+ Font Resize -

The Government of India is making special economic zone the "engine for economic growth" both at the Centre and in the states, and with good reason.

In a little over three years, since the SEZ Act came into effect in 2006, India formally approved over 500 public and private special economic zones that include 91 operational SEZ. The special economic zones have had a magical effect on exports, which zoomed over sixfold in five years from 2004 through 2009.

Sound infrastructure, attractive fiscal package and singlewindow clearance are luring domestic and foreign investors to the SEZ. As on March 31, 2009, some 2,000-odd industrial units were operating in private and government export zones, and the number is expected to more than double in the next few years.

According to the ministry of commerce and industry, the concept of SEZ is also helping promote investment by small and medium enterprises that are critical to the success of the export zones. It also offers a suitable platform for attracting export-oriented foreign direct investment.

The recent economic meltdown appears not to have dampened interest in SEZ which, as the ministry noted, "Registered an impressive growth in export, investment and employment generation."

The board of approval for special economic zones under the ministry of commerce and industry will meet in New Delhi on February 11, as it does periodically, to discuss eight new proposals for setting up SEZ and accord formal approval for two SEZ that were cleared in principle earlier. The 10 proposals run across a broad array of industrial segments from pharmaceuticals to granite processing, portbased engineering to free trade warehousing zones and plastics to information technology. These special economic zones will add to a total of 578 SEZ that boast a combined envisaged investment of around Rs 1.10 lakh crore and an employment potential of four lakh.

Some of the mainline new-generation special economic zones that have made significant progress in terms of exports, employment and investment are Nokia SEZ, Mahindra City SEZ, Flextronics SEZ and ETL Infrastructure IT SEZ in Tamil Nadu; Apache SEZ (Adidas Group), Wipro Ltd and Divi's Laboratories in Andhra Pradesh; Mundra Port and SEZ in Gujarat; Moser Baer SEZ in Uttar Pradesh; Wipro SEZ and Biocon SEZ in Karnataka; and Serum Bio- Pharma Park in Maharashtra, to name just a few.

Around three-fifth of approved SEZ are in IT & ITES, electronic, hardware and semi-conductor, biotechnology, pharmaceuticals, textile, and engineering sectors. There is, however, a flipside to the SEZ growth story. The bulk of SEZ currently in operation and under execution are small in size with limited land requirements. Most of the large size and multi-product SEZ have reported slow progress in implementation. Acquisition of land is the biggest challenge faced by these SEZ. Non-availability of land in time has forced some of the promoters to apply for denotification of their proposals in the last one year.

India is several years behind in SEZ considering that it was one of the first in Asia to recognise the export processing zone model, having established the first EPZ in Kandla, Gujarat, in 1965. China formally declared Shenzhen as its first and, since its largest, special economic zone only in May 1980. In spite of fewer special economic zones, China is far ahead of India in all respects of SEZ growth.

Now the Indian government, armed with the SEZ policy of 2000, the SEZ Act of 2005 and the SEZ Rules of 2006, is attempting to cover up the 35- year delayed start by promoting an aggressive growth-oriented agenda for SEZ. However, much of the success of these export zones, which exist in nearly all the regions of the world including USA, China and Middle East, will depend on a stable and people-friendly SEZ policy regime - one that will be in the interest of all stakeholders, from the farmer and land holder to the investor and exporter.

Printer-Friendly Version E-mail This Article