India was
one of the first in Asia to recognize the effectiveness of the Export Processing
Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla
in 1965. Seven more zones were set
up thereafter. However, the zones were
not able to emerge as effective instruments for export promotion on account
of the multiplicity of controls and clearances, the absence of world-class
infrastructure, and an unstable fiscal regime. While correcting the shortcomings
of the EPZ model, some new features were incorporated in the Special Economic
Zones (SEZs) Policy 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.
The salient
features of the SEZ scheme are:-
Ø
A designated duty
free enclave to be treated as foreign territory only for trade operations and
duties and tariffs.
Ø
No licence required
for import.
Ø
Manufacturing or
service activities allowed.
Ø
SEZ units to be
positive net foreign exchange earner within three years.
Ø
Domestic sales
subject to full customs duty and import policy in force.
Ø
Full freedom for
subcontracting.
Ø
No routine examination
by customs authorities of export/import cargo.
In order to impart
stability to SEZ regime and to achieve generation of greater economic activity
and employment through the establishment of SEZs, a Special Economic zone Act
has been enacted. The SEZ Act, 2005, supported
by SEZ Rules, have come into effect on 10th February,
2006. Incentives and facilities offered to units in SEZs under the Act, for
promotion of investment, 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 Central Sales Tax, exemption from Service Tax and single window
clearance mechanism for establishment of units.
All the eight Export
Processing Zones (EPZs) located at Kandla and Surat (Gujarat), Santa Cruz (Maharashtra), Cochin (Kerala),
Chennai(Tamil nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida
(U.P.) have been converted into Special Economic Zones.
In
short span of about three years since SEZs Act and
rules were notified in February, 2006, formal approvals have been granted
for setting up of 577 SEZs out of which 325 have
been notified. Out of the total employment provided to 4.28 lakh persons in
SEZs as a whole, 2.93 lakh persons is incremental employment
generated after February, 2006 when the SEZ Act has come into force.
Atleast double this number
obtain indirect employment outside the SEZ as a result of the operations
of SEZ Units. This is in addition to the employment created
by the developer for infrastructure activities.
Physical exports from the SEZs have increased
from Rs.66,638 crore in 2007-08 to Rs.99,689 crore
in 2008-09, registering a growth of 50%. There
has been overall growth of export of 620% over past five years (2003-04).
These figures establish beyond doubt that the response to the SEZ policy
of the Central Government has been overwhelming and the scheme has been able
to achieve the envisaged objectives. An
investment of Rs. 1,16,879 crore has been made in SEZs
this includes Foreign Direct Investment of US$ 2.43 billion.
Exports from the functioning
SEZs during the last five years are as under:
|
Year
|
Value
(Rs.
Crore)
|
Growth
Rate
(over
previous Year)
|
|
2004-05
|
18,314
|
32%
|
|
2005-06
|
22,840
|
25%
|
|
2006-07
|
34,615
|
52%
|
|
2007-08
|
66,638
|
93%
|
|
2008-09
|
99,689
|
50%
|
A total of
98 SEZs are making exports. Out of this 60 are IT/ITES,
13 Multi product and 25 other sector specific SEZs.
The total number of units in these SEZs is 2279.
Impact of
the scheme
The overwhelming
response to the SEZ scheme is evident from the flow of investment and creation
of additional employment in the country. The SEZ scheme has generated tremendous response
amongst the investors, both in India and abroad, which is evident from the
following details of certain SEZs which have recently
come up:
Ø Nokia
Special Economic Zone in Tamil Nadu (Telecom
equipments SEZ).
Ø Mahindra City SEZ, Tamil Nadu (Apparels and fashion accessories; IT/Hardware; auto
ancillary).
Ø Apache
SEZ (Adidas Group) in Andhra Pradesh (Footwear SEZ).
Ø Mundra Port and Special
Economic Zone, Gujarat (Multi product SEZ).
Ø Moser
Baer SEZ, Noida, Uttar Pradesh (SEZ for
Non-conventional energy incl. solar energy equipment).
Ø Wipro Limited, Andhra
Pradesh (IT SEZ).
Ø Divi’s Laboratories
Limited, Andhra Pradesh (Pharma SEZ).
Ø Flextronics SEZ in Tamil Nadu (Electronic Hardware SEZ).
Ø ETL
Infrastructure IT SEZ, Tamil Nadu (IT SEZ).
Ø Wipro Limited, Karnataka -
2 SEZs in Sarjapur and
Electronic City (IT SEZ).
Ø Biocon Limited, Karnataka
(Biotech SEZ).
Ø Serum
Bio-Pharma Park, Maharashtra
(Pharma SEZ).
Ø Manyata Promoters Private
Limited, Karnataka (IT/ITES SEZ).
Ø Chandigarh Administration, Chandigarh (IT SEZ).
Ø Hyderabad
Gems Limited, Hyderabad (Gems and Jewellery SEZ).
Ø Maharashtra Airport Development
Corporation Limited, Maharashtra (Multi product SEZ).
Ø Reliance
Jamnagar Infrastrucure Ltd.
(Multi Product).
Ø Suzlon Infrastrucutre
Ltd. (Hi-tech Engineering Products & related services).
*
Joint Secretary, Ministry of Commerce & Industry
DNM/RTS/VN
SS-84/SF-84/12.08.2009
(Release ID :51797)