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SEZs: A ready reckoner
George Iype | June 22, 2006
On June 19, Reliance Industries Chairman Mukesh Ambani signed a mega land acquisition deal with the Haryana government to set up one of the biggest Special Economic Zones (SEZs) in the country.
As per the Ambani plan, Reliance will buy 25,000 acres of land from the Haryana state government to set up a Rs 25,000 crore (Rs 250 billion) multi-product SEZ that will have a cargo airport and a 2,000 mw power plant.
Ambani has pledged to develop the SEZ as a world-class hub for manufacturing, services and agri-based industries in the most competitive environment.
But the Haryana SEZ is not the mega project that Ambani has under pipeline. His Reliance is finalising the mother of all SEZs in the Asian sub-continent. Reliance and in association with the Maharashtra government have decided to set up two massive SEZs across 14,000 hectares in Navi Mumbai and Maha Mumbai.
Ambani is not the only industrialist who have jumped into developing the SEZs across India. Companies like Wipro, Infosys, Satyam, Bajaj, Biacon, DLF and many others are finalizing plans to set up SEZs.
What is it that attracts every company in India to set up An SEZ?
Here is all you need to know about SEZs.
What is an SEZ?
An SEZ, or a Special Economic Zone, is like a foreign territory within a country. An SEZ is governed by a special set of rules to facilitate foreign direct investment for export-oriented production. SEZs are free trade zones and customs authorities do not supervise them.
These zones are typically marked by minimum bureaucracy, best infrastructure, generous tax holidays, unlimited duty free imports of raw, intermediate and final goods as well as capital goods. Basically, governments look to SEZs to overcome difficulties in bureaucracy and fiscal measures.
Are SEZs a new phenomenon in India?
No. In fact, the first such zone in the country was set up way back in 1965 at Kandla. But it was known then as the Economic Processing Zone. Thereafter, in 1972, the Santacruz Electronic Export Processing Zone (SEEPZ) was launched in Mumbai.
Later, six more EPZs were set up at Noida (Uttar Pradesh), Falta (West Bengal), Cochin (Kerala), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), and Surat (Gujarat).
When did the government decide to set up many such zones in the country?
In April 2000, the government announced a policy on the formation of SEZs to give internationally competitive duty-free environment for export production. It is said it was late commerce minister Murasoli Maran who was instrumental in chalking out plans for the new-look SEZs in India.
During his visit to China in 2000, Maran was so impressed by the modern, hassle-free economic zones in China that he told his officials: "Let us also make them."
Have SEZs helped China to attract foreign investment?
Yes. Analysts say China attracts nearly $45 billion per year in foreign direct investment compared to India's figures of $2 billion annually, all because of the sprawling SEZs they have set up across that country.
How are the SEZs set up? Are they established by the government?
The SEZs are being set up by the government either wholly or partly with private sector participation. Generally, the government provides land to private companies that develop the SEZs, according to rules and regulations.
How many SEZs has the government given sanction to?
The Union government has cleared nearly 150 SEZs, including those of Mukesh Ambani's Reliance Group, Biocon, Bajaj Auto, Bharat Forge, DLF, the Adani Group and Satyam Computer. All these companies have to complete a set of formalities, such as land acquisition.
How much land would it require to set up an SEZ?
The government rule says minimum 10 hectares of land is required to set up an SEZ. An SEZ should have a minimum built-up area of 1 lakh square metres. More specifically, the government notification says SEZs for gems and jewellery would require a minimum land area of 10 hectares and 50,000 square metres of built-up area, while biotech and non-conventional energy SEZs would need 10 hectares and 40,000 square metres, respectively.
Multi-product SEZs must have an area of 1,000 hectares, while multi-services and sector-specific SEZs should have a minimum area of 100 hectares. The processing area in SEZs would be 35 per cent.
What is the employment target the government has in the SEZs?
The government estimate says the 150 new SEZs would give employment to over 7 lakh (700,000) people. In each of the 30 multi-product SEZs, investment in infrastructure alone will be to the tune of Rs 4,000 crore (Rs 40 billion), thus making a total investment of Rs 1.2 lakh crore (Rs 1.2 trillion).
Is there any SEZ fully operational?
Yes. The Mahindra SEZ in Chennai currently has 2,500 employees. It says by the end of this year, the figure would be 35,000.
Which all states are racing ahead to set up the SEZs?
Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Haryana, Gujarat, Uttar Pradesh and West Bengal are racing ahead in setting up SEZs.
Which Indian state has planned the largest number of SEZs?
Maharashtra. The state has planned as many as 51 SEZs across the state, a majority of which are coming up near Mumbai and Pune.