SPECIAL ECONOMIC ZONE

PRESENTED BY:-NEERAJ KAKKAR

FMS-IRM JAIPUR,RAJASHAN

Objectives Of Presentation

• PART 1-To describe about SEZ, Its categories, its advantages and disadvantages in INDIA.

• PART 2-To describe the 2 controversies related to SEZ’s.

PART 1…

WHAT IS SPECIAL ECONOMIC ZONE

A Special Economic zone (SEZ) is a geographical region that is designed to export goods and provide employment. SEZs are exempt from federal laws regarding taxes, quotas, labour laws and other restrictive laws in order to make the goods manufactured in the SEZ at a globally competitive price.

Categories Of SEZ

FREE TRADE ZONE

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A free trade zone (FTZ) or export processing zone (EPZ), also called foreign-trade zone, formerly free port, is an area within which goods may be landed, handled, manufactured, and re-exported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Free-trade zones are organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade.

INDUSTRIAL PARKS

An industrial park (also known as industrial estate, trading estate) is an area zoned and planned for the purpose of industrial development. Industrial parks are usually located on the edges of, or outside the main residential area of a city, and normally provided with good transportation access, including road and rail.

URBAN ENTERPRISE ZONE

An Urban Enterprise Zone is an area in which policies to encourage economic growth and development are implemented. Urban Enterprise Zone policies generally offer :-1. Tax concession.2. Infrastructure incentives. 3. Reduced rules and regulations. to attract investments and private companies into the zones. Urban Enterprise Zones are common in the United Kingdom and the United States.

HISTORY OF SEZ IN INDIA1.From 1965 onwards, India experimented with the concept of such units in the form of Export Processing Zones.2.A revolution came in 2000, when mr. Murlisone Maran, then commerce minister, made a tour to China, Then he incorporated the SEZs into the Exim Policy of India. Five year later, SEZ Act 2005 was also introduced and in 2006 SEZ rules were formulated.

Rajasthan1. Mahindra World City(Jaipur) Ltd. Kalwara

Village, Jaipur, Rajasthan IT/ITES.2. Kisan Udyog khara, Bikaner.3. AIC Hindoun City.4. Kaladwas Industrial Estate (SEZ) Udaipur

Number Of SEZ’s IN INDIA

Currently, there are about 143 SEZs (as of June 2012) operating throughout INDIA and an additional 634 SEZs (as of June 2012) that have been formally/principally approved by the Government of India.

OBJECTIVES OF SEZ IN INDIA

1.Generation of additional economic activity.2.Promotion of exports of goods and services.3.Promotion of investment from domestic and foreign sources 4.Creation of employment.5.Development of infrastructure facilities.6.Single window clearance for setting up of a SEZ and an unit in

SEZ.7.Single window clearance on matters relating to central as well

as state governments.8.Easy and simplified compliance procedures and

documentations with stress on self certification

FACILITIES OF SEZ IN INDIA

A. 15 year corporate tax holiday on export profit – 100% for initial 5 years, 50% for the next 5 years and up to 50% for the balance 5 years equivalent to profits ploughed back for investment.

B. Allowed to carry forward losses.C. Duty free import  or domestic procurement of goods for setting up of the

SEZ units.D. Goods imported/procured locally are duty free and could be utilized over

the approval period of 5 years.E. Exemption from customs duty on import of capital goods, raw materials,

consumables, spares, etc.F. Exemption from payment of Service Tax.G. Setting up Off-shore Banking Units (OBU) allowed in SEZs.H. External Commercial Borrowings up to $ 500 million a year allowed without

any maturity restrictions.I. Enhanced limit of Rs. 2.40 crores per annum allowed for managerial

remuneration.J. No routine examination by Customs officials of export and import cargo.

DRAWBACKS OF SEZ

o Land grabbing at very low prices.o Loss of livelihood of the farmers whose land was acquired for

SEZo Revenue loses because of the various tax exemptions and

incentives.o Many traders are interested in SEZ, so that they can acquire

at cheap rates and create a land mark for themselves.o Huge downward impact of tax:- GDP Ratio and the common

man have to pay the price of it.o The SEZ’s if not properly located could lead to Supply Chain

Management problems as well.

PART 2…

SEZ ControversyIn spite of the strong objectives of the INDIAN Government The

SEZ policy is in following controversy.Generation of little new activity as there may be relocation of

industries to take advantage of tax concessions.Revenue loss due to tax exemption.Large-scale land acquisition by the developers, may lead to

displacement of farmers with meager compensation.Acquisition of prime agricultural land, having serious

implications for food security.Uneven growth aggravating regional inequalities.

Jamnagar IncidenceA. Held in In November 2006, GujaratB. Farmers from the Jamnagar District moved to supreme court to challenge

the setting-up of a 10,000-acre (approx. 4,000-ha) SEZ by Reliance Infrastructure.

They claimed :-1. Acquisition of large tracts of agricultural land in the

villages of the district violated the Land Acquisition Act of 1894.

2. It was also in breach of the public interest.

Results:-a) Government putted a ceiling on the maximum land area that can be

acquired for multi-product zones .b) Decide to “go slow” in approving SEZs.

Nandigram Violence Nandigram is a rural area in Purba Medinipur district of the Indian state of West

Bengal. It is located about 70 km south-west of Kolkata, opposite the industrial city of Haldia. 

Nandigram Violence was held in 2007. West Bengal government decided to allow Salim Group to set up a chemical hub

at Nandigram under the SEZ policy. The main objective was to expropriate 10,000 acres of land for a Special Economic

Zone (SEZ) to be developed by the Indonesian-based Salim Group. The villagers took control of the area and all the roads to the villages were cut off. The police shootings at least 14 villagers died and 70 more wounded. The chief minister Buddhadeb Bhattacharjee ordered the Nandigram land

acquisition notification to cover up the matter. NO steps was taken to ensure that all persons are getting essential levels of food,

shelter, water and sanitation, health care and education, as well as their right to voluntary return or resettlement.

RESULTS:-Chief minister Buddhadeb Bhattacharjee shifted the plant to Nayachar, 30 kilometres from Haldia, to set up the chemical hub.

SUGGESTIONS…

How SEZ’s should be modelled to Benefit INDIA

Size Does Matter:- It hardly needs reiteration that only a large sized zone can generate economic activity on some reasonable scale.

TAX Benefits:- The incentive package in India is quite liberal and may even be a shade better than today.

Labor Laws:- Flexible labor policy is the need of hour in the SEZ’s.

Domestic Tariff Areas:-Apart of cheaper and competitive products the domestic market itself provides immense opportunity for sale of products.

Conclusion…The SEZ’s could drastically improve the economic activity in the

countryMake the country’s export competitive and globally noticeable,

be net foreign exchange earner and provide immense employment opportunity.

ButThis should not be done at the cost of bringing down the

agricultural activities, Land grabbing and real estate mafia should be properly regulated so that the common man is not the

net sufferer to get the net foreign exchange earner up and running.