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The success of Software Technology Parks (STPs) in the 1990s encouraged Government
of India to announce the scheme of Special Economic Zones (SEZs) as a part of the
Export- Import Policy in March 2000, to be effective from April 2000 to achieve a three-fold
objective of increasing exports, accelerating the country's economic growth, and attracting
Foreign Direct Investment (FDI). This scheme was continued in the Foreign Trade Policy,
2004-2009, and aimed at providing a globally competitive, conducive, and free
atmosphere for exports, and attract domestic and foreign investments. The SEZ concept, as
distinguished from the earlier patterns of Export Processing Zones (EPZs) and 100%
Export-Oriented Units (EOUs), recognizes the issues related to economic development, and provides
for developing self-sustaining industrial townships along the major industrial belts, so as
to minimize pressure on the existing infrastructure of nearby settlements. This is true in
case of multi-product SEZs where the area acquired is large, and not in case of other
patterns, where the area is relatively small. The SEZs are duty-free insulated enclaves of
development, and are deemed to be non-domestic tariff areas for the purposes of trade operations,
and duties and tariffs. In the development of SEZs and their infrastructural facilities, 100%
FDI is allowed. Unlike EPZs, SEZs can now be developed by the public, private, joint sector
or by the state governments. The center acts as a facilitator by providing the framework
for establishing SEZs, monitoring the performance, and fulfilling the norms expected of
SEZs, to serve the national, state and local economy. The policy offers several fiscal and
regulatory incentives far beyond those covered in the earlier patterns, to developers of SEZs as well
as to manufacturing and service enterprises promoted within the zones, and for
the development of infrastructure.
Inspired by the overwhelming success of six SEZs of China, located along
the southeastern coastline in close proximity to the trading and financial centers of
Hong Kong, Macao and Taiwan, India formulated its SEZ policy from the year 2000
for accelerating exports. By early 2003, eight EPZs—seven of the central government, and
one in the private sector, were converted into SEZs, and new ones were approved
thereafter. The converted SEZs are located at Kandla and Surat (Gujarat) (Surat in the private
sector), Kochi (Kerala), Santa Cruz (Mumbai, Maharashtra), Falta (West Bengal), Chennai
(Tamil Nadu), Visakhapatnam (Andhra Pradesh), and Noida (Uttar Pradesh). In addition,
three new initially approved SEZs, which have gone into production, are located at
Indore (Madhya Pradesh), Manikanchan, Salt Lake (Kolkata, West Bengal), and Jaipur
(Rajasthan). The Special Economic Zone (SEZ) Act, 2005 along with SEZ Rules, 2006 became
operational from February 10, 2006. The number of approvals given by the Board of Approval of
the Union Department of Commerce of the Ministry of Commerce and Industry have
increased in leaps and bounds since then. The objectives of SEZs are generation of
additional economic activity, promotion of exports of goods and services, attracting investment
from domestic and foreign sources, developing world-class infrastructural facilities, and
creation of employment opportunities. Boost to industrial productivity, and adoption of
innovations, advanced technology, and modern management practices are part of the overall design
of SEZs. The change in the SEZ scheme as compared to EPZ/EOUs is that no export
obligation is mandated, though net foreign exchange earnings is a prerequisite. Thus, a SEZ unit
can cater solely to the domestic market after paying the customs duty applicable to the item
at the time of clearance. The other difference between the old schemes and SEZ
is the benefit of duty exemption available for construction of the zone by the developer. This may
not benefit the industrial units set up in SEZ much, but is arbitraged by the real estate owner. |
