2011 gs indian econ handout 23

8/7/2019 2011 GS Indian Econ Handout 23

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ICSA/CSE-2011/GENERAL STUDIES(PRELIMS)/PROF. S. MAITRA/HAND OUT #23 1

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India was one of the first in Asia to recognize the effectiveness of the

Export Processing Zone (EPZ) model in promoting exports, with Asia's first

EPZ set up in Kandla in 1965. With a view to overcome the shortcomingsexperienced on account of the multiplicity of controls and clearances;

absence of world-class infrastructure, and an unstable fiscal regime and

with a view to attract larger foreign investments in India, the Special

Economic Zones (SEZs) Policy was announced in April 2000.

This policy intended to make SEZs an engine for economic growth

supported by quality infrastructure complemented by an attractive fiscalpackage, both at the Centre and the State level, with the minimum

possible regulations. SEZs in India functioned from 1.11.2000 to

09.02.2006 under the provisions of the Foreign Trade Policy and fiscal

incentives were made effective through the provisions of relevant

statutes.

To instill confidence in investors and signal the Government's

commitment to a stable SEZ policy regime and with a view to impart

stability to the SEZ regime thereby generating greater economic activity

and employment through the establishment of SEZs, a comprehensive

draft SEZ Bill prepared after extensive discussions with the stakeholders.

A number of meetings were held in various parts of the country both by

the Minister for Commerce and Industry as well as senior officials for this

purpose. The Special Economic Zones Act, 2005, was passed by

Parliament in May, 2005 which received Presidential assent on the 23rd of

June, 2005. The draft SEZ Rules were widely discussed and put on the

website of the Department of Commerce offering suggestions/comments.

Around 800 suggestions were received on the draft rules. After extensive

consultations, the SEZ Act, 2005, supported by SEZ Rules, came into

effect on 10th February, 2006, providing for drastic simplification of


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procedures and for single window clearance on matters relating to central

as well as state governments.

The main objectives of the SEZ Act :

(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;

It is expected that this will trigger a large flow of foreign and

domestic investment in SEZs, in infrastructure and productive capacity,

leading to generation of additional economic activity and creation of

employment opportunities.

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 a processing area where

alone the SEZ units would come up and the non-processing area where

the supporting infrastructure is to be created.

The SEZ Rules provide for:

" Simplified procedures for development, operation, and

maintenance of the Special Economic Zones and for setting up units

and conducting business in SEZs;

Single window clearance for setting up of an SEZ;

Single window clearance for setting up a unit in a Special Economic

Zone;


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Single Window clearance on matters relating to Central as well as

State Governments;

Simplified compliance procedures and documentation with an

emphasis on self certification

Facilities and Incentives 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.

The major incentives and facilities available to SEZ developers

include:-

Exemption from customs/excise duties for development of SEZs for

authorized operations approved by the BOA.


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Income Tax exemption on income derived from the business of

development of the SEZ in a block of 10 years in 15 years under

Section 80-IAB of the Income Tax Act.

Exemption from minimum alternate tax under Section 115 JB of the

Income Tax Act.

Exemption from dividend distribution tax under Section 115O of the

Income Tax Act.

Exemption from Central Sales Tax (CST).

Exemption from Service Tax (Section 7, 26 and Second Schedule of

the SEZ Act).

Export Performances

Exports from the functioning SEZs during the last few years are

as under:

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 93%

2008-

2009

99,689 50%

2009-

2010

2,20,711.39 121.40%


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The EOU Scheme introduced in early 1981, is complementary to the

SEZ scheme (erstwhile EPZ scheme). It adopts the same production

regime but offers a wider option in location with reference to factors like

source of raw materials, port of export, hinterland facilities, availability of

technological skills, existence of an industrial base, and the need for a

large area of land for the project.

Over the last decade, Export Oriented Units have evolved as a major

player in the country's export effort. They have grown consistently at

double digit level, and recorded a growth of about 27.48% during the

year 2004-05

SALIENT FEATURES

No license required for import.

Exemption from Central Excise Duty in procurement of capital

goods, raw-materials, consumables spares etc. from the domestic

market.

Exemption from customs duty on import of capital goods, raw

materials, consumables spares etc.


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Reimbursement of Central Sales Tax (CST) paid on domestic

purchases.

Supplies from DTA to EOUs treated as deemed exports.

Reimbursement of duty paid on furnace oil, procured from domesticoil companies to EOUs as per the rate of drawback notified by the

Directorate General of Foreign Trade.

100% Foreign Direct Investment permissible.

Exchange earners foreign currency (EEFC) Account.

Facility to retain 100% foreign exchange proceeds in EEFC Account.

Facility to realize and repatriate export proceeds within twelvemonths.

Further extension in time period can be granted by RBI and their

authorized dealers.

Re-export of imported goods found defective, goods imported from

foreign suppliers on loan basis etc.

Exemption from industrial licensing requirement for items reservedfor SSI sector.

Profits allowed to be repatriated freely without any dividend

balancing requirement

Access to Domestic Market upto 50% of FOB value of export on

concessional rate of duty.

Duty free goods to be utilized in two years. Further extensiongranted on liberal basis.

Job work on behalf of domestic exporters for direct export allowed.

Conversion of existing Domestic Tariff Area ( DTA) unit into an EOU

permitted.

Can procure duty-free inputs for supply of manufactured goods to

advance licence holders.

Suppy of ITA-I items in the domestic market which would be counted

for fulfillment of NFE.


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EOUs in agriculture and horticulture engaged in contract farming

may be permitted to take out duty free goods listed to the fields of

contact farmers for production.

OBLIGATIONS OF EOUThe EOUs are required to achieve Positive Net Foreign Exchange Earning(NFE). NFE

shall be calculated cumulatively for a period of five years from the commencement of

production .For this purpose, a Legal Undertaking is required to be executed by the

unit with the Development Commissioner.

The units have to provide periodic reports to the Development Commissioner and

Zone Customs. Units have to obtain Customs Bonding from the concerned

jurisdictional Central Excise Authority.

S.N

o.Zone States/UTs

Functional E

OUs as

on 31.3.2008

Zone total

Functiona

lEOUs

Export(Pr

ov.)*In Rs

Crores

Export(Pr

ov)*In US

$ Million

Zonewis

eTotal

ExportI

n Rs. Cr.

ZonewiseT

otal

ExportUS$

Million

1Visakha

SEZ

Andhra

Pradesh243 246 4400.25 1092.94 4415.64 1096.76

2 Chhatisgarh 3 15.39 3.82

4Falta

SEZ

West

Bengal80 111 1347.95 334.81 2104.20 522.64

5 Bihar 0 0.00 0.00

6 Jharkhand 6 49.11 12.20

7 Orissa 23 705.75 175.30

8 Assam 0 0.00 0.00

9 Tripura 0 0.00 0.00

10 Mizoram 1 0.00 0.00

11 Manipur 0 0.00 0.00

Meghalaya 1 1.39 0.35

12 Nagaland 0 0.00 0.00

13Arunachal

Pradesh0 0.00 0.00

14 Sikkim 0 0.00 0.00

15Kandla

SEZGujarat 289 289 83836.48 20823.40 83836.48 20823.40

16Cochin

SEZKerala 70 468 1065.00 264.53 19222.00 4774.38

17 Karanataka 398 18157.00 4509.86

18Madras

SEZ

Tamil Nadu 435 466 12969.86 3221.47 13543.14 3363.86

19 Pondichery 27 572.96 142.31

20A & N

Island4 0.32 0.08


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21SEEPZ-

SEZMaharashtra 374 446 6577.48 1633.72 9310.06 2312.44

22 Goa 52 2349.79 583.64

23Daman and

Diu

24 Dadra&Nagar Haveli

20 382.79 95.08

25Noida

SEZDelhi 61 452 881.59 218.97 8768.40 2177.91

26 Haryana 116 1588.00 394.43

27Uttar

Pradesh111 4197.59 1042.60

28 Punjab 27 579.05 143.83

29 Rajasthan 121 1417.00 351.96

30

Himachal

Pradesh 6 45.61 11.33

31Jammu &

Kashmir3 29.98 7.45

32 Chandigarh 3 7.76 1.93

33 Uttrakhand 4 21.82 5.42

34Indore

SEZ

Madhya

Pradesh19 19 1011.38 251.21 1011.38 251.21

Total Total 2497 2497 142211.30 35322.61142211.3

035322.61

Export Performance of EOUs & SEZ Units ---> Statement showing year-wise Exportperformance by EOUs & SEZ Units

Year SEZ Units EOUs TOTAL

Rs. In

Crore

Gro

wth

%

US $

Millio

n

Growt

h

%

Rs. In

Crore

Growth

%

US $

Millio

n

Growt

h

%

Rs. In

Crore

Growth

%

US

$

Mill

ion

Growth

%

1992-

931376 474 2170 748 3546 1222

1993-

941960 42.4 632 33.33 3086 42.20 995 33.02 5046 42.281 1627 33.142

1994-

952653 35.37 856 35.44 4710 52.61 1519 52.66 7363 45.914 2375 45.974

1995-

963236 21.96 981 14.60 7009 48.83 2123 39.76 10245 39.147 3104 30.695

1996-

974339 34.1 1240 26.40 8729 24.53 2494 17.48 13068 27.552 3734 20.296

1997-

984817 11.03 1302 5.00 10279 17.76 2778 11.39 15096 15.521 4080 9.2662

1998-

995252 9.034 1250 -3.99 12058 17.32 2871 3.35 17311 14.673 4121 1.0049

1999-

20006709 27.72 1560 24.80 13701 13.63 3186 10.97 20410 17.903 4746 15.166


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2000-

018552 27.48 1859 19.17 15912 16.14 3536 10.99 24464 19.865 5395 13.675

2001-

029190 7.451 1915 3.01 18735 17.74 3930 11.15 27925 14.146 5845 8.3431

2002-

0310057 9.435 2095 9.40 23591 25.91 4875 24.03 33647 20.491 6970 19.237

2003-04 13814 37.36 2996 43.01 28828 22.20 6274 28.70 42641 26.73 9270 33

2004-

0518655 35.05 4140 38.18 39228 36.08 8727 39.11 57883 35.745

1286

738.808

2005-

0622840 22.43 5159 24.61 49462 26.09 11172 28.02 72302 24.91

1633

126.924

2006-

0734787 52.31 7688 49.02 69965 41.45 15462 38.40 104752 44.882

2315

041.755

2007-

0866638 91.56 16492 114.51 142211 103.26 35194 127.62 208849 99.374

5168

6123.27

EXPORT, IMPORT, NFE, DURING 2008-09 AND CUMULATIVE INVESTMENT &

EMPLOYMENT TILL MARCH, 2009 BY EOUs (Values In Rs Crores)

S.No. SEZsEXPORT

In Rs crores

IMPORT In

Rs crores

NFE In Rs

crores

INVESTMENT

In Rs croresEmployment

NSEZ 10608.82 2531.47 8077.35 2274.45 43714

2 SEEPZ-SEZ 18539.12 7309.11 11230.01 5227.93 41858

3 MSEZ 14044.65 4709.98 9334.67 23949.19 54204

4 CSEZ 17697.20 5808.35 11888.85 8416.22 86333

5 VSEZ 7908.36 3642.66 4265.70 1013.20 197316 FSEZ 3086.39 1070.13 2016.26 1275.38 9946

7 KASEZ 98582.38 86472.58 12109.80 3410.40 24514

8 ISEZ 1031.29 162.89 868.40 189.71 3305

Total 171498.21 111707.17 59791.04 45756.48 284105

EXPORT, IMPORT, NFE, DURING 2008-09 AND CUMULATIVE INVESTMENT &

EMPLOYMENT TILL MARCH, 2009 BY EOUs (Values In US $ Million)

S.No. SEZs

EXPORT

In US $

Miln.

IMPORT

In US $

Miln.

NFE In US $

Miln.

INVESTMENT

In US $ Miln.

1 NSEZ 2306.60 550.40 1756.20 494.52

2 SEEPZ-SEZ 4030.83 1589.17 2441.66 1136.67

3 MSEZ 3053.63 1024.06 2029.57 5207.10

4 CSEZ 3847.78 1262.87 2584.91 1829.88

5 VSEZ 1719.46 792.00 927.46 220.29

6 FSEZ 671.05 232.67 438.38 277.30

7 KASEZ 21434.07 18801.13 2632.95 741.50

8 ISEZ 224.23 35.42 188.81 41.25

Total 37287.65 24287.70 12999.95 9948.51


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Export from EOUs & its share in Country's Export & Net Foreign Exchange earned by EOUS (Values

In Rs Crores)

Year EOUs'Exports

EOUs'

ExportGrowth

Rate % over

prev. year

India'sExports

India's

ExportGrowth

Rate % over

prev. year

EOUs'

%

share of

India's

export

EOUs'Imports

1997-

9810278.51 130101 9.50 7.90 2566.88

1998-

9912058.27 17.32 139753 7.40 8.63 3104.80

1999-

200013701.29 13.63 159561 14.20 8.59 3014.70

2000-

0115912.00 16.14 203571 27.60 7.82 3659.01

2001-

0218743.45 17.79 209018 2.70 8.97 5940.81

2002-

0323590.60 25.86 255137 22.06 9.25 6973.00

2003-

0428827.58 22.20 293367 14.98 9.83 9928.00

2004-

0539228.40 36.08 375340 27.94 10.45 16692.11

2005-

0649462.35 26.09 456418 21.60 10.84 30485.96

2006-

0769964.60 41.45 571779 25.28 12.24 30154.50

2007-

08168838.80 141.32 655863 14.71 25.74 108209.59

2008-09(P)

171498.20 1.58 839978 28.07 20.42 111707.17

Average Annual growth rate percentage (during last 5 Years (2008-09/2003-04)

In Rs.Term In US $ Term

Growth rate of Export over last 5 years 469.43 468.91

Avg Annual Growth Rate % 93.89 93.78
http://www.eouindia.gov.in/eou_distribution_main.htm#002http://www.eouindia.gov.in/eou_distribution_main.htm#002http://www.eouindia.gov.in/eou_distribution_main.htm#002http://www.eouindia.gov.in/eou_distribution_main.htm#002

2011 gs indian econ handout 23

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