WHAT IS SEZ
A Particular Economic Zone, SEZ, is a particular country which is owned and managed by a private house, allowed for the intent of trade, responsibilities and duties to be a foreign district. SEZs will bask benefits such as nothing imposts responsibilities, income revenue enhancement, gross revenues revenue enhancement, service revenue enhancement.
Alternatively SEZ is a geographical country where economic Torahs that are more broad than a state ‘s normal economic Torahs. The class ‘SEZ ‘ covers a wide scope of more specific zone types, which includes Export Processing Zones ( EPZ ) , Free Trade Zones ( FTZ ) , Free Zones ( FZ ) , Industrial Estates ( IE ) , Urban Enterprise Zones, Free Ports and others.
The construct of SEZ was fundamentally modeled on the construct of Export Processing Zones ( EZP ) that came up about 50 old ages back. The thought of EZP was to do employers to import stuffs that they worked on and export them back without holding to pay responsibility.
SEZs have been implemented utilizing a assortment of institutional constructions across the universe runing from to the full public ( authorities operator, authorities developer, authorities regulator ) to ‘fully ‘ private ( private operator, private developer, public regulator ) . In many instances, public sector operators and developers act as quasi-government bureaus in that they have a pseudo-corporate institutional construction and have budgetary liberty. SEZs are frequently developed under a public-private partnership agreement, in which the populace sector provides some degree of support ( proviso of off-site substructure, equity investing, soft loans, bond issues, etc. ) to enable a private sector developer to obtain a sensible rate of return on the undertaking ( typically 10-20 % depending on hazard degrees ) .
Need FOR SEZ
To develop export oriented industries.
To pull planetary fabrication through foreign direct investing ( FDI ) .
To enable transportation of modern engineering and create inducements for substructure.
For the execution of broad market economic system.
To develop substructure installations along with the growing of SEZ units.
To supply occupation chances.
To increase the GDP of a state by opening up the economic system.
To make an international competitory environment for export production at low cost.
GLOBAL Scenario
China was one of the earliest states to implement SEZ. It created the first SEZ in the early 80 ‘s under the authorities of DENG XIAPING. This is the most popular SEZ in the universe. Today there are more than 3000 SEZ ‘s in the universe distributing across 120 states. They account for over 600 billion dollars in exports and bring forthing near to 50 million occupations all over the universe.
Following the Chinese illustrations, Particular Economic Zones have been established in several states, including Brazil, India, Iran, Jordan, Kazakhstan, Pakistan, the Philippines, Poland, Republic of Korea, Russia, Ukraine, United Arab Emirates, Cambodia, and North Korea.
SEZ ‘s AROUND THE WORLD
China
The most celebrated SEZ ‘s in China are Shenzhen, Xiamen, Shantou, Zhuhai and Hainan Province. Shenzhen was the first SEZ that was set up in the universe supplying assorted revenue enhancement benefits and privileges for the foreign companies who were willing to put in China. This thought was a immense success and Shenzhen ‘s economic system grew at 28 % per twelvemonth from the twelvemonth 1980 to 2004. Harmonizing to one of the studies Shenzhen exports accounted to $ 101.5 billion 13 % of China ‘s entire exports. It is China ‘s covering electronics maker and one of the richest metropoliss in the state.
Soviet union
Russia presently has 16 federal economic zones and several regional undertakings under its belt. Recently in March 2010 Russia ‘s SEZ ‘s hosted 207 investors from 18 different states. The investors included large MNC ‘s like Cisco, Yokohama, Rockwool and many others. The SEZ ‘s are wholly owned and managed by the Russian State. The good known SEZ ‘s are Dubna, Lipetsk and Altai Krai.
SOUTH KOREA
Located in the south east portion of South Korea Daegu-Gyeongbuk Free Economic Zone ( DGFEZ ) consists portion of Daegu a metropolis and parts of North Gyeongsang state. There are wholly 11 particular zones distributing across 39.54 square kilometres.
Philippines
The SEZ ‘s in Philippines are called ecozones which are aggregation of industries meant for the advancing economic development. These ecozones are maintained by Department of Trade and Industry. There are more than 200 SEZ ‘s in Philippines. The good known 1s are Clark Special Economic Zone ( 29,365 hectares ) and Zamboanga City Special Economic Zone.
Pakistan
China is assisting put up SEZ ‘s in Pakistan. China is assisting to develop Haier-Ruba economic zone on the outskirts of Lahore. There are other China- Pakistan economic zones which are unfastened merely to Chinese investors. There are programs to setup Nipponese economic zones where once more it is merely unfastened for Nipponese investors.
Malaysia
Malaysia ‘s first economic zone was launched in August 2009. It is East seashore Economis Region SEZ. This SEZ brings about a gross of 23 billion to the state ‘s GDP and helped in making close to 220000 occupations in the East seashore Economis Region SEZ.
Scenario OF SEZS IN INDIA
In order to increase exports and foreign investings in the state and better the substructure and occupation chances, the Government of India announced in April 2000 the debut of ‘Special Economic Zones ‘ scheme in India. The first Export Processing Zone was build in Kandla in 1965 to hike export from the state. That was the start of SEZ ‘s in India. However, it got the required drift merely after the debut of SEZ Act 2005.
To put up a particular economic zone in India, the SEZ act was announced in 2005 to specify the SEZ policies. It set in topographic point the processs and guidelines for acquisition of land and SEZ development following the proper SEZ Torahs. More amendments were made in SEZ Act 2006 and SEZ policy 2007. This policy allows puting up of SEZ in public sector or private sector or by joint sector or even by the province authoritiess. SEZ units of India are granted with revenue enhancement price reductions, financial inducements and lands at cheaper rates. The SEZ Board of Approval ( BoA ) has formulated a individual window SEZ blessing mechanism for the smooth operation of SEZs.
The SEZ norms and regulations are different in different parts of the universe. Incentives are provided to the concerns runing under SEZ ‘s in the signifier of:
- domestic procurance of goods for growing or responsibility free imports
- operation and care of SEZ units
- 100 % IT freedom for the first 5 old ages
- freedom from minimal alternate revenue enhancement
- freedom from cardinal gross revenues revenue enhancement
- 50 % during the following 5 old ages
At the start of 2009, 811 units are in operations in 8 functional SEZ ‘s in India, each holding mean country coverage of 200 estates. 8 to the full functional Export Processing Zones ( EPZs ) have been converted into SEZs. These SEZs nowadays in different parts of the state in either the private or public or joint sectors or by any State Government. However, bulk belongs to private sector and merely 9 SEZs are being developed under the authorities. But this procedure of planning and development is under inquiry, as the provinces in which the SEZs have been approved are confronting intense protests, from the farming community, impeaching the authorities of forcibly snaping fertile land from them, at to a great extent discounted monetary values as against the prevailing monetary values in the commercial existent estate industry. Besides some reputed companies like Bajaj and others have commented against this policy and have suggested utilizing waste and barren for puting up of SEZs.
TYPES OF SEZS IN SEEN IN INDIA ARE:
SEZ FOR FREE TRADING & A ; WAREHOUSING: Free trading and warehousing are particular classs SEZs with an aim of bettering trading and repositing. It aims to construct substructure for trade to help export and import of goods and services with autonomy to transport out trade traffics in free economic system. In these zones, minimal 50 % of the country is appropriated for developing processing parts ; free repositing and trading may be set up as portion of SEZ for multiple merchandise.
SEZ FOR MULTI-PRODUCT ZONES: Particular Economic Zone for multiple merchandise means a Particular Economic Zone where different units may be set up for fabrication and processingA two or more productsA in one sector or one merchandise under two or more sectors or for warehousing and trading or offering two or more services in one sector or offering services under two or more sectors.
SEZ FOR SECTOR SPECIFIC: Particular Economic Zone for peculiar sector implies Particular Economic Zone aimed merely for one or more services in a sector orA one or more merchandises in a sector.
SEZ IN A PORT OR AIRPORT: These zones are built up close ports or at airdromes.
State wise distribution of SEZs is given below: –
Some of the major Particular Economic Zones in India are as below –
SEZ
Location
Type
Size
Kandla Special Economic Zone
Kandla, Gujarat
Multi merchandise
1.17 sq.miles
SEEPZ Special Economic Zone
Mumbai, Maharashtra
Electronicss and Gems and Jewellery
0.15 sq.miles
Noida Special Economic Zone
Uttar Pradesh
Software and gems & A ; jewelry
0.48 sq.miles
MEPZ Special Economic Zone
Chennai, Tamil Nadu
Multi merchandise
0.41 sq.miles
Cochin Special Economic Zone
Cochin, Kerala
Multi merchandise
0.16 sq.miles
Falta Special Economic Zone
Falta, West Bengal
Multi merchandise
0.44 sq.miles
Visakhapatnam SEZ
Vishakhapatnam, Andhra Pradesh
Multi merchandise
0.56 sq.miles
Karnataka Biotechnology and Information Technology Services
Banglore, Karnataka
Information technology
43 hectares
Shree Renuka Sugars Limited
Burlatti in Belgaum territory
Sugarcane processing
100
Ittina Properties Private Limited
Banglore, Karnataka
Real estate and IT sector, covering electronics, hardware and package
15.732 hectares
Divyasree Infrastructure
Bellandur Amani Kane near Bangalore
Real Estate, IT/ITES
20.234 hectares
Chaitanaya Infrastructure Private
Banglore, Karnataka
Real estate, IT
20.24 hectares
Reliance Industries
Navi Mumbai, Mumbai
Multi merchandise
14000 hectares
Shipco Infrastructure Private Limited
Karnataka
Free Trade Ware Housing Zone
120 hectares
Hinduja Investments Private Limited
Doddamannugudde in Bangalore Rural territory
fabric and dress sector
100 hectares
Looking at the benefits of SEZs, cardinal Indian pudding stones are be aftering or have already ventured into the SEZ bandwagon. Some of the large names are Mahindra & A ; Mahindra coming up with the Mahindra World City in Chennai and Reliance Industries binding up with Haryana Government and other developers like DLF and Unitech India Ltd. Other topographic points where SEZs are coming up are Gurgaon, Navi Mumbai, Nadigram, Manesar, Nagpur, Noida, Indore, Surat, Dehradun, Kochi, Kanpur, environing countries of Bangalore, Pune, Goa, Hyderabad and Jaipur.
THE SPECIAL ECONOMIC ZONES ACT, 2005
The SEZ Act is a Government Policy which was introduced to supply a globally attractive and competitory platform for Indian exports. The Act caters to the constitution, development and direction of particular economic zones within the state for publicity of exports.
Some of import dates-
- 1st April 2000- Policy was initiated
- May 2005-Passed by the Parliament
- 23rd June 2005- Issued by the ministry of Law and Justice
- tenth Feb 2006- Came into force
The SEZ Act 2005 is given in the signifier of seven chapters and three agendas as highlighted below.
PRELIMINARY-The act is called Particular Economic Zones Act, 2005 and extends to whole of India.
Constitution OF SEZ- Besides deals with fundamental law of different governments related to it. Appointment of developer, co-developer and presentment of country where unit can be located.
CONSTITUTION OF BOARD OF APPROVAL-The Board of Approval can suspend the missive of blessing of the developer and reassign the rights to another Administrator for a period of upper limit 1 twelvemonth.
DEVELOPMENT COMMISSIONER-The Cardinal Government can besides name the Development Commissioner of SEZ ( one or more ) . He would oversee the performance/work of the Developer and the Unit of measurements in a SEZ.
SINGLE WINDOW CLEARANCE-The Government may make “ Approval Committee ” for SEZ for O.K.ing import and export of goods and services, monitor their use, O.K. modify or culls proposals for puting new units for fabrication or rendition services in SEZ, etc.
SPECIAL FISCAL PROVISIONS FOR SPECIAL ECONOMIC ZONES -Goods and services exported out or imported into the state are capable to freedoms, drawbacks and grants from imposts responsibility, excise, securities dealing revenue enhancement, gross revenues revenue enhancement, service revenue enhancement and income revenue enhancement.
Particular ECONOMIC ZONE AUTHORITY-The Government constitutes an Authority for each SEZ which would set about steps for the development, operation and direction of that SEZ.SEZ Authority Fund is established by them to back up the workings of the SEZ.
MISCELLANEOUS-There are regulations formulated by Cardinal Government sing puting up of International Economic Service Centre and Offshore Banking Unit in SEZs. Besides, there is individual enforcement bureau for some notified offenses and tribunals are designated by the province authoritiess for offenses and civil suits happening in SEZs.
SCHEDULES-In the 3 agendas there are accounts, footings and conditions and amendments refering to the Act are given.
SALIENT FEATURES OF SEZ ACT
It offers a comprehensive policy model to run into the demands of all the major stakeholders in a SEZ – the developer, operator, occupant endeavor, provider and occupants.
Earlier policies refering EPZ/SEZ came in horizon of Foreign Trade Policy and the inducements and revenue enhancement benefits were conveyed by the authorities time-to-time via handbills and presentments. This system did non give adequate assurance to the investors to perpetrate significant financess for puting up units in SEZ.
Besides, the Act provides expeditious and individual window clearance mechanism by the Board of Approval.
In financial footings, the Act offers a really attractive inducement bundle
Exemption from imposts responsibility, excise, securities dealing revenue enhancement, gross revenues revenue enhancement, service revenue enhancement and income revenue enhancement to both the developers and the units.
Tax freedoms for following 15 old ages ( current unit has 7 old ages ) , that is, 100 % revenue enhancement freedom for 5 old ages, 50 % for the following five old ages, and 50 % of the export net incomes for the following 5 old ages.
100 % income revenue enhancement is exempted for 10 old ages in a period of 15 old ages for developers of SEZ.
Following are the commissariats for infrastructure-
The constitution of free trade zones holding universe category trade-related substructure would promote import and export of goods and do India a planetary trading hub.
This would enable public private engagement in substructure development.
The “ SEZ authorization ” in each cardinal authorities SEZ would guarantee development of new substructure and better the bing one.
BENEFITS DERIVED FROM THE ACT
The Act has led to dramatic addition in Foreign Direct Investment ( FDI ) within the initial few old ages.
It has generated employment chances in the Zones to the melody of 50 % . It has possible to raise the employment scenario enormously in the coming old ages.
It is pulling batch of foreign every bit good as domestic investings.
Each SEZ that has been set up by the Cardinal Government provides superior administrative liberty.
It has appointed individual enforcement bureau and particular tribunals to guarantee fleet test and enquiry for notified offenses committed in Particular Economic Zones.
Since the Act came into consequence in February 2006, there has been dramatic addition in constitution of SEZs. There were about 212 blessings 21 provinces as on October 27, 2006. Until now, 34 SEZs from these petitions have been notified.
The chief advantages of developing SEZ units in India are:
- Promotes Industrialization
- Encourages economic growing
- Attracts both domestic and foreign investings.
- Creates employment chances in the state
- Endorses the export of goods and services
- Helps in puting up and running new concern through the simplified processs.
- Conformity processs and certifications are made simple and easy to adhere.
- Single window clearance by both State and Cardinal authorities in puting up a new SEZ or SEZ unit.
- Improves substructure installations
- Infusion of modern engineerings
- Some of the cardinal advantages of SEZ in India are as mentioned below:
Tax benefits for 15 years on export net income – for first 5 initial old ages 100 % , approximately 50 % for the following 5 year and for the balance 5 yrs revenue enhancement relaxation on the net incomes ploughed back for investings.
Exemption from custom responsibilities on all imports for the intent of development of undertaking like natural stuffs, capital goods, spares etc.
Exclusion from VAT /Central Excise responsibility on procurance of resources refering to the development of undertaking like capital goods, natural stuffs, consumables, spares etc.
Freedom for 100 % FDI to develop townships with instruction, resort areas, diversion etc. Besides there are no limitations on the foreign ownership for such developments.
Exemption from Central Gross saless Tax and State Gross saless Tax.
Exemption from Service Tax.
Exemption from other levies that are extended by the several State Governments.
Single window clearance by both State and Cardinal authorities in puting up a new SEZ or SEZ unit. Thus we can anticipate early blessings, clearances and difference declarations from the authorities.
Tie ups with figure of Public and Private Banks are made to offer fiscal aid for concern.
Proper drainage and sewerage system are provided.
Easy handiness to airport and railway Stationss to run the concern swimmingly.
Complete authorization to supply and keep services like H2O, electricity, security, eating houses and recreational Centres etc within the zone on strictly commercial footing
Coevals of power, its transmittal and distribution within SEZs is allowed.
Investings made in SEZ units are besides eligible for Tax freedom under Section 88 of Income- revenue enhancement Act, 1961.
Allows losingss to be carry forwarded.
No licence is required for import
The full export value of theA goods can beA realised and sentA back to India until a 12 month period from the export day of the month.
The SEZ ‘s are allowed to write-down or predate their unfulfilled export measures upto 5 % of their one-year mean realisation.
THE SEZ AND EXPORT PROMOTION:
During the period of 2000, the public presentation of Particular Economic Zones hapless due to the hapless export policy of India, with included immense revenue enhancements and responsibilities. The Government of India so decided to ease the export policies of the state to ease the easy growing of SEZ and to advance export of Indian goods across International finishs. This healthy environment to export created a new export oriented units ( EOU ) within the designated Particular Economic Zones. Further these EOUs are designed in such a manner that they focus specially on the growing of the Indian exports.
DISADVANTAGES OF SEZ
REGIONAL DISPARITY IN DEVELOPMENT:
More than two-third of the SEZs are located in five provinces merely, viz. Karnataka, Andhra Pradesh, Maharashtra, Tamil Nadu and Gujarat. Of the entire investings for SEZs, approximately 90 per centum have been made in these provinces. Besides these provinces account for more than 85 per centum of the employment generated by SEZs. Of the entire exports by SEZs, Gujrat and Tamil Nadu accounted for more than 80 per centum.
SECTORAL Preference:
The development has been selective and limited to a few sectors merely. 70 per centum of the SEZs have been developed for IT/ITES services, approximately 6 per centum are into fabrics and 4 per centum are in Biotech. Particularly in the IT sector, there is no demand for SEZ as India has the technological border and a really big pool of first-class human resource. Thus the sector would hold anyhow performed good. Besides the fabrication sectors merely travel base to SEZs for the exclusive ground of get awaying revenue enhancements.
LOSS FOR THE NATIONAL EXCHEQUER:
The Indian SEZs were supposed to supply excellent, universe category, province of the art architecture. However in world, many SEZs have been created for suiting merely the developer. Such SEZs themselves enjoy revenue enhancement benefits but build substructure that meets their ain demand merely. Alternatively of pulling the targeted FDI, many bing units have parked themselves in these SEZs as it provides first-class concern conditions every bit good as immense revenue enhancement cuts.
Hapless GOVERNANCE:
Indian administrative officials messed up the complete thought of SEZ. While they right recognized the potency of puting up SEZ, which would move as platform for pulling FDI, they ignored to understand the construction of SEZ. Alternatively of revenue enhancement benefits being passed under close examination and purely controlled administrative processs ; the full control passed onto private custodies. Naturally the private participants wholly hijacked the SEZ construct and transformed it from being a prospective vehicle for promoting FDI, employment and grosss, into a manner of avoiding revenue enhancements for themselves.
Inadequate Compensation:
Fiscal minutess in existent estate have been rather cloudy. They are largely in hard currency, with official record demoing merely a portion of the minutess ; rest dealing is carried out below the radio detection and ranging. In such a instance, rating of land by the authorities for the interest of compensation is hard. In most of the instances, land is purchased from husbandmans at a much lower monetary value than the predominating market monetary value.
Besides the compensation handed out for re-establishment ; re-settlement etc. to the affected husbandmans has been paltry. Even the meagre compensation is unnecessarily delayed and jobbers, corrupt politicians and unscrupulous administrative officials get a cut from this sum.
Possibility of the affected husbandmans being provided employment in the same SEZ itself is besides limited as they do non possess the necessary accomplishments.
CHALLENGES FACED BY SEZ
LAND AQUISITION:
Agricultural lands have been siphoned off in order to put up SEZs for hiking industrial activity. As agricultural activities are non taxed in India and records are either non present or non maintained to maintain path of agricultural activities, it is really hard for the authorities to specify agricultural land and allow separate position for them.
Many a clip political clout, police force or musculus power is used to catch fertile lands from junior-grade husbandmans. The Nandigram SEZ in West Bengal is a authoritative illustration in this instance.
Clash WITH THE Government:
As per the revised bill of exchange of Direct Tax Code ( DTC ) , the income revenue enhancement benefits would non be extended, for units that would come up after the terminal of current fiscal twelvemonth. Thus SEZ developers, whose undertakings are afoot, would surely non acquire the revenue enhancement benefits. Therefore renting to concerns will non be easy. Besides many SEZ are non to the full occupied. These SEZ developers would wish to acquire their SEZs denotified. This sends a incorrect signal to foreign investors, who might no longer be interested to transport out concern when their benefits are taken off.
FUTURE OF SEZs
A Comparison of Benefits between SEZ and Industrial Parks / EOU / STPI
Looking at the above comparing it is clearly apparent that the SEZ has a great advantage in footings of financial benefits, administrative protocols and physical substructure. However, analysis of the hereafter construction for SEZs indicates that a really high competitory environment where client will hold many options of seting up units and the SEZ developers will confront jobs of land acquisition hurdlings and pricing force per unit areas.
TATA STRATEGIC GROUP GUIDELINES FOR SEZ
Tata Strategic Management Group is a prima direction consulting house in South Asia. They have come up with the a strategic theoretical account which will assist SEZs in future.
