Who is responsible for having SEZs in place??? I mean, what parameters are kept for creating these zones..??

Question

Who is responsible for having SEZs in place??? I mean, what parameters are kept for creating these zones..??

Answer 1

SEZs in India as export-oriented business zones where companies may avail of tax benefits and a cluster of incentives and concessions from the government have made quite an impact with their results.

Conceptualized to reduce pressure on urban centres and to augment the country’s urban infrastructure, they also have a critical role to play in increasing exports, attracting foreign investment and creating employment. The current 400 odd Special Economic Zone (SEZ) projects on the anvil is a direct conclusion of reaping visible rewards offered through the SEZ route.

Export Promotion Council for SEZs is the government body that notifies the SEZs. With the Indian companies setting up bases in SEZs, the total investments in SEZs shot up while foreign investments in SEZs followed suit.

SEZs have, in fact, helped people in rural areas increase their income. They have generated a considerable investment. More than 32,000 people are employed in the SEZs on regular wages. The Ministry of Commerce estimates employment generation of 100,000 people by December 2007 and export revenues to cross Rs 67,000 crore by the end of 2007-08.

The case for SEZs in India:

India’s strengths that can encourage investments in a SEZ:

Strong economic growth prospects

Large and skilled workforce

Strong policy framework

Presence of ancillary industries

Strong growth in the external sectors

Formidable domestic market

The visible change in the government’s outlook and policies towards the SEZs makes the case for SEZs in the private-public partnership format a realistic one for the SEZ projects Gujarat government has been allotted 15,000 hectares of land for setting up SEZs, the highest in the country.

The Government’s role:

The government has promoted all kinds of industries to set up bases in these SEZs. The changing nature of industries in the Indian SEZs is amply demonstrated in the increasing share of pharmaceuticals, engineering sectors, the gems and jewellery industry, information technology, IT-enabled services and electronic hardware, food processing textiles, aviation, research and design.

The IT sector has contributed to the growth of SEZ exports significantly as most of the IT/ITES companies are based in SEZs. With the new SEZ Act, 2005, the government has introduced major changes from its earlier policy.

It has done away with certain regulations and has simplified the process of starting a business by introducing the single window clearance policy. In states like Haryana, Maharashtra and Andhra Pradesh, hub of urbanization, a major part of agricultural land has been converted for integrated township projects that account for over 3% of the agricultural land as well as residential real estate projects that cover 1%.

A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws. The category 'SEZ' covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of an SEZ structure is to increase foreign investment. 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 population over 10 million within 20 years. Following the Chinese examples, Special Economic Zones have been established in several countries, including Brazil, India, Iran, Jordan, Kazakhstan, Pakistan, the Philippines, Poland, Russia, and Ukraine. North Korea has also attempted this to a degree, but failed. Currently, Puno, Peru has been slated to become a "Zona Economica" by its president Alan Garcia. A single SEZ can contain multiple 'specific' zones within its boundaries. The two most prominent examples of this layered approach are Subic Bay in the Philippines and the Aqaba Special Economic Zone in Jordan.

In a recent comprehensive econometric study[1] on the SEZ policies in China and India, Leong(2007) investigates the impact of opening up the Chinese and Indian economy on economic growth in these countries using new panel data sets for both the national economies and the regional economies of China. The policy change to a more liberalized economy is explicitly identified using instrumental variables. The results provide support that export growth does have a positive and statistically significant effect on economic growth in these countries. However, the growth rates of these countries are export and FDI inelastic, in the sense that a one percentage point increase in growth rate of export or FDI will have a less than one percentage point increase in economic growth rate of these countries. In the case of the Chinese regions, the presence of export processing zones may exert positive effect on the regional growth rate but the increase in regional growth is even more export inelastic than at the national level. The result dispel the popular view that adopting a policy of more openness in the economy has a “multiplier” effect on economic growth. Of the two phases of liberalization in both countries, the second stage is statistically significant. One possible reason is that the scale of liberalization is greater in the second phase. Additionally, increasing the number of SEZs has very negligible effect on economic growth. Taken together, these results suggest that what contributes to greater growth is a greater scale of liberalization, rather than increasing the number of SEZs

Considering the need to enhance foreign investment and promote exports from the country and realising the need that a level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, The Government of India had in April 2000 announced the introduction of Special Economic Zones policy in the country, deemed to be foreign territory for the purposes of trade operations, duties and tariffs. As of 2007, more than 500 SEZs have been proposed, 220 of which have been created. This has raised the concern of the World Bank, which questions the sustainability of such a large number of SEZs. The Special Economic Zones in India closely follow the PRC model. India passed special economic zone act in 2005

[edit] List of SEZs in India

The policy provides for setting up of SEZs in the public, private, joint sector or by State Governments. It was also envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones. Accordingly, the Government has converted Export Processing zones located at

Visakhapatnam (Andhra Pradesh)

Ahmedabad, Baroda, Kandla and Surat (Gujarat)

Cochin (Kerala)

Pithampur (Madhya Pradesh)

Nagpur also refer MIHAN, Pune and Santa Cruz-Mumbai (Maharashtra)

Chennai, Ilandaikulam Madurai, Nanguneri and Tirunelveli (Tamil Nadu)

NOIDA, Greater NOIDA (Uttar Pradesh) UP

Falta (West Bengal)

Currently, India has 1022 units in operations in 9 functional SEZs, each an average size of 200 acres. 8 Export Processing Zones (EPZs) have been converted into SEZs. These are fully functional. All these SEZs are in various parts of the country in the private/joint sectors or by the State Government. But this process of planning and development is under question, as the states in which the SEZs have been approved are facing intense protests, from the farming community, accusing the government of forcibly snatching fertile land from them, at heavily discounted prices as against the prevailing prices in the commercial real estate industry. Also some reputed companies like Bajaj and others have commented against this policy and have suggested using barren and wasteland for setting up of SEZs.the special ecomoic zones. Attempts to set up a Special Economic Zone in Nandigram have led to protests by villagers in the area. A Parliamentary Committee to study and give recommendations on SEZs has said that no further SEZs be notified unless the existing law is amended to incorporate the changes related to the land acquisitions.

Genpact has announced its plans to expand its presence in Hyderabad by setting up a Special Economic Zone (SEZ) across 50 acres in the city at Jawahar Nagar.

The challenges:

The government’s SEZ initiative has also been taken with a grain of salt by farmers in some parts of the country whose land was being acquired by local governments to hand over to companies developing the zones, forcing the government to rethink its policy.

It first grants an approval and then notifies the zones after the land acquisition is complete. For a while it put a temporary freeze on fresh clearances and formal go-aheads for previously approved SEZs.

But removed the freeze on approvals and notifications but not without major caveats including placing a ceiling on the size of the zones (5,000 hectares).

SEZ proposed by Skil Infrastructure Ltd. to be set up in Karnataka, will be scrutinised after the FIPB Foreign Investment Promotion Board clears Skil’s proposal to offload a26% stake to a US-based investor for $500 million.

The major challenges are associated with SEZs are:

Improvements are called for in terms of size, road and port connectivity, assured power supply, flexible labour laws and decentralized decision making.

There is lack of complete data and information around SEZs which keeps from giving a holistic understanding of its potential and providing insights on the functioning of the existing SEZs.

Ever since the government implemented the SEZ Act in 2005, only 1,945-sq km land has been earmarked for the projects. Many fresh projects can still be accommodated. Recently, the Centre has directed to the state governments to place a 1% cap on conver