PROJECT ON

SPECIAL ECONOMIC ZONE

HISTORICAL BACKGROUND

FAILURE OF EPZ
The absence of a policy Absence of implementation authority to centrally coordinate and control Procedural constrains Infrastructural deficiencies Limited concessions and limited powers of the zone authorities to take actions on the spot resulting in ordinate delays.

WHAT IS AN

SEZ ?

WHY SEZs ?
Boost exports Foreign exchange earnings Create jobs Up gradation of firms capabilities Entrepreneurial development Human skill development Technology transfers Industrial diversification

TYPES OF SEZ
Sector specific SEZ-units may be set up for
- Manufacture of one or more goods in a sector - Rendering of one or more services in a sector

Multi product SEZ-units may be set up for

- Manufacture of two more goods in a sector or goods falling in two or more sectors - Trading and warehousing - Rendering of two or more services in a sector or services falling in two or more sectors

Other SEZ
- SEZ in a port or airport - SEZ for free trade and warehousing

DISTINCTIVE FEATURES OF SEZs

No routine examination of export and import cargo by customs. SEZ units to be positive net foreign exchange earners in three years. SEZ units to maintain accounts in formats of their choice. Duty free goods to be utilized within the approval period of five years. No fixed wastage norms. External commercial borrowing through automatic route.

EXIM POLICY 2002-07

BENEFITS DERIVED FROM SEZs

A) Exports from the functioning SEZs during the last three years are as under :Value (Rs. In Crore) Year 2003-2004 2004-2005 2005-2006 2006-07 13,854 18,314 22 840 34,787 Growth Rate (over previous year ) 39% 32% 24.7 52.3%

Projected exports from all SEZs for 2007-08 :- Rs. 67088 crores

B) Investment And Employment In The SEZs Set Up Prior To The SEZ Act, 2005 C) Investment and employment in the SEZs notified under the SEZ Act 2005 :-

Current investment and employment :Investment :Rs. 52193 crores Employment :46814 persons Expected investment and employment (by December 2009) :Investment :Rs. 2,85,279 crores Employment :21,42,089 additional jobs

D) Expected investment and employment if 405 formal approvals becomes operational :-

Investment :Employment :-

Rs. 3,00,000 crores

4 million additional jobs

E) Environment
F) Foreign Direct Investment

G) Banking / Insurance/ External Commercial Borrowings

H) Tax benefits
Unit
Development stage (capital goods, consumable, component and spares)

Developer / co-developer

No custom duty No excise duty No sales tax No service tax No purchase tax No stamp duty and registration fees No stamp duty on mortgages No electricity duty As above

No custom duty No excises duty No sales tax No service tax No purchase tax No stamp duty and registration fees No stamp duty on mortgages No electricity duty As above

Operation stage (raw materials, consumables, components and spares)

Profit stage

Exemption from income tax 100% for the first five years, 50% for the next five years, 50% of profits ploughed back for the next five years No MAT

No income tax for ten years (80 IAB) No MAT (115 JB) No dividend distribution tax (115 O)

RESULTS OF BENEFITS

Reduced cost of infrastructure Reduced cost of utilities Reduced cost of raw material Reduced cost of capital Reduced cost of manpower Operational ease enabled

Baskets of benefits leading to global competitiveness

Land requirements for approved Special Economic Zones

Approval Mechanism And Administrative Set Up Of SEZs

Approval mechanism Administrative set up

INSTITUTIONAL FRAMEWORK ON SEZs

-Approval committee -Development Commissioner - Board of Approval - SEZ authority - Proper Officer - Co-Developer - Developer Township Authority

CURRENT POSITON OF SEZs

IMPACT OF THE SCHEME

Nokia SEZ in Tamil Nadu 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 Divvys Laboratories, Andhra Pradesh Rajiv Gandhi Technology Park, Chandigarh ETL Infrastructure IT SEZ, Chennai Hyderabad Gems Limited, Hyderabad

India v/s China - SEZ comparison and review

KPMG India, Tax Head, Sudhir Kapadia said, "They (Chinese SEZs) are close to ports and trade nations like Hong Kong, Macau and Taiwan. A lot of thought has gone into the location of these SEZs. "

COMPARISON OF SEZ POLICIES OF CHINA & INDIA

Issue Size China
Very big. Typically in hundreds of hectares. Well thought out and located only on coasts. To facilitate exports and imports easily. Relaxed in the SEZs. Experimentation of liberal policies in the specified areas while insulating them from the rest of the country. Basically foreigners who are wooed with sops and promise of stability in policy. In 1979.

India
Even 10 hectares will do. Anywhere. No restriction.

Location

Labour laws Policy regime

Flexibility is totally absent. Based on fiscal sops.

Investors

Basically locals. Not foreign investor driven; which should have been the case. In 1969, with the export processing zone concept. But failed to muster courage in giving these regions foreign territory status till the year 2000 when Murasoli Maran announced the SEZ policy. Any where and any number. So far 28 operational. About 200 received approvals. Longer and steeper than in China.

Commencement

Number

Only six: Shenzhen, Zhuhai, Shantou, Xiamen, Hainan and Pudong. Present.

Tax holidays

COMMENTS

SEZ are Special economic zone or land grab?

Loss of Revenue Rs 1Lac crores.

THANK YOU