Special Economic Zones - Backgrounder

The Special Economic Zones (SEZs) Policy supported by SEZ Act 2005 and SEZ Rules 2006 intends 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 single window clearance mechanism. The process of globalization has enhanced the relevance of SEZs and SEZs have become an important component in the export led industrialization strategy, playing a crucial role in promoting the manufacturing sector, including enabling investment climate for SMEs and offer platform for attracting export-oriented FDI. The salient features of the SEZ scheme are:

a) generation of additional economic activity

b)  promotion of exports of goods and services

c)  promotion of investment from domestic and foreign sources

d) creation of employment opportunities

e) development of infrastructure facilities

2. In short span of about three years since SEZs Act and rules were notified in February, 2006, formal approvals have been granted for setting up of 568 SEZs out of which 315 have been notified. Out of the total employment provided to 3.87 lakh persons in SEZs as a whole, 2.53 lakh persons is incremental employment generated after February, 2006 when the SEZ Act has come into force. At least double this number obtain indirect employment outside the SEZ as a result of the operations of SEZ Units. This is in addition to the employment created by the developer for infrastructure activities. Physical exports from the SEZs have increased from Rs.66638 crore in 2007-08 to Rs.90416 crore in 2008-09, registering a growth of 36%.  There has been overall growth of export of 552% over past five years (2003-04). These figures establish beyond doubt that the response to the SEZ policy of the Central Government has been overwhelming and the scheme has been able to achieve the envisaged objectives.   

3. A total of 91 SEZs are making exports. Out of this 43 are IT/ITES, 13 Multi product and 35 other sector specific SEZs. The total number of units in these SEZs is 2263.

4.  The new generation SEZs have created a tremendous local area impact in terms of direct employment, emergence of new activities, changes in consumption pattern and social life, human development facilities (such as for education, healthcare) etc.  SEZs generate demand for complementary services and goods and thus impact on other sectors. For instance, demand for packing materials, packaging industries, banking and related services, other ancillary and component industries will create spill over effects. The SEZ policy provides incentives to developers to build local infrastructure in the areas of power, water, roads and social infrastructure. SEZs help in build up local infrastructure and reduce the burden on urban areas.

5. Even during the current economic meltdown, SEZs have registered an impressive growth in export, investment and employment generation.

 Some success stories in SEZs

 Nokia Special Economic Zone in Tamil Nadu (Telecom equipments SEZ):

   ·Physical Exports of Rs.10385.3 crore effected in three years (2006-07 to 2008-09)

   ·Direct employment provided to 14859 persons.   

   ·Investment of Rs.2225.47 crore has already been made in this SEZ, out of which FDI is Rs.833.51 crore.   

   ·Projected investment of Rs.2930 crore and projected direct employment of 20000 persons.

Mahindra City SEZ, Tamil Nadu (Apparels and fashion accessories; IT/Hardware; auto ancillary):

   ·Physical Exports worth Rs.1524.56 effected in three years (2006-07 to 2008-09)   

   ·Direct employment provided to 9383 persons.   

   ·Investment of Rs.1372.5 crore has already been made in this SEZ, out of which FDI is Rs.187.63 crore.

   ·Projected investment of Rs.2404.17 crore and projected direct employment of 56766 persons.

Apache SEZ (Adidas Group) in Andhra Pradesh (Footwear SEZ):

   ·Physical Exports worth Rs.172.03 crore was effected in three years (2006-07 to 2008-09)  

   ·Direct employment provided to 5342 persons, out of which 1453 are women employees.   

   ·Investment of Rs.227.15 crore has already been made in this SEZ, out of which FDI is Rs.16.77 crore.    

   ·Projected direct employment of 20000 persons.

Wipro Limited, Andhra Pradesh (IT SEZ):

  · Physical Exports worth Rs.586 crore was effected in two years (2007-08 to 2008-09)  

   ·Direct employment provided to 4437 persons.   

   ·Investment of Rs.371.701 crore has already been invested in this SEZ.    

   ·Projected investment of Rs.223 crore and projected direct employment of 7000 persons.

Mundra Port and Special Economic Zone, Gujarat (Multi product SEZ):  

   ·Physical Exports worth Rs.768.44 crore was effected in two years (2007-08 to 2008-09)  

   ·Direct employment provided to 870 persons, out of which 10 are women employees.   

   ·Investment of Rs.5219.009 crore has already been made.   

   ·Projected investment of Rs.25545 crore and projected direct employment of 2, 08,869 persons.

Reliance Jamnagar Infrastructure Ltd., Gujarat (Multi Product):

·  Physical Exports in 2008-09 was Rs.9882.28 crore.

·  Direct employment provided to 2385 persons.   

·  Investment of Rs.32082 crore has already been invested in this SEZ.    

·  Projected investment of Rs.36274 crore.