Aravali Institute of Management

(An institution of Marwar Education Foundation)

Legal Aspect Of Management

Topic:-Special Economic Zone and Associated Legal Regime in

India : Failure or Success

Submitted To:- Submitted By:-

Mr Trideep Raj Bhandari Group no. 1
PGP 1

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SEZ (Special Economic Zone)
Introduction:-

With a view to overcome the shortcomings experienced 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 fiscal package, 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 procedures and for single window clearance on matters
relating to central as well as state governments. The main objectives of the
SEZ Act 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;

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India was one of the first in Asia to recognize the effectiveness of the Export
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.
• 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).

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.

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Approval mechanism:-
The developer submits the proposal for establishment of SEZ to the
concerned State Government. The State Government has to forward the
proposal with its recommendation within 45 days from the date of receipt of
such proposal to the Board of Approval. The applicant also has the option to
submit the proposal directly to the Board of Approval.

The Board of Approval has been constituted by the Central Government in

exercise of the powers conferred under the SEZ Act. All the decisions are
taken in the Board of Approval by consensus. The Board of Approval has 19
Members. Its constitution is as follows:

(1) Secretary, Department of Commerce Chairman

(2) Member, CBEC Member
(3) Member, IT, CBDT Member
(4) Joint Secretary (Banking Division), Department of
Economic Affairs, Ministry of Finance
(5) Joint Secretary (SEZ), Department of Commerce Member
(6) Joint Secretary, DIPP Member
(7) Joint Secretary, Ministry of Science and Technology Member
(8) Joint Secretary, Ministry of Small Scale Industries and Member
Agro and Rural Industries
(9) Joint Secretary, Ministry of Home Affairs Member
(10 Joint Secretary, Ministry of Defence Member
)
(11 Joint Secretary, Ministry of Environment and Forests Member
)
(12 Joint Secretary, Ministry of Law and Justice Member
)
(13 Joint Secretary, Ministry of Overseas Indian Affairs Member
)
(14 Joint Secretary, Ministry of Urban Development Member
)
(15 A nominee of the State Government concerned Member
)
(16 Director General of Foreign Trade or his nominee Member
)
(17 Development Commissioner concerned Member
)
(18 A professor in the Indian Institute of Management or the Member
) Indian Institute of Foreign Trade
(19 Director or Deputy Sectary, Ministry of Commerce and Member
) Industry, Department of Commerce Secretary

Administrative set up:-

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The functioning of the SEZs is governed by a three tier administrative set up.
The Board of Approval is the apex body and is headed by the Secretary,
Department of Commerce. The Approval Committee at the Zone level deals
with approval of units in the SEZs and other related issues. Each Zone is
headed by a Development Commissioner, who is ex-officio chairperson of the
Approval Committee.

Once an SEZ has been approved by the Board of Approval and Central
Government has notified the area of the SEZ, units are allowed to be set up in
the SEZ. All the proposals for setting up of units in the SEZ are approved at
the Zone level by the Approval Committee consisting of Development
Commissioner, Customs Authorities and representatives of State
Government. All post approval clearances including grant of importer-exporter
code number, change in the name of the company or implementing agency,
broad banding diversification, etc. are given at the Zone level by the
Development Commissioner. The performance of the SEZ units are
periodically monitored by the Approval Committee and units are liable for
penal action under the provision of Foreign Trade (Development and
Regulation) Act, in case of violation of the conditions of the approval.

Background and concept of sezs

In 1990 the then union commerce minister visited the high tech SEZ in china. He got
impressed by their contribution to the rapid growth of GDP. He wanted to imply it in
our country. But export promotion zone EPZ was already exist. But EPZ was not so
effective because of the result in chine. The government of India announced SEZ
policy in march 2000 under export import policy that time Mr. Maran was the union
minister of commerce and Industries. But existing government defeated in 2004 so he
could not fetch his plan for bid. but the new govt. come out with SEZ act 2005 which
attained the assent of president on 23rd June.

Objectives of SEZ
•Generation of Economic activity
• Promotion of exports of goods and services
• Promotion of investments from foreign and domestic sources

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 • Creation of employment opportunity
• Development of infrastructure facility

Some provisions of SEZ

• there will be 100% tax exemption from labor law.
• SEZ includes three types of zone there is multi product, SEZ sector specifics
zone, port and airport based SEZ and free trade & warehousing zone/
• SEZ can be established mainly for manufacturing goods for provider’s
specified circumstances.

SEZ is a geographical area to produce goods which has their separate economic
laws which are more liberal than the economic laws which are visits in the
country. SEZ is establishe3de for the promotion of foreign trade.

Before SEZ there was one another zone called EPZ exports promotions zone. it
was Established in 1965 kandala. It was established to attract the foreign investors
to import raw material and export the manufactured goods. This zone also herds
the liberal law like labor low and liberal tax.

SEZ is established to enhance the economic growth of India. but if govt. charges
the policy will also be charged. So to project the policy by happening this
government has made a SEZ act which binds the policy& laws. So new SEZ is
providing the employment and better quality product. Now we can say that India
will be able to make a place in International economy with the help of SEZ

Facilities to SEZ
• There is CST exemption for SEZ
• Service tax is also exempted for SEZ units
• Minimum alternate tax is exempted for SEZ unit
• There is 100% income tax exemption on the income of export for SEZ
• SEZ can import goods without duty

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Concept of SEZ
SEZ was established to improve growth of country. It was established to improve
our exports & foreign investment. SEZ has provided improvement in export &
foreign investment. It has provided us employment, infrastructure and better
quality product. So now government is thinking to provide them more fiscal or
non fiscal facilities or exemption so that it can be motivated more and more. So
that it can provide us more improvement in our export. It can contribute in the
growth of country.

SEZ provides cost effective unit to the manufacturer. So that manufacturer can
take risk easily. SEZ is bounded with laws & ethics which has government
support so they can save their time which is consumed in government formalities.
As I mentioned earlier that SEZ has provided employment & got foreign
investment here I am presenting some data regarding these

At present, 1016 units are in operation in the SEZ, providing direct employment to
over 3.49 lakh persons; about 40 per cent of whom are women. Private investment
by entrepreneurs in the SEZ established prior to the SEZ Act is of the order of
over Rs. 81000 crore. In the 63 notified SEZ which have come up after 10th
February 2006, investment of Rs. 13,435 crore has already been made in less than
one year.

Conclusion
Now I can say that SEZ was established by getting inspiration from China. Our
Minister thought that it would work in India as It worked in China. The main
Objective was to improve the overall economic growth in India. To achieve
overall growth we focused on foreign investment and export because that time we
were lagging behind in both the fields. That’s why SEZ was established with more

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 facilities and exemptions in rules and taxes. SEZ did it work effectively. It gained
the targeted goals. It improved exports and was able to attract foreign investment
along with it provided great opportunity of employment.

[1] www.nanguneri.com date may 01 2008, author sezindia.nic.in Posted by israels 72

[2] R. Shashi Kumar M.A. M.Phil, Ph.D,Department of commerce Bangalore
university Article sez in India Page no. 6,7

International Status of Special Economic Zone

Due to benefits from special economic zones there is huge significant expansion
noticed during recent years. I 2006 3500 special economic zones operated in 130
countries in all over the world and accounted over $600 billion in export and 66
million direct jobs are increased due special economic zones. The popularity of
special economic zones is increased due to provide trade terms for manufacture –
based export. Special economic zones attract investment and foreign exchange.
Special economic zones help countries to improve spur employment generation,
facilitate adoptions of improved technologies and assist in creation of
infrastructure.
Country wise US has more number of special economic zones due to its
attractiveness to foreign trade and local business. After US China is most popular
for their special economic zones by adopting export-oriented strategies during
1980s and 1990s. The central feature of china was to established of special
economic zones and Costal cities.
There are lots of countries which have no. considerable special economic zones
like Vietnam, Hungary, Cost Rica, Mexico etc.
In Asian there are lots of countries who implemented special economic zones to
improve their development strategies and for improve there countries
infrastructure, promoting employment and export.

Global Distribution Of EPZs/SEZs

Item 1975 1986 1997 2002 2006

1 2 3 4 5 6
No. of 25 47 93 116 130
countries
No. of EPZs 79 176 845 3000 3500
Employment ---------- ----------- 2205 43Durgesh 66
(million)
Page 8 06-
11-2010

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 Major social economic zones in the world with employment and
export

Country NO.of zone Country Employment Country Export

China 187 China 50000 China 145000

Vietnam 185 Indonesia 6000 Malaysia 117013

Hungary 160 Mexico 1300 Hong kong 101500

Costa rica 139 Vietnam 950 Iran 87289

109 Pakistan 888 Ireland 82500
Mexico

The United states:- The United states is top listed for manufacturing investment
for economic zone due to its foreign trade zones . Foreign trade zones are played main
role to establish US as a hub for manufacturing.
The FTZs in the US as designated sites where special customs procedures apply and
the FTZs .

China:- after US China is the second country who makes special economic zones at
wide area. The first four place where china makes special economic zones are
Shenzhen (32750 hector), Zhuhai (12100), Shantou (23400) and Xiamen (13100).
Apart from social economic zone china has various economic zones depending upon
its various geographical locations, type of investment and region political structure
such as open coastal area, open economic zones, state level economic and technology
development zones.Cummulative 20% of the total FDI into china has made to it’s way
into china.

Ireland:- Ireland has enacted free zone customs procedures within the overall
ambit of EU laws. Ireland has one operational Free Zone – Shannon Free Zone.
Shannon was a hub airport during the early transatlantic air travel. When modern
long flying aircrafts comes into picture, Shannon lost its geographical importance. In
1959, Government of Ireland decided to develop an industrial hub at Shannon and
declared it as a Free Zone. The zone has a total area of 240 hectare. Some of the
sectors operating in the zone are engineering, electronics, telecommunication,
aviation, software, shared services, logistics and transport and financial services.

Poland:- Introduction of social economic zones in Poland is in 1950. The main

objectives of developing the social economic zones were creating employment,
protecting the environment, applying new technology, managing natural resources,
and taking advantage of unused assets and infrastructure. In order to attract investors,
preferential tax treatment applies to the SEZs. An important aspect of the policy is to
provide incentives based on type of investment, quantum of investment, the number
of local people employed and trained. Some of the prominent industries established in
the zones are automotive and automobile parts, aircraft manufacturing, metal
working, food processing and beverages. At present, there are 17 special zones in
Poland covering an area of around 6338.92 hectare. The zones currently employ more

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than 14,000 people. Euro Park Mielec, spread over 575 hectare, is one of the
successfully operating SEZ in Poland.

South East Asia: In South East Asian , Cambodia follows the international best
practice of avoided different tax incentives for firms located in SEZ/EPZ. H. The
duration of the tax holiday in Vietnam’s promotion zone is 2–4 years, except for high-
tech zones for which it is 8 years. Thailand offers complete withholding tax
exemption in its zones, while Vietnam provides for a reduced rate, essentially making
the provision of direct incentives more favourable.

Afghanistan:-The government of Afghanistan has expressed strong interest in the

potential for the IGC to provide support on the development of the country’s
growth policies. The IGC organized a workshop in response to this demand
which took place in March 2010 and featured discussions on supply- and
demand-side issues in the drug economy, financial and information services,
management of mineral resources, land titling, the construction sector, Special
Economic Zones, women in the economy, and labor and wage issues.

GERMANY:- SEZ is an independent economic entity within the Steinbeis

Foundation. It was founded in March 1990 as the operational unit of the
Commissioner for Europe of Baden-Württemberg's Minister of Economic Affairs.
The main region to established SEZ in Germany is to promote European RTD
programmes and to support cross-border technology transfer. SEZ has offices in
Stuttgart and Karlsruhe. The SEZ team is made up of 30 well qualified members of
staff. SEZ has been partner in the Enterprise Europe Network of the European
Commission with about 600 participating organisations in over 40 countries. The
network provides information and advice to companies, universities and research
organisations on EU matters, innovation, research and technology transfer. It is also
promoting the exploitation of European research results.
SEZ is partner in the Baden-Württemberg consortium together with Handwerk
International, the Ministry of Economic Affairs and seven Chambers of Industry and
Commerce. The Enterprise Europe Network builds on the former network of
Innovation Relay Centres. From 1993 until 2008, SEZ has been one of eight
Innovation Relay Centres in Germany (71 in Europe). Between 2000 and spring 2008
it has been consortium leader of the IRC Stuttgart - Erfurt - Zürich, the Innovation
Relay Centre for the German regions Baden-Württemberg and Thuringia as well as
for the German speaking part of Switzerland.

SEZ is the National Contact Point for small and medium sized enterprises in Baden-
Württemberg. At the same time it acts as EU-Contact Point for Universities in Baden-
Württemberg.

For the benefit of its clients, SEZ is involved in different cooperation networks – in
particular the Steinbeis transfer network with more than 700 Steinbeis Enterprises in
Baden-Württemberg and beyond and the Enterprise Europe Network.
• SEZ's services include:
• Providing information regarding European research programmes and other EU
funding possibilities

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 • Offering advice regarding European project bidding and the financing of
projects
• Analysing the research and innovation potential of enterprises
• International partner search for partners in transnational projects and
technology transfer
• Project management
• Offering support in the exploitation of research results and in transnational
technology transfer by
company missions and international brokerage events
• Development of regional strategies technology foresight
• Event management

Indonesia:-Indonesia hopes foreign investors to invest more in its Special

Economic Zone (SEZ), or Free Trade Zone (FTZ) located in Batam, Bintan and
Karimun, the three islands in Riau isles province, the Jakarta Post reported here on
Monday.
The zone is a prototype of the special economic zone designed to become a business
and industrial centre for domestic and multinational firms.
It offers various administrative facilities, such as licensing, taxation and complete
infrastructure to support the business and industries.
"Implementing the SEZ concept in a number of areas is necessary because we are
competing with other countries which are also doing the same thing," Riau islwes
governor Ismeth Abdullah said.
The regional official who has been chairing Batam Industrial Development Authority
(BIDA) for 11 years said that he began the fight for FTZ status when he was
appointed by former president Baharuddin Jusuf Habibie in 1998 as the chairman of
BIDA.
BIDA is an institution formed by former president Suharto in 1971, which is
accountable to the president to develop Batam island as the first International scale
Industrial zone in Indonesia to compete with similar zones in the Asia Pacific region.

Conclusion

• Special Economic Zone operated in 130 countries in all over the world and
accounted over $600 billion in export and 66 million direct jobs are
increased due special economic zones.
• The popularity of special economic zones is increased due to provide trade
terms for manufacture –based export. Special economic zones attract
investment and foreign exchange.
• Special economic zones help countries to improve spur employment
generation, facilitate adoptions of improved technologies Durgesh and
assist in creation of infrastructure.

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 • Mainly special economic zone mostly popular in United Status, China,
Afghanistan, Indonesia, Kenya, Poland, Germany, India, Pakistan.

http://www.rbi.org.in/scripts/publicationreportdetails.aspx?urlpage=&id=558
http://theigc.org/taxonomy/term/Afghanistan

http://www.secure-force.eu/index.php?
option=com_content&task=view&id=24&Itemid=55

Land Acquisition Act

The Land Acquisition Act of 1894 is a legal Act in India which allows the
Government of India to acquire any land in the country.

“Land Acquisition” literally means acquiring of land for some public purpose by
government/government agency, as authorized by the law, from the individual
landowner(s) after paying a government fixed compensation in lieu of losses incurred
by land owner(s) due to surrendering of his/their land to the concerned government
agency.

The land acquisition act of 1894 was created with the expressed purpose of
facilitating the government’s acquisition of privately held land for public purposes.
The word "public purpose", as defined in the act, refers to the acquisition of land for
putting up educational institutions or schemes such as housing, health or slum
clearance, apart from the projects for rural planning or formation of sites. The word
"government" refers to the central government if the purpose for acquisition is for the
union and for all other purposes it refers to the state government. It is not necessary
that all the acquisition has to be initiated by the government alone. Local authorities,
societies registered under the societies registration act, 1860 and co-operative
societies established under the co-operative societies act can also acquire the land for
developmental activities through the government.

Procedure for the Land Acquisition

1. Investigation

• When a local authority or a company requires a land, an application is required

to be made by it to the revenue authority.
• The application should be accompanied with a copy of the plan showing
survey nos., purpose of acquisition and the reason for the particular site to be
chosen and the provision made for the cost of the acquisition.

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• After the government has been fully satisfied about the purpose, the least area
needed, and other relevant facts as provided under land acquisition rules, it
will issue a notification under Section 4 of the act that the particular land is
required for public purpose.
• One of the revenue officers is appointed as the collector to hold an inquiry
under Section 5-A of the Act.
• After notification the owner is prohibited from selling his property or
disposing of it and prevented from carrying out any works of improvements
for which no compensation will be paid if executed without prior permission
from the collector.

2. Objection and Confirmation

• Objections are invited from all persons interested in land within thirty days
from the date of notification.

• The objections will be valid on one or more of the following grounds:

o i. That the purpose for which the land is proposed for acquisition is not
a public purpose.
o ii. That the land is not or less suitable than another piece of land for the
said purpose.
o iii. That the area under acquisition is excessive.
o iv. That the acquisition will destroy or impair historical or artistic
monuments or will desecrate religious buildings, graveyards and the
like.
• The collector after hearing the objections will submit his report to the
government who will finally declare the land for acquisition under the Section
6 of the Act.
• After notification the collector proceeds with the claim. He has the site marked
out, measured and a plan of the same is made.

3. Claim and Award

• The collector will issue notices under Section 9 to all persons interested in the
acquisition to file their claim reports.
• The collector is not to be a party to the proceedings, is to possess an expert
knowledge on valuation, and offers a fair price to an owner and checks that the
public funds are not wasted.
• The claim filed should contain the names of the claimants and co-shares if any
rents or profits for last three years and a valuation report of the land from an
architect or an engineer.
• The government can abandon the acquisition proceedings by simply canceling
the notification. However, in that case compensation has to be paid under
Section 48(2).
• In determining the compensation the market value of the land is determined at
the date of notification. The rise and fall in the value during the period of
transaction and notification is taken into consideration.
• Compensation is also payable when:
o i. Part of the property is proposed for acquisition in such a manner that
the remainder depreciates in value.

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 o ii. When the land notified for acquisition has standing crops or trees.
o iii. If the person interested has to change his place of residence or
business then the excess rent payable for the new premises is also
considered for compensation.
• Matters which are not taken into consideration for the purpose of land
acquisition are:
o i. The degree of urgency which has led to the acquisition.
o ii. Any disinclination of the person interested to part with the land.
o iii. Any increase in the land value likely to accrue from the use to
which it will be put when acquired.
• • After necessary inquiries the collector declares his award showing true area
of the land, total amount of compensation payable and apportionment of
compensation if there are more than one owners or claimants.
• The collector has to make the award under section 11 within a period of two
years from the date of notification.

4. Reference to Court

• Any person interested to whom the award is not satisfactory can submit a
written application to the court.
• This application should be made within six weeks from the date of declaration
of the award.

5. Apportionment

• In apparent of the compensation each of the claimants are entitled to the value
of his interest, which he has lost, by compulsory acquisition.
• Thus it is required to value a variety of interest, rights and claims in the land in
terms of money.

Special Economic Zone (SEZ) Act 2005

• ESTABLISHMENT OF SPECIAL ECONOMIC ZONES
Procedure for making proposal to establishment of SEZs-Establishment of
SEZ and approval and authorisation to operate to, Developer - Guidelines for
notifying SEZe - Processing and non-processing areas Exemption from taxes,
duties or cess
• CONSTITUTION OF BOARD OF APPROVAL
Constitution of Board of Approval - Duties, powers and functions of Board -
Suspension of letter of approval and transfer of Special Economic Zone in
certain cases
• DEVELOPMENT COMMISSIONER
Development Commissioner - Functions of Development Commissioner
• SINGLE WINDOW CLEARANCE
Approval Committee - Setting up and OBU, IFSC- Agency to inspect,

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 enforcement, investigation, inspection and search or seizure - Designated
Courts - Appeal to High Court
• Special Fiscal Provisions for SEZs
Exemptions, drawbacks and concessions - Provisions of Income-tax Act -
Duration of goods or services - Transfer of ownership and removal of goods
-Domestic clearance by Units
• SEZ AUTHORITY
Constitution - Staff - Transfers - Functions - Grants and Loans - Accounts and
Audit - Returns - Directions by the Government -Power to supersede
Authority
• MISCELLANEOUS
Reference of dispute -Limitation - Power to modify provisions - Power of
State Government - Power to make rules -Power to remove difficulties -
Amendment of certain enactments-Savings.
• THE FIRST SCHEDULE
(See sections 7 and 54) Enactments
• THE SECOND SCHEDULE
THE SECOND SCHEDULE- (See section 27) MODIFICATIONS TO THE
INCOME-TAX ACT, 1961. (43 of 1961)
• THE THIRD SCHEDULE
AMENDMENT TO CERTAIN ENACTMENTS -AMENDMENT TO THE
INSURANCE Act, 1938 - AMENDMENTS TO THE BANKING
REGULATION ACT, 1949 -AMENDMENT TO THE INDIAN STAMP
ACT, 1899

Success or Failure of Special Economic Zones

(SEZ) in India
SEZ started his functions 1-11-2000 to 9-2-2006 under the provisions of the foreign
trade policy. The main reason of establishing the SEZ was to increase foreign
investment, economic development, promote business environment, increase the
exports of India etc. As we know that success and failure are the two sides of a coin
so SEZ also has the same.
Success of SEz:
 SEZ played a vital role to increase the exports, foreign investment and
generating employment.
 Basically the reason behind the increase in foreign investment was the
infrastructure facilities that attract them.
 In infrastructure facilities we include Road connectivity, Communication,
Medical, Education etc.

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 In achieving those objective Govt. Played vital role as well as private
sectors.
 SEZ helped to generate capital in form of FDI that is necessary for a
developing countries like India.
 SEZ also helped in terms of export policy like no requirement of import
license, exemption from custom duties and central excise duties.
 The SEZ policy also provides favourable and attractive incentives to
enterprises and developers.
 As SEZ helped to industries in many terms it also generated lots of indirect
employment in terms of labour.
 SEZ can be in forms like Export Promoting Zone.
 The success of these Export Promoting Zones’ can be measure in form that
30 years ago 80 Special Economic Zones in 30 countries generated approx 6
billion in exports and approx 1 million people employed but today as they are 3000
SEZ operates in 120 countries and had generated more than 600 billion in exports
and 50 million employment.
 Under SEZ policies central and state government provides many tax
breaks.These tax breaks provides incentives to developers and enterprises and also
provides free world class residential accommodation schools, medical facilities etc.
Due to only these incentives they get ready to spend money on industries. So we
can say that tax breaks given to developers may not be a bad idea or lose.
 The success of SEZ can be measure by following some data:
 Exports recorded an increase of 36.4% in dollar terms from $16 billion in
2007-08 to $22 billion in 2008-09.
 The success of SEZ policy can be measure that it helped in foreign
investment in textiles, hardware, software and generating employment in these
areas.
 SEZ policy in Tamil Nadu changed the industrial situation.
 SEZ policy of Visakhapatnam increased export turnover to Rs 1000 crore
in 2006-07 to Rs 1500 crore in 2007-08..
 SEZ policy of Visakhapatnam also helped in different varieties of
industries like iron and steel, granite, pharmaceuticals, engineering, gems and
jewellery etc.
Agricultural is the backbone of Indian rural areas and due to draught or some
serious problems the cases of suicide were increasing like anything so keep
this point in mind the Indian govt. A special programme was implemented in
31 districts .
 In some rural areas there were some problems regarding land like
irrigation and reinfed, So for more and more productivity its necessary that land
must be productive so a authority was setted the name of that was National Reinfed
Area Authority.
 National Reinfed Area Authority also helped to farmers to address various
aspects like income, production and welfare etc.
 SEZ has also provided many flexible labour law that helped to many
contract appointment for a specific period.
 SEZ provided approval committee for each zone to provide ‘single-
window’ clearance for all matters.

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 SEZ also provides duty free import of capital goods and inputs for
production for export.
 SEZ also provides liberal access to foreign exchange.
 SEZ also helped to get sustainability in economy or faster economic
growth because with the help of SEZ we are able to foreign exchange,
infrastructure development, agriculture development, growth in export etc.
 SEZ also provides liberalization and modernization in many sectors like:
Agriculture, Rural and town, Defence etc.
 SEZ also provides cost effective production to manufacturer because every
necessary things are available like labour etc.
 SEZ allows full exemption from income tax to SEZ units for 5 years 50%
concession for the next five years and exemption from customs and excise duty
from all imported inputs to SEZ developers as well as units located to them.

Some opposition that it faced or

failure
 Full exemption in income tax that comes under fiscal concession that was
given to SEZ units according to time basis and it also include exemption in excise
duty from all imported inputs to SEZ developers, so these units are not required
ever a single amount to pay income tax in comparison to other peoples so it creates
partiality. Such type of tax preference makes tax system complex and creates
evasion and avoidance.
 In the policies under SEZ it was given that multi product SEZ are required
to be minimum size of 1000 hectares but the size restriction for gems and
jewellery, information technology and bio technology it could be below 10
hectares so even though these all sectors are growing and it creates hindrance
among their growth.
 As the main objective of establishing SEZ was to attract foreign investors
to invest in India so FDI is directly depends upon its different types of factors
including policy on FDI itself instead of stable policy environment, infrastructure,
labour law etc.
 SEZ act facilitates the land acquisition for conversion to other uses
forcefully so this creates opposition from the part of farmers.
 Some politicians said that SEZ act was business friendly government and
market friendly government, According to them they are as following:
 Business friendly government works closely with business leaders
individually or collectively to promote their preferred activities.
 Market friendly government focuses more on setting rules for all producers
and sectors.
 SEZ act really helped to grow the export level but it should mean that
production for export and production for domestic start to keep them separate.
 One of the main drawback of SEZ is that it do not address and in fact work
against what is really needed -an economic policy that promotes competition,
innovation and growth throughout the economy, an urban policy that focuses on
affordable housing and services for all, a social policy that actively expands

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 opportunities for all regions and classes and a political policy that bridges the
divide between those who support continuing reform in the role of government and
those who fear the rigours of liberal capitalism.

Conclusion
o After viewing all success and failure sector wise we can say that most
probably SEZ fulfilled it objectivity and attained all possible targets. SEZ policies
according to state wise achieve growth in their respective areas.
o As the main objectivity of establishing SEZ was to increase foreign
investment, increase the export of India, development of business environment or
we can say it was about overall development of economy.
o As SEZ also faced lots of opposition from opposition parties but he
achieve almost all targets.
o The success of SEZ according to sector wise we can even measure from
these some following facts :
o Exports recorded an increase of 36.4% in dollar terms from $16 billion in
2007-08 to $22 billion in 2008-09.
o SEZ policy of Visakhapatnam increased export turnover to Rs 1000 crore
in 2006-07 to Rs 1500 crore in 2007-08.
o SEZ policy of Visakhapatnam also helped in different varieties of
industries like iron and steel, granite, pharmaceuticals, engineering, gems and
jewellery etc.
o SEZ policy in Tamil Nadu changed the industrial situation.
o SEZ also helped to generate employment into country.
o SEZ also helped to generate capital for India in terms of foreign
investment that was basic necessity for a developing country.
o SEZ also helped in agriculture sector as this sector is the backbone of India
in terms it provide them knowledge that how to increase productivity.
o SEZ also provides flexible labour law that helped contractors more and
more.
o SEZ also provides liberalisation and privatization in many different sectors
like: agriculture, defence etc.

o So we can say that overall performance of SEZ was good even though it
faced lots of opposition.

Case study of 4 effected villages in malur Taluk, Karnataka

In this case Karnataka Industrial Area Development Board(KIADB) is Identified

700 acres of land in Malur taluk of Kolar district, Karnataka is identified for

18
acquisition for the formation of industrial estates in Phase IV. In this case 4
villages are affected by KIADB. this land is very useful for Industries and SEZ
because this land is only
50km from Banglore. So KIADB is more interested in this land. In this land many
area are the on roads.

In this 2000 ha of land has been identified for a special economic zone. The land
acquired includes wet land dry land, government grant land to SC/ST people. In
this area they are already purchased the land in Phases I, II, III. It is noted for its
non ransparent and corrupt land acquisitions.

The villager are filed the more than 300 applications citing their objections that
the villagers are not agree to give the land because many farmers are Dalit Thiglas,
and villager who are work in nearly factory. And there is complete lack of
awareness about which land will be acquired and which is spared. And they said
that women earn daily wages of Rs. 40. and men are earn between 50-100. and
formers are have poultry farming and make Rs.15000-20000 in one or a half
month. The villagers are also work in many nearly factory and brick factory or in
other SMEs. So its sufficient for them. The KIADB’s many promises are only
orally, nothing is there in written. And KIADB has promised compensation of Rs.
8-10 lakhs per acre.

The KIADB has said that the region will be developed because of the IT And BT
companies coming there, the roads will be widened, local youths will get
Employment and the price of land owned by farmers will rise 10 times. and they
benefited from the rise in price of land. The Industries have low cost land and
subsidy. Industries are having low cost Labour.

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Problems:
The Karnataka Industrial Area Development Board is starting the project of land
acquisition for industrial estates and special economic zones. They face many
problems these are followings:-
• Farmers have challenged the land acquisition of SEZ. And filed an
objection.
• The farmers have approached the local MLA who has given the assurance
of his support. And also have supports from Raitha Sangha.
• They said that government might take one to ten years to pay the
compensation amount and farmers will not be able to do anything about
this. So how will they survive?
• Farmers from mendalli village say that they don’t need the compensation
and they are not selling their land.
• Farmers demand that give written promise of providing employment to one
member of each family.
• They are not give any written promise related to a site for each family in
this land area.
• Many farmers are demand more compensation because government is give
vary less compensation.
• Farmers are said that sitting up two charities locally. the entire
responsibilities has to be given to these trusts to ensure that developmental
activities are initiated locally.
• They were not awarded that which type of industry is set up their small
scale industries or IT and BT companies.
• People belonging to SC and ST are also having the committee. Preliminary
notice has been issued to their lands also.
• Only few will benefit from the rise in price of the land from Rs.5 lakhs to
about Rs.lakhs.
• KIADB has promised the tanks and lands surrounding the village will not
be enquired but all these promises have been made orally, nothing is in
written. So farmers are worried.
These are the mane problems are faced by the KIADB in this project.

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Solution:

The Karnataka Industrial Area Development Board (KIADB) is facing many

problems in this project. Because the farmers are not agree to give the land. The
solutions of these problems are following.

• The KIADB is give public notice about that there which type of industries
are established in this land, small industries or IT and BT industries.
• The KIADB is give the public notice about phase IV and the give details
about which land in land is acquired. And which is spared.
• The KIADB will be gives all require promise of compensation in written.
• They will try to meet with the farmers and the MLA of thise area.
• They will think about the committee’s points.
• They give written promise of providing employment of one member of
each family.
• The provide employment first the local person and this is not necessary that
the employer is young people.
• The give preference in job only local people of village.
• They provide more compensation of land, compurgation of last they gives.
Because the land value rise very more after the land acquisition.

21
• The industries take more labour on low cast and land also. So they give the
more salary to villager employees so they give the land very easily for land
acquisition and special economic zone.
• The provide jobs on wages of 80-150 so the farmer are know that the
industries are very beneficial for them.
• The KIADB give the written promise that they give special site of the each
family in this land area. Because many peoples are already having many
houses in this require land area.
• They are setting up 4 charities locally. These charities are have
responsibility of developmental activities are initiated locally and provide
employment of the local people.
• This land is very useful for the industries and after this getting this land
many industries are come in this area and state. And the development of
this area is very more than the other area.

Conclusion
• Now we can say that SEZ was established by getting inspiration from
China.
• Our Minister thought that it would work in India as It worked in China.
The main Objective was to improve the overall economic growth in India.
To achieve overall growth we focused on foreign investment and export
because that time we were lagging behind in both the fields. That’s why
SEZ was established with more facilities and exemptions in rules and
taxes. SEZ did it work effectively. It gained the targeted goals. It improved
exports and was able to attract foreign investment along with it provided
great opportunity of employment.
• Special Economic Zone operated in 130 countries in all over the world
and accounted over $600 billion in export and 66 million direct jobs are
increased due special economic zones.

22
• The popularity of special economic zones is increased due to provide
trade terms for manufacture –based export. Special economic zones
attract investment and foreign exchange.
• Special economic zones help countries to improve spur employment
generation, facilitate adoptions of improved technologies Durgesh and
assist in creation of infrastructure.
• Mainly special economic zone mostly popular in United Status, China,
Afghanistan, Indonesia, Kenya, Poland, Germany, India, Pakistan.
• After viewing all success and failure sector wise we can say that most
probably SEZ fulfilled it objectivity and attained all possible targets. SEZ
policies according to state wise achieve growth in their respective areas.
• As the main objectivity of establishing SEZ was to increase foreign
investment, increase the export of India, development of business
environment or we can say it was about overall development of economy.
• As SEZ also faced lots of opposition from opposition parties but he
achieve almost all targets.
• The success of SEZ according to sector wise we can even measure from
these some following facts :
• Exports recorded an increase of 36.4% in dollar terms from $16 billion
in 2007-08 to $22 billion in 2008-09.
• SEZ policy of Visakhapatnam increased export turnover to Rs 1000
crore in 2006-07 to Rs 1500 crore in 2007-08.
• SEZ policy of Visakhapatnam also helped in different varieties of
industries like iron and steel, granite, pharmaceuticals, engineering, gems
and jewellery etc.
• SEZ policy in Tamil Nadu changed the industrial situation.
• SEZ also helped to generate employment into country.
• SEZ also helped to generate capital for India in terms of foreign
investment that was basic necessity for a developing country.
• SEZ also helped in agriculture sector as this sector is the backbone of
India in terms it provide them knowledge that how to increase productivity.
• SEZ also provides flexible labour law that helped contractors more and
more.
• SEZ also provides liberalisation and privatization in many different
sectors like: agriculture, defence etc.

• So we can say that overall performance of SEZ was good even though it
faced lots of opposition.

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