Special Economic Zones (SEZs) in India

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Special Economic Zones in India- Relevance for UPSC Exam

GS Paper 3: Indian Economy- Issues relating to planning, mobilization of resources, growth, development and employment; Investment models.

The union government is considering a proposal to allow producers in Special Economic Zones (SEZs) to sell their output to the domestic market without treating them as imports.
The government is also reviewing the exclusion of export-oriented units (EOUs) and SEZs from the recently notified tax refund scheme for exports.

About Special Economic Zone (SEZ): It is an area within a country’s national borders in which the business and trade laws are different from the rest of the country.
Key Purpose: SEZs are established for different purposes like increasing trade balance (by promoting export), employment, increased investment, job creation and effective administration.
- The SEZs are expected to be engines for economic growth.
Relaxation offered by the government in SEZs: government formulates various financial policies to encourage businesses to set up in the SEZs. These policies are typically related to investing, taxation, trading, quotas, customs, and labour regulations.
- In the initial period, the government often offers tax holidays (a period of lower taxation).
- The government also ensures the ease of doing business in these areas.

Origin:
- Asia’s first EPZ (Export Processing Zones) was established in 1965 at Kandla, Gujarat.
- SEZs are similar in structure to EPZs.
- Indian SEZs are modeled on the success of Chines 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.
Legislative backing: The Special Economic Zones Act was passed in 2005 to provide legislative support to SEZs. The Act came into force along with the SEZ Rules in 2006.
- SEZs Act 2005: “It is defined as an Act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto.”
- Between 2000-2006, SEZs were operational under the Foreign Trade Policy.
Present status: 379 SEZs are notified by the government, out of which 265 are operational.
- Regional Distribution of SEZs in India: about 64% of the SEZs are located in five states- Tamil Nadu, Telangana, Karnataka, Andhra Pradesh and Maharashtra.
Baba Kalyani Committee: It 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.