Presentation on theme: "Indo arab chamber of commerce"— Presentation transcript:
1 Indo arab chamber of commerce Special Economic Zones Engines of Growth Sanjeet Singh, Director (SEZ) Dept of Commerce, Govt. of India
2 Rationale for Special Economic Zones in India Indo arab chamber of commerceRationale for Special Economic Zones in IndiaTo overcome the hurdles to export oriented investment on account of:multiplicity of controlsabsence of world-class infrastructure, andan unstable fiscal regime….was not possible to achieve immediately on a country wide basis.
3 Indo arab chamber of commerce Evolution of SEZsEvolved from the Export Promotion Zones initiative of the 70’s Special Economic Zones (SEZs) Policy was announced in April Parliament passed the Special Economic Zones Act, 2005 which supported by SEZ Rules, came into effect on 10th February, 2006.
4 Key Objectives of SEZ Policy Generation of additional economic activityPromotion of exports of goods and services;Promotion of investment from domestic and foreign sources;Creation of employment opportunities;Development of infrastructure facilities
5 The SEZ Policy Simplified procedures for setting up SEZs Single window clearanceA designated duty free enclaveSimplified compliance proceduresEnhanced investment inflowEnhanced export infrastructure and productive capacityGeneration of additional economic activityCreation of employment opportunities.
6 Fiscal Incentives Regime Indo arab chamber of commerceFiscal Incentives RegimeDuty free import/domestic procurement of goods for development, operation and maintenance of SEZ unitsExternal commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction, as per the guidelines of the Ministry of Finance.Exemption from Central and State levies (Sales Tax, Service Tax, some other levies).Single window clearance for Central and State level approvals.Income Tax exemption on income of SEZ Developers and Units has been severely curtailed through imposition of measures like MAT and DDT etc.Net foreign exchange earnings by Units within five years;Domestic sales subject to full customs duty
7 SEZ Administrative Structure Indo arab chamber of commerceSEZ Administrative StructureDepartment of Commerce, Govt of IndiaThe Board of ApprovalsApex: Govt of IndiaSEZ Development CommissionerUnit Approval CommitteeOperational Level: SEZState GovernmentsDepartment of Revenue (CBEC, CBDT, DGEP)Ministry of Environment, etcOther KeyDepartments
8 SEZs at a Glance (As on 25.10.2012) Number of Formal approvals 586 Number of notified SEZs385(incl 7 Central Govt State/Pvt. SEZs)No. of In-Principle Approvals49Operational SEZs158(17 are multi product SEZs)Units approved in SEZs3,482
9 Indo arab chamber of commerce Exports from SEZsYearsExports( Rs. Crore)Growth Rate34,78752%66,63893%99,68950%2,20,712121%3,15,86843.1%3,64,47815.4%(April – June, 2012)1,18,32264%
10 Major Sector-wise Exports from SEZs (2006-07 to 2011-12) Financial YearsComputer/ Electronic softwareGems and JewelleryChemicals and Petroleum RefineryOther Mfg sectorsTotal Exports50716,0691,10616,93334,6153,98523,0061,42338,22466,63816,22833,4366,38643,63999,68945,78443,82973,97257,1262,20,71184,70047,8491,06,55876,7613,15,86881,01774,6171,52,51656,3273,64,478(export figures in crores)
11 Employment and Investment in SEZs (as on 30.6.2012) (no. of persons)Incremental Employment(after Feb, 2006)Total EmploymentTotal7,85,5399,20,243INVESTMENTIncremental investment(after Feb, 2006)Total InvestmentTotalRs.2,09, cr.Rs.2,13, cr.
13 The Imperative for Enhanced Exports and FDI Growth India’s Balance of Trade is in deficit, which is a fairly high proportion of GDP.While exports have growth over the past decade, imports have also risen sharply, resulting in a growing adverse balance of trade position.This gap is financed in part through net services income and net remittances.The Current Account remains in deficit, the remaining gap is covered through net inflows on the Capital AccountThere is no option other than promoting enhanced export and FDI growth.The SEZ program is a promising instrument for achieving both these objectives.
15 Impact of SEZs Direct and indirect employment Studies commissioned by the Department of Commerce have indicated that SEZs have had a positive local area impact in terms ofDirect and indirect employmentCChanges in consumption pattern and social lifeEmergence of new economic activities,Human development facilities (such as for education, healthcare etc.)
16 Some Significant Trends in SEZ Sector Growth Geographical Concentration of SEZs: Six States, Andhra Pradesh, Kerala, Maharashtra, Gujarat, Karnataka and Tamil Nadu, account for a major proportion of SEZs and 92% of total exports from them.Urban centric growth of SEZs – Even within these six States, SEZs are largely concentrated around existing urban agglomerates, leaving the hinterland virtually untouched.Sectoral Dispersion of SEZs: There is a pre-dominance of IT SEZs in the sector, and multi sector SEZs are few and far between. Of the 153 operational SEZs, only 17 are multi product SEZs.Skewed Export Pattern: IT/ITES SEZs and Petroleum sector contribute to the roughly two-thirds of SEZ exports. Non-petroleum manufacturing contributes the balance minority share.Inadequate progress of Manufacturing activity: As reflected above, the SEZ sector has not fully addressed the concern of boosting the manufacturing sector in India.Limited number of Operational SEZs: While 589 SEZs have been formally approved as on 31st May 2012, only 389 have been notified, of which only 153 SEZs are exporting i.e. only % of the approved SEZs.
24 Some Success Stories in SEZs New generation SEZs which have made significant progress in terms of Exports, Employment and Investment generation:Apache SEZ Development India Private Ltd, Andhra Pradesh (Footwear SEZ)Nokia Special Economic Zone in Tamil Nadu (Telecom equipments SEZ)
25 Some Success Stories in SEZs Mahindra City SEZ, Tamil Nadu(Apparels and fashion accessories; IT / Hardware; auto ancillary)Sri City, Nellore/Chitoor,Multi Product SEZ
26 Some Success Stories in SEZs Brandix Apparel, SEZ, VizagSerum Bio Pharma Park, Pune
27 Some Success Stories in SEZs Reliance Jamnagar SEZ, RefineryQuark City, Mohali, Punjab
28 Challenges facing the SEZs Non availability of non-double cropped, contiguous and vacant land for SEZsChanged fiscal regime - imposition of MAT/ DDT; possible changes through DTC.Single Window Mechanism and coordination across departments at the Central and State Government level.Large number of States not having an SEZ Policy / ActSlow pace of development of infrastructure within the SEZs and external support infrastructureNon availability of incentives for SEZs under schemes such as FPS, FMS, DPEB, Duty Drawback, VKGUY etc.
29 SEZ Policy and Operational Framework Reform Initiative
30 Major Areas of Reform Minimum Land Area Required For SEZ The Issue of Broad-banding – Revision definition of Sector: Contiguity Norms:Vacancy Issues:Non-Processing Area of SEZFree Trade and Warehousing Zone Issues
31 Major Areas of Reform IT and ITES SEZs – Special Dispensation Exit Policy for Developers and Units:Advance Ruling:Shifting / Relocation of Units in a SEZ : Operational Issues to be addressed through amendments to the SEZ Rules:Towards more meaningful State Govt Recommendations (SGRs)Defining Consumables -allowing benefits under SEZ Policy:Benefits and exemptions under Rule 27 for sub-contractors of Units
32 Apache SEZ, Nellore Brandix SEZ, Vizag Nokia SEZ, Sriperumbudur sezindia.nic.inMahindra World City, Chennai Quarkcity, Mohali