Special Economic Zones

Why in news

• The government has proposed to free up unused built-up land inside Special Economic Zones (SEZs) for other economic activity.

About SEZ:

• An SEZ is an enclave within a country that is typically duty-free and has different business and commercial laws chiefly to encourage investment and create employment.
• Apart from generating employment opportunities and promoting investment, SEZs are created also to better administer these areas, thereby increasing the ease of doing business.
• Presently, 379 SEZs are notified in India, out of which 265 are operational.
• About 64% of the SEZs are located in five states – Tamil Nadu, Telangana, Karnataka, Andhra Pradesh and Maharashtra.

Legislative framework:

• An SEZ Policy was announced in 2000 in order to overcome the obstacles businesses faced. 
• 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 2000 to 2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes.
• The Special Economic Zones Act was passed by Parliament in May, 2005 
• 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
• 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 Rules provide for different minimum land requirement for different class of SEZs. Every SEZ is divided into
  • Processing area where alone the SEZ units would come up and
  • Non-processing area where the supporting infrastructure is to be created.

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.

PRELIMS QUESTION

Consider the following statements regarding ‘Special Economic Zones (SEZ)’ in India:

1. It comes under the administrative control of Ministry of Commerce and Industry

2. SEZ units can avail 100% income tax exemption on export income for first five years of their operation

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer