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Special Economic Zones

Special Economic Zones (SEZs) in India have seen significant growth in exports, investment, and employment over the last three years. SEZs are designated duty-free enclaves meant to encourage investment and job creation by providing tax and regulatory incentives. While the first export processing zone was established in 1965, the SEZ program began in 2000 to address infrastructure and bureaucratic issues limiting prior zones' success. Currently, 379 zones have been approved across India, though only 265 are operational, concentrated in five states. SEZs have driven exponential increases in exports, investment, and employment since 2005-06. However, challenges remain due to underutilized land, multiple competing models, and stronger zones in Southeast Asia

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48 views

Special Economic Zones

Special Economic Zones (SEZs) in India have seen significant growth in exports, investment, and employment over the last three years. SEZs are designated duty-free enclaves meant to encourage investment and job creation by providing tax and regulatory incentives. While the first export processing zone was established in 1965, the SEZ program began in 2000 to address infrastructure and bureaucratic issues limiting prior zones' success. Currently, 379 zones have been approved across India, though only 265 are operational, concentrated in five states. SEZs have driven exponential increases in exports, investment, and employment since 2005-06. However, challenges remain due to underutilized land, multiple competing models, and stronger zones in Southeast Asia

Uploaded by

Sangram Asabe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Special Economic Zones

drishtiias.com/daily-updates/daily-news-analysis/special-economic-zones

Indian Economy

Why in News

Special Economic Zones (SEZ) have touched new heights in terms of


performance in Exports, Investment and Employment in the last three years.

Key Points

About:
An
SEZ is a territory within a country that is typically duty-free
(Fiscal Concession) and has different business and commercial laws chiefly to
encourage investment and create employment.
SEZs are created also to better administer these areas, thereby increasing
the ease of doing business.
SEZs in India:
Asia’s first
EPZ (Export Processing Zones) was established in 1965 at
Kandla, Gujarat.
While these EPZs had a similar structure to SEZs, the government
began to establish SEZs in 2000 under the Foreign Trade Policy to
redress the infrastructural and bureaucratic challenges that were seen to have
limited the success of EPZs.
The Special Economic Zones Act was passed in 2005. The Act came into
force along with the SEZ Rules in 2006.
However, SEZs were operational in India from 2000 to 2006 (under the
Foreign Trade Policy).
India’s SEZs were structured closely with China's successful model.
Presently, 379 SEZs are notified, out of which 265 are operational. About
64% of the SEZs are located in five states – Tamil Nadu, Telangana,
Karnataka, Andhra Pradesh and Maharashtra.
The Board of Approval is the apex body and is headed by the Secretary,
Department of Commerce (Ministry of Commerce and Industry).
The Baba Kalyani led committee was constituted by the Ministry of
Commerce and Industry to study the existing SEZ policy of India and had
submitted its recommendations in November 2018.
It was set up with a broad objective to evaluate
the SEZ policy towards
making it WTO (World Trade Organisation) -compatible and to
bring in global best practices to maximise capacity utilisation and to
maximise potential output of the SEZs.

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Objectives of the SEZ Act:
To create additional economic activity.
To boost the export of goods and services.
To generate employment.
To boost domestic and foreign investments.
To develop infrastructure facilities.
Major Incentives and Facilities Available to SEZ:
Duty free import/domestic procurement of goods
for development,
operation and maintenance of SEZ units.
Exemption from various taxes like Income Tax, minimum alternate tax,
etc.
External commercial borrowing by SEZ units upto US $ 500 million in a
year without any maturity restriction through recognized banking channels.
Single window clearance for Central and State level approvals.
Performance so far:
Exports: Exports
of Rs. 22,840 Crore (2005-06) has increased to Rs.
7,59,524 Crore (2020-21).
Investment: Investment of Rs. 4,035.51 Crore (2005-06) has increased to
Rs. 6,17,499 Crore (2020-21).
Employment: Employment from 1,34,704 persons (2005-06) has
increased to 23,58,136 persons (2020-21).
Challenges:

Unutilized Land in SEZs:


Due to lack of demand for
SEZ space and disruptions caused by the
pandemic.
Existence of Multiple Models:
There are multiple models of
economic zones such as SEZ, coastal
economic zone, Delhi-Mumbai Industrial Corridor, National
Investment and Manufacturing Zone, food park and textile
park which pose challenges in integrating the various models.
Competition from ASEAN Countries:
In the past few years, many of the ASEAN
countries have tweaked
their policies to attract global players to invest into their SEZs and have
also worked on a developmental set of their skilling initiatives.
Consequently, Indian SEZs have lost some of their competitive
advantages globally and hence need to have fresher policies.

Way Forward

Promotion of MSME investments in SEZs by linking with MSME schemes


and allowing alternate sectors to invest in sector-specific SEZs is among the
recommendations by the Baba Kalyani Committee on SEZs.
It had also batted for additional enablers and procedural relaxations as
well as granting SEZs infrastructure status to improve their access to finance
and enable long-term borrowings.

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Source: PIB

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