Government policies: Special Economic Zones (SEZ) China’s Regional Policy 5-year plans.
SEZ Legislation and Policy Paper
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Transcript of SEZ Legislation and Policy Paper
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SEZs - Legislation & PolicyDiscussion Material
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Infrastructure Advisory3
Discussion Backdrop (1/2)
SEZ is a geographical region that has economic laws that are more liberal than a country's typicaleconomic laws and is typically created to serve one or more of the following purposes
To enhance foreign investment
To promote exports from the country
To create a level playing field for the domestic enterprises and manufacturers to be competitive globally
Since the end of WW II, SEZs / EPZs / FTZs have been handed over as solutions to the
developing nations to jumpstart economic development
China, which started experimenting with SEZs from 1980 onwards, has shown great success inintegrating its economy to the worlds through these zones
India, which had earlier followed the EOU / EPZ route for export promotions, came out with aSEZ policy in 2000 followed by an act in 2005 on the lines of the Chinese model
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Infrastructure Advisory4
Discussion Backdrop (2/2)Though controversial both inside and outside the government, the act has been a runaway success with thedeveloper community With more than 600 applications
Over 2200 sq. km. of promised development
Over USD 500 billion (Rs 22,00,000 crore) in annual revenues targeted
More than USD 120 billion in development investments (Rs 5,50,000 crore)
Today, the debate on SEZs is reaching a crescendo and the entire SEZ landscape is in a state of flux. Themajor issues of the SEZ debate are:
Policy and macroeconomic debate
Direction, consistency and impact of policy
Policy objective
Public good
Resource grabbing
Creation of private oligopolies
Microeconomic debate
SEZ formatsEconomics inherent in the SEZ concept for the various stakeholders
Land acquisition and R&R
Drain on public exchequer
Administration and regulation debate
Debate on alternatives
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Infrastructure Advisory5
SEZs: Legislation & Policy - Agenda
SEZs Legislative Landscape
Central Laws
SEZ Policy Topical Issues
SEZ Policy State Comparison
State Laws
Summary
Policy exploitation for Real Estate
Revenue losses due to tax exemptions
Over-capacity creation
Diversion and locking of land
Tenability of private local government
Underserved domestic markets
Fate of EOUs and STPs post 2009
Undefined exit for units & developers
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Infrastructure Advisory6
SEZs: Legislation & Policy - Agenda
SEZs Legislative Landscape
Central Laws
SEZ Policy Topical Issues
SEZ Policy State Comparison
State Laws
Summary
Policy exploitation for Real Estate
Revenue losses due to tax exemptions
Over-capacity creation
Diversion and locking of land
Tenability of private local government
Underserved domestic markets
Fate of EOUs and STPs post 2009
Undefined exit for units & developers
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Infrastructure Advisory7
Constitutional Backdrop
Section 1: India shall be a Union of States
Executive and legislative powers across allmatters in the country have been divided
between the Union and states
Section 73: The Executive Power of theUnion shall extend to matters which respect
to which the Parliament has the right tomake laws provided that it shall not,except as provided in the Constitution,extend in any State to matters with respectto which the Legislature of the State has alsopower to make laws
Schedule 7 of the Constitution defines thedistribution of legislative and executivepowers between the Central and State
Governments
The 74 th Constitutional Amendment Actprovides for devolution by the State
Legislature of powers and responsibilitiesupon Municipalities with respect topreparation of plans for economicdevelopment and social justice, and for theimplementation of development schemes
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Infrastructure Advisory8
Distribution of Responsibilities
UNION LIST Railways, National Highways Foreign exchange and foreign loans Trade and commerce with foreign countries Definition of customs frontiers Income taxes, excise duties, customs duties
STATE LIST Public order & police Local government Public health & sanitation Roads, bridges, etc. Water Land, incl. Colonisation Industries Gas & gas works Taxes on:
Land & buildings Entry of goods into a local
area Consumption / sale of
electricity Sale / purchase of goods Professions, trades, etc. Luxuries & entertainments Stamp duties
CONCURRENT LIST Registration of births & deaths Ports, other than major ports Factories Boilers Electricity
12 th SCHEDULE FUNCTIONS OF
MUNICIPALITIES Urban planning Regulation of land use and construction of
buildings Planning for economic and social
development Water supply for domestic, industrial and
commercial purposes Public health, sanitation & solid waste Fire services Provision of urban services & amenities
parks, street lighting, parking lots, Burial / cremation grounds Registration of births & deaths
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Infrastructure Advisory9
Regulatory Framework: CentralCentral SEZ Act:
The Special Economic Zone Act, 2005 defines regulation for SEZs within the domain of unionsubjects:
Stipulations regarding size and scope of SEZs
Approval and notification of Special Economic Zones
Institutional framework for the same
Institutional framework for the discharge of various regulatory functions at zone level DevelopmentCommissioner, Approval Committee
Delegation of powers under the Union list of subjects
Fiscal regime applicable to SEZ developers and units, under various subjects within the Union list
FDI approvals, establishment of units subject to industrial licensing
Definition of customs procedures, establishment of zone level customs facilities
Environmental laws and local rules regarding land planning etc apply on SEZs
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Infrastructure Advisory10
Regulatory Framework: StateState Legislations:
Institutional facilitation mechanisms e.g.,
Empowered Committee in Maharashtra
Project Evaluation Committee; and Project Approval Committee
Zone-level administration mechanisms e.g.,
Industrial Township Authority in Maharashtra constitution, functions
Empowerment of developer for the discharge of various planning and infrastructure services within thezone:
Urban planningDelivery of infrastructure services, including electricity generation and distribution, water supply, waste watertreatment and solid waste, ports, roads / bridges and transportation services, gas distribution, telecommunicationand data distribution
Recovery of user charges for services above
Fiscal benefits to developer and units under various state legislations
Delegation of powers on various subjects within the state list to the Development Commissioner at zonelevel
Relaxation of the applicability of various state legislations to the zone
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SEZ: Physical Concept
Notified Areaof SEZ
Non-Processing Area
FTWZIFSC
Entry / ExitPoint(s)
To be fully secured by taking suchmeasures as approved by the
Board of Approval
The DC of the SEZ is responsible for demarcating processing/non-processing areas
Land / built-up space in the processing areato be leased:
To entrepreneurs holding valid letters of
approval, with lease period co-terminus withLOA
For facilities for exclusive use of the Unitssuch as canteens, public telephone booths,first aid centres, creches, etc.
To a person desiring to create infrastructure
facilities for use by prospective Units
Facilities such as Free Trade & Warehousing Zones, International FinancialServices Centre may be approved forestablishment within the Processing Area
Developer may allot the land in the non-processing area for business and socialpurposes such as:
Educational institutions
Hospitals
Hotels
Recreation and entertainmentfacilities
Residential and business complexes
DTA units not allowed to set up
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Infrastructure Advisory12
Flavors of SEZs Indian ContextSpecial Economic Zone for
Multi-Product
Special Economic Zone forMulti-Services
Minimum size = 1,000 hectares; Maximum size = 5000 hectares Contiguous area required Minimum size of processing area = 50%
Minimum size = 100 hectares Contiguous area required Minimum size of processing area = 50%
Special Economic Zone forSpecific Sector
Minimum size = 100 hectares Contiguous area required
Minimum size of processing area = 50%
Special Economic Zone inport / airport
Minimum size = 100 hectares Contiguous area required Minimum size of processing area = 50%
Special Economic Zone forIT, Biotech, Non-
conventional Energy orGems & Jewellery
Minimum size = 10 hectares Contiguous area required
Minimum size of processing area = 50% Minimum built-up space (for IT SEZ) = 1 mn sq feet.
Special Economic Zone forFree Trade & Warehousing
Minimum size = 40 hectares Contiguous area required Minimum size of processing area = 50%
Minimum built-up space of 100,000 sq. m. May be set up as part of an SEZ for multi-products
May be set up as part of an SEZ for specific sector, with area notexceeding 20% the zone area
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SEZ Entity Landscape
ProjectExecution
BD, Mktg.& Sales
Servicedelivery
BusinessSupport
functions
Co-developers Providers
Board of Approvals
DevelopmentCommissioner
Unit ApprovalsCommittee DCs Office
Single Window
State Govt .
Residents Residential Industrial Commercial
CentralGovt.
Customs
Regulatory bodyDispute settlementtribunal
TownshipManagement
Developer
Utility & Infrastructure
Outsourced servicedelivery
Urban Planning& design
Oversight and facilitationcommittees
Industrial Township
AuthoritySPA
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Infrastructure Advisory14
SEZ Institutional Framework - Overview
DevelopmentCommissioner
Grant all local and state level clearances,etc. delegated by the Central / StateGovernment. Monitor such approvals,licenses, registrations, etc.Make town planning regulations
Board of Approval
Approving proposals to set up SEZs Approval of authorized operations inan SEZFDI Approvals to Developers, Units
Approvals for infrastructure provision(through co-developers, etc.)
Approval Committee
Approve imports of goods and services intothe SEZ
Approve proposals forestablishment of SEZunits
Allow foreign
collaborations / FDIproposals duly cleared bythe Board of ApprovalMonitor compliance bySEZ Developer, units DeveloperPlanned development of SEZ
Prepare development plan Demarcate and develop sites
Allocate and transfer plots,buildings Regulate the erection of
buildings in accordance withthe plan
Develop, operate, maintaininfra
Demarcate Zone boundary
Regulator
Monitoring of infrastructureservices and O&M of the SEZ
Proper Officer
Customs
administration
Entity
SPV for delivery of Developer / Co-Developer Services
Co-Developer
Provider of infrastructure facilities
SEZ Development Authority
Governing body in the caseof state run SEZs(Equivalent to thedeveloper)
State oversight &
facilitation committees
Coordinates between the DCsoffice single window and thestate administrationEvaluates and approves SEZproposals at the state level
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Infrastructure Advisory15
Central Government SEZ Legislative landscape
Central SEZ Act
Electricity Act
Rules accompanying the Central SEZ Act
Model Municipal Law
Acts & Policies
Board of Approvals
Development Commissioner
Entities
73 rd & 74 th Amendments
Unit Approval Committee
Regulatory Bodies
EOU / EHTP / STP Acts
SEZ Development Authority
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States Typical SEZ Legislative landscape
State SEZ Act
State Land Policy
State Municipal Policy
State Labour Policy
Acts & Policies
State oversight & Facilitation Committee
Entities
State Town Planning Policy
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State SEZ Policies (2/3)
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Municipal PowersIndustrial Township Authority should be constituted
Developer should be the given control over the ITA
Model Provisions (1/2)
Planning Powers Developer should be given the power of a Special Planning Authority
Single Window
The state government should constitute an organization to facilitate between the SEZs and the
state government machinery in a transparent manner
Process Re-engineering at the state government department level is a must
Public UtilityService
Special Economic Zones should be declared Public Utility Service to ensure continuity of seamless operations
State SEZ Policies (3/3)
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Labor PolicyState Labor union acts should be abrogated
Hire & fire
Model Provisions (2/2)
EnvironmentalPolicy Self certification should be allowed for non-polluting industries
Deemed ClearanceRoute
The state government should allow for deemed clearance route for approvals from stategovernment bodies
Land AcquisitionModel land acquisition policy should be formulated at the central level
R&R should be handled by a dedicated government body that collects user charges
State SEZ Policies (3/3)
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Infrastructure Advisory22
SEZs: Legislation & Policy - Agenda
SEZs Legislative Landscape
Central Laws
SEZ Policy Topical Issues
SEZ Policy State Comparison
State Laws
Summary
Policy exploitation for Real Estate
Revenue losses due to tax exemptions
Over-capacity creation
Diversion and locking of land
Tenability of private local government
Underserved domestic markets
Fate of EOUs and STPs post 2009
Undefined exit for units & developers
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Infrastructure Advisory23
1 Policy exploitation by real estate developers who have no track record in economic activity / export promotion andassociated infrastructure creation / development scale
SEZ Policy Topical Issues (1/8)
Issues
2 Tax exemptions to drive significant revenue losses to state and central governments
3 Over-built SEZ capacity leading to under-performance
4 Diversion of large volumes of land from agriculture and other productive uses into potentially under-utilised SEZcapacity
5 Constitutional and moral tenability of large-population industrial-urban townships with non-elected, privately-runlocal governments with monopoly over utility and infrastructure provision
6 Under-served domestic markets, as industrial capacity is diverted to export use
7 The fate of STP units, EOUs, etc., post March 31, 2010
8 Undefined exit for units
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Infrastructure Advisory24
SEZ Policy Topical Issues (1/8)
Issue I: Policy Exploitation by Real Estate Developers (1/3)
Policy Highlights
at least fifty percent of the area shall be earmarked for developing processing area
A Developer may import or procure from the DTA without payment of duty, taxes or cess all
type of goods required for authorized operations
import of duty free material for setting up residential and / or business complex or any other
facilities in the non-processing area of the SEZ shall be as approved by the Board
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Policy Analysis Quantum of Non-Processing Area
Is a 50% area for non-processing activities justifiable?
100%Total
Balance Agriculture & Water Bodies
12-14%Transportation12-14%Public & Semi-Public
18-20%Recreational
10-12%Industrial
4-5%Commercial
35-40%Residential
% Area Allocation
Land Use
UDPFI* Guidelines , issued by the MoUD,GOI, recommend the following areaallocations for large-scale projects
* Urban Development Plan Formulation & Implementation
Empirical evidence: Greater NOIDA
Land use breakup of Outline Development Planyear 2021 for Projected urban population of 12LakhsAs a model of smart town planning, landhas been appropriated for various activities asunder:
19%Industrial
6%Commercial
25%Residential12%Public and semi utilities
13%Transportation
25%Recreational
SEZ Policy Topical Issues (1/8)
Issue I: Policy Exploitation by Real Estate Developers (2/3)
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Low value addition 20-50%on land cost
Limited price appreciation 3-5% p.a. including overthe long term
Limited project returns 10-15%
Value addition 600-1000% on
land cost
Attractive long-term price trends e.g., 27% p.a. in Gurgaonover a 22 year period
Project returns of 45%+ arecommon
IndustrialEstate
RealEstate
Developer Incentive Structures
Developer incentives predominantly impelled by market forces have driven the view of SEZs as real estateopportunities
A combination of regulation, competitive forces and reduction in tax breaks for real estate activity required toreinforce policy objectives of export promotion
The solution is not to reduce the quantum of non-processing areas
SEZ Policy Topical Issues (1/8)
Issue I: Policy Exploitation by Real Estate Developers (3/3)
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Infrastructure Advisory27
SEZ Act Highlights: every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacksand concessions, namely:
exemption from any duty of customs, to carry on the authorised operations
exemption from any duty of excise, on goods brought from Domestic Tariff Area to a Special Economic Zone orUnit, to carry on the authorised operations
drawback or such other benefits as may be admissible from time to time on goods brought or services providedfrom the Domestic Tariff Area into a Special Economic Zone
exemption from service tax on taxable services provided to a Developer or Unit to carry on the authorisedoperations
exemption from the levy of taxes on the sale or purchase of goods under the Central Sales Tax Act, 1956 if suchgoods are meant to carry on the authorised operations
Income Tax Act (Section 80-IAB):
Income tax exemption for Developers:100% for a period of 10 years (within a block of 15 years)
Income tax exemption for Units: 100% for a period of 5 years, 50% for a further 5 years, followed by another 5-year period where certain exemptions are allowed if reinvestment reserve is created out of profits
SEZ Policy Topical Issues (2/8)
Issue II: Tax Breaks & Associated Revenue Losses to Central, State Governments (1/3)
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Infrastructure Advisory28
A policy debate between the Ministry of Finance and Ministry of Commerce is underway key
concerns:
Continuing exemptions on various taxes and duties will be availed by exporting units (including EOUs, STP
units, etc.) that relocate to SEZs
Real Estate developers will benefit from tax exemptions to activities in the non-processing area, that arenot necessarily linked to export promotion
MOF estimates revenue losses of Rs. 100,000 cr p.a.
MOC projects revenue enhancement of Rs. 44,000 cr p.a. on account of enhanced economic activity
SEZ Policy Topical Issues (2/8)
Issue II: Tax Breaks & Associated Revenue Losses to Central, State Governments (2/3)
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Not all of the available fiscal benefits are allowable under the WTO Agreement on Subsidies & CountervailingMeasures:
Tax exemptions to EOUs, STP Units, EPZ Units against export activity are to be phased out in April 2010 (sunset clause)
Prohibited subsidies under WTO, such as the full or partial exemption remission, or deferral specifically related to exports,
of direct taxes, will continue to be available to SEZ units even after the sunset period
Sectors where the country has reached export competitiveness e.g., textiles & clothing will require phasing out of
export subsidies
Countervailing remedies available to trading partners under WTO may nullify part of the benefits to exporters
Some benefits will not be countervailed e.g., those driven by superior / cheaper infrastructure, lower transaction costs inan SEZ, etc. leading to greater trade volume
The net effect of fiscal benefits will be determined by a complex interplay between the scale of countervailing
action, residual increases in competitiveness to exporting units, and the impact of these on incrementalexport-focused investment
Partial re-distribution of tax revenues from India (exporting country) to importing countries, due to the impact of
countervailing
Enhancement in trade volume, and therefore economic activity, indirectly enhancing government tax revenues
SEZ Policy Topical Issues (2/8)
Issue II: Tax Breaks & Associated Revenue Losses to Central, State Governments (3/3)
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Infrastructure Advisory30
More than 600 applications for Special Economic
Zones at various stages of processing
Investment absorption capacity of Rs. 4,000,000 cr
Between 1991 and 2005, cumulative investment
intentions countrywide totaled Rs. 1,894,200 cr
Conversion of ~ 30% into physical investment on the
ground
Conclusion: severe over-capacity being planned in
the SEZ space
SEZ Policy Topical Issues (3/8)
Issue III: Over-built SEZ capacity, leading to under-performance (1/2)
% of Formal & In-principle Approvals
Note: values in the order of Number, Percentage
Website: http://sezindia.nic.in/ ; Data as on 1 st May 2007
28, 7%6, 2%
31, 8%
19, 5%
17, 4%
167, 42%
75, 19%
53, 13%
Apparel and Textile Auto Sector
Biotech & Pharma Electronics
Engineering IT/ ITES
Multi Product / Multi Services Others
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Large number of competing SEZs will limit success for all zones
Empirical evidence: China, which today has only 6 special economic zones
Shenzhen, near Hong Kong is the only zone to have reached significant levels of success
Pudong, near Shanghai, identified recently as a SEZ, is the other emerging star performer
Key inferences:
Only a limited number of zones will be successful
Very likely, these will be in close proximity to the countrys largest and most economically vibrant centres,
such as Mumbai, Pune, Bangalore, Delhi
Large tracts of land could be locked into non-performing SEZs
SEZ Policy Topical Issues (3/8)
Issue III: Over-built SEZ capacity, leading to under-performance (2/2)
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Significant over-capacity in SEZs will lead to under-utilisation of land
Industrial estates, especially in land-locked states such as Punjab, UP, etc. are characterised by
occupancy levels of 35-40% or less
Taxation structures applicable to SEZ units make them non-competitive in servicing the DTA
market
SEZ Act envisages no mechanism for de-notification of unsuccessful Zones
Even if such a mechanism is put in place, de-notification will be a challenge with reference to the fate of
any units located in such unsuccessful zones
Continuation of the EOU scheme in its current form or in a modified version may be necessary to
provide the flexibility to de-notify zones
SEZ Policy Topical Issues (4/8)
Issue IV: Locking of large land tracts into under-utilised SEZ space
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Constitution of India, Section 243Q
There shall be constituted in every state a municipal council (corporation) for a smaller (larger) urban
areaProvided that a Municipality may not be constituted in such urban area as the Governor may, havingregard to the size of the area and the municipal services being provided specify to be an industrialtownship
SEZ Bill, MaharashtraThe State Government may notify such (special economic) zone as an Industrial Township
The Authority for such township shall comprise the following members, namely:
The Chairman to be nominated by the Developer
Two members to be nominated by the Developer
One member to be nominated by the Development Commissioner
One member to be nominated by the State Government
SEZ Policy Topical Issues (5/8)
Issue V: Privatized local government (1/2)
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Key implications of prevailing policy environment:
Urban townships of whose populations could run into millions will not have a democratic process of election of local government
Private monopolies will be responsible for provision of a wide range of services falling into the third tierof government such as water supply, solid waste, sanitation,
Our expectation:
This will be a highly litigated element of SEZ policy, where the Supreme Court will probably need tointervene in coming years
In the meanwhile, a sector regulator is likely to be put in place, at least for tariff regulation
SEZ Policy Topical Issues (5/8)
Issue V: Privatized local government (2/2)
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-395
-395
-395
-39
5
-395
-395
-395
-39
5
-395
-39
5
-39
5
DTA Unit SEZ Unit D u t i e s / t a x e s o n D T A S a l e s ( % o f s a l e p r i c e )
Case II: Import Content of raw materials = 100%
Policy SEZ Act
Any goods removed from a SEZ to the DTA shall be chargeable to duties of customs including anti-dumping, countervailingand safeguard duties, as leviable on such goods when imported
The effect of this policy: to make servicing the DTA market non-competitive from within an SEZ location, especially whereproduction is based on local raw materials
D u t
i e s o n
R M
C u s t o m s o n
F G
E x c i s e
/ C V D o n
F G #
S a l e s
T a x
/ S A D
I n c o m e
t a x
O t h e r
t a x
e s *
-395
-395
-395
-39
5
-395
-395
-395
-395
-395
-395
-395
DTA Unit SEZ Unit D u t i e s / t a x e s o n D T A S a l e s ( % o f s a l e p r i c e )
Case I: Import Content of raw materials = 0%
SEZ Policy Topical Issues (6/8)
Issue VI Under-served Domestic Market (1/2)
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Key implications:
Separation of DTA and SEZ operations enforced by the prevailing policy regime, may lead to sub-optimalscale manufacturing facilities, as well as duplication of infrastructure
The creation of fresh infrastructure for a growing domestic market has taken a backseat
Policy expectations:
Review of domestic market access for SEZ goods produced with raw materials substantially sourced fromdomestic sources
SEZ Policy Topical Issues (6/8)
Issue VI Under-served Domestic Market (2/2)
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Exporting units located in the DTA EOUs, STP Units, etc. account for a large proportion of the countrysexports
EOU exports in 2005-06: Rs 47,426 cr (Rs 37,035 cr from April - Dec 2006)
STP exports in 2005-06: ~Rs. 95,000 cr
These units will be subject to a competitive shock come March 2010, when fiscal exemptions available to theseunits will cease
Other exporting units not under SEZ / EOU regime are already subject to a full tax regime
The Ministry of Finance seeks to prevent relocation of existing units into SEZs, to prevent their continuing toavail tax exemptions
Key implications:
The existence of multiple regimes for exporting firms is not an efficient situationExporting firms likely to be forced to close down DTA operations and relocate to SEZ locations
This will especially hold true for industries like apparel and software, where capital intensity is low relative to sales
SEZ Policy Topical Issues (7/8)
Issue VII: The fate of EOUs, STP Units, etc. post March 2010 (1/2)
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EOU
NFEP to be 20+% for most products
50% exports allowed as DTA sales @ concessional duty
Duties applicable on goods used to set up units
Retention of up-to 70% earnings in EEFC a/c allowed
Export proceeds to be realized & repatriated to India
within 6 monthsMaterial can be stocked for 1 year
Development commissioner to attest import of Capitalgoods
Customs examination in import & export cargo
FIPB approval required for some FDI
SSI reservation policy applicable
Jewellery units cannot subcontract work to DTA units
NFEP to be > 0
Unlimited DTA sales @ full duty
No customs/excise duties applicable on goods used to setup units
Retention of full earnings in EEFC a/c allowed
Export proceeds to be realized within 12 months
Material can be stocked for 5 years
All imports on self certification
No routine customs examination in import & export cargo
100% FDI automatic
SSI reservation policy not applicable
Jewellery units are can subcontract work to DTA units
SEZ Policy Topical Issues (7/8)
Issue VII: The fate of EOUs, STP Units, etc. post March 2010 (2/2)SEZ
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SEZ Policy:
land or built up space in the processing area shall be given on lease only to the entrepreneurs holdinga valid Letter of Approval and the lease period shall be co-terminus with the validity of the Letter of
Approval
The Letter of Approval shall be valid for five years from the date of commencement of production and,after the completion of five years from the date of commencement of production, the DevelopmentCommissioner may, at the request of the Unit, extend validity of the Letter of Approval for a further
period of five years
The Unit may opt out of Special Economic Zone with the approval of the Development CommissionerProvided that if the unit has not achieved positive Net Foreign Exchange, the exit shall be subject topenalty that may be imposed under the Foreign Trade (Development and Regulation), Act, 1992
Key implications:Units not fulfilling NFE criteria as per the Letter of Approval may be required to exit
The fate of fixed assets created by the unit in such a situation is undefined
This is likely to discourage the establishment of capital-intensive operations within the SEZ
SEZ Policy Topical Issues (8/8)
Issue VIII: Undefined exit mechanisms
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SEZs: Legislation & Policy - Agenda
SEZs Legislative Landscape
Central Laws
SEZ Policy Topical Issues
SEZ Policy State Comparison
State Laws
Summary
Policy exploitation for Real Estate
Revenue losses due to tax exemptionsOver-capacity creation
Diversion and locking of land
Tenability of private local government
Underserved domestic markets
Fate of EOUs and STPs post 2009
Undefined exit for units & developers
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8/14/2019 SEZ Legislation and Policy Paper
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Infrastructure Advisory41
Summary
The policy regime for special economic zones has some way to go before itapproaches perfection. Key lacunae are likely to result in:
Promotion of inefficiencies, through duplication of infrastructure investments,promotion of DTA unemployment, locking in of land into unproductive uses
Substantial revenue losses to the Government, with less than proportionalbenefits in the form of economic gains from increased activity
Legal and constitutional challenges
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8/14/2019 SEZ Legislation and Policy Paper
42/42
Infrastructure Advisory42
Indias Leading IntegratedInfrastructure Development Company
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