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Special Economic Zones Engines of Growth Sanjeet Singh, Director (SEZ) Dept of Commerce, Govt. of India 1.

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Presentation on theme: "Special Economic Zones Engines of Growth Sanjeet Singh, Director (SEZ) Dept of Commerce, Govt. of India 1."— Presentation transcript:

1 Special Economic Zones Engines of Growth Sanjeet Singh, Director (SEZ) Dept of Commerce, Govt. of India 1

2 Rationale for Special Economic Zones in India To overcome the hurdles to export oriented investment on account of: multiplicity of controls absence of world-class infrastructure, and an unstable fiscal regime ….was not possible to achieve immediately on a country wide basis. 2

3 Evolution of SEZs Evolved 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,

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 4

5 Simplified procedures for setting up SEZsSimplified procedures for setting up SEZs Single window clearanceSingle window clearance A designated duty free enclaveA designated duty free enclave Simplified compliance proceduresSimplified compliance procedures 5 The SEZ Policy Enhanced investment inflowEnhanced investment inflow Enhanced export infrastructure and productive capacityEnhanced export infrastructure and productive capacity Generation of additional economic activityGeneration of additional economic activity Creation of employment opportunities.Creation of employment opportunities.

6 Fiscal Incentives Regime Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units External 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 6

7 SEZ Administrative Structure Department of Commerce, Govt of India The Board of Approvals Apex: Govt of India SEZ Development Commissioner Unit Approval Committee Operational Level: SEZ State Governments Department of Revenue (CBEC, CBDT, DGEP) Ministry of Environment, etc Other Key Departments 7

8 SEZs at a Glance (As on ) Number of Formal approvals586 Number of notified SEZs 385 (incl 7 Central Govt State/Pvt. SEZs) No. of In-Principle Approvals49 Operational SEZs 158 (17 are multi product SEZs) Units approved in SEZs3,482

9 Exports from SEZs Years Exports ( Rs. Crore) Growth Rate ,78752% ,63893% ,68950% ,20,712121% ,15, % ,64, % (April – June, 2012) 1,18,32264%

10 Major Sector-wise Exports from SEZs ( to ) Financial Years Computer/ Electronic software Gems and Jewellery Chemicals and Petroleum Refinery Other Mfg sectors Total Exports ,0691,10616,93334, ,98523,0061,42338,22466, ,22833,4366,38643,63999, ,78443,82973,97257,1262,20, ,70047,8491,06,55876,7613,15, ,01774,6171,52,51656,3273,64,478 (export figures in crores)

11 Employment and Investment in SEZs (as on ) EMPLOYMENT (no. of persons) Incremental Employment (after Feb, 2006) Total Employment Total7,85,5399,20,243 INVESTMENT Incremental investment (after Feb, 2006) Total Investment TotalRs.2,09, cr.Rs.2,13, cr.

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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 Account There is no option other than promoting enhanced export and FDI growth. The SEZ program is a promising instrument for achieving both these objectives.

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15 Impact of SEZs 15 Direct and indirect employment C Changes in consumption pattern and social life Emergence of new economic activities, Human development facilities (such as for education, healthcare etc.) Studies commissioned by the Department of Commerce have indicated that SEZs have had a positive local area impact in terms of

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 31 st May 2012, only 389 have been notified, of which only 153 SEZs are exporting i.e. only % of the approved SEZs.

17 Distribution of SEZs in the Country

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19 State wise Approved, Notified and Operational SEZs (as in Aug, 2012) 19

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24 Some Success Stories in SEZs New generation SEZs which have made significant progress in terms of Exports, Employment and Investment generation: Nokia Special Economic Zone in Tamil Nadu (Telecom equipments SEZ) Apache SEZ Development India Private Ltd, Andhra Pradesh (Footwear 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 SEZs Changed 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 / Act Slow pace of development of infrastructure within the SEZs and external support infrastructure Non 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 1.Minimum Land Area Required For SEZ 2.The Issue of Broad-banding – Revision definition of Sector: 3. Contiguity Norms: 4.Vacancy Issues: 5.Non-Processing Area of SEZ 6.Free Trade and Warehousing Zone Issues

31 Major Areas of Reform 7. IT and ITES SEZs – Special Dispensation 8.Exit Policy for Developers and Units: 9.Advance Ruling: 10.Shifting / Relocation of Units in a SEZ : 11. Operational Issues to be addressed through amendments to the SEZ Rules: A.Towards more meaningful State Govt Recommendations (SGRs) B.Defining Consumables -allowing benefits under SEZ Policy: C.Benefits and exemptions under Rule 27 for sub-contractors of Units

32 sezindia.nic.in 32 Apache SEZ, Nellore Brandix SEZ, Vizag Nokia SEZ, Sriperumbudur Mahindra World City, Chennai Quarkcity, Mohali


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