Report on

SPECIAL
ECONOMIC
ZONE
Submitted By:Kuldeep Singh
Roll No: 03
MBA (GEN.)-A

CONTENTS
S. No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Page No.
Introduction
Brief History of Special Economic Zone
Revolution in Indias SEZs
Objectives of SEZ
SEZ Act 2005
Salient Features of the SEZ Act
SEZ Rules 2006
Incentives and facilities offered to the SEZs
Approval mechanism and Administrative set up of SEZs
Land requirements for approved Special Economic Zones
Benefits derived from SEZs

13.

Investment and employment in the SEZs

Exports from the functioning SEZs during the last Five

14.

years
Impact of the scheme

15.

SEZs Leading to the growth of labour intensive

manufacturing industry

16.

Special Economic Zones Controversy

17.

Introduction
Special Economic Zone, the new engines for export led economic growth in India, defined
as:
Specifically delineated duty-free enclave and shall be deemed to be foreign territory
for the purposes of trade operations and duties and tariffs
. . . . EXIM Policy 2000, Chapter 9 para 30
A Special Economic Zone in short SEZ, is a geographically bound zone where the economic
laws in matters related to export and import are more broadminded and liberal as
compared to rest parts of the country. SEZs are projected as duty free area for the purpose
of trade, operations, duty and tariffs. SEZ units are self-contained and integrated having
their own infrastructure and support services.
Within SEZs, a unit may be set-up for the manufacture of goods and other activities
including processing, assembling, trading, repairing, reconditioning.
As per law, SEZ units are deemed to be outside the customs territory of India. Goods and
services coming into SEZs from the domestic tariff area or DTA are treated as exports from
India and goods and services rendered from the SEZ to the DTA are treated as imports into
India.
Brief History of Special Economic Zones SEZ
The world first known instance of SEZ have been found in an industrial park set up in
Puerto Rico in 1947. In the 1960s, Ireland and Taiwan followed suit. One of the earliest and
the most famous Special Economic Zones were founded by the government of the People's
Republic of China under Deng Xiaoping in the early 1980s. The most successful Special
Economic Zone in China, Shenzhen, has developed from a small village into a city with a
3

population over 10 million within 20 years. Shenzhen SEZ, started in 1981, has achieved
38% GDP growth CAGR (highest recorded so far) mainly due to Liberal economic framework
and Integrated infrastructure at very competitive prices. China made the SEZs gain global
currency with its largest SEZ being the metropolis of Shenzhen.
From 1965 onwards, India experimented with the concept of such units in the form of
Export Processing Zones (EPZ). 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.
Revolution in Indias SEZs
But a revolution came in 2000, when Murlisone Maran, then Commerce Minister, made a
tour to the southern provinces of China. After returning from the visit, he incorporated the
SEZs into the Exim Policy of India. 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. 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. SEZs in India functioned from
1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal
incentives were made effective through the provisions of relevant statutes.
To instill confidence in investors and signal the Government's commitment to a stable
SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating
greater economic activity and employment through the establishment of SEZs, a
comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A
number of meetings were held in various parts of the country both by the Minister for
Commerce and Industry as well as senior officials for this purpose. The Special Economic
Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent
on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the
website of the Department of Commerce offering suggestions/comments. Around 800
suggestions were received on the draft rules. After extensive consultations, the SEZ Act,
4

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.

Objectives of SEZ
The first and the foremost objective behind the introduction of Special Economic Zones is
attracting foreign investors to the country. However, there are other objectives as well.
These are:
1. Attracting Foreign Direct Investment and promotion of exports of goods and services
2. Earning foreign exchange and contributing to the exchange rate stability
3. Increasing the export sector with more emphasis on non-traditional exports
4. Generation of employment opportunities and additional economic activity
5. Bringing in new technologies
6. Developing backward regions and development of infrastructure facilities
7. Nourishing the strategically important sectors to the economy, such as, IT, Electronics,
Tourism, R&D and Infrastructure and Human Resource Development
8. Strengthening and raising the standard of the network of local enterprises serving the
Zone.
Special Economic zones in India are based on Chinese Successes with SEZs and the United
States Foreign Trade Zones (FTZs) which are now finally set to take off after the
government has freed a lot of licensing restrictions and eased the tariffs and incentives
with the new SEZ Act, 2005.
India is looking to these SEZs to power its investment and growth and help boost
employment, manufacturing and services. The main objectives of these zones include;
5

development of the advanced technology sector, in particular information technology and

telecom networks, material engineering, health care, medical engineering, genetic
engineering, biotechnology and environmental protection.
Ensuring favorable economic, organizational and infrastructural conditions for domestic
and foreign investors employment of the scientific and research potential of local
universities by the transfer of the results of scientific research and advanced technologies
to the industrial sector as well as education and training of professional staff supporting
the development and restructuring of the existing companies by the delivery of innovative
technologies and organizational concepts.
It is expected that this will trigger a large flow of foreign and domestic investment in SEZs,
in infrastructure and productive capacity, leading to generation of additional economic
activity and creation of employment opportunities.
SEZ Act
The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and
creation of related infrastructure. A Single Window SEZ approval mechanism has been
provided through a 19 member inter-ministerial SEZ Board of Approval (BoA). The
applications duly recommended by the respective State Governments/UT Administration
are considered by this BoA periodically. All decisions of the Board of approvals are with
consensus.The SEZ Act 2005 is mainly divided into 7 different chapters and 3 schedules
The SEZ Act deals primarily with the following matters:
Establishment of the SEZ and the various authorities constituted in this connection.
Appointment of the Developer, Co-developers and approval for units to be located in the
notified area.
Exemptions, drawbacks and concessions including exemptions from customs duty (on goods
brought into or exported from the SEZ), excise, service tax, securities transaction tax,
sales tax and income tax.

Offshore Banking Unit & International Financial Services Centre. Setting up of offshore
banking units / International Financial Services Centre in SEZs.
Notified Offences & Civil Suits. A single enforcement agency/officer for certain notified
offences as well as the designation of courts by the state governments for such offences
committed in and for civil suits arising in SEZs.
Salient Features of the SEZ Act
Governance: An important feature of the Act is that it provides a comprehensive SEZ policy
framework to satisfy the requirements of all principal stakeholders in an SEZ the
developer and operator, occupant enterprise, out zone supplier and residents. Earlier, the
policy relating to the EPZs/ SEZs was contained in the Foreign Trade Policy while incentives
and other facilities offered to the SEZ developer and units were implemented through
various notifications and circulars issued by the concerned ministries/departments. This
system did not give confidence to investors to commit substantial funds for development of
infrastructure and for setting up units.
Another major feature of the Act is that it claims to provide expeditious and single window
clearance mechanisms. The responsibility for promoting and ensuring orderly development
of SEZs is assigned to the board of approval. It is to be constituted by the central
government. While the central government may suo motu set up a zone, proposals of the
state governments and private developers are to be screened and approved by the board.
At the zone level, approval committees are constituted to approve/reject/modify
proposals for setting up SEZ units.
In addition, the Development Commissioner (DC) and his/her office is responsible for
exercising administrative control over a zone. The labour commissioners powers are also
delegated to the DC. Finally, clause 23 requires that designated courts will be set up by the
state governments to try all suits of a civil nature and notified offences committed in the
SEZs. Affected parties may appeal to high courts against the orders of the designated
courts.

Infrastructure:
Provisions have been made for the establishment of free trade and warehousing zones to
create world class trade-related infrastructure to facilitate import and export of goods
aimed at making India a global trading hub.
The setting up of offshore banking units and units in an international financial service
centre in SEZs.
The public private participation in infrastructure development.
The setting up of a SEZ authority in each central government SEZ for developing new
infrastructure and strengthening the existing one.

SEZ Rules 2006

Consequent upon the SEZ Rules coming into effect w.e.f. 10th February, 2006, Twenty-eight
meetings of the Board of Approvals have since been held. During these meetings, formal
approval has been granted to 531 SEZ proposals. There are 143 valid in-principle approvals.
Out of the 531 formal approvals, 260 SEZs have been notified.
SEZ Rules 2006 are the rules which lay down the complete procedure which an individual is
required to follow if one intends to develop the SEZ or one intends to establish a unit in
SEZ. The benefits of various taxes available to a developer or a unit are also given in the
SEZ rule.
GSR 54 (E) In exercise of the powers conferred by section 55 of the Special Economic Zones
Act, 2005 (28 of 2005), the Central Government hereby makes the following rules, namely:8

The SEZ Rules provide for different minimum land requirement for different class of SEZs.
Every SEZ is divided into a processing area where alone the SEZ units would come up and
the non-processing area where the supporting infrastructure is to be created.

The SEZ Rules provide for:

1. Simplified procedures for development, operation, and maintenance of the Special
Economic Zones and for setting up units and conducting business in SEZs;
2. Single window clearance for setting up of an SEZ;
3. Single window clearance for setting up a unit in a Special Economic Zone;
4. Single Window clearance on matters relating to Central as well as State
Governments;
5. Simplified compliance procedures and documentation with an emphasis on self
certification;
6. Different minimum land requirement for different class of SEZs;
7. Every SEZ is divided into a processing area where alone the SEZ units would come up
and the non-processing area where the supporting infrastructure is to be created;
Based on consultations and suggestions received, certain amendments to the Rules were
notified on 10th August 2006. Subsequently, a list of authorized operations for which
exemptions would be available, for use by the Board of Approval while approving
authorized operations to be undertaken by SEZs, were also notified on 27th October 2006.
Incentives and facilities offered to the SEZs
The SEZ Act offers a highly attractive fiscal incentive package, which ensures Exemption
from custom duties, central excise duties, service tax, central sales taxes and securities
transaction tax to both the developers and the units.

The incentives and facilities offered to the units in SEZs and to SEZ Developers for
attracting investments into the SEZs, including foreign investment include:Customs and Excise

SEZ Units are free to import from the domestic sources without paying any duty on
capital goods, raw materials, consumables, spare, packing materials, office
equipment, DG sets, etc. for implementation of their project in the zone without
any license or specific approval. Good which are imported duty free could be
utilized over the approval period of 5 years.

Sales to DTA (Domestic Tariff Area) by SEZ units is always regarded as import and is
subject to all normal import duties, including Countervailing Duty, SAD, etc.

SEZ Units are free from the periodic examination by Customs of export and import
cargo.

SEZ units may sub-contract a part of their production through units in

DTA/SEZ/EOU/EPZ with the permission of the customs authorities. Sub-contracting
may also be permitted for processing abroad with the permission of the board of
approval.

Income Tax
Part-1 Income Tax incentives for SEZ units

Tax exemption for SEZ units engaged in manufacture or providing services- A new
section 10AA has been introduced in the IT Act by SEZ Act, 2005 which provides that
the units in SEZ which start manufacturing or producing articles/ things or which
start providing services on or after April 1, 2005 will be eligible for a deduction of
100 percent of export profits for the first five years from the year in which such
manufacture/ provision of services commences and 50 percent of the export profits
for the next five years. Further, for the next five years a deduction shall be allowed
of up to 50 percent of the profit as is debited to the profit and loss account and
credited to the Special Economic Zone Reinvestment Reserve Account (subject to
conditions).
Tax exemption for Offshore Banking units in SEZ- A deduction in respect of certain
incomes would be allowed under the new section 80LA, to scheduled banks or
foreign banks having an Offshore Banking unit in SEZ or to a unit of IFSC. The
deduction shall be for 100 percent of income for five consecutive years beginning
from the year in which permission/ registration has been obtained under the Banking
Regulation Act or the SEBI Act or any other relevant law and 50 percent of income
for next five years.
10

Interest received by non-residents and not ordinary residents on deposits made with
an Offshore Banking Unit on or after April 1, 2005 shall be exempt from tax.
Exemption from Minimum Alternate Tax ("MAT")- Income arising or accruing on or
after April 1, 2005 from any business carried on, or services rendered by SEZ unit
would be exempt from MAT under section 115JB.
Exemption from Capital Gains- Capital gains arising on transfer of assets (machinery,
plant, building, land or any rights in buildings or land) on shifting of the industrial
undertaking from an urban area to any SEZ would be exempt from capital gains tax.
The exemption would be allowable if within one year before or three years after
such transfer:
Machinery or plant is purchased for the purposes of business of industrial
undertaking in SEZ by the assessee.
Assessed has acquired land or building or has constructed building for the purposes
of business in SEZ.
The original assets are shifted and establishment of the industrial undertaking is
transferred to SEZ; and other specified expenses are incurred.
The amount of exemption for capital gains would be restricted to the costs and
expenses incurred in relation to all or any of the purposes mentioned above.

Part-2 Income Tax incentives for SEZ Developer

Tax holiday for SEZ developers- A new section 80-IAB has been introduced in the IT
Act vide SEZ Act, 2005 whereby a deduction of 100 percent of profits derived from
the business of developing SEZ (notified on or after April 1, 2005) would be available
to developer of SEZ for any 10 consecutive years out of 15 years beginning from the
year in which SEZ has been notified.
Exemption under section 10(23G) that was available to infrastructure capital fund or
a cooperative bank on interest and long term capital gains investment had been
extended to investment made by SEZ developers qualifying for tax holiday under
section 80-IAB of the IT Act. However, this exemption has been withdrawn with
effect from assessment year 2007-08.
Exemption from Dividend Distribution Tax ("DDT")- No DDT would be payable by a
developer of SEZ on dividend declared, distributed or paid on or after April 1, 2005
out of current income.
Exemption from MAT- Any income earned on or after April 1, 2005 by a SEZ developer
would be exempt from MAT under section 115JB of the Act.
from Domestic Tariff Area (DTA) to SEZ.

Foreign Direct Investments

100% FDI is freely allowed in manufacturing sector in SEZ units under automatic
route, except arms and ammunition, explosive, atomic substance, narcotics and
hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes,
cigars and manufactured tobacco substitutes.
No cap of foreign investments for SSI reserved items.
Off-Shore Banking Units (OBUs)
Setting up of OBUs allowed in SEZs.
11

OBUS are entitled for 100% income tax exemption for 3 years and 50% for next 2
years.

Banking / External Commercial Borrowings (ECBs)

ECBs by units up to US$ 500 million a year allowed without any maturity restrictions.
Freedom to bring in export proceeds without any time limit.
Flexibility to keep 100% of export proceeds in EEFC account and freedom to make
overseas payment from such account.
Exemption from interest rate surcharge on import finance.
SEZ units allowed to write-off unrealized export bills.
Exemption from interest rate surcharge on import finance.
Service Tax
Exemption from service tax to SEZ units.
Sales to DTA
DTA sales can be undertaken subject to achievement of positive NFE. Net Foreign Exchange
(NFE) shall be calculated cumulatively for a period of 5 years from the commencement of
commercial production.

For the purpose of calculation, the value of imported capital goods shall be
amortized as follows o 1st 2nd year: 5% each year.
o 3rd 5th year: 10% each year
o 6th 8th year: 20% each year
Exemption from capital gains on transfer of an industrial unit from urban area to a
SEZ.
Drawback or such other benefit as may be admissible from time to time on goods
and services admitted from the DTA for setting up, operation and maintenance of
units.
All exports from the DTA to the Zone shall be exempt from state and local body
taxes or levies as (In some states, exports made to educational institutions,
hospitals, hotels, residential and / or commercial complexes, leisure and
entertainment facilities or any other facilities as may be notified by the state
government are not exempt).
Developers of SEZs may import or procure goods from DTA without payment of duty
for development, operation or maintenance of SEZ.
Exemption from Central Sales Tax (CST) on supply of goods from the DTA for
development, operation and maintenance of SEZs.
Income tax exemption for a block of 10 years in the first 15 years of operation.
Drawback or such other benefits as may be admissible from time to time on supply
of goods from DTA for development, operation and maintenance of SEZs.
Investment income in the form of dividends, interest or long term capital gains, of
an infrastructure capital company from investments made in an enterprise engaged
in the development, operation or maintenance of a SEZ are exempt from tax.
Foreign investment permitted.
12

Service tax exemption on services provided to a developer or to a unit located in the

SEZ region.
Any activity or transaction in the Zone, which is liable for entertainment duty under
the Bombay Entertainments Duty Act, 1923 and Luxury Tax under the Maharashtra
Tax on Luxuries Act, 1987 shall not be liable to such tax The fiscal benefits shall be
applicable for a period of 25 years from the date of notification of the zone by the
Government of India or such extended period as may be decided by the State
Government
With respect to each Special Economic Zone all such transactions between the Zones
or within the Zone or both, including the transactions of land acquisition for
development of the Zone between the developer or co-developer and land owners
and land transactions between the developers or co-developers and the units,
carried out after declaration of the Zone by the Government of India, shall be
exempt from the following State taxes, cess and levies namely:
o
Purchase tax, Sales tax and Turnover tax
o Specified sales (Lease tax) in respect of lease of goods
o
Stamp duty for the first transaction between the Developer or co-developer
and the land-owner and the first transaction between the Developer or codeveloper and the Units
o
Registration fee for the first transaction between the Developer or codeveloper and the land-owner and the first transaction between the
Developer or co-developer and the Units
o Land assessment tax
o Electricity duty and tax (Only for sales to Units in processing area)
o Water pollution cess
o Works Contract tax
State government shall
o Provide exemption from electricity duty or taxes on sale of self generated or
purchased electric power for use in processing area of an SEZ.
o Allow generation, transmission, distribution of power within a SEZ subject to
the provisions of the electricity act

Exemptions in Matters Related to Environment

SEZs permitted to have non-polluting industries in IT and facilities like golf courses,
desalination plants, hotels and non-polluting service industries in the Coastal
Regulation Zone area.
SEZ units are exempted from public hearing under Environment Impact Assessment
Notification.
Company Act
Enhanced limit of INR 2.4 cores per annum is allowed for managerial remuneration.
Agreement to opening of Regional office of Registrar of Companies in SEZ.

Exemption from requirement of domicile in India for 12 months prior to

appointment as Director.
Drugs and Cosmetics
Exemption from port restriction under Drugs & Cosmetics Rules.
Sub-Contracting / Contract Farming.
13

SEZ units may sub-contract part of production or production process through units in
the Domestic Tariff Area or through other EOU / SEZ units.
SEZ units may also sub-contract part of their production process abroad.

Labor Laws
Normal Labor Laws are applicable to SEZs, which are enforced by the respective State
Governments. However, State Governments have been requested to simplify the procedures
/ returns and for introduction of a single window clearance mechanism by delegating
appropriate powers to Development Commissioners of SEZ.

Approval mechanism and Administrative setup of SEZs

Approval mechanism:
The developer submits the proposal for establishment of SEZ to the concerned State
Government. The State Government has to forward the proposal with its recommendation
within 45 days from the date of receipt of such proposal to the Board of Approval. The
applicant also has the option to submit the proposal directly to the Board of Approval.
The Board of Approval has been constituted by the Central Government in exercise
of the powers conferred under the SEZ Act. All the decisions are taken in the Board of
Approval by consensus. The Board of Approval has 19 Members. Its constitution is as
follows:

(1)

Secretary, Department of Commerce

Chairman

(2)

Member, CBEC

Member

(3)

Member, IT, CBDT

Member

(4)

Joint Secretary (Banking Division), Department

of Economic Affairs, Ministry of Finance
14

(5)

Joint Secretary (SEZ), Department of Commerce

Member

(6)

Joint Secretary, DIPP

Member

(7)

Joint Secretary, Ministry of Science and

Member

Technology
(8)

Joint Secretary, Ministry of Small Scale

Member

Industries and Agro and Rural Industries

(9)

Joint Secretary, Ministry of Home Affairs

Member

(10)

Joint Secretary, Ministry of Defence

Member

(11)

Joint Secretary, Ministry of Environment and

Member

Forests
(12)

Joint Secretary, Ministry of Law and Justice

Member

(13)

Joint Secretary, Ministry of Overseas Indian

Member

Affairs
(14)

Joint Secretary, Ministry of Urban Development

Member

(15)

A nominee of the State Government concerned

Member

(16)

Director General of Foreign Trade or his

Member

nominee
(17)

Development Commissioner concerned

Member

(18)

A professor in the Indian Institute of

Member

Management or the Indian Institute of Foreign

Trade
(19)

Director or Deputy Sectary, Ministry of

Commerce and Industry, Department of
Commerce
15

Member Secretary

Administrative set up:

The functioning of the SEZs is governed by a three tier administrative set up. The Board of
Approval is the apex body and is headed by the Secretary, Department of Commerce. The
Approval Committee at the Zone level deals with approval of units in the SEZs and other
related issues. Each Zone is headed by a Development Commissioner, who is ex-officio
chairperson of the Approval Committee.
Once an SEZ has been approved by the Board of Approval and Central Government has
notified the area of the SEZ, units are allowed to be set up in the SEZ. All the proposals for
setting up of units in the SEZ are approved at the Zone level by the Approval Committee
consisting of Development Commissioner, Customs Authorities and representatives of State
Government. All post approval clearances including grant of importer-exporter code
number, change in the name of the company or implementing agency, broad banding
diversification, etc. are given at the Zone level by the Development Commissioner. The
performance of the SEZ units are periodically monitored by the Approval Committee and
units are liable for penal action under the provision of Foreign Trade (Development and
Regulation) Act, in case of violation of the conditions of the approval.
Land requirements for approved Special Economic Zones
The total land requirement for the formal approvals granted till date is approximately
67772 hectares out of which about 109 approvals are for State Industrial Development
Corporations/State Government Ventures which account for over 20893 hectares. In these
cases, the land already available with the State Governments or SIDCs or with private
companies has been utilized for setting up SEZ. The land for the 260 notified SEZs where
operations have since commenced involved is approximately over 29953 hectares only.
Out of the total land area of 2973190 sq km in India, total agricultural land is of the
order of 1620388 sq km (54.5%). It is interesting to note that out of this total land area, the
land in possession of the 260 SEZs notified amounts to approximately over 299 sq km only.
The formal approvals granted also works out to only around 677 sq km.
16

Benefits derived from SEZs

Benefit derived from SEZs is evident from the investment, employment, exports and
infrastructural developments additionally generated. The benefits derived from multiplier
effect of the investments and additional economic activity in the SEZs and the
employment generated thus will far outweigh the tax exemptions and the losses on
account of land acquisition. Stability in fiscal concession is absolutely essential to ensure
credibility of Government intensions.

Investment and employment in the SEZs

At present, 1897 units are in operation in the SEZs. In the SEZs established prior to
the Act coming into force, there are 1141 units providing direct employment to over 1.99
lakh persons; about 35% of whom are women. Private investment by entrepreneurs in
these SEZs established prior to the SEZ Act is of the order of over Rs. 4043.28 crore.

Employment Data
Total employment in SEZs at 2008: 3,49,203 persons
Total employment in SEZs at 13 Aug 2009: 4,28,000 persons
Total incremental employment generated in SEZs since Feb., 2006: 2,93,000 persons
Break up of Employment Data
DIRECT Employment created in notified

100885 persons (all Incremental

SEZs (as of 30.6.08)

Employment generated after February

2006)

DIRECT Employment in Private/State Govt.

48988 persons (Incremental employment

SEZs which came into force prior to SEZ

generated since Feb. 2006: 36,250

Act, 2005 (as of 30.6.08)

persons)

DIRECT Employment in 7 SEZs established

1,99,330 persons (Incremental employment

by the Central Government (as of 30.6.08)

generated since Feb. 2006: 77,094 persons)

Investment

17

Total investment in Special Economic Zones as of 30.6.2008: Rs. 81093 crore

Total investment in Special Economic Zones as of 2008-09: Rs. 116879 crore
FDI $2.43 bn investment in sez
Incremental investment since February, 2006: Rs. 77058 crore
Investment in notified SEZs (as of 30.6.08)

Rs. 73348 crore (all Incremental

Employment generated after February
2006)

Investment in Private/State Govt. SEZs

Rs. 3701.91 crore (incremental investment

which came into force prior to SEZ Act,

generated since Feb. 2006 is Rs. 1946 crore)

2005 (as of 30.6.08)

Investment in 7 SEZs established by the

Rs. 4043.28 crore (incremental investment

Central Government (as of 30.6.08.)

generated since Feb. 2006 is Rs. 1764.08

crore)

Exports from the functioning SEZs during the last Five years are as under
Physical exports in the year 2007-08 accounted for 84% of the total turnover of SEZs
381% increase in exports over four years (2003-04 2007-08).
Year

Value (Rs. Crore)

Growth Rate ( over

previous year )

2003-2004

13,854

39%

2004-2005

18,314

32%

2005-2006

22 840

25%

2006-20007

34,615

52%

2007-2008

66,638

92%

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 list of Developers who have set up SEZs:
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Nokia SEZ in Tamil Nadu

Quark City SEZ in Chandigarh

Flextronics SEZ in Tamil Nadu

Mahindra World City in Tamil Nadu

Motorola, DELL and Foxconn

Apache SEZ (Adidas Group) in Andhra Pradesh

Divvys Laboratories, Andhra Pradesh

Rajiv Gandhi Technology Park, Chandigarh

ETL Infrastructure IT SEZ, Chennai

Hyderabad Gems Limited, Hyderabad

Maha Mumbai SEZ in Maharastra

Noida SEZ in Utter Pradesh

SEEPZ SEZ in Maharashtra

Kandla SEZ in Gujrat

Cochin SEZ in Cochin

Madras SEZ in Chennai

Visakhapatnam SEZ in Visakhapatnam

Falta SEZ in Kolkata

Surat SEZ in Surat, Gujrat

Manikanchan, Salt Lake SEZ in Kolkata

(for gems and jewellery)

Indore SEZ in Indore

(Multi-product)

Jaipur SEZ in Jaipur

(Gems and Jewellery)

Mahindra City-SEZ in Chennai

(Information Technology & Apparel and fashion accessories )

Salt Lake Electronic City-SEZ, in Kolkata

(Software Development and IT enabled services)
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SEZs Leading to the growth of labour intensive manufacturing industry

Out of the 531 formal approvals given till date, 184 approvals are for sector specific and
multi product SEZs for manufacture of Textiles & Apparels, Leather Footwear, Automobile
components, Engineering etc.. which would involve labour intensive manufacturing. SEZs
are going to lead to creation of employment for large number of unemployed rural youth.
Nokia and Flextronics electronics hardware SEZs in Sriperumbudur are already providing
employment to 13722 and 629 persons. Hyderabad Gems SEZ for Jewellery manufacturing
in Hyderabad has already employed 1500 persons. They have a projected direct
employment for about 1500 persons. Apache SEZ being set up in Andhra Pradesh will
employ 30,000 persons to manufacture 10,00,000 pairs of shoes every month. Current
employment in Apache SEZ is 5325 persons. Brandix Apparels, a Sri Lankan FDI project
would provide employment to 60,000 workers over a period of 3 years. Even in the services
sector, 12.5 million sq meters space is expected in the IT/ITES SEZs which as per the
NASSCOM standards translates into 12.5 lakh jobs. It is, therefore, expected that
establishment of SEZs would lead to fast growth of labour intensive manufacturing and
services in the country.
Special Economic Zones Controversy
Land, especially agricultural land is a very sensitive issue in India. There are millions of
people whose livelihood depends on agricultural land. But the introduction of SEZ in India
has resulted in the dispossession of agricultural land and has affected the livelihood of
farmer at large. In against of this, farmers first protested to safeguard their interests
through litigation and court cases challenging the establishment of SEZs. But later on, the
resistance against SEZ in India became massive when political parties also joined the
farmers.
Jamnagar Incidence

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In November 2006, farmers from the Jamnagar District in Gujarat moved the High Court of
Gujarat and later to the Supreme Court in order to challenge the setting-up of a 10,000acre (approx. 4,000-ha) SEZ by Reliance Infrastructure. They claimed that the acquisition
of large tracts of agricultural land in the villages of the district not only violated the Land
Acquisition Act of 1894, but was also in breach of the public interest. This led the
Government to consider putting a ceiling on the maximum land area that can be
acquired for multi-product zones and decide to go slow in approving SEZs.
Nandigram Violence
The Nandigram violence is another famous incidence related to SEZ controversy. Nandigram
is a rural area in Purba Medinipur district of the Indian state of West Bengal. It is located
about 70 km south-west of Kolkata, on the south bank of the Haldi River, opposite the
industrial city of Haldia.
In 2007 the West Bengal government decided to allow Salim Group to set up a chemical hub
at Nandigram under the SEZ policy. Farmers of that village were against it. So, on the order
of the Left Front government on 14 March, 2007, more than 3,000 heavily armed police
stormed the Nandigram area. The main objective was to remove the protestors in order to
expropriate 10,000 acres of land for a Special Economic Zone (SEZ) to be developed by the
Indonesian-based Salim Group. During this incidence, police shot dead at least 14 villagers
and wounded 70 more including children and women.
The above given examples show the controversies associated with SEZs. No doubts that
these commercial hubs started with a lot of premature praise and have now became a bone
of contention which is readily exploited by the political forces to the detriment of the
peasants, who fear losing their means of livelihood.

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