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ACKNOWLEDGEMENT

We take this opportunity to thank our H.K.Training Centre which has given

us such an opportunity to present our thoughts threw this project.

We could like this project guide Mr. N.S.Trivedi sir whose keen

interest in this project and patience of clearing all our queries that

arose during the project. He not only helped us to solve queriesbut also helped in other problems Too. His suggestion and

encouragement help us very much too successfully complete our

project.

Last but not least we will never forget H.K.Training Centers staff

members for their support during this period of time. Also those

friends who have been helpful throughout in the preparation of

the project.

Thank you,

NarendraPatel (Roll no. 40)

Yagnesh

Patel (Roll no.44)

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Bhave

sh Patel (Roll no.35)

Chetan Sheladiya (Roll no. 66)

CERTIFICATE

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THIS IS TO CERTIFY THAT MR.NARENDRA PATEL,

MR.YAGNESH PATEL, MR.BHAVESH PATEL AND MR.

CHETAN SHELADIA OF H.K.CENTER FOR

PROFESSTIONAL TRAINING HAS SUBMITTED THEIR

PROJECT SPECIAL ECONOMIC ZONE IN THE YEAR

2010-2011 IN PARTIAL FULFILLMENT OF THE

REQUIREMENT EOR THE COMPLETION OF PROJECT

WORK AT THE POST GRADUATE DIPLOMA IN EXPORT -

IMPORT MANAGEMENT AND INTERNATIONAL FINANCE ,

GUJARAT UNIVERSITY.

DATE:

SIGNATURE:

PREFACE

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The project report is an important part of export import management. It is

an important and an internal part of experience to develop our skill.

Students are required to see the different subject and to get the practice

knowledge as well as them come to know different types of export import

structure followed in different countries.

The project report is an opportunity to blend the theoretical knowledge with

practice aspect of subject. This subject gives us an opportunity to test and

verify the application of theories and comprehend between practical , we

have got that type of visit.

The present report is our sincere attempt to present the information and

fact regarding SPACIAL ECONOMIC ZONE . We believe that this

experience will be useful to us in our prospective endeavors and

commitments.

Introduction

Export processing zones are typically an enclave of units operating in a

well-defined area within the geographical boundary of a country where

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certain economic activities are promoted by a set of policy measures that

are not generally applicable to the rest of the country.

These zones are known by different names such as Free Trade Zones

(FTZ), Industrial Free Zone, Export Processing Zones (EPZ), Bonded Free

Zones and Special Economic Zones (China).

The concept of export processing zones is not a new one. An InternationalLabor Organization (ILO) report, states that some of the earliest references

of export processing zones date back to thirteen century in Spain. As per

the report, The Free Zone Consortium of Cadiz was founded in 1929.

In recent times, thefirst export processing zone (EPZ) was set up in 1959

at Shannon, in Ireland and in 1962 Puerto Rico established an EPZ in the

island.

The main objectives of SEZ scheme

1. Attract Foreign Direct Investment (FDI).

2. Earn foreign exchange and contribute to exchange rate

stability.

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3. Boost the export sector, especially non-traditional exports.

4. Create employment opportunities.

5. Introduce new technology.

6. Develop backward regions.

7. Stimulate sectors such as electronics, informationtechnology ,R & D, tourism,

8. Infrastructure and human resource development that are

regarded as strategically important to the economy.

9. Create backward & forward linkages to increase the output

and raise the standard of local enterprise that supply goods

and services to the zone.

The Salient features of Special economic zones

1. No License required for import.

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2. Manufacturing, trading or services activities allowed.

3. Full freedom of subcontracting.

4. No routine examination of export import cargo by customs

authorities.

5. SEZ units to have positive net foreign exchange earner.

6. Financial incentives like tax holidays, duty free imports and

exports.

7. Single window clearance.

8.High quality infrastructure.

9. Strategic location and market access.

Special Economic Zones in India

India is one of the first countries in Asia to recognize the effectiveness of

the Export Processing Zone (EPZ) model in promoting exports. Asias first

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EPZ was set up in Kandla in 1965. The proposal for setting up the Kandla

Free Trade Zone (KAFTZ) was mooted in 1961, for the following reasons:

a) To facilitate the development of the Kutch region,

b) To ensure greater utilization of Kandala Port and

c) To create employment opportunities in the Kandla -Gandhidham

area.

These zones offer the following facilities:

Financial incentives like tax holidays, duty free imports and exports; High quality infrastructure; Abundant and relatively cheap labor; Strategic location and market access.

However, the EPZ concept had some limitations like

Fixed geographical area,

Non-suitability for medium and large industrial units

Non-suitability for units which intended to set up units near the

source of raw material or specialized labor.

The concept of EPZ was later complemented by schemes like

Export oriented scheme which was introduced by the Ministry of Commerce

in 1980 vide resolution dated 31st December 1980.

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Over the years the Scheme underwent various changes and its scope also

expanded substantially as compared to the initial Scheme, which was

basically for manufacturing sector with certain minimum value addition in

terms of export earnings.

In the late 1990s, when the then Commerce Minister of India, late Murasoli

Maran, visited the special economic zones (SEZs) in China, he was

inspired by what he saw. Accordingly, The Government of India (GoI) first

introduced the concept of SEZ in the Export -Import Policy 2000 with a view

to provide an internationally competitive and hassle free environment for

exports.

As the performance of EPZs fell far short of expectations due to various

reasons, the SEZs were conceived as a much larger and more efficient

form. The policy provides for setting up of SEZs in the public, private, joint

sector or by State Governments.

After the introduction of SEZ scheme in the EXIM Policy from

01.04.2000, all existing FTZ/EPZ have been converted to SEZ.

What is Special?

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The word "Special" mainly means special economic systems and policies.

In other words, the central government gives the special economic zones

special policies and flexible measures, allowing them to utilize a special

economic management system.

Special tax incentives for foreign investments in the sez.

Greater independence on international trade activities.

Economic characteristics are represented as "4 primacies":

o Constructions primarily rely on attracting and utilizing foreign

capitals;

o Primary economic forms are Sino-foreign joint ventures and

partnerships as well as wholly foreign-owned enterprises;

o Products are primarily export-oriented;

o Economic activities are primarily driven by market.

Special Economic Zones in India are governed by provisions of Special

Economic Zones Act, 2005 and Special Economic Zones Rules 2006.

Up to the end of October, 2006 the Board of Approval has given formal

approval to 237 special economic zones and in principle approval to 166

special economic zones.

Currently there are 948 units in operation in the 15 functional SEZs. The

SEZ units provide employment to about 1.10 Lakhs persons (out of which

40% are Females)

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Who Can Apply

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[Incorporating provisions of SEZ Act, 2005 and SEZ Rules,

2006]

1. Who can make the Application for setting up of SEZ?

A Special Economic Zone may be established unde this Act, eitherjointly or severally by ;

The Central Government, State Government, or Any person

For manufacture of goods or rendering services or for both or as aFree Trade andWarehousing Zone.

[Refer section 3, sub-section (1) of SEZ Act, 2005]

2. Local authority and any agency.

3. Association of Persons (AOP) or body of individuals (BOI)(Whether incorporated or not) .

4. A Company.(Incorporated in India or outside India).

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5. Co-operative society.

6. Firm.

7. Proprietary concern.

8. Hindu undivided family.

9. An Individual or resident in India or abroad.

10. An Office or branch owned or controlled by above.

How to Set Up a Unit in a SEZ

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Provisions relating to establishment of a Unit in SEZ are containedin Sections 15 to 19 of the Act read with Rules 17 to 21. Any person

desirous of setting a Unit in SEZ has to prefer a consolidated application tothe designated to Development Commissioner in Form F, in five copies,with a copy to the Developer (Section15 read with Rule 17). However, incases where the Unit is engaged in a business in which FDIIs not permissible under automatic route, or in a business in respect ofwhich an industrial license is required, under the provisions of Industries(Development & Regulations) Act, 1951, then The application will have tobe preferred to the Board of Approval and not to the DevelopmentCommissioner. Applications for registration under Income Tax and CentralLabor Laws will have to be preferred separately by the person to therespective departments. The development commissioner shall get theapplication scrutinized and placed before the Approval Committee or theBoard of Approval as the case may be. The Approval Committeemay approve, modify or reject the proposal within 15 days of receipt, andsimilarly the Board of Approval may approve, modify or reject theProposal within 45 days of receipt (Rule 18) . It is pertinent to note that noproposal for SEZ would be considered if it is for any of the purposes listedUnder Rule 18(4). If the proposal is approved, the DevelopmentCommissioner issues a Letter of Approval in Form G. This Letter of

Approval shall be valid for a period of one year from the date of grant withinwhich Unit shall commence commercial production or service or FTWZactivity as the case may be. This can be extended by another period of twoyears, and further extended by one year subject to the condition that two-thirds of activities, including construction, have been completed and acertificate to that extent is produced from a chartered engineer (Rule 19).If the Unit has not commenced production or service activity within thevalidity period or the extended validity period, the Letter of ApprovalShall be deemed to have lapsed with effect from the date on which itsvalidity expired (Rule 19). The Letter of Approval so granted shall be validFor five years from the date of commencement of production or serviceactivity. After expiry of the period, the Development Commissioner canRenew it for another period of five years at a time (Rule 19).

Approval mechanism

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INCENTIVE / FACILITIES TO SEZ

DEVELOPER

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100% Foreign Direct Investment (FDI) is allowed for townships withResidential, educational, recreational facilities and franchise for basic

Telephone service in SEZs.

A 10-year tax holiday (i.e. a tax holiday for any consecutive blockof 10 years in the first 15 years of operation) has been provided forundertakings involved in developing and/or operating and/ormaintaining notified SEZs before March 31, 2006.

Duty free import/domestic procurement of goods for development,operation and maintenance of SEZs.

Exemption from Service Tax and/or Central Sales Tax.

Income of an infrastructure capital fund/company from investmentin a SEZ is exempt from Income tax.

Investment made by individuals in SEZs is also eligible forexemption under Section 88 of Income- tax Act, 1961 (the IT Act).

Generation, transmission and distribution of power in SEZs isallowed.

Full freedom in allocation of space and built up area for approvedSEZ units on commercial basis.

Authorization to provide and maintain services like water,electricity, security, restaurants, recreation centers, etc on commercial

lines is allowed.

A D V A N T A G E S

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The SEZ Act also provides a number of incentives to units proposed to beset up in SEZs.SEZ units may be set up for carrying on manufacturing,trading or service activity. A unit setup in SEZ has the following facilitiesand incentives:

15 year corporate tax holiday on export profit 100% for initial 5years,

50% for the next 5 years and up to 50% for the balance 5 year

Equivalent to profits ploughed back for investment.

Allowed to carry forward losses.

No license required for import.

Duty free import/domestic procurement of goods for setting up of the SEZunits.

Goods imported/procured locally are duty free and could be utilised over theapproval period of 5Years.

Exemption from customs duty on import of capital goods, raw materials,consumables, spares etc.

Exemption from Central Excise duty on the procurement of capital goods, rawmaterials,

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Consumable spares, etc. from the domestic market.

Exemption from payment of Central Sales Tax on the sale or purchaseof goods, provided that, the goods are meant for undertaking authorized

operations.

Exemption from payment of Service Tax.

The sale of goods or merchandise that is manufactured outside theSEZ ( i.e., in DTA) and which is purchased by the Unit (situated in the

SEZ) is eligible for deduction and such sale would be deemed to be

exports.

The SEZ unit is permitted to realize and repatriate to India the fullexport value of goods or software within a period of twelve months from

the date of export.

Write-off of unrealized export bills is permitted up to an annual limit of5% of their average.

Exemption from requirement of domicile in India for 12 months prior to

appointment as Director.

Since SEZ units are considered as public utility services, no strikeswould be allowed in such companies without giving the employer 6

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weeks prior notice in addition to the other conditions mentioned in the

Industrial Disputes Act, 1947.

The Government has exempted SEZ Units from the payment of stampduty and registration fees on the lease/license of plots.

External Commercial Borrowings up to $ 500 million a year allowedwithout any maturity restrictions.

Enhanced limit of Rs. 2.40 crores per annum allowed for managerialremuneration. Annual realization.

No routine examination by Customs officials of export and import cargo.

Setting up Off-shore Banking Units (OBU) allowed in SEZs.

OBU's allowed 100% income tax exemption on profit earned for threeyears and,

50 % for next two years.

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D I S A D V A N T A G E S

Revenue losses because of the various tax exemptions.

Most players are interested in setting up SEZs with an eye on thereal estate bounty so that they can acquire at cheap rates and create a

land bank for themselves.

The number of units applying for setting up EOUs is notcommensurate to the number of applications for setting up SEZs

leading to a belief that this project may not match up to expectations.

Revenue losses because of the various tax exception incentives.

Many traders are interested in SEZ so they just acquire the land atcheap rates and build up the property for themselves.

Many small trades set up EOU once and after that one export saledone but then close then close down the unit so that the set up at SEZ is

disadvantage for the other promising units.

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Inadequate infrastructure: In India there is less development in thearea of infrastructure. So the infrastructure development is necessary for

the purpose of export.

Restrictive policies: SEZ policy initially very restrictive for the smalland medium scale industries. So the promotion through SEZ will be

affected because of the restrictive policies.

Lengthy Procedure-No Single Window.

In India, all the procedures are lengthy. Specially, for setting up a unitin SEZ is very tedious procedures. So many units are not interested.

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Controversy of special economic zone

Introduction:

After the initial hiccups in March 2000, when Murasoli Maranannounced the new policy regarding tax-free enclaves, the concept of an

SEZ and its implementation seemed to sail in calm waters. But soon, with

farmers experiencing dispossession of their land and political parties

exploiting the plight of the farmers for their own political ends, the

discussion became more heated, leading to a host of protests. At first,

there were some court cases challenging the setting up of SEZs, especially

the legitimacy of forceful land acquisition on grounds of public purpose.

But later, the resistance became really Indian when people and partiestook to the streets and politicians started fasting and lamenting the neo-

liberal land grab and the Government not knowing how to appease the

storm. Land, especially agricultural land in India, is a very delicate subject

and has been an emotive issue ever since the zamindaridays. Land is the

livelihood of millions of people. Not only are the immediate owners of the

land affected, but also sharecroppers or daily wage laborers who eke out

their living through a scant, but reasonably reliable source of income. The

interests of the developers wishing to set up an SEZ could not be more

diametrically adverse. They need large tracts of contiguous land to

establish export-orientated production zones, thereby causing the need to

acquire land from those who make a living from it. Farmers first tried to

safeguard their interests through litigation.

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Jamnagar Incident:

In November 2006, farmers from the Jamnagar District in Gujarat

moved the High Court of Gujarat and later even the Supreme Court to

challenge the setting-up of a 10,000-acre (approx. 4,000-ha) SEZ by

Reliance Infrastructure. They alleged that the acquisition of large tracts of

agricultural land in the villages of the district not only violated the Land

Acquisition Act of 1894, but was also in breach consider putting a ceiling

on the maximum land area that can be acquired for multi-product zones

and decide to go slow in approving SEZs.

Nandi Gram violence:

1. The Nandi gram violence is another is famous incidence related toSEZ controversy. Nandi gram is a rural area in the Indian state of

west of Kolkata and opposite the industrial city of Haldia.

2. In 2007 the west Bengal government decided to allow salim group to

set up a chemical Hub at Nandi gram under the SEZ but farmers of

that village were against it. So, on the order of the front government

on 14 march 2007, more than 3000 armed police stormed the nandi

gram area. The main objectives were to remove the protesters in

order to expropriate 10000 of land for a sez to be developed by the

Indonesian based salim group. During this incident, police dead at

least 14 villagers and wounded 70 more including children and

women.

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CONCLUSION

The SEZs could drastically improve the economic activity in the

country, make the countrys exporter competitive and globally noticeable

and provide immense employment opportunity. But this should not be

done at the cost of bringing down the agricultural activities; land

grabbing and real estate brokers should be properly regulated so that

the common man should suffer.

As compared to other country where majority of the SEZs were

setup by the government, similar should be adopted in india, if not fully it

should be a public-private partnership and regulatory bodies should be

properly managed. To be economically viable SEZs should be approved

over a particular land area and for it to be profitable and self sustainable.

Relaxed tax norms, labor laws and DTA regulation will surely attract

foreign investment and major industries to setup industries in the SEZs

making it profitable and meeting its desired results !

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Bibliography

Export What Where How

By: Paras Ram

Export MarketingBy: Dr. W.K.Acharya

Dr. shaukat Ali

Export Management

By: Jain Khushpat S.

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Source of information

www.export911.com

www.ecgcindia.com

www.eximbank.com

www.sezindia.com

www.sezppt.com

http://www.export911.com/http://www.export911.com/http://www.ecgcindia.com/http://www.ecgcindia.com/http://www.eximbank.com/http://www.eximbank.com/http://www.eximbank.com/http://www.sezindia.com/http://www.sezindia.com/http://www.sezppt.com/http://www.sezppt.com/http://www.export911.com/http://www.ecgcindia.com/http://www.eximbank.com/http://www.sezindia.com/http://www.sezppt.com/