Free trade zones / Special Economic Zones in India

FTZ / SEZ: - A Special Economic Zone (SEZ) is a geographical region that has more liberal economic laws than the ones generally followed in the rest of the country. The category 'SEZ' covers a broad range of more specific zone types: Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others.A FTZ (Free Trade Zone) is a particular area of a country where normal trade barriers & requirements like taxes, tariffs, and quotas are either eliminated or reduced, to attract businesses & investment. FTZs are usually characterised by labour intensive manufacturing set-ups that involve a high level of imports & exports. These kinds of zones are mostly prevalent in developing nations, and further in under-developed regions of that nation. In India, FTZs are seen as those areas where goods maybe landed, handled, manufactured or reconfigured, & re-exported without much intervention from customs authorities. Only when the goods are moved to consumers in the rest of the country, do they become subject to the prevailing customs duties.With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger FDI in India, 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, attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations.FTZs / SEZs: IndiaIn India, the setting up of SEZs can be done by the public, private, joint sector or by State Governments. Some of the existing Export Processing Zones (EPZs) have also been converted into Special Economic Zones:

1. SEEPZ Special Economic Zone2. Kandla Special Economic Zone3. Cochin Special Economic Zone4. Madras Special Economic Zone5. Visakhapatnam Special Economic Zone6. Falta Special Economic Zone7. Noida Export Processing Zone 8. Surat Special Economic Zone 9. Manikanchan Salt Lake Special Economic Zone 10. Indore Special Economic Zone 11. Jaipur Special Economic Zone 12. Mahindra City- Special Economic Zone, Chennai

13. Salt Lake Electronic City- Special Economic Zone, Kolkata 14. Moradabad Special Economic Zone15. Jodhpur Special Economic Zone 16. Surat Apparel Special Economic Zone, Surat 17. Nokia SEZ, Tamil Nadu

Besides this, 531 have been formally approved, out of which 260 have been notified as of 30th September 2008.

Benefits of SEZ

Unit Developer / Co-developer

Development stageOperation stage(Capital goods, consumables, components & spares)

No customs duty No excise duty No sales tax No service tax No purchase tax No stamp duty & registration

fees No stamp duty on mortgages No electricity duty

No customs duty No excise duty No sales tax No service tax No purchase tax No stamp duty &

registration fees No stamp duty on mortgages No electricity duty

Profit stage Exemption from Income tax 100% for the first 5 years 50% for the next 5 years 50% of profits ploughed back

for the next 5 years No MAT

No income tax for 10 years No MAT No dividend distribution tax

Results of benefits: Reduced cost of infrastructure Reduced cost of utilities Reduced cost of raw materials Reduced cost of capital Reduced cost of manpower Operational ease Global competitiveness

Types of SEZ

SEZs are generally classified based on the following:1. Multi-product SEZ:

Here units may be set up for manufacture of goods / services falling in two or more different sectors, for trading and warehousing.

2. Sector specific SEZ:This zone would be exclusively for one or more products / services in a particular sector.

3. Port / Airport SEZ:This kind of SEZ exists in an existing port / airport.

4. Free Trading & Warehousing SEZ:This SEZ focuses on trading and warehousing. The objective of such a zone is to create trade related infrastructure to facilitate import & export and facilitate trade transactions in free currency. In a stand alone Free Trading and Warehousing Zone at least 50% of the area should be earmarked for developing processing area, free trading and warehousing for multi products.

ConclusionAs mentioned earlier, 531 SEZs have been formally approved of in India, out of which 260 have been notified. It is often reported that India is following the PRC (People’s Republic of China) model, where foreign trade was focused upon and SEZs were set up across the country. SEZs in India, especially due to the sudden surge in numbers, have faced their fair share of criticism, from farming communities, economists to well-known companies. Overall, the impact of export growth on the economic growth & development of the country is yet to be seen.