Special Economic Zone (SEZ)

SEZs have been established in many countries as testing grounds for implementation of liberal market economy principles. They are viewed as instruments to enhance the acceptability and credibility of transformation policies, to attract domestic and foreign investment, and generally, for the opening up of the economy. With its genesis in the Export Processing Zones (EPZ), the SEZs in
India seek to promote value addition component in exports.
Generate employment and mobilize foreign exchange. EPZs and SEZs were employed with considerable success by China and other ASEAN countries in the 1970s and 1980s to create regional
islands, where export-oriented manufacturing could be undertaken. In India, the EPZ experiment
was much less of an unequivocal success; and since 1965, when the first EPZ in Kandla was set up.
A total of only 11 such zones have come into existence. The Exim Policy of 1997-2002 then introduced the more comprehensive and liberal SEZ concept, after which a bill was drafted and passed by Parliament in the form of the SEZ Act, 2005.

   
                                       SEZ Act, 2005

Objectives

• to provide for a stable and long-term fiscal policy framework with minimum regulatory
intervention for such zones
• to attract investment, both domestic and foreign
• to ensure employment generation through encouraging export activities t
• There would be no violation of labour laws in the SEZs.
• It also provides for a single-window clearance mechanism for the establishment of SEZs.
• The objective of SEZs includes making available goods and services free of taxes and
duties, bolstered by integrated infrastructure for export production and a package of
incentives to attract foreign and domestic investments for promoting export- led growth.
Provisions
• It empowers the Union Government to specify an officer or agency for carrying out
surveys or inspections to verify or ensure compliance with the provisions of the Central
Act by a developer or an entrepreneur.
• The Act provides that SEZs could also take the form of port, airport, inland container
depot, land station and land customs stations, as the case may be, under Section 7 of the
Customs Act.
• The Act approves the setting up of an International Financial Services Centre in a SEZ.
• The Act provides for tax concession for 15 years in respect of newly established SEZ
units that begin to manufacture or produce articles or provide services during the
previous year relevant to any assessment year commencing on or after April 1, 2006.
• under this dispensation, units would be eligible for 100 per cent tax exemption for 5
years, 50 per cent for the next five years and 50 per cent of the ploughed back export
profits for the next five years (in all 15 years).
• Indian SEZs to be based on ‘India- specific’ model instead of adopting the model
followed by any other country.
Apprehensions against SEZ
Some of the apprehensions against the SEZs are
a) Generation of little new activities as there may be relocation of industries to take
Advantage of tax concessions,
b) Revenue loss,
c) Large-scale land acquisition by the developers which may lead to displacement of farmers with eager compensation,
d) acquisition of prime agricultural land having serious implications for food security,
e) Misuse of land by the developers for real estate and
f) Uneven growth aggravating regional inequalities.