SEZ POLICIES & ITS IMPACT

NO

NAME TAG

1 Pranit Tak 106

2 Vidhi Thakral 107

3 Prashant Thakur 108

4 Pallavi G. Tondwalkar

109

5 Prriya Ubhe 110

SEZ is …• A geographical region that has economic laws

that are more liberal than a country's typical economic laws.

• Includes FTZ, EPZ, FZ, IE, Free Ports, Urban Enterprise Zones etc.

• Often developed under a public-private partnership arrangement involving equity investments, soft loans, bond issues, etc

• Basic goal is to increase foreign investment.

DEVELOPER & UNIT OWNER

• "A developer is a person or body of persons, company, firm & such other private or Government Undertaking who develops, builds, designs, organizes, promotes, finances, operates, maintains or manages a part or whole of the infrastructure & other facilities in the SEZs as approved by the Central Govt.“

• Unit owners / Unit holders are the parties who set-up their factories / units within the SEZ & operate them.

HISTORY OF SEZ• 1947: Industrial park in Puerto Rico• 1965: India experimented with the concept of

Export Processing Zones (EPZ). • 1960: Ireland & Taiwan followed suit• 1980: China made the largest SEZ(Shenzhen)• 2000: Murlisone Maran, then Commerce

Minister, incorporated the SEZs into the Exim Policy of India.

• 2005: The SEZ Act was introduced • 2006: SEZ Rules were formulated

SEZ ACT, 2005

MAIN OBJECTIVES:

(a) Generation of additional economic activity (b) Promotion of exports of goods and services(c) Promotion of investment from domestic and

foreign sources(d) Creation of employment opportunities(e) Development of infrastructure facilities

SEZ ACT, 2005The SEZ Act 2005 is mainly divided into 6 different chapters:

• Establishment Of Special Economic Zone• Constitution Of Board Of Approval • Development Commissioner• Single Window Clearance• Special Fiscal Provisions For Special

Economic Zones • Special Economic Zone Authority

SEZ RULES• The basic provisions of the SEZ Rules 2006 can

be summarized as follows –  • Creation of additional economic activity. • Promotion of exports of goods and services • Promotion of investment from domestic and

foreign sources• Creation of employment at competitive rate. • Development of infrastructure facilities • Promulgation of simplified procedures • Single window clearance • Facilitation of easy and simplified compliance

procedures and documentations.

SEZ POLICYObjectives of the Scheme1. Aim at world class infrastructure2. SEZ may be developed and managed by

private/joint/state sector3. New infrastructural development

Criteria for approval1. Min size of SEZ shall not be <1000 hectares2. SEZ & units therein shall abide by local laws3. Adequate arrangements4. At least 25 % area of SEZ shall be used for

developing industrial area

SEZ POLICY• Procedure for Approval• Location of the proposed zone• Area of SEZ & its distance from nearest Sea• Financial details & Details of foreign equity• Specific industries or a multi-product zone• Free from environmental prohibition• Water, Electricity & other services - provided • Exemption in electricity duty • Generation, transmission & distribution of power• Exemption from various taxes• Declared as a Public Utility Service• A Letter of Permission

SEZ POLICY• Powers under Industrial Disputes Act would be

delegated to the Development Commissioner• Govt. may grant in-principle approval to proposals • Approval shall be valid for a period of 3 years• Converted EPZ into SEZ General Conditions1. Undertaking shall continue until benefits under IT

Act are to be availed.2. The Central Government may withdraw the approval Agreement with Central Government1. Setting up of SEZ shall be treated as 'Agreement'

TERMS AND CONDITIONS

• SEZ units shall abide by local laws• SEZ shall make security arrangements• Minimum area of 1000 hectares & at least 35

% of the area is to be earmarked for industrial area

• Minimum area of 1000 hectares will not be applicable to product specific SEZs

INCENTIVES• Customs and Excise • Income Tax

(i) Incentives for SEZ units(ii) Incentives for SEZ Developer

• Foreign Direct Investments• Off-Shore Banking Units (OBUs)• Banking / External Commercial Borrowings

(ECBs)

INCENTIVES

• Sales to DTA• Service Tax• Environment• Company’s Act• Drugs & Cosmetics• Sub-contracting

Rajasthan3%

Maharashtra19%

Karnataka17%

Andhra Pradesh16%

Tamil Nadu8%

Orisa3%

Gujarat10%

Haryana13%

West Bengal5%

Uttar Pradesh6%

Maharashtra

Karnataka

Andhra Pradesh

Haryana

Gujarat

Tamil Nadu

Uttar Pradesh

West Bengal

Orissa

Rajasthan

STATE-WISE SEZs

SEZs IN INDIA• Nokia SEZ in Tamil Nadu  • SEEPZ - Andheri (East), Mumbai • Khopata - Multi-product, Mumbai• Quark City SEZ in Chandigarh • Flextronics SEZ in Tamil Nadu • Mahindra World City in Tamil Nadu • Motorola, DELL and Foxconn   • Apache SEZ (Adidas Group) in Andhra Pradesh • Divvy’s Laboratories, Andhra Pradesh • Rajiv Gandhi Technology Park, Chandigarh • ETL Infrastructure IT SEZ, Chennai • Hyderabad Gems Limited, Hyderabad

CIDCO’s NMSEZ

IMPACT ON ECONOMY• Increased GDP growth • Increase FDI in-flows• Increase Exports• Generate Employment opportunities

(1,13,426 persons )- Direct - Indirect

• Increased Investment (Rs. 83450crore )• Technology upgradation• tapping of local talent• Usage of non-agricultural land

SEZ EXPORTS

Year Value(Rs. Crore)

Growth Rate(over prev. yr.)

2003-2004 13,854 39%

2004-2005 18,314 32%

2005-2006 22 840 25%

2006-2007 34,615 52%

2007-2008 66,638 92%

EXPORTS FROM SEZs

BENEFITS

• Increased global presence• Bigger inroads into small and medium scale

manufacturing.• Sector-wise boom• Competitive platform to India's entrepreneurs• Countrywide development of infrastructure is

expensive & implementation of structural reforms requires time, development of SEZ expedites the process of industrialization.

CHALLENGES1. Land Acquisition2. Revenue Loss to Government3. Cap on non-processing area4. Many traders are interested in SEZ, so that

they can acquire at cheap rates & create a land bank for themselves.

5. The number of units applying for setting up EOUs is not commensurate to the number of applications for setting up SEZs leading to a belief that this project may not match up to expectations.

CHALLENGES

CONTROVERSIES

• JAMNAGAR INCIDENCE:> 10,000-acre SEZ by Reliance Infrastructure > Govt. had to put a ceiling on the maximum land area that can be acquired for SEZs

• NANDIGRAM VIOLENCE:> Salim Group - Chemical hub> 3,000 heavily armed police shot dead 14 villagers & wounded more than 70

• Kalinganagar in Orissa

ANALYSIS• ‘Hire and fire' policy not suitable. Increasing miseries, gross inequality, mass

unemployment, and conflicts.

• Foreign investment alone not enough for economic development

Exa.china, japan,soviet union

• Pure private ownership spells disaster for both workers

WHAT MORE CAN BE DONE

• Major issues

Commitments for Export, FDI, Manufacturing diluted

Impact on agricultural land

Compensation & Rehabilitation of Farmers

Revenue losses of State & Center

Impact on domestic industries

Non processing zone business

Global experience

S. No.

Issues Issues Action Needed

1 Financing of SEZs

Who will finance SEZ projects and units in SEZs.

Ministry of Finance in consultation with RBI and SEBI should announce a clearly laid down policy for financing of SEZ projects. Support for Processing Zone.

2 Limit on number of SEZs

Any limit on number of SEZs will create market distortions

There should not be any upper limit on number of SEZs

3 Transparency

Transparency in approval process is key to success of the SEZ concept

A transparent policy framework should be created to discourage corruption and ensure proper growth of SEZs.

4 Promoters' Credibility

We need to have promoters with proven credibility for developing SEZs. Good quality of promoters can really make this concept a grand success.

Government needs to conduct due diligence before giving approval thwarting any attempt of fly by night operators.

5 Non-transferibility

Government should allow only serious promoters with long-term perspective to develop SEZs.

We should not allow transfers of undeveloped SEZs. Promoters should not be able to sell any part of SEZ without developing it.

Special Thanks To…• Financial Express – (“India must rework its

SEZ policy” - February 23, 2007 10:09 IST)• The Economic Times – (“SEZ policy needs

amendment” - 14 Nov 2006, 0046 hrs IST, Amiti Sen)

• Haryana Govt. SEZ policy – (haryana.gov.in/SEZpolicy/)

• counterviews.org/sez.html • slideshare.net• twocircles.net• colliers.com• sezindia.nic.in

ANY QUESTIONS?