SEZ

(Special Economic Zone)

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. With a view to
overcome the shortcomings experienced on
account of the multiplicity of controls and
clearances; absence of world-class infrastructure,
and an unstable fiscal regime and with a view to
attract larger foreign investments in India, the
Special Economic Zones (SEZs) Policy was
announced in April 2000.

Special Economic Zone (SEZ) is mainly

introduced to attract the foreign
investment and technology. SEZ has its
own laws for trade and other business
apart from the country's law. SEZ covers
the following zones:
Free Trade Zone (FTZ)
Export Processing Zones (EPZ)
Free Zones (FZ)
Industrial parks
Free Ports
Urban Enterprise Zones

Importance of SEZ
Special Economic Zone (SEZ) is a scheme
to attract investment in a particular area.
Backward areas where business and
commerce can't reach are promoted to
do business in a particular area.
So that unused area of land can be used
fruitfully. Through such scheme,
government attracts industrialists to start
factory in such areas and they would be
give tax concession etc.

Regulators of SEZ
Particular area is termed as SEZ; this
is regulated by the Ministry of
Commerce and Industry. The Ministry
of Commerce and Industry takes
decisions with regards to SEZ.
Facilities are provided in SEZ by the
government to promote the business
and employment.

Objectives of SEZ

The SEZ Act, 2005, supported by SEZ Rules,

came into effect on 10th February, 2006,
providing for drastic simplification of procedures
and for single window clearance on matters
relating to central as well as state governments.
The main objectives of the SEZ Act are:
generation of additional economic activity
promotion of exports of goods and services;
promotion of investment from domestic and
foreign sources;
creation of employment opportunities;
development of infrastructure facilities;

Advantages of SEZs in India

Attracting Foreign Investment: Free trade
and foreign direct investment have been
powerful channels for transmission of
technology from the industrially developed
advanced countries to the developing nations.
The process has benefited both: the parent
companies spread for economic advantage
and the developing countries gain advantage
in the development ladder from resourcebase, low-tech production to high-tech value
added products and services.

 Providing Employment Opportunities:

One of the important objectives of SEZ is to
reduce unemployment by creating
employment opportunities in developing
countries. In order to increase the job
creation effect, SEZs are often establishment
in areas where a big number of workers are
idle, often backward areas. Empirically it is
also found that activities taking place in SEZs
are low-skilled often assembly work and other
basic manual work. SEZs in India play an
important role in providing employment
opportunities. SEZs in India provided direct
employment to over 6.44 lac persons.

 Promoting Exports : Generally

success of SEZ policy is judged by its
ability to enhance foreign investment
and promote exports. As it is stated
in the objectives that promotion of
export is an important criterion to
measure success of SEZ policy
particular SEZ Act came into effect,
SEZs in India showed tremendous
increase in exports.

 Developing Infrastructural Facilities: As

per the definition contained in the SEZ Rules,
2006, infrastructure means facilities needed
for development, operation and maintenance
of a Special Economic Zone and includes
industrial, business and social amenities like
of land, roads, buildings, sewerage and
influent treatment facilities, solid waste
management facilities, storage tanks and
interconnecting pipelines for liquids and
gases etc.

 Technology up gradations and

technology transfer :Most of economic
and social progress of the past few centuries
has been due to technology. Most
technological improvements in developing
countries to a large extent are dependent on
the diffusion of technology from advanced
countries. SEZs attract export oriented FDI
and promote other forms of collaboration
between local firms and MNCs.

Disadvantages or Issues on SEZ in India

Loss of Government Revenue :

The SEZ Act, 2005 offers various
fiscal and non-fiscal incentives and
facilities for attracting investment
(including foreign direct investment)
into the SEZs.

 Degeneration of agriculture and

associated livelihood issues : Currently,
the most widely discussed issue is the land
acquisition for SEZs mostly from farmer. It
has been argued that due to the
implementation of the SEZ policy in different
parts of the country, a large amount of
agricultural land will be put to use for
industrial purpose and that will have severe
implications on the livelihood of farmers and
food securities.

 Uneven Regional Development :One of

the important objectives of planning of India
is to secure a balanced growth of the
different regions of the country and thereby
reduce regional disparities in development. It
is essential for the success of democratic
planning that the benefits of economic
development should reach all the regions of
the country and no area or segment should
feel neglected or else people of such
neglected areas would remain indifferent and
apathetic to the various development
schemes of the government.

 Unethical practices: Many traders

are interested in SEZ, so that they
can acquire at cheap rates and
create a land bank for themselves.

 Discrimination against existing

industries: There is a criticism that
due to fiscal incentives enjoyed by
units in as SEZ, they will be relatively
outside SEZs and as a result of this
there may be a tendency to establish
industrial units only in SEZs, which
can aggravate uneven economic
development of the country.