“SEZ” is a geographical region that has economic laws that are more liberal than a country's

typical economic laws. An SEZ is a trade capacity development tool, with the goal to promote
rapid economic growth by using tax and business incentives to attract foreign investment and
technology. Today, there are approximately 3,000 SEZs operating in 120 countries, which
account for over US$ 600 billion in exports and about 50 million jobs. By offering privileged
terms, SEZs attract investment and foreign exchange, spur employment and boost the
development of improved technologies and infrastructure.

There are 13 functional SEZs and about 61 SEZs, which have been approved and are
under the process of establishment in India.

Most developing countries in the world have recognized the importance of facilitating
international trade for the sustained growth of the economy and increased contribution to the
GDP of the nation. As part of its continuing commitment to liberalization, the Government of
India has also, since the last decade, adopted a multi-pronged approach to promote foreign
investment in India. The Government of India has pushed ahead with second-generation reforms
and has made several policy changes to achieve this objective.

The SEZ policy was first introduced in India in April 2000, as a part of the Export-Import
(“EXIM”) policy of India. Considering the need to enhance foreign investment and promote
exports from the country and realizing the need that level playing field must be made available to
the domestic enterprises and manufacturers to be competitive globally, the Government of India
in April 2000 announced the introduction of Special Economic Zones policy in the country
deemed to be foreign territory for the purposes of trade operations, duties and tariffs. To provide
an internationally competitive and hassle free environment for exports, units were allowed be set
up in SEZ for manufacture of goods and rendering of services. All the import/export operations
of the SEZ units is on self-certification basis. The units in the Zone are required to be a net
foreign exchange earner but they wouldl not be subjected to any pre-determined value addition
or minimum export performance requirements. Sales in the Domestic Tariff Area by SEZ units is
subject to payment of full Custom Duty and as per import policy in force. Further Offshore
banking units are being allowed to be set up in the SEZs.

The policy provides for setting up of SEZ's in the public, private, joint sector or by State
Governments. It is also being envisaged that some of the existing Export Processing Zones
would be converted into Special Economic Zones.
Accordingly, the Government has converted Export Processing Zones located at Kandla and
Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West Bengal),
Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a
Special Economic Zones. In addition, 3 new Special Economic Zones were approved for
establishment at Indore (Madhya Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur and
have already commenced operations.

India is one of the first countries in Asia to recognize the effectiveness of the Export Processing
Zone (EPZ) model in promoting exports. Asia’s first EPZ was set up in Kandla in 1965. With a
view to create an environment for achieving rapid growth in exports, a Special Economic Zone
policy was announced in the Export and Import (EXIM) Policy 2000. Under this policy , one of
the main features is that the designated duty free enclave to be treated as foreign territory only
for trade operations and duties and tariffs. No licence required for import. The manufacturing,
trading or service activities are allowed.
To provide a stable economic environment for the promotion of Export-import of goods in a
quick, efficient and hassle-free manner, Government of India enacted the SEZ Act, which
received the assent of the President of India on June 23, 2005. The SEZ Act and the SEZ Rules,
2006 (“SEZ Rules”) were notified on February 10, 2006. The SEZ Act is expected to give a big
thrust to exports and consequently to the foreign direct investment (“FDI”) inflows into India,
and is considered to be one of the finest pieces of legislation that may well represent the future of
the industrial development strategy in India. The new law is aimed at encouraging public-private
partnership to develop world-class infrastructure and attract private investment (domestic and
foreign), boosting economic growth, exports and employment.

The Ministry of Commerce and Industry lays down the regulations that govern the setting up and
administering of the SEZs. The Central Government isfunctioning, while the State Governments
play a significant lead role in the development of SEZs in their respective States by stipulating
the conditions to be adhered to by an SEZ and granting the necessary approvals. The policy
framework for SEZs has been enacted in the SEZ Act and the supporting procedures are laid
down in SEZ Rules.

The Special Economic Zone Act 2005 came into force with effect from 10th February 2006, with
SEZs Rules legally vetted and approved for notification. The SEZs Rules, inter-alia, provide for
drastic simplification of procedures and for single window clearance on matters relating to
central as well as state governments. Investment of the order of Rs.100, 000 crores over the next
3 years with an employment potential of over 5 lakh is expected from the new SEZs apart from
indirect employment during the construction period of the SEZs. Heavy investments are
expected in sectors like IT, Pharma, Bio-technology, Textiles, Petro-chemicals, Auto-
components, etc. The SEZ Rules provides the simplification of procedures for development,
operation, and maintenance of the Special Economic Zones and for setting up and conducting
business in SEZs. This includes simplified compliance procedures and documentation with an
emphasis on self-certification; single window clearance for setting up of an SEZ, setting up a
unit in SEZs and clearance on matters relating to Central as well as State Governments; no
requirement for providing bank guarantees; contract manufacturing for foreign principals with
option to obtain sub-contracting permission at the initial approval stage; and Import-Export of all
items through personal baggage.

With a view to augmenting infrastructure facilities for export production it has been decided to
permit the setting up of Special Economic Zones (SEZs) in the public, private, joint sector or by
the State Governments. The minimum size of the Special Economic Zone shall not be less than
1000 hectares. Minimum area requirement shall, however, not be applicable to product specific
and port/airport based SEZ. This measure is expected to promote self-contained areas supported
by world-class infrastructure oriented towards export production. Any private/public/joint sector
or State Government or its agencies can set up Special Economic Zone (SEZ).

This paper explores the Indian policy framework for an SEZ, it further discusses the various
incentives available to an SEZ and an SEZ Unit, and the recent legal and regulatory
developments pertaining to SEZs in India.

ADMINISTRATIVE SET UP FOR SEZS:

SEZs is governed by a three tier administrative set up

a) The Board of Approval is the apex body in the Department,

b) The Unit Approval Committee at the Zonal level dealing with approval of units in the SEZs
and other related issues, and
c) Each Zone is headed by a Development Commissioner, who also heads the Unit Approval
Committee.Special economic zone is a particular area inside a state which acts as foreign
territory for tariff and trade operations. Govt. provides tax exemption (IT, Excise, customs, sales
etc.), subsidised water and electricity etc.

SEZ can be sector specific or multi product sez. It helps in the development of infrastructure of
the area around the SEZ, provides employment to ppl, makes the exports more viable. All this
will helps the country's products to become mor competitive vis-a-vis providing all round
development of region.

It should be noted that if 100 acres are alloted for SEZ, then only 30-35% of area is used for
setting up plants. rest of the area is used to provide housing facilities, malls, multiplexes etc.
Also Tax exemption is for specific period say for 10 yrs or so.

Although u hv not asked but think where the land for SEZ will come from as land is a finite
source. So, there are controversies regarding snatching of arable/cultivated land or buying land at
very discounted artes from farmers or poor ppl and then selling it to corporates at exorbitant
prices. There's much more to SEZ.

Grab today's copy of Economic times (if u r an Indian) and go to editorial page. there is
interesting discussion over this issue.

SEZ means Special Economic Zone is the one of the part of government’s policies in India. A
special Economic zone is a geographical region that economic laws which are more liberal than
the usual economic laws in the country. The basic motto behind this is to increase foreign
investment, development of infrastructure, job opportunities and increase the income level of the
people.

The SEZ was first established by the China for increase in investment and increase job
opportunities and technical knowledge and bring about certain tax reforms.

SEZ was introduced on 1/4/2000 in India with a view to provide an internationally competitive
and hassle free environment for exports and make the domestic enterprises and manufacturers
globally competitive. The units set up under SEZ can be for manufacturing or rendering service.
The policy provides setting up the SEZ in the public sect ndia was among the first countries to value
the merit of Export Processing Zone (EPZ).The first special economic zone in India was set up in Kandla in
1965.The government was keen to remove the hurdles to export in India which existed in the form of
multitude of controls and clearances, lack of international standard infrastructure and inefficient fiscal
regime. Keeping in mind foreign investors, the country announced the formation of Special Economic
Zones (SEZs) in April 2000.

The Special Economic Zone act 2005 was passed by the government to instill confidence among
investors about the government’s commitment in ensuring stability and progress of SEZ's. The highlights
of the SEZ Act are:

 Additional economic activity.

 Encourage exports of goods and services.
 Encourage investment from domestic and foreign sources.
 Generate employment opportunities
 Improve infrastructure facilities.

This in turn would lead to large scale investments from both foreign and domestic companies in SEZ's in
India. The SEZ Act 2005 signifies the importance of state governments in export promotion and in
creating the necessary infrastructure. Through a 19 member inter ministerial SEZ board a single window
SEZ approval mechanism has been formed to make decisions with regards to applications.

The SEZ rules suggest different minimum land requirement for different class of SEZ's. Each SEZ is
divided into a processing area where only SEZ's units can be set up and non processing area where
supporting infrastructure can be set up. The SEZ rules provide:

 Simple procedures for development, operation and maintenance of SEZ's.

 Single window clearance for setting a SEZ.
 Single window clearance for setting up a unit in SEZ and for clearance from Central and State
governments.
 Easier compliance procedures and documentation.

Incentives And Facilities Offered To The SEZ's

They are:

 Duty free import/domestic procurement of goods for development, operation and maintenance
of SEZ units.
 Income Tax exemption up to 100 per cent on any export from SEZ under Section 10AA of the
Income Tax Act for first five years, 50 per cent for next five years and 50 per cent of ploughed
back export profit for next five years.
 SEZ units were given permission to borrow externally up to US $ 500 million in a year without
any maturity restriction through authorized banks.
 Exempted from Central sales and service tax.
 Single window clearance.
Prominent Developers In SEZ's

Some of the prominent developers in SEZ's are

 Nokia SEZ in Tamil Nadu 

 Quark City SEZ in Chandigarh
 Flextronics SEZ in Tamil Nadu
 Mahindra World City in Tamil Nadu
 Motorola, DELL and Foxconn 
 Apache SEZ (Adidas Group) in Andhra Pradesh
 Divvy's Laboratories, Andhra Pradesh

or or private sector or by joint sector.

The main Advantages of SEZ Units in India can be summarized as promotion of industrialization and
economic growth through sustainable development. The main policy statement of the first Special
Economic Zone policy statement states that these SEZ units of India shall be offered tax rebates, fiscal
incentives and lands at subsidized rates and these are the primary Advantages of SEZ Units in India. The
implementation of the first drafted Special Economic Zone policy took place from the end of the year
2000.The first policy statement for the development of Special Economic Zones in India was drafted as a
five-year project, starting from 1.11.2000 to 09.02.2006. Further, the first policy statement of the Indian
Special Economic Zones were amended to accommodate and compliment the growth attained.

The main objectives of setting up of Special Economic Zones in India are as follows -

 Generation of additional economic activity

 Promotion of exports of goods and services
 Promotion of investment from domestic and foreign sources
 Creation of employment
 Development of infrastructure facilities
 Simplified procedures for development, operation, and maintenance of the Special Economic
Zones and for setting up units and conducting business
 Single window clearance for setting up of a SEZ and an unit in SEZ
 Single window clearance on matters relating to Central as well as State Governments
 Easy and simplified compliance procedures and documentations with stress on self certification

Some of the key Advantages of SEZ Units in India is mentioned as below -

 10-year tax holiday in a block of the first 20 years

 Exemption from duties on all imports for project development
 Exemption from excise / VAT on domestic sourcing of capital goods for project development
 No foreign ownership restrictions in developing zone infrastructure and no restrictions on
repatriation
 Freedom to develop township in to the SEZ with residential areas, markets, play grounds, clubs
and recreation centers without any restrictions on foreign ownership
 Income tax holidays on business income
 Exemption from import duty, VAT and other Taxes
 10% FDI allowed through the automatic route for all manufacturing activities
 Procedural ease and efficiency for speedy approvals, clearances and customs procedures and
dispute resolution
 Simplification of procedures and self-certification in the labor acts
 Artificial harbor and handling bulk containers made operational through out the year
 Houses both domestic and international air terminals to facilitate transit, to and fro from major
domestic and international destinations
 Has host of Public and Private Bank chains to offer financial assistance for business houses
 A vibrant industrial city with abundant supply of skilled manpower, covering the entire spectrum
 of industrial and business expertise
 Well connected with network of public transport, local railways and cabs
 Pollution free environment with proper drainage and sewage system
 In-house Customs clearance facilities
 Easy access to airport and local Railway Station
 Full authority to provide services such as water, electricity, security, restaurants and recreational
facilities within the zone on purely commercial basis
 Abundant supply of technically skilled manpower
 Abundant supply of semi-skilled labor across all industry sectors

Some of the established important Special Economic Zones in India are given as below -

 Falta food processing unit, West Bengal

 Salt Lake Electronic City, West Bengal
 Manikanchan - Gems and jewelry, West Bengal
 Calcutta Leather Complex, West Bengal
 Karnataka Biotechnology and Information Technology Services - SEZ on biotechnology sector in
Bangalore's Electronics City, over an area of 43 acres
 Shree Renuka Sugars Limited - SEZ on sugarcane processing complex covering 100 hectares,
comprising a sugar plant, power station and distillery, at Burlatti in Belgaum district
 Ittina Properties Private Limited and three other - SEZs in IT sector, covering electronics,
hardware and software sectors in
 Bangalore, over an area of 15.732 hectares
 Divyasree Infrastructure - SEZ in the IT/ITES sector over an area of 20.234 hectares in
Bellandur Amani Kane near Bangalore
 Chaitanaya Infrastructure Private Limited - SEZ in the IT/ITES sector in Bangalore over an area
of 20.24 hectares
 Bagmane Developers Private Limited - SEZ in the IT/ITES sector in Raman Nagar in Bangalore
North over an area of 15.5 hectares
 Shipco Infrastructure Private Limited - Free Trade Ware Housing Zone in Karnataka over an area
of 120 hectares
 Hinduja Investments Private Limited - SEZ in the textile and apparel sector at
Doddamannugudde in Bangalore Rural district, over an area of 100 hectares
 Wipro Infotech - SEZ on IT / ITES at Electronics City, Sarajpur Bangalore
 Hewlett Packard India Software Operation Pvt. Ltd. - SEZ on IT
 Food processing and related SEZ services in Hassan, over an area of 157.91 hectares.
 SEZs on pharmaceuticals, biotechnology and chemical sectors in Hassan, covering of 281.21
hectares.
 SEEPZ - Andheri (East), Mumbai
 Khopata - Multi-product, Mumbai
 Navi Mumbai - Multi-product, Mumbai

The key projections for the financial year 2007 - 2008 are as follows -

 Projected exports from all SEZs for 2007-08 is Rs.67300 crore

 Presently, 1016 units are in operation and providing direct employment to over 1.79 lakh people
of which around 40% are women
 Private investment by entrepreneurs before the SEZ Act was around Rs.4400 crore. In the 63
notified SEZs which have come up after 10th February 06, investment of Rs.13, 435 crore has
already been made in less than a year
 Have created direct employment for around 18, 457 people