SEZ SECNARIO IN INDIA

JANUARY 2007

A report by IndiQuest Research Services

© All Right Reserved, 2007
Executive Summary:

Special Economic Zones (SEZs) have been established in many countries as testing grounds for
the implementation of liberal market economy principles. SEZs are viewed as instruments to
enhance the acceptability and the credibility of the transformation policies, to attract domestic and
foreign investment and also for the opening up of the economy. SEZs in India seek to promote
the value addition component in exports, to generate employment as well as to mobilize foreign
exchange.

Globally, many countries have initiated the Free Trade Agreements which have eventually led to
a spurt in investments in the infrastructure of the Free Trade Zones (FTZs) and SEZs. A close
examination of the evolution of SEZs in countries with similar economies like India eg; China,
Iran, UAE and Jordan will help us to understand their success stories and further implement
those factors in order to curb the SEZ bottlenecks faced by India today. The Shenzhen SEZ in
China is a perfect example of a SEZ success story.

In India, the government has been proactive in the development of the SEZs. They have
formulated policies, reviewed them occasionally and have ensured that ample facilities are
provided to the developers of the SEZs as well as to the companies setting up units in the SEZs.
This eventually led to the biggest ever corporate rush for the development of SEZ. Over 234
companies have received formal approval, 162 companies have received in-principle approval
and 100 companies have received notification to set up the SEZs. The Indian government is
expecting an investment of Rs.53,561 crore and an additional job creation for 15,75,452
individuals in SEZs by December, 2009. Despite all the efforts, SEZ has become the most
controversial issue for India today. It is very important to understand the basic concept of SEZs,
the type of SEZs, the life cycle of an SEZ before initiating any policy or investments in the SEZs.
The diagram below is a snapshot of the different types of SEZs. Inspite of the fact that the SEZ
Act and the FDI Policies for SEZ are very lucrative, the rationale that the Indian SEZ policy will
spawn rapid economic and industrial growth,is being questioned.

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With the never ending list of trouble shooting problems in India, it becomes very important to
understand the business of SEZs in India. The report emphasizes on certain issues which further
clarify them. The report helps you to answer some questions like

• What is a SEZ?
• What is the approximate capital expenditure required for a SEZ?
• Big SEZ investments announced in India
• Turnover of existing SEZs in India over the past three years.
• Future government projections for SEZs
• Pros and Cons in the existing SEZ policy setup.
• Major Events and Debates in SEZs

The answers to the above, not only concerns those companies willing to leverage the SEZ
facilities but also the investors and its stakeholders. The study will help in the better
understanding of the SEZ concept, clarify the SEZ policies in India, the bottlenecks faced by India
and also stress on the steps the government must adopt to make SEZ a hassle free issue.

To order a copy of the full report, please contact indiquest.services@indiquest.co.uk

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 Table of Contents
1 Executive Summary
1.1 Introduction
2 Global Scenario
2.1 Overview
2.2 Creation of an SEZ
2.2.1 SEZs in the world – Middle East, Iran, UAE, Asia China
3 Indian Scenario
3.1 Overview & Initial Signs
3.2 SEZ Act 2005
3.3 Government Initiatives
3.4 Current Scenario
3.4.1 Procedures to set-up a SEZ
3.5 The existing Set up - Pros and Cons
3.6 Future Projections
3.7 Major Events in SEZ in 2006-07
4 Capital Expenditure on SEZ projects in India
4.1 Estimated Capital Expenditure for a SEZ
4.1.1 The following graph illustrates the capital expenditure incurred for the period 1998-2007
4.1.2 Top 10 SEZ Investments in India as of January 2007
4.1.3 State-wise distribution of SEZ investments as of January 2007
4.1.4 Sector-wise distribution of SEZ investments as of January 2007
4.1.5 New Investments in SEZs
5 Foreign Direct Investments and SEZs
5.1 Some Major FDI Policy Changes for SEZs announced in March 2007
5.1.1 SEZ package for the Marine Sector
5.1.2 SEZ package for the Gems & Jewellery Sector
5.1.3 Export Oriented Units (EOUs/EHTP/STP/BTP)
5.1.4 Deemed Exports
5.2 FDI Policies for SEZs
5.3 Export Promotion schemes for SEZs
5.4 Implications of these schemes
5.5 Evasion of Tax under schemes
5.6 Important sectors in the Indian Economy attracting foreign direct investment
5.7 Exports from SEZ
6 Appendix
6.1 Definition of SEZs
6.2 Life Cycle of a SEZ
6.2 Physical Structure of SEZ in India
6.3 Traits of a serious player in the SEZ business

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