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Special Economic Zones generate exports and employment
by
Anil Mukhim
India was one of the first in Asia to recognize the effectiveness of the
Export Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ
set up in Kandla in 1965. Seven more zones were set up thereafter. However,
the zones were not able to emerge as effective instruments for export
promotion on account of the multiplicity of controls and clearances, the
absence of world-class infrastructure, and an unstable fiscal regime. While
correcting the shortcomings of the EPZ model, some new features were
incorporated in the Special Economic Zones (SEZs) Policy announced in April
2000. This policy intended to make SEZs an engine for economic growth
supported by quality infrastructure complemented by an attractive fiscal
package, both at the Centre and the State level, with the minimum possible
regulations.
The salient features of the SEZ scheme are:-
A designated duty free
enclave to be treated as foreign territory only for trade operations and
duties and tariffs.
No licence required for
import.
Manufacturing or service
activities allowed.
SEZ units to be positive
net foreign exchange earner within three years.
Domestic sales subject
to full customs duty and import policy in force.
Full freedom for
subcontracting.
No routine examination
by customs authorities of export/import cargo.
In order to impart stability to SEZ regime and to achieve generation of
greater economic activity and employment through the establishment of SEZs, a
Special Economic zone Act has been enacted. The SEZ Act, 2005, supported by
SEZ Rules, have come into effect on 10th February, 2006. Incentives and
facilities offered to units in SEZs under the Act, for promotion of
investment, including foreign investment include: duty free import/domestic
procurement of goods for development, operation and maintenance of SEZ units,
100% Income Tax exemption on export income for SEZ units under Section 10AA of
the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50%
of the ploughed back export profit for next 5 years, exemption from Central
Sales Tax, exemption from Service Tax and single window clearance mechanism
for establishment of units.
All the eight Export Processing Zones (EPZs) located at Kandla and Surat
(Gujarat), Santa Cruz (Maharashtra), Cochin (Kerala), Chennai(Tamil nadu),
Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida (U.P.) have been
converted into Special Economic Zones.
In short span of about three years since SEZs Act and rules were notified in
February, 2006, formal approvals have been granted for setting up of 577 SEZs
out of which 325 have been notified. Out of the total employment provided to
4.28 lakh persons in SEZs as a whole, 2.93 lakh persons is incremental
employment generated after February, 2006 when the SEZ Act has come into
force. Atleast double this number obtain indirect employment outside the SEZ
as a result of the operations of SEZ Units. This is in addition to the
employment created by the developer for infrastructure activities. Physical
exports from the SEZs have increased from Rs.66,638 crore in 2007-08 to
Rs.99,689 crore in 2008-09, registering a growth of 50%. There has been
overall growth of export of 620% over past five years (2003-04). These figures
establish beyond doubt that the response to the SEZ policy of the Central
Government has been overwhelming and the scheme has been able to achieve the
envisaged objectives. An investment of Rs. 1,16,879 crore has been made in
SEZs this includes Foreign Direct Investment of US$ 2.43 billion.
Exports from the functioning SEZs during the last five years are as under:
|
Year |
Value
(Rs. Crore) |
Growth Rate
(over previous Year) |
|
2004-05 |
18,314 |
32% |
|
2005-06 |
22,840 |
25% |
|
2006-07 |
34,615 |
52% |
|
2007-08 |
66,638 |
93% |
|
2008-09 |
99,689 |
50% |
A total of 98 SEZs are making exports. Out of this 60 are IT/ITES, 13 Multi
product and 25 other sector specific SEZs. The total number of units in these
SEZs is 2279.
Impact of the scheme
The overwhelming response to the SEZ scheme is evident from the flow of
investment and creation of additional employment in the country. The SEZ
scheme has generated tremendous response amongst the investors, both in India
and abroad, which is evident from the following details of certain SEZs which
have recently come up:
Nokia Special Economic
Zone in Tamil Nadu (Telecom equipments SEZ).
Mahindra City SEZ, Tamil
Nadu (Apparels and fashion accessories; IT/Hardware; auto ancillary).
Apache SEZ (Adidas
Group) in Andhra Pradesh (Footwear SEZ).
Mundra Port and Special
Economic Zone, Gujarat (Multi product SEZ).
Moser Baer SEZ, Noida,
Uttar Pradesh (SEZ for Non-conventional energy incl. solar energy equipment).
Wipro Limited, Andhra
Pradesh (IT SEZ).
Divi’s Laboratories
Limited, Andhra Pradesh (Pharma SEZ).
Flextronics SEZ in Tamil
Nadu (Electronic Hardware SEZ).
ETL Infrastructure IT
SEZ, Tamil Nadu (IT SEZ).
Wipro Limited, Karnataka
- 2 SEZs in Sarjapur and Electronic City (IT SEZ).
Biocon Limited,
Karnataka (Biotech SEZ).
Serum Bio-Pharma Park,
Maharashtra (Pharma SEZ).
Manyata Promoters
Private Limited, Karnataka (IT/ITES SEZ).
Chandigarh
Administration, Chandigarh (IT SEZ).
Hyderabad Gems Limited,
Hyderabad (Gems and Jewellery SEZ).
Maharashtra Airport
Development Corporation Limited, Maharashtra (Multi product SEZ).
Reliance Jamnagar
Infrastrucure Ltd. (Multi Product).
Suzlon Infrastrucutre
Ltd. (Hi-tech Engineering Products & related services).
* Joint Secretary, Ministry of Commerce & Industry
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