SEZs under schemes such as FPS, FMS, DPEB, Duty Drawback, VKGUY etc.

29. SEZ Policy and Operational Framework Reform Initiative

30. Major Areas of Reform Minimum Land Area Required For SEZ
The Issue of Broad-banding – Revision definition of Sector:
 Contiguity Norms:
Vacancy Issues:
Non-Processing Area of SEZ
Free Trade and Warehousing Zone Issues

31. Major Areas of Reform IT and ITES SEZs – Special Dispensation
Exit Policy for Developers and Units:
Advance Ruling:
Shifting / Relocation of Units in a SEZ :
 Operational Issues to be addressed through amendments to the SEZ Rules:
Towards more meaningful State Govt Recommendations (SGRs)
Defining Consumables -allowing benefits under SEZ Policy:
Benefits and exemptions under Rule 27 for sub-contractors of Units

32. Apache SEZ, Nellore Brandix SEZ, Vizag Nokia SEZ, Sriperumbudur
sezindia.nic.in
Mahindra World City, Chennai Quarkcity, Mohali