A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws. Usually the goal is an increase in foreign investment. An SEZ is a trade capacity development tool, with the goal to promote rapid economic growth by using tax and business incentives to attract foreign investment and technology. According to World Bank estimates, as of 2007 there are more than 3,000 projects taking place in SEZs in 120 countries worldwide which account for over US$ 600 billion in export and about 50 million jobs.
Considering the need to enhance foreign investment and promote exports from the country and realising the need that a level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, The Government of India had in April 2000 announced the introduction of Special Economic Zones policy in the country, deemed to be foreign territory for the purposes of trade operations, duties and tariffs. As of today there are 13 functional SEZs and about 61 SEZs, which have been approved and are under the process of establishment in India. The policy provides for setting up of SEZ's in the public, private, joint sector or by State Governments. It is also being envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones. Accordingly, the Government has converted Export Processing Zones located at Kandla and Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special Economic Zones were approved for establishment at Indore (Madhya Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur and have already commenced operations.
The Special Economic Zone Act 2005 came into force with effect from 10th February 2006, with SEZs rules legally vetted and approved for notification. The SEZs rules provide for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. To provide an internationally competitive and hassle free environment for exports, units were allowed be set up in SEZ for manufacture of goods and rendering of services. All the import/export operations of the SEZ units are on self-certification basis. The units in the Zone are required to be a net foreign exchange earner but they would not be subjected to any pre-determined value addition or minimum export performance requirements. Sales in the Domestic Tariff Area by SEZ units are subject to payment of full Custom Duty and as per import policy in force. Further Offshore banking units are being allowed to be set up in the SEZs.
Investment of the order of Rs.100, 000 crores ($22.7 Billion) over the next 3 years with an employment potential of over 5 lakh is expected from the new SEZs apart from indirect employment during the construction period of the SEZs. Exports from the SEZs during 2005-2006 were of the order of Rs. 15,582 crores ($3.5 Billion) as compared to Rs. 13,225 crores ($3 Billion) in the previous year.
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