Section 1 Industrial parks: concept evolution

Approach to industrial development has witnessed

paradigm shift over the past 50 years...
INDUSTRIAL ESTATES

1950-80s

Areas ranging from 10-20 HA

Governed by State Acts

PRODUCT CLUSTERS
SMEs operate out of product cluster
No defined cluster boundaries
Micro, Small, Medium Enterprises
Development Act

SPECIAL ECONOMIC ZONES

1990s
2005
onwards

Areas ranging from 10-5,000 ha

SEZ Act 2005
Multi product/ Sector-Specific SEZ/ Free
Trade Warehousing Zone
Net worth criteria for Developer

SIR/ NIMZ
Min. Area- 5,000 ha
VGF applicable
State and central Govt. would fund
trunk infrastructure
Single window clearance and easy exit
policy
Not export specific

INDUSTRIAL CORRIDORS

2011
onwards

2014
Industrial Parks in India - Overview JBIC
PwC

Mega industrial development:

DMIC length- 1,500 km, CBIC 260
km,
Multi-sectoral integration- Logistics,
Real Estate, Port/ Road/ Rail, urban
Infrastructure
Investment needs in the range of a
staggering USD 90 Bn
23 April 2014
2

Section 1 Industrial parks: concept evolution

... being strongly supported by suitable policy

interventions
Industrial
Policy
Resolution

Industrial
Policy

SEZ Act

In-principle
approval for
DMIC

1956

1991

2005

2007

Size of
development
prescribed
between 105000 HA
Fiscal and
non-fiscal
incentives
extended to
units in SEZ
Single
window
clearances

Integrated corridor
development approach
9 mega industrial
nodes each measuring
200-250 sq. km
(20,000 to 25,000 ha)
Mega infra-structure
project of USD 90
billion
Substantial private
sector investment
(70%) envisaged
Multi-sectoral
opportunities
Creation of brand new
cities

Socialistic
tendencies
Restricted
private
sector
participation
Government
Monopoly
over sectors

Abolished
Industrial
Licensing
Reduced
industries
reserved for
public sector
FDI under
automatic
route

Gujarat Special
Investment
Region Act

2009

Investment
region in lines
with world-class
economic hubs
50 to 100 sq.kms
(5,000-10,000
HA)
Effective
framework for
private sector
participation

National
Manufacturing
Policy (NMP)

2011

NMP 2011 sets

targets for
enhancing share
of manufacturing
GDP to 25% and
creation of 100
mn jobs by 2025
National
Investment and
Manufacturing
Zone (NIMZ)

* DMIC Delhi-Mumbai Industrial Corridor

Industrial Parks in India - Overview JBIC
PwC

23 April 2014
3

Section 1 Industrial parks: concept evolution

Industrial parks in India have been promoted both by

National and State level policies
Industrial Park /
Area / Estate
State level

National level

National Investment
and Manufacturing
zones (NIMZs)

Special Investment
Regions (SEZs)

Government
developed

Privately developed

State industrial
development corporations
are responsible for
development of industrial
estates/areas (GIDC, APIIC,
MIDC, etc.)

Number of successful parks in

India includes:
Mahindra World City,
Sricity, L&T, Infosys,
Mundra SEZ, Reliance,
Nokia SEZ

Very good locations

Low land prices/rentals
Availability of utilities
Last mile connectivity
provided by government

Only basic
infrastructure available
Ineffective admin
procedures

Industrial Parks in India - Overview JBIC

PwC

State-of-the-art
infrastructure
Fully ready plots/builtto-suit spaces
Tenant-friendly admin
procedures
High price of land
Developer to ensure
availability of utilities
and the last mile
connectivity
Location of the park
23 April 2014
4

Section 1 Industrial parks: concept evolution

National Manufacturing Plan was formulated to

accelerate development, inclusive growth and provision
of gainful employment
Industry verticals under NMP
Employment intensive industries

textiles, leather, gems & jewellery and food processing

Capital Goods

machine tool, heavy transport , earth moving and mining

equipments

Industries with strategic significance

aerospace, ship building and IT hardware

Industries where India enjoys a

competitive advantage

automobiles; pharmaceuticals

Public Sector Enterprises

defence, energy

Industrial Parks in India - Overview JBIC

PwC

23 April 2014
5

Section 1 Industrial parks: concept evolution

Specific policy instruments and industry verticals have

been conceptualized under NMP introduction of NIMZs
Policy instruments / industry verticals

Rationalization and simplification of business regulations;

Simple and expeditious exit mechanism for closure of sick units while protecting
labour interests;

Financial and institutional mechanisms for technology development, including green

technologies;

Industrial training and skill up gradation measures;

Incentives for SMEs;

Special Focus Sectors;

Leveraging infrastructure deficit and government procurement - including defence;

National Investment and Manufacturing Zones (NIMZs); Special

Investment Region Act (SIR)

Each of NIMZs will be of minimum 5,000 hectares (50 sq.km)

Trade Policy.

Industrial Parks in India - Overview JBIC

PwC

23 April 2014
6

Section 1 Industrial parks: concept evolution

SEZ act of 2005 created the wave for large scale

industrial export zones in India
SEZ Act was formulated when India after a decade and half of export processing zones, units and
other measures contributed a dismal share of less than 1% of world exports

SEZs can be sector-specific, multi-product, free trade warehousing zone, port/airport based SEZ
An SEZ can be implemented jointly or severally by central government, state
government, or private sector
The approval procedure is 3-staged: in-principle, formal and notified SEZ
Entities eligible to set up units in an SEZ can be a new unit, existing unit, off-shore banking
units
Key obligation is to achieve net positive foreign exchange earnings (NPFE)
Tax benefits include reduced costs of capital, infrastructure, raw material etc

Industrial Parks in India - Overview JBIC

PwC

23 April 2014
7

Section 1 Industrial parks: concept evolution

SEZ sector faced multiple challenges leading to

inordinate delays/ closures
Imposition of MAT and DDT impacting cost
Legitimacy of forceful land
acquisition on grounds of public
purpose.
Limited availability of contiguous
stretches of waste/ barren land
Non-standardized compensation,
R&R packages- varies based on
area, nature and political scene in
the region
Delayed government clearances

Regulatory
Issues

Land &
Environment

Improper project planning: Most SEZs in

India located inland, far from port/ rail
connectivity
Project Phasing/ Packaging & Marketing
Risk sharing with Government and
between developer- co-developer- SEZ unit
entrepreneurs
Project Financials: Huge-upfront capital
requirement, long gestation period, Tenure
restrictions, Revenue uncertainty
Industrial Parks in India - Overview JBIC
PwC

SEZ
challenges

Technical &
Financial
issues

arbitrage
Lack of clarity on DTC
Single-window clearance only on paper
RBI classification of SEZ exposure as Real
Estate,- implications on cost of borrowing
Universality of NFE across sectors, SEZ
regulation agnostic

Demand
Dynamics

Externalities

Sizeable no. of SEZs

(588 formally
approved)- over
optimistic demand
projections
Competitiveness and
positioning of exports
from India vis-a-vis
other countries

Economic slowdown
Project enablers: Political will/
stability/ social consent
Forex risk, Real estate etc
Forward and backward linkages

23 April 2014
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Section 1 Industrial parks: concept evolution

The government formulated a package of measures to

revive interest in SEZs
In 2013 the government announced the formulation of a package of measures to revive interest in
Special Economic Zones (SEZs) Scheme.

Type of SEZs

Existing

Revised

Multi product

1000 hectares

500 hectares

Sector specific (other

than IT/ITES SEZ)

100 hectares

50 hectares

Under the revival package, the GoI has

decided to reduce the minimum
land area requirement by 50% of the
existing requirement
Further
sectoral
broad-banding
introduced to encompass activities under
the same sector in order to set up
additional SEZs in sector specific SEZs
Exit policy for SEZ units has been
abolished - it has now been decided to
permit transfer of ownership of SEZ units
including sale thereof.

Reduction in minimum area requirements will significantly boost investments in

SEZs, particularly in the manufacturing sector
Industrial Parks in India - Overview JBIC
PwC

Source: PwC analysis

23 April 2014
10

Section 1 Industrial parks: concept evolution

Major differences between NIMZ and SEZ (1)

SEZ

NIMZ

PwC assessment

Minimum land area

50 to 500 hectares
depending upon the
sector (higher for multisector SEZs, lower for
niche)

5,000 hectares.
Processing area
may include one or
more SEZs.

NIMZ can be viewed as a

cluster of smaller industrial
areas such as SEZs, EoUs, etc.

Maximum area

5,000 hectares for multiproduct.

Not specified

NIMZ is not restrictive.

30%

A comparison of SEZ and

NIMZs on these parameters
reflects governments
willingness to ease the overall
burden on a private developer

Minimum processing
area

50%

Special Purpose Vehicle

mandatory

No

Responsibility for
Environmental Impact
Assessment (EIA)

Developer

Industrial Parks in India - Overview JBIC

PwC

Source: PwCs report NMP Point of View

Yes. CEO of the

SPV will be a senior
central or state
government
official.

Even though NIMZ will

involve private sector
participation, the government
intends to be in control of
overall management.

State Government
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Section 1 Industrial parks: concept evolution

Major differences between NIMZ and SEZ (2)

Cost of masterplanning
Applicability of
Viability Gap Funding
(VGF)

Tax incentives /
concession to SEZ visa-vis NIMZ

Interest subsidy for

working capital
requirement

SEZ

NIMZ

Not specified

Central Government

Not specified

Yes

Presently, supplies
to SEZ is exempt
from indirect taxes
subject to fulfilment
of export obligations
and other conditions

NMP proposes to provide

various tax exemptions /
concessions to unit
establishments in NIMZ.

Not specified

In government purchases
preference Subvention of
interest on working
capital by 4%.

Industrial Parks in India - Overview JBIC

PwC

Source: PwCs report NMP Point of View

PwC assessment

Fiscal incentives have been

provided to encourage players
to operate under a NIMZ.
Present applicable exemptions
to SEZs will not get affected if
they are put under NIMZ SEZ
is mainly for export oriented
units whereas NIMZ will
comprise of export oriented
units as well as domestic
suppliers. Thus, both SEZ and
NIMZ will attract capital
investment and it will help in
increasing employment
opportunities.

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Annexure 1: States where special acts/policies for SEZ

are in place
SEZ acts

Gujarat SEZ Act

Haryana SEZ Act
Madhya Pradesh SEZ Act
West Bengal SEZ Act
Tamil Nadu SEZ Act
Punjab SEZ Act

SEZ policies

Jaharkhand Special Economic Zone Policy

Uttar Pradesh SEZ Revised Policy 2007 Part - A
Uttar Pradesh SEZ Revised Policy 2007 Part - B
Karnataka State Policy for Special Economic Zones
2009
Operational guidelines for Karnataka State Policy 2009
Punjab Special Economic Zone Policy - 2005
Chandigarh Administration Special Economic Zone
Policy - 2005
Kerala Special Economic Zone Policy-2008
West Bengal Special Economic Zone Policy
Maharashtra Special Economic Zone Policy
Madhya Pradesh Special Economic Zone Policy

SEZ rules
Gujarat SEZ
Authority Rule