SEZPresented By:-

Group 2

Abhey Bansal (001)

Anchal Khare(003)

Anuragdeep Badyal (012)

Aditya Bidwai (060)

Amarjeet Singh (106)

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Background

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

Shortcomings 1. multiplicity of controls and clearances2. absence of world-class infrastructure3. an unstable fiscal regime 4. unable to attract larger foreign investments

in India

SEZ Policy

The Special Economic Zones (SEZs) Policy was announced in April 2000.

This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations.

SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes. 

SEZ Act

To instill confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through the establishment of SEZs,

A comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose.

The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005.

The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules.

After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments.

Objectives

The main objectives of the SEZ Act are: (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 Rules

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

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

Special Economic Zone Single Window clearance on matters relating to

Central as well as State Governments Simplified compliance procedures and

documentation with an emphasis on self certification

Facilities and Incentives

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units

100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

External commercial borrowing by SEZ units up to US $ 500 million in a year without any maturity restriction through recognized banking channels.

Exemption from Central Sales Tax. Exemption from Service Tax. Single window clearance for Central and State level approvals. Exemption from State sales tax and other levies as extended by the respective

State Governments.

Facilities and Incentives

The major incentives and facilities available to SEZ developers include

Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.

Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.

Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.

Exemption from dividend distribution tax under Section 115O of the Income Tax Act.

Exemption from Central Sales Tax (CST). Exemption from Service Tax.

Export performances

Source: Ministry of Commerce and Industry

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Procedural Framework

The entire procedural framework covers under the SEZ Act and Rules are mainly divided under three heads :

1. Definitions, Bodies and types of SEZs2. Procedure to set up an SEZ3. Procedure to set up an SEZ unit

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Definitions, Bodies and Types of SEZs

Section 2 of the Act gives definitions of SEZ related bodies like –

Developer, Unit, Manufacture, Domestic Tariff Area

Regulatory Bodies includes: - Board of Approval

- Development Commissioner - Approval Committee - SEZ Authority

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SEZ Types

SEZ Types

Multiproduct

Sector Specific

Free Trade &

Warehousing

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SEZ Setup

SEZ can be setup by – Central or State Government, the public or the

private sector including a foreign company or jointly in the form of a consortium

Procedure includes:- Application

- Approval by Board (guidelines check)

- Central Government Grants Letter of Approval

- Land documents Submission

- Declaration of SEZ by Central Government

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Obligations of SEZ/SEZ UNIT SEZ Units are required to achieve

positive Net Foreign Exchange (NFE) Periodic Reports to the Development

Commissioner and Zone Customs Unit is required to execute a bond with the

Zone Customs for its operations in the SEZ The Unit is required to maintain proper

accounts and furnish details regarding the value of imports, exports, etc. to the Development Commissioner on a quarterly basis

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PROGRESS-PHYSICAL

All 8 EPZs converted into SEZs :-

Kandla ( Gujarat) : 1965 (625 Acres) Seepz( Maharashtra) : 1975 (110 Acres) Noida (U P) : 1986 (310 Acres) Madras ( T N) : 1986 (262 Acres) Cochin ( Kerala ) : 1986 (103 Acres) Falta ( W B) : 1986 (280 Acres) Visakhapatnam( AP) : 1994 (360 Acres) Surat ( Gujarat ) : 1998 (103 Acres)

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15 SEZ approved in principle:

Maha-Mumbai ( Maharashtra ) Vallarpadam/Puthuvypeen (Kerala) Moradabad (U.P.) Jodhpur(Rajasthan) Nangunery ( T N) Paradeep & Gopalpur (Orissa) Kulpi and Salt Lake (W B) Bhadohi, Kanpur, Greater NOIDA Visakhapatnam and Kakinada, (A P) Hassan ( Karnataka)

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SEEPZ SEZ

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History

1973 

• SEEPZ was set up on 1st May, 1973 as uni- product EPZ exclusively for manufacture and export of electronic items in an area of 100 acres of land leased through the Maharashtra Industrial Development Corporation (MIDC), Andheri(East).

• The objective was of accelerating the progress of electronics manufacturing in India.

1987-

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• Considering the high potential and the pollution-free nature of Gem & Jewellery Industry, the Govt. of India decided to permit manufacture and export of Gem & Jewellery items from SEEPZ.

2000

• Government of India decided to set up new Special Economic Zone/ convert some of the existing Export Processing Zones to Special Economic Zones.

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Location

Located in the heart of metropolitan Mumbai, SEEPZ-SEZ has access to Mumbai's vast commercial, industrial and social infrastructure, its efficient communication network, a competent ancillary base, a well developed financial and credit structure, a skilled and experienced urban work force.

SEEPZ-SEZ is just 6 kilometers away from Mumbai's International airport at Sahar, Mumbai sea port is 30 kilometers away from the zone. SEEPZ-SEZ is also well connected from various parts of city by local trains and the urban transport service. Point to point dedicated data communication facilities are available at SEEPZ.

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Infrastructure

SEEPZ-SEZ is spread over 111 acres and consists of 7 Standard Design Factories and 3 Gem & Jewellery Factories, 2 Towers in SEEPZ++ area & One multistoried building with a built up area of 4 lakh sq. ft. Plots are leased for 30 years and built up area is leased for five years on renewable basis.

As SEEPZ SEZ is statutorily exempt from power cuts. The Zone has also an assured supply of 4.6 mld. of water a day. The Minerals and Metal Trading Corporation of India (MMTC) has its

strong room within the premises of the SEEPZ SEZ for security and quick delivery of precious metals. MMTC also offers gold to gem and Jewellery exporters for sale or on loan basis. This enables exporters quick and cheaper access to raw materials.

SEEPZ-SEZ is a export manufacturing hub with an in-house Customs clearance facility.

From parking space , a residential hotel, restaurants and food court, a warehouse, foreign post office, Banks, Offshore Banking Units, Communication Centre, an exclusive Telephone Exchange, ATM centres, high security entrance and dedicated Fire Station.

SWOT Analysis for Indian SEZs Strengths:

Skilled Manpower – English speaking Worldwide acceptance of capabilities in fields like

Pharmaceutical manufacturing & research Clinical trials Manufacturing auto parts Engineering designing & consultancy, IT & ITES Entertainment etc etc

Financial & other institutional Networks like Stock Exchanges, Insurance Companies, Educational Institutes

Attraction of a large ‘Indian’ market: growing middle class with purchase power

SWOT Analysis for Indian SEZs Weakness:

Infrastructure bottlenecks –connecting infrastructure like Roads leading to SEZs.

Political changes Convertibility of Currency on Capital A/c Red Tape Labour reforms Zones by & large are still zones not smart cities. Inappropriate locations Long gestation period 4 to 5 years in absence of

infrastructure development.

SWOT Analysis for Indian SEZs Opportunities:

An alternative manufacturing base, particularly compared to Chinese SEZs.

Services SEZs do not require movement of input and output physically and hence, surrounding infrastructure may not matter much.

For multi-product SEZs, almost 23 ports are available. Most of them are likely to be EDI compliant.

New small ports & airports are also being developed keeping SEZ concept in mind.

SWOT Analysis for Indian SEZs Threats:

Loosing edge of low labour costs - many countries are competing.

Formation of economic blocks, Effect on Government Revenues.

Negotiations for FTAs with many countries may erode competitiveness.

The pattern of buying & selling may not continue. With relocations of industries in other third world countries, new competitors will emerge.

Major Issues

Land Acquisition

Role of State Govt. in Land Acquisition

Compensation Packages to land owners

Rehabilitation packages for displaced farmers

State Govt.’s commitment to create infrastructure

Time frame for operationalisation

Control over SEZs – MoC or MoF

Amendments to Laws and Rules

Controversies

Nandigram Violence

Singur Controversy

Jamnagar Incidence

HP opt out of Bangalore

Reliance Industries’ Rewas Port Project

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Exports by SEZ

Exports from Indian SEZ totaled INR 2.2 Trillion in 2009-10 fiscal. It grew by a stupendous 43% to reach INR 3.16 Trillion in 2010-11 fiscal. Indian SEZs have created over 840,000 jobs as of 2010-11.

Despite all odds, exports through Indian SEZs grew further by 15.4% to reach INR 3.64 Trillion (roughly US$ 66 billion).

So exports of Indian SEZs have experienced a phenomenal growth of 50.5% for the past eight fiscals from a meager US$ 2.5 billion in 2003-04 to about US$ 65 billion in 2011-12 (accounting for 23% of India's total exports).

During the April--November this fiscal, the country's exports have shrunk by 5.95 per cent to USD 189.2 billion.

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Issues

Globally, only a handful of SEZs, have generated substantial exports, along with significant technology upgradation. For each successful Shannon (Ireland) or Shenzhen (China), there are 10 failures – in the Philippines, Malaysia, Brazil, Mexico, Colombia, Sri Lanka, Bangladesh, why, even India.

A report by the Comptroller and Auditor General (CAG) says: “Customs duty amounting to Rs. 7,500 crores was forgone for achieving net foreign exchange earnings of Rs.4,700 crores.

 Chief Economic Adviser Raghuram Rajan has warned: “Not only will [the SEZs] make the government forgo revenue it can ill afford to lose, they also offer firms an incentive to shift existing production to the new zones at substantial cost to society.

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Present Issues

Slowdown in growth of export from SEZs.  due to imposition of Minimum Alternative Tax (MAT) and Dividend Distribution Tax on SEZs in 2010-11, which were earlier exempted from almost all levies. 

Concerns over issues like the cost of credit, weak disbursement of credit, rising cost of manufacturing, transaction cost, raw material availability

As much as 75 per cent of the SEZ area can be used for non-core activities, including development of residential or commercial properties, shopping malls and hospitals.

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Future Prospects

New norms by the end of Jan 13 to revive special economic zones

Reduce the threshold for each sector-specific SEZ because of the constraints faced by developers in acquiring large, vacant and non-agricultural land.

Gov. plans to reduce the minimum area for multi-product SEZs from 1,000 hectares to 250 hectares; and multi-services/sector-specific zones from 100 hectares to 40 hectares

As the contiguity norm poses a hurdle for investors, the ministry plans to apply the norm only to the processing area where manufacturing and exports take place and exempt it for other areas.

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Contd..

Incentives for developers keen on remote and under-developed areas.

The export benefits announced in the foreign trade policy in June included a 2 per cent interest discount, or subvention scheme, for a number of sectors such as toys, sports goods, processed agricultural products and ready-made garments, apart from SMEs and the handloom sector.

The focus product and focus market schemes, wherein the government gives cash incentives equivalent to 2 per cent of the value of exports, were expanded with the incorporation of seven new markets and 100 new products

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Conclusion

The SEZ’s could drastically improve the economic activity in the country, make the country’s export competitive and globally noticeable, be net foreign exchange earner and provide immense employment opportunity. But this should not be done at the cost of bringing down the agricultural activities.

Land grabbing and real estate should be properly regulated.

Public-private partnership and regulatory bodies should be properly managed to weed out fallacies.

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Contd..

Stability and predictability of a policy regime is absolutely essential to assure investors, both domestic and foreign, that when they invest money under the government policy, there will be stability.

To further make use of full potential of SEZ’s Industries which are capable of indigenous generation of raw materials should be provided with tax holidays in terms of benefits to facilitate competitive pricing in the domestic tariff areas.

Relaxed Tax norms, Labor laws and regulations may attract foreign investment and major industries to setup industries in the SEZ’s making it profitable and meeting its desired results

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