Sez

Special Economic Zones – CONCEPT, STRUCTURE, PROCESS , IMPACT, FUTURE

International Business Environment-JAY SHUKLA

Origin & History of SEZs Yester years EPZs (Export

Processing Zones) are todays SEZs

One of the earliest & most famous SEZs were founded by China under Den Xiaoping in the early1980s

Today the most prominent SEZs in China are Shenzhen & Pudong, a district of Shanghai

However, India’s first EPZ was set up in Kandla (Gujarat) in 1965 followed by Santacruz (Mumbai) in 1973

http://www.topmasala.com/images/wonders/great_wall.jpg

Historical background

Four modernizations – Liberalization of Agriculture; Rural & Town Industrialization through Defence, Urban & Area Export-oriented enterprises through SEZs.

Importance of the last in faster economic growth, modernization of Industry & Trade and export growth

Policy of preferred regions – unequal growth – open-door policies

Hong Kong and East Asian factors Overriding approach based on Deng’s

Observation: “For us to establish SEZs and adopt open-door policies, we must have a clear guiding ideology: that is, “Not to constrain but to release”

Experience with EPZsStarting with Kandla in 1965; SEEPZ in

1972, Based on reviews of working, Cochin, Falta, Madras (Chennai) and NOIDA in 1984 and Vizag in 1989

Very limited impactLess than 40% of approvals fructified,

rest cancelled or lapsedEmployed only 0.01% of labour forceFDI was less than 20% of total investmentAccounted for less than 4% of exports.

Net export much lower as imports were over 60% of exports

INTRODUCTION

The concept of SEZ is expected to bring large dividends to the State in terms of economic and industrial development and the generation of new employment opportunities.The SEZs are expected to be engines for economic growth..

Special Economic Zone (SEZ) is defined as "a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs".

Special Economic Zone is one or more areas of a country where the tariffs and quotas are eliminated and bureaucratic requirements are lowered so that more companies are attracted to the area. The companies establishing in the area also get extra incentives for doing business.

SEZs are an acknowledgement of the potential of export-led development strategy in accelerating economic growth.

Government of India have notified Special Economic Zones (SEZs) Act 2005 and notified Special Economic Zone Rules 2006 with a view to augmenting infrastructure facilities for export production.

Setting up of Special Economic Zones are permitted in the public, private, joint sector or by the State Governments.

What is a SEZ ?

Incentives and facilities offered to the SEZs

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units

100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels.

Exemption from Central Sales Tax. Exemption from Service Tax. Single window clearance for Central and State level approvals. Exemption from State sales tax and other levies as extended by the

respective State Governments.

SEZ Approval Consequent upon the SEZ Rules coming into effect w.e.f. 10th February, 2006, Twenty-five meetings of the Board of Approvals have since been held. During these meetings, formal approval has been granted to 462 SEZ proposals. There are 135 valid in-principle approvals. Out of the 462 formal approvals, 222 SEZs have been notified.Benefits derived from SEZs

Benefit derived from SEZs is evident from the investment, employment, exports and infrastructural developments additionally generated. The benefits derived from multiplier effect of the investments and additional economic activity in the SEZs and the employment generated thus will far outweigh the tax exemptions and the losses on account of land acquisition. Stability in fiscal concession is absolutely essential to ensure credibility of Government intensions.Exports from the functioning SEZs during the last five years :

Year Value (Rs. Crore) Growth Rate( over previous year )

2003-2004 13,854 39%

2004-2005 18,314 32%

2005-2006 22 840 25%

2006-2007 34,615 52%

2007-2008 66,638 92%

SEZ Policy of 2000

New Policy in April 2000. SEZs permitted to be set up in the public, private, joint sector or by the State Governments

Minimum size of 1000 hectares (4 sq. miles) Simplified procedures and more incentives Main measures were:

Conditions for automatic approval relaxed considerably Customs procedures simplified Units could produce items reserved for SSI units in

domestic market 100% FDI investment for manufacturing Profits could be repatriated fully Freedom for sub-contracting 100% I.T. exemption for five years Exemption from Central Excise Duty on capital goods,

raw materials, consumable spares from domestic market Reimbursement of CST paid on domestic purchases

Evolution : from EPZs to SEZs

Deficiencies in EPZ policy were : Limited power of Zonal authorities Absence of single window facility

within the Zone Rigid custom procedure for bondings

& bank guarantees Restrictive FDI policy Procedural constraints & severe

infrastructural deficiencies During 1991-2000, wide-ranging

measures were initiated by the GoI for revamping and restructuring EPZs.

This phase was thus marked by progressive liberalisation of policy provisions and relaxation in the severity of controls and simplification of procedures.

Focus had been on delegating powers to zone authorities, providing additional

fiscal incentives, simplifying policy provisions and providing greater

facilities.

The EXIM Policy (1997-2002) introduced a new scheme from April 1, 2000 for

establishment of the Special Economic Zones (SEZs) in different parts of the

country.

From November 1, 2000 the EPZs at Kandla, Santa Cruz (Mumbai), Cochin and Surat have been converted into

SEZs.

In 2003, other existing EPZs namely, Noida, Falta, Chennai, Vizag were also

converted into SEZs.

As on June 2005, 53 SEZs have been approved by the Government of India

out of which 11 SEZs are functional and the rest 42 SEZs are under

establishment.

Contd……….

Evolution : from EPZs to SEZs

Functional SEZs at present

At present there are eight functional SEZs located at:

SantaCruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) & Nodia (Uttar Pradesh) in India. Further a SEZ at Indore (Madhya

Pradesh ) is now ready for operation.

In addition 18 approvals have been given for setting up of SEZ at Positra (Gujarat), Navi Mumbai and Kopata (Maharashtra), Nanguneri (Tamil Nadu), Kulpi and Salt Lake (West Bengal), Paradeep and Gopalpur (Orissa), Bhadohi, Kanpur, Moradabad and Greater Noida (U.P), Vishakhapatnam and Kakinada (Andhra Pradesh), Vallarpadam/Puthuvypeen (Kerala) Hassan (Karnataka), Jaipur and Jodhpur (Rajasthan) on the basis of proposals received from the State Governments.

Functional SEZs at presentContd……….

Agriculture: Its function in Indian economyAgriculture (a term which encompasses farming) is the process of producing food, feed, fiber and other goods by the systematic raising of plants and animals.

India has a labour force of 509.3 million.

60% of which is employed in agriculture and related industries.

agricultural crops include rice, wheat, oilseed, cotton, jute, tea, sugarcane, and potatoes.

The agricultural sector accounts for 28% of GDP.

Service and industrial sectors make up 54% and 18% respectively.

Agriculture accounts for 8.56 % of India’s exports. About 43 % of India's geographical area is used for agricultural activity.

Agriculture is still the largest economic sector and plays a significant role in the overall socio-economic development of India

SEZ: Independent force to boost Indian Economy

SEZ is a better proposition.

SEZ policy is nowhere in conflict with agriculture sector. In fact it’s a lucrative proposition. India will have to gear-up with its modernization and reformation of agriculture sector to make it competent and profitable globally.

Wal-Mart’s role in Indian agriculture would be one such step to make the farmers use modern technology to make them eligible for profit sharing partnership proposal.

That depends on the efforts that government of India and its population put in. The SEZ conflict with agriculture as of now seems more like a political war fought with the help of pawns for immediate political mileage.

Positive Impacts

• To Nation– World class business environment– Increased FDI– Higher economic growth– Infrastructural development– Export growth– Employment Opportunities– Exposure to technology and global

markets

Positive Impacts

• TO Business houses– Hassle free operating environment– Single window clearance– Simplified procedure for setting up business,

compliance proc with with self certification– Duty free import– Tax exemption- VAT, CST, ST, other levies– External commercial borrowings– 100% profit reptriation from export earnings

Positive Impacts

• To People– Employement opportunities– Impact on lifestyle and standard of living– Business infrastructure combined with social

facilities– Better work culture , good education, leadership

vision

Hurdles

• To Nation– Loss of revenue

Hurdles

• To Business– Land acquisition– Single window actually is not– No strategic planning for electicity, water

Hurdles

• To People– Grabbing of fertile land– Water scarcity- Threat to access– Food scarcity– Exploitation of labour– Landless farmers

Hurdles

• To Environment

– Mangrove destruction– Destruction of ground water recharge system– Pollution

Definitions in Special Economic Zones Act,2005

1) "Unit" means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after commencement of this Act (Section 2(zc) of Special Economic Zones Act ,2005)

2) “Offshore Banking Unit” means a branch of a bank located in a Special Economic Zone and which has obtained the permission under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (Section 2(u) of Special Economic Zones Act ,2005)

DEFINITIONS contd..

3) “International Financial Services Centre” means an International Financial Services Centre which has been approved by the Central Government under sub-section (1) of section 18 (Section 2(q) of Special Economic Zones Act ,2005)

4) “entrepreneur” means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15 (Section 2(j) of Special Economic Zones Act ,2005)

5) “existing Unit” means every Unit which has been set up on or before the commencement of this Act (Section 2(l) of Special Economic Zones Act ,2005)

New and Existing Unit

• New Unit Any person, who intends to set up a Unit for carrying on the authorised operations in a Special Economic Zone, may submit a proposal to the Development Commissioner concerned

• Existing Unit An existing Unit shall be deemed to have been set up in accordance with the provisions of SEZ Act,2005 and such Units shall not require approval under the SEZ Act, 2005 .

(Section 15(1) of SEZ Act,2005)

Procedure for establishment of Unit ( if proposal not

related to Foreign collaboration and FDI)

Application to Development Commissioner with a copy to developer

Development Commissioner shall scrutinise proposal and place before approval committee

Approval Committee approve the proposal

Development Commissioner will issue a letter of approval in Form G for setting up the unit

Procedure for establishment of Unit ( if proposal relates to Foreign collaboration and FDI)

Application to Development Commissioner with a copy to developer

Development Commissioner shall scrutinise proposal and place before Board

Board shall approve the proposal

Development Commissioner will issue a letter of approval in Form G for setting up the unit

Letter of Approval to a Unit-Rule 19(2) and (3)

What is a LetterValidity of a Letter The Letter of Approval shall be valid for

one year within which period the Unit shall commence production or service or trading or Free Trade and Warehousing activity .(Rule 19(4) of SEZ Rules ,2006)

Foreign Companies in SEZ- Rule 19(7)

• Foreign companies can also set up manufacturing units as their branch operations in the Special Economic Zones in accordance with the provisions of Foreign Exchange Management (Foreign exchange derivatives contracts) Regulations, 2000.

Some Contents of Project Report Overview of the entire project

Details of Activities proposed Direct and indirect employment likely to be

generated Project cost and means of finance Financial/Technical, etc. tie ups Details of Backward and Forward integrations Details of Past experience Infrastructure: About the Land, Factory premises,

Equipment, Office premises Risks associated with Project Implementation schedule

Matters that can be included in application-

Rule 17(1)(a) Setting up of unit in a SEZ(b) Annual permission for sub-contracting(c) Allotment of Importer-Exporter Code

number(d) Allotment of land/industrial sheds in

the SEZ(e) Water connection(f) Registration-cum-Membership

Certificate(g) Small Scale Industries Registration

Matters that can be included in application Rule 17(1) contd..

(h) Registration with Central Pollution Control Board

(i) Power connection(j) Building approval plan(k) Sales tax registration(l) Approval from inspectorate of factories(m) Pollution control clearance, wherever

required;(n) Any other approval as may be required from

the State Government

Guidelines for Central Government for notifying special Economic

Zone –sec 5 a) generation of additional economic activityb) 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;

andf) maintenance of sovereignty and integrity

of India, the security of the State and friendly relations with foreign States.

Specific requirements for SEZ-Rule 5(5)

Before recommending any proposal for setting up of a SEZ, the State Government endeavor that following are made available in the State to the proposed SEZ and Developer

a. exemption from the State and local taxes, levies and duties

b. exemption from electricity duty or taxes on sale, of self generated or purchased electric power

c. allow generation, transmission and distribution of power within a SEZ

Specific requirements for SEZ – Rule 5(5) ….

d. providing water, electricity and such other services,

e. Delegation of power to the Development Commissioner under the Industrial Disputes Act, 1947 and other related Acts in relation to the Unit

f. Declaration of the Special Economic Zone as a Public Utility Service under the Industrial Disputes Act, 1947

g. Providing single point clearance system to the Developer and unit under the State Acts and rules

Forms used A Application for setting up SEZ

B Format for letter of approval for SEZ developers

C Format for Letter of approval for providing Infrastructure facilities in SEZ

D Bond-cum Legal Undertaking for developers

E Format for Quarterly and half-yearly report for SEZ developer/co-developer to be furnished to Development commissioner

Forms used Contd..F Consolidated Application Form

G Format for letter of approval for Unit

H Bond-cum Legal Undertaking for SEZ unit

I Annual Performance report for units

J Form for Appeal

K Permanent Identity Card

Check list for the proposals to be taken

up by BOA1) Name of the Developer.2) Proposed area of the location of the SEZ.3) Status of recommendation of the proposal by

the State Government (if available). 4) Whether proposal is for formal or in-principle

approval? (In case land is in possession of the promoter, it is considered for formal approval)

5) Is it a multi-product SEZ?6) If it is a sector specific SEZ, the sector is.7) Whether it meets the area requirements.8) Area of the SEZ (in hectares)

Check list for the proposals to be taken up by BOA…

9) Whether Form- A has been filed?10)Whether undertaking and affidavit has been

submitted?11)Whether project report has been submitted?12)Whether land is owned/leased and is in

possession of the Developer?13)Does the proposal meet the area

requirements of the Rules?14)Whether the land has existing structures or

is vacant?15)Whether the land is contiguous?16)Projected investment in the project.

Check list for the proposals to be taken up

by BOA….17) Projected exports from the project.18) Projected employment from the project.19) Share capital and Reserves of the Developer Company.20) Source of funds for the project. 21) Audited Accounts of the Developer for last 3 years (for all

the constituents in case the Developer is a SPV).22) Extent of FDI 23) Source of FDI 24) Whether provisions contained in the Press Note No. 5

(2005 Series), issued by the Ministry of Commerce and Industry have been followed in respect of Telecom/IT SEZ development?

Processing and Non Processing area

The areas falling within the Special Economic Zones maybe demarcated by the Central Government as-(a) the processing area for setting up Units for activities,being the manufacture of goods, or rendering services; or(b) the area exclusively for trading or warehousingpurposes; or(c) the non-processing areas for activities other than thosespecified under clause (a) or clause (b) ( Section 6 of SEZ Act,2005)

The processing area and Free Trade and Warehousing Zone shall be fully secured by boundary wall with specified entry and exit points. – Rule 11(2) of SEZ Rules ,2006)

Usage of Land in SEZ-Rule 11

• The developer holding land on lease basis shall assign lease hold right to the entrepreneur holding valid Letter of Approval.(Rule 11(6))

• The lease period shall be co-terminus with the validity of the Letter of Approval.(Rule 11(5))

• Developer may grant on lease land or built up space, for creating facilities such as canteen, public telephone booths, first aid centres, creche and such other facilities as may be required for the exclusive use of the Unit. .( Proviso to Rule 11(5))

Usage of Land in SEZ-Rule 11

• The Developer may allot land in the processing area on lease basis to a person desiring to create infrastructure facilities for use by the prospective Units. (Rule 11(8))

• The Developer shall not sell the land in a Special Economic Zone. (Rule 11(9))

New Rule11(10)

No vacant land in the non-processing area shall be

leased for business and social purposes such as

educational institutions, hospitals, hotels,

recreation and entertainment facilities, residential

and business complexes, to any person except a

co-developer approved by the Board :

Provided that the developer or co-developer may

lease the completed infrastructure along with the

vacant land appurtenant thereto for such purposes

Provided further that infrastructure for business or

social purposes in the Special Economic Zone, as

may be approved by the Board, shall be eligible for

exemptions, concessions and drawback.”.

Procedure for setting up SEZ

-Sec 15 Any person, who intends to set up a Special

Economic Zone, may, after identifying the area make a proposal in Form A to either of the following

a)State Government concerned b) Board of Approval

25 Copies of Form A are to be given along with Project report outlining the economic and commercial viability of the project

No application fees

Suo moto set up of SEZ

Central Government may:-(a) after consulting the State Government

concerned;(b) without referring the proposal for setting up the

Special Economic Zone to the Board; and(c) after identifying the area;suo moto set up and notify the Special Economic Zone(Proviso to sub section 4 of section 3 of SEZ Act ,2005)

Flow Chart for Setting up SEZ

SEZ can be formed in two ways

By Applying to SG

By applying to Board of Approval

SG forward the Proposal to BOA

Obtain the concurrence

of SG

BOA approves the

proposal

SG=Sate Government

Flow Chart for Setting up SEZ contd..

Central Government shall issue letter of Approval to developer

Developer shall furnish to Central Government information about area

Central Government will notify the area as SEZ

Contents of Form A• Location of SEZ• Distance from the nearest Sea Port/Air Port/Rail

or Road• Details of Lease of Land• Proposed investment details• Means of financing • Equity holdings• Details of areas (Processing areas and non-

processing area) used for various purposes in SEZ

• Activities Proposed in Processing and non-processing area

• Details of employment likely to be generated

Kinds of SEZ

Kinds of SEZ

SEZ for multi-product

SEZ for specific sector

SEZ in a port orairport

Minimum Contiguous Area Requirement

Type Area for specific states/UT

Min.Processing Area

Multi-product 1000 hectares 200 hectares 25 % (old)35% (new)( may be relaxed to 25% by CG on Board recommendation)

Multi -services

100 hectares 100 hectares 25%

Sector specific

100 hectares 50 hectares 50%

Electronic Hardware and software

10 hectares( and min. built up area of 1 lakh sq.mtrs)

10 hectares and min. built up area of 1 lakh sq.mtrs)

50%



Min.Processing Area

Bio- technology/ Non- conventional energy

10 hectares (old)10 hectares( with a min. built up area of 40000 sq.m) (new)


50 %

Gems and jewellery sector

10 hectares (old) 10 hectares( with a min. built up area of 50000 sq.m) (new)


50 %



Min.Processing Area

Free Trade and Warehousing Zone- Stand alone

40 hectares (with 1 Lac square meter built up area)

40 hectares(with 1 Lac square meter built up area)

50 %(new)

Free Trade and Warehousing Zone- SEZ for a specific sector

No minimum area requirement but subject to max area not exceeding 20% of the processing area

No minimum area requirement but subject to max area not exceeding 20% of the processing area


SEZ Amendment Rules,2006( came into force on

10.08.2006) 1. Minimum processing area for multi- product

shall be at least thirty-five per cent of the

area which may be relaxed up to twenty-

five per cent by the Central Government on

recommendations of the Board for the

reasons to be recorded in writing

SEZ Amendment Rules,2006…

SPECIAL SECTOR1. the area shall be ten hectares or more with a

minimum built-up area as under : (i) forty thousand square meters in case of a

Special Economic Zone proposed to be set up exclusively for bio-technology and non-conventional energy sectors including solar energy equipments/cells but excluding a Special Economic Zone set up for non-conventional energy production and manufacturing;


(ii) fifty thousand square meters in case of a

Special Economic Zone proposed to be set

up exclusively for the gems and jewellery

sector.”


FREE TRADE AND WAREHOUSING ZONES

In a stand alone Free Trade and Warehousing

Zone at least fifty per cent of the area shall be

earmarked for developing processing area :

“Provided further that a Free Trade and

Warehousing Zone may also be set up as part

of a Special Economic Zone for multi-product;”


Rule 5A. Infrastructure requirements relating to information technology

In case of a Special Economic Zone relating to information technology, the following facilities shall be ensured, namely :—

(a) twenty-four hours uninterrupted power supply at stable frequency in the zone;

(b) reliable connectivity for uninterrupted and secure data transmission;

(c) provision for central air-conditioning system and

(d) a ready to use, furnished plug and pay facility for end users.”.

Rule 18(4) (g)

No proposal shall be considered

for:

“ the use of any plant or

machinery previously used for

any purpose in Domestic Tariff

Area.”

Area conversion factors

1 Acre = 0.404686 Hectare1 Hectare = 2.47109 Acres1 Sq. Km. = 0.38610 Sq. Mile1 Sq. Km. = 100 Hectares

1 Sq. Mile = 2.58999 Sq. Kms

What is corporate Farming

• Corporate farming is a term that describes the business of agriculture.

• Specifically, what is seen by some as the practices of would-be mega corporations involved in food production on a very large scale.

• It is a modern food industry issue, and encompasses not only the farm itself, but also the entire chain of agriculture-related business, including seed supply, agrichemicals, food processing, machinery, storage, transport, distribution, marketing, advertising, and retail sales.

Flow of Corporate farming• Critics argue that the ultimate goal of corporate farming is to vertically

integrate the entire process of food production, from the development of proprietary strains of DNA through to the distribution and sale of food to consumers.

• Some corporations are considered to be well on the way to achieving this objective, and have become very large in the process, such as Archer Daniels Midland and the privately held Cargill, with 2004 revenues of $62.9 billion. citation needed]

• "Corporate farming" is a fairly broad term that deals with the general practices and effects of a small number of large, global corporations that dominate the food industry.

• It does not refer simply to any incorporated agribusiness enterprise, although most agricultural businesses today are in some way economically connected to the dominant food industry players. As such, it may be thought of as a movement, which is at times also referred to as "anti-corporate farming".

Benefits of Corporate Farming • The core argument for the methods criticized as corporate farming is

essentially: "This is the way to keep up with population growth, and to make inroads into feeding billions of people to developed nation standards—this is the only way to feed the world." Indeed, rapid technological development and large-scale global production management are responsible for an unprecedented abundance of inexpensive, widely available, attractive, "safe" food. By lowering the cost of raw food inputs, creating sophisticated long-distance distribution networks, producing processed convenience foods, and making food available year-round in vastly stocked supermarkets, corporate farming has presented consumers in the wealthiest regions of the world with an immense variety of food, at relatively low cost. Today, in North America, only about 10% of average income is spent on food. By this measure, provided these methods are sustainable, corporate farming would appear to be a tremendous success

http://en.wikipedia.org/wiki/Supermarket

http://en.wikipedia.org/wiki/North_America

http://en.wikipedia.org/wiki/Sustainability

Corporate farming in India

• "Corporate farming" is a fairly broad term that deals with the general practices and effects of a small number of large, global corporations that dominate the food industry. It does not refer simply to any incorporated agribusiness enterprise, although most agricultural businesses today are in some way economically connected to the dominant food industry players. As such, it may be thought of as a movement, which is at times also referred to as "anti-corporate farming".

• India to promote corporate contract farmingCommodity Online NEW DELHI: Worried over the slow growth in agricultural sector, the government is planning for expansion in corporate contract farming.

Minister of State for Food Processing Subodh Kant Sahai said the government is open to corporate contract farming.

While domestic corporate bigwigs such as Reliance and Bharti have already taken up the contract farming route to feed their retail chains, global majors Wal-Mart, Tesco and Carrefour are also eyeing foray into India retail.

• Corporate contract farming has taken off in states like Punjab, Haryana, Maharashtra and Gujarat. Providing the private sector a more level playing field would help raise the country’s overall farm goods’ processing level, the minister said.

So far, 17 states have made a provision for contract farming in their respective Agricultural Produce Marketing Committee Act to provide legal framework.

In seven more states, there exist no regulatory laws preventing such an arrangement.

• India’s is world’s second largest producer of fruit and vegetables. Its annual post harvest loss on fresh fruit and vegetables on lack of processing facilities has been pegged at Rs 40,000 crore.

The minister prescribed market-oriented farming to minimise post-harvest loss. Large-scale corporate farming will also lift the food processing sector.

During the 11th Five Year Plan (2007-12), the growth target for the food processing sector is 7 per cent, while agriculture sector is seen growing only at 4 per cent.

• Every bit of farm produce should be viewed as processing raw material, Sahai said. India aims at raising the level of food processing in farm products to 20 per cent by 2015 from the current 6 per cent.

Underscoring the critical role of states in raising the country’s overall food processing level, the minister said that states should adopt a fresh look at their agricultural policy.

The ministry has written to all chief ministers to accord high priority to food processing in a bid to raise rural income.

SEZs IN CHINADevelopment over the years

- Started soon after beginning of reforms in 1978.- Four SEZs started in 1979 – three in Guangdong adjacent to Hong

Kong and one at Xiamen in Fujian - Heavy government investment in infrastructure. Each zone could

introduce its own Regulation to grow investment, approvals and tax concessions.

- Based on the success, in 1984, the SEZ benefits were extended to 14 coastal open cities.

- Economic & Technology Development Zones (ETDZ) and High Tech and New Technology Industry Development Zones encouraged in coastal open cities.

- In 1985, three development triangles – Pearl River Delta (PRD), the Yangtze River Delta (around Shanghai) and Minum Delta (around Xiamen) were designated as coastal open areas.

- Hainan Island was declared as fifth SEZ in 1988

REASONS FOR SUCCESS- Unique locations – of the five SEZs, Shenshen,

Shantou and Zhuhai are in Guangdong Province adjoining Hong Kong. Fourth, Xiamen, is in Fujian Province and nearer Taiwan.

- Large size with government and local authorities providing improved infrastructure with foreign collaboration Attractive incentive packages for foreign investment.

- Liberal customs procedures.- Flexible Labor Laws providing for contract

appointments for specified periods.- Powers to Provinces and local authorities to frame

additional guidelines and in administering the Zones.

SEZs IN INDIASEZs in India

Experience with EPZs

- Starting with Kandla in 1965; SEEPZ in 1972, based on reviews of working, Cochin, Falta, Madras (Chennai) and NOIDA in 1984 and Vizag in 1989

- Very limited impact

- Less than 40% of approvals fructified- Rest cancelled or lapsed

- Employed only 0.01% of labour force

- FDI was less than 20% of total investment

- Accounted for less than 4% of exports. Net export much lower as imports were over 60% of exports

REASONS FOR FAILURE

SEZs in India

(ii) Inadequate infrastructure(iii) Restrictive policies(iv) Lengthy procedures – No Single Window(v) Locational disadvantages(vi) Stringent labour laws

- In the 1990s, as a part of reforms, powers delegated to zone authorities, additional fiscal incentives were given, policy provisions were simplified and greater facilities were provided leading to some, not very significant, improvements.

SMALL SIZE OF EPZs

Location Size (Sq.miles)

Kandla (Gujarat) 1.17

SEEPZ (Mumbai) 0.15

Cochin (Kerala) 0.16

NOIDA (UP) 0.48

Chennai (TN) 0.41

Vizag (AP) 0.56

Falta (WB) 0.44

CURRENT SEZs IN INDIA.

Education

Sez