7.

Benefits derived from SEZs

SEZs are good from the point of view of growth and development. It increases income level of citizens,
encourages competition and lowers labor costs.
1.Export Performances
Exports from the functioning SEZs during the last six 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 93%
Source : Economic Survey 2009-2010

2.Attracts FDI and exchange earnings:
FDI spells long term capital that can help sustain solvency. Also FDI will ensure meaningful ownership, in
times of adverse claims pay put, it is only through the FDI route that foreign stake holders will infuse
capital to come over the adverse situation The state id well informed about the latest technology and
also relevant information regarding the trade that goes on all over the world and how the domestic
producers can penetrate into several markets. And private businesss can position them in the world
market and boost the standard of living of citizens.

3.SEZs also create a lot of job opportunities:
Also when SEZs become a success it increases the GDP, and acts as a good economic model for the
policy makers to mimic.

8.DISADVATAGES

1.First and main loss of SEZ is large scale acquisition of land takes place which results in displacement of
farmers and alternate means of livelihood are not available for them. This issue is a major problem; it
is tough to relocate them to other jobs. It has to be seemed that it could create socio-economic
disparities as the SEZ would accommodate the high and mighty the poor people will be pushed towards
poverty and unemployment.

2.Second is lack of cultivable land, if cultivable land should be short than growth of agriculture should be
reduced. Thats why the prices of food grains should be more up and inflation rate will be at top.

3.Third in the area of employment the disadvantage of SEZ is quite similar to the disadvantages of Wal-
Mart entering retail business. New jobs are created and working conditions improve, but for whom? It
is for the educated masses and the literate people and not for the laborers. Laborers suffer in the form
of; forced overtime, exhausting work schedules; poverty pay, and unhealthy working conditions. The
majority of workers in the SEZ units are women who are exposed to the most humiliating sexual
harassment s. Free trade creates a race to the bottom, whereby developing countries lower their
labor charges and environmental standards in an effort to attract foreign
investment.

4.Fourth, Companies would like to simply relocate to SEZ to take advantage of the tax concessions
being offered. This will bring about a significant revenue loss to the government. The companies that
incorporate under SEZ enjoy a lot of tax holidays, this will result in a kind of disguised industry just as
disguised unemployment. The Finance Ministry has estimated that SEZs could run up a revenue loss of
Rs 1, 75,000 crore in direct taxes, custom and excise duties over the next five years. At in the last,
question is that what is the importance and necessity of SEZ in India? Is SEZ compulsory on the cost of
thousand acres cultivable land, and the livelihood of farmers? Due to this sage government bare the lot
of revenues losses, Farmers are fighting with the government and government surrendered in front of
industrialist.

Why is SEZ important?
9.Investment and employment in the SEZs set up prior to the SEZ Act,2005

At present, 1943 units are in operation in the SEZs. In the SEZs established prior to the Act coming into
force, there are 1143 units providing direct employment to over 1.97 lacks persons; about 37%of whom
are women. Private investment in these SEZs established prior to the SEZ Act is of the order of over
Rs.5626.24crore.

10. CURRENT INVESTMENT AND EMPLOYMENT



11.Challenges before SEZ

1) All Indians want to countries economic development, this is main dream of our citizen but benefits of
SEZ will not get to pour people SEZ has to solve it.
2) With the acceptance of globalization we are making big valley between rich and poor and it is reverse
effect to our democracy.
3) SEZ will end all labors welfare policy which is not suitable for democracy.
4) All over India farmer are making strong appose to SEZ because Govt. acquiring their under fertility
land, therefore proper channel of acquisition is important to govt.
5) Which solutions govt. will choose for loosed revenue from SEZ?





12. Measures to Improvement

1) Govt. has to acquire fallow ground not under fertilizer lands.
2) When acquisition of land of farmer govt. have to take reliable steps for rehabilitation of farmer and
give rational cost of their lands.
3) Govt. have to decide perfect rules and regulation for acquisition of land for SEZ.
4) For which purpose land is being acquired only that purpose land should be used.


13. CONCLUSIONS:
The above explanation, it is indicated that there are some disadvantages of SEZ and also some
advantages. When in 1991 we accepted the policy of LPG (Liberalization, Privatization and Globalization)
there was much crises and protest against it. But today we are getting its fruits. In the same way if we
avoid the disadvantages of SEZ, and accepted SEZ, it will definitely help to develop Economic growth.



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FAILUR OF SCZ

New Delhi: They were supposed to be Chinese-style, self-contained industrial enclaves aimed at turning
India into a powerhouse of manufacturing for exports, but things havent quite gone according to plan. In
its initial findings, a study commissioned by the commerce ministry now proffers two reasons why the
Special Economic Zones (SEZs) didnt work. Incentives offered under the foreign trade policy to exporters
outside of the zones and disincentives arising out of free-trade agreements (FTA) snagged the SEZ
policy, the study has found. The commerce ministry commissioned the think tank Indian Council for
Research on International Economic Relations (ICRIER) to do the comprehensive cost-benefit analysis of
the SEZ policy. Arpita Mukherjee, a professor at ICRIER who is heading the study team, said the
implementation of the foreig n trade policy in 2009, through which a slew of export incentives were given
to exporters outside SEZs, acted as a disincentive to invest in SEZs. In a way, you created zones to
promote exports and disincentivized such activity by giving more export benefits to units outside such
zones, she said. The commerce ministry provides incentives to exporters outside SEZs through the duty
drawback scheme, and focus market and focus product schemes, among others. The duty drawback
scheme allows manufacturers to seek a refund of duty paid on imported materials used in the
manufacture of goods which are exported; the focus market and focus product schemes incentivize
exports to specific geographical regions and specific products. Mukherjee said ideally such benefits
should also have been extended to SEZs to ensure a level playing field. The situation further aggravated
with the global economic downturn of 2008-09 when demand for Indian goods fell drastically and duty-
free sale of SEZ products within the country was not allowed, she said. Since the SEZ policy was
announced in 2000, 576 formal approvals have been granted for setting up of such enclaves, out of which
392 SEZs have been notified. Only 170 are operational. One of the most common refrains against the
SEZs has been that they failed to achieve their intended objective of encouraging manufacturing exports
from India and instead became attractive centres for information technology firms to avail of tax incentives
by shifting to the zones from domestic tariff areas. To be sure, SEZs have access to duty-free imports of
manufacturing inputs because technically they are considered to be outside of the countrys domestic
tariff area. But, with India signing free-trade agreements with countries where duties on many products
are eliminated or reduced substantially, the advantage accruing to SEZs was negated, Mukherjee said.
Such a situation does not arise in other countries since their differential tariff rates are much lower than
India, she said. India has free-trade agreements with countries such as Sri Lanka, Japan, South Korea
and the Association of South-East Asian Nations, which groups Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The ICRIER study was
commissioned in April this year against the backdrop of declining interest in SEZs after the government
imposed a minimum alternative tax on SEZ units in April 2012 and to examine many negative perceptions
about the industrial zones. The commerce ministry also asked ICRIER to examine the impact of foreign
trade policy and the regulatory framework as well as analyse incentives provided under free-trade
agreements signed by India with other countries and their effect on the SEZs. Mukherjee pointed to a
difference between the models followed by China and India while China created a limited number of
large, self-sustainable, confined enclaves near port facilities to boost exports, India opted to license a
large number of SEZs without ensuring proper infrastructure outside the zones. There is another hurdle
that SEZs face. Tax incentives granted to SEZs are seen as breaching World Trade Organization rules
that bar financial contributions by a government or public body. Units in SEZs still enjoy income-tax
benefits. Mukherjee said countries impose countervailing duties to negate direct tax subsidies, which
reduces the competitiveness of exports from such enclaves. So far, 33 countervailing duty measures
have been slapped on against India, second only behind China (42). We have to substitute such tax
incentives to SEZ units by subsidies on inputs, which are used in production of exports material and are
not considered subsidy under WTO rules, Mukherjee said. Looking at SEZs only from the incentives
perspective is a narrow approach to the problem, said Biswajit Dhar, director general, Research and
Information System for Developing Countries, a think tank under the external affairs ministry. SEZs were
supposed to be areas where government provides state-of-the-art technology and infrastructure facility.
However, later they were left to private developers. We should go back to the original idea and develop
such zones as pockets of excellence, he said. SEZs should provide better infrastructure facilities, which
in turn will reduce the cost of operations and act as an incentive for exports, said Ajay Sahai, director
general of the Federation of Indian Export Organisations. When it comes to allowing SEZs to sell in
domestic market, one has to take into consideration the concerns of the domestic manufacturers, he
said.

Read more at: http://www.livemint.com/Politics/pZ1V1BKitKNV1tzWqIIShL/Study-lists-why-Indias-special-
economic-zones-policy-didnt.html?utm_source=copy

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Governments policy on SEZ is failing
he Special Economic Zone (SEZ) policy is failing in India. Out of the total 558 approved
SEZs, only 158 are operational. On the other hand, many companies, which were allotted
land for SEZs are surrendering them.
The SEZ Act was introduced in 2005 with a view to create infrastructure and employment
enclaves, which would put the economy on the fast track to growth. It was based on the SEZ
model in China, which is quite successful in terms of export competitiveness, employment
generation, GDP growth, and attracting foreign investment.
Though the idea of SEZs was to promote all sectors, out of the 158 operational SEZs, about
90 were for the IT business. The number of manufacturing SEZs was much lower. As many
as 34 approved SEZs have surrendered due to low demand and the economic slowdown.
Those who surrendered include Reliance Industries and real estate company Parsvanath,
while Unitech is planning to sell its SEZ in Haryana. Earlier, companies like JSW Bengal
Steel, Videocon Reality and Infrastructure and L&T too surrendered their SEZs.
As per the ministry of commerce's reply to a parliamentary standing committee on
commerce, the biggest hurdles are availability of land, poor single window system and lack
of coordination among departments, both at the Central as well as state government level.
"Moreover, many states do not have an SEZ policy to enable benefits envisaged under the
SEZ Act and Rules. In addition to this, taxes are also being imposed on SEZs while they are
generally tax free zones worldwide," said the report.
The committee, expressing concern over non-utilisation of the land, said, "It has come to
our notice that though the land was acquired for establishing SEZs, no industries came up
there. Instead real estate business has become prosperous in the guise of SEZ and the rich
fertile land of the farmers were being diverted without any real development."
With a view to encourage companies' participation in the SEZs, the government recently
reduced the mandatory requirement of 10 hectares of minimum land area for setting up IT
SEZs. Now, the minimum built-up area requirements to be met with by SEZ developers is
100,000 sqm for the seven major cities, 50,000 sqm for B category cities and 25,000 sq m
for other cities. However, it remains to be seen whether this is sufficient to attract
companies.
Interestingly, the SEZs have shown a good revenue growth ($66 billion in 20122013, 23%
of India's total exports) but it is still far behind compared to China.
According to Ashutosh Limaye, Head Research of Jones Lang LaSalle (JLL) India, a real
estate firm, there were certain decisions, which impacted the SEZ story. "The imposition of
minimum alternate tax (MAT) and dividend distribution tax (DDT) on SEZ entities was a
major reason. Their imposition was contrary to the initial idea of promoting SEZs," he said.
Prem Chand Gupta, a member of the Parliamentary standing committee on commerce, said
the government should adopt a positive industrial policy outlook to attract the investors. He
also called for financial incentives with proactive policy reforms for promoting SEZs.