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Navi Mumbai -
    City of the 21st Century

Introduction

Navi Mumbai is a modern township spread over an area of around 350 sq. km., and been planned, designed and developed by CIDCO. CIDCO has developed high-quality infrastructure facilities in the Navi Mumbai area including housing complexes, industrial infrastructure, business districts, road & railway linkages, educational and recreational facilities, etc.

The township has been developed as a series of nodes with high-quality housing infrastructure available at most nodes. Further, social infrastructure for the township has also been developed in terms of hospitals (2200 beds capacity), gardens (175 nos.), community centres (20 nos.) and over 80 playgrounds. Other infrastructure like fire stations, police stations, etc. is also in place.

Navi Mumbai is well connected to Mumbai both by wide roads and mass rapid rail systems. Travel time from Mumbai's central business district at south Mumbai varies from 45 minutes (water transport) to 60 minutes (road/rail transport). India's busiest domestic and international airport Chatrapati Shivaji International Airport - is just 90 minute drive from Navi Mumbai.

The township is also well connected to other parts of the state through railway and road networks. In terms of rail infrastructure, Navi Mumbai has six rail corridors and an independent mainline rail terminal connecting the city directly to other parts of the country. Several national and state highways pass through the township. India's first expressway - the Mumbai-Pune Expressway as well as the Konkan Railway, that connects Central India to North Karnataka and Goa, passes through Navi Mumbai. These linkages enable ready access to other industrial areas in Pune, Thane, Vapi, Nagothane, Kalyan, Bhiwandi, Nashik, Dombivili, Ambernath, Rasayani and others. In terms of sea linkages, Navi Mumbai has access to one of India's largest seaports - JNPT that lies within the boundary of Navi Mumbai.

In addition to the existing infrastructure, several new projects are on the anvil. These include a proposed new international airport, which is to be located at Navi Mumbai (estimated project cost around USD 2 billion). The airport has already been approved by the State Government and is in advanced stages with respect to Central Government approval. Other proposals include the proposed sea-link between Mumbai and Navi Mumbai which will land in the SEZ (estimated project cost around USD 1.5 billion).

The development of these planned facilities is likely to be accelerated on account of demand generated due to the SEZ Project as well as fiscal incentives offered by the State Government.

The township has adequate power and water facilities. The total installed power generation capacity in Navi Mumbai is around 960 MVA with a planned capacity of over 1500 MVA by 2010. There is adequate water supply for the region as well. CIDCO has developed its own dams in the area - with an existing capacity of 150 MLD and a planned capacity of around 465 MLD by 2005.

In terms of living standards, Navi Mumbai scores over Mumbai on account of the low level pollution, de congested residential areas and high proportion of open spaces and green belts. In comparison to Mumbai, the township has significantly lower living costs, owing mainly to the optimal land and infrastructure costs.

Currently, Navi Mumbai has a population of around 1.2 million people, which is projected to reach 2 million by 2008.

NMSEZ is spread over an area of approximately 4,377 hectares (around 44 square kilometres), and comprises of four zones, Dronagiri, Kalamboli, Ulwe and the regional park zone (RPZ) of 1,850 ha. In addition, 300 hectares of land adjacent to the port is proposed to be contributed by JNPT. CIDCO has already acquired the land in the zones of Dronagiri, Kalamboli and Ulwe. Land in the RPZ area has not been acquired.

NMSEZ is the only new SEZ in India where the land (except the RPZ area) is in possession of the project sponsor. This significantly reduces the possiblity of any regulatory delays on account of land transfer and improves time to market for the SEZ.

Certain zones in the SEZ area like Dronagiri and Kalamboli have been partially developed. The existing development includes basic infrastructure such as access roads, master water supply and sewerage network, and a few commercial and residential complexes. However, no development has commenced in the Ulwe zone. The RPZ is proposed as a green belt and no industrial activity is envisaged in this zone. This zone could be utilised for recreational activities and proposed infrastructure in the zone includes a club house, golf course and other recreational facilities amenities.

NMSE-Best positioned SEZ in India

An analysis of NMSEZ's strengths and the available opportunities brings out the attractiveness of NMSEZ as an investment destination for potential tenants and investors. The analysis has been conducted by the Ernst & Young led consortium on the basis of factor considerations (availability of raw material, labour, infrastructure, policy incentives, and competition from international and local SEZs, etc.

Strengths

Infrastructure
Proximity to international and domestic transportation infrastructure.

  • JNPT, which is adjacent to NMSEZ, is India's largest and most modern seaport providing necessary linkages to the international markets. Further, the SEZ is in proximity to Mumbai Port, which is also a major port in the country.
  • Chhatrapati Shivaji International Airport at Sahar, is 60/90 minute away. Further, the second Mumbai International Airport is planned to be set up by 2010, which will give a boost to air-cargo-linked industries.
  • Well-connected road and rail linkages - National Highways (NH3, 4, 8, 9 & 17) link the area to the rest of the country.
  • Water transport, linking south Mumbai to NMSEZ is expected to boost accessibility to the area.

With convenient rail, sea, road and air linkages, NMSEZ is best placed to create a world-class trans-shipment hub in Navi Mumbai. This would divert a lot of existing traffic from Mumbai and nearby areas to the SEZ, increasing avenues to earn additional revenues

 

Proximity to Mumbai and Navi Mumbai

  • Proximity to international and domestic transportation infrastructure
  • Jawaharlal Nehru Port, which is adjacent to NMSEZ, is an efficient container port providing necessary linkages to the international markets. Further, the SEZ is in proximity to Mumbai Port, the largest port facility in the country.
  • Chhatrapati Shivaji International Airport at Sahar, is 60/90 minute away. Further, the Navi Mumbai International Airport is expected to be set up by 2007-08, which will give a boost to air-cargo-linked industries
  • Well-connected road and rail linkages - National Highways (NH3, 4, 8, 9 & 17) link the area to the rest of the country.
  • Water transport, linking south Mumbai to NMSEZ is expected to boost accessibility to the area.

With convenient rail, sea, road and air linkages, NMSEZ is best placed to create a world-class trans-shipment hub in Navi Mumbai. This would divert a lot of existing traffic from Mumbai and nearby areas to the SEZ, increasing avenues to earn additional revenues

 

 

Proximity to Mumbai and Navi Mumbai

  • Access to trading centres - Mumbai is a regional and national trading centre for many products (e.g. gems and jewellery
  • Access to cheap and skilled manpower- Navi Mumbai is located on the Pune- Mumbai-Thane knowledge corridor, and has access to skilled manpower from reputed national and international educational institutes including engineering and technical colleges, management institutes, etc. Further labour costs in the region are significantly lower than those in other developed countries, thereby providing outsourcing opportunities
  • Access to social infrastructure - CIDCO has developed the residential areas in Navi Mumbai and Belapur region. These residential units are ready for occupation
  • Access to huge urban markets - Mumbai, Navi Mumbai and Pune, with a population base of approximately 15 million are within the catchment area of the SEZ.
  • Access to finance - NMSEZ's proximity to Mumbai, the commercial centre and financial capital of the country, will provide unlimited access to capital, for the units located in NMSEZ.

 

Infrastructure availability

  • The Navi Mumbai region has adequate power generation capacity
  • Water from CIDCO's own dams is available in plenty
  • Internal infrastructure such as water supply pipelines and internal roads, etc., has already been developed within Dronagiri zone

Existence of international and national transport infrastructure along with the significant internal infrastructure that is already developed provides a head-start to NMSEZ as compared to other local SEZs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CIDCO as co-promoter

CIDCO is a premier town planning & development agency in India, and has established itself as an excellent infrastructure provider over the years. CIDCO has been instrumental in the development of Navi Mumbai. CIDCO is a special planning authority for a number of other urban areas in Maharashtra.

Due to its long-standing experience in township development and the success of the Navi Mumbai township project, CIDCO has been invited by several other Indian states to provide consultancy services on city/township development.

Due to its expertise in town planning as well as its success in Navi Mumbai, GoI has appointed CIDCO as the nodal agency for the planning, development and marketing of NMSEZ.

CIDCO's presence as a co-promoter to the project would provide NMSEZ with an existing administrative setup that would help implement the project effectively, as well as provide easy access to a quasi-government body that would facilitate the interaction between NMSEZ and the GoM.

Proximity to other industrial areas

Proximity to well-developed industrial areas such as Ambernath, Belapur, Dombivli, Kalyan, Nasik, Nagothane, Pune, Thane, Taloja, etc., provide excellent linkages with support industries and suppliers of intermediates, to the units that would come up within NMSEZ.

Miscellaneous

  • Climatic conditions are favourable in Maharashtra for growing fruits, vegetables, flowers which ensure abundant supply to agro-based industries
  • Maharashtra's long coastline of 720 km and river length of 3200 km could be leveraged to boost the exports of marine products

 

Opportunities

  • Industrial units in India are increasingly looking out for industrial estates and integrated facilities, where infrastructure facilities are on par with international standards.
  • There is an increasing trend among unorganized sectors to move to integrated facilities in order to get cluster and common infrastructure benefits. Such industries include Gems & Jewellery, Biotech, Information Technology, toys and leather. These sectors can reap the benefits of clustering. NMSEZ will be catering to the specific needs by building specialized enclaves for these sectors
  • There is an increasing trend worldwide for developing trans-shipment facilities in order to achieve transportation efficiencies. JNPT has the potential and is also being positioned as a trans-shipment port. Given NMSEZ's access to airports, road & rail networks as well as JNPT, there is significant opportunity for NMSEZ to position itself as a transshipment hub
  • Several infrastructure facilities like the airport project, sea-link project, water transport terminals, extension of railway network, etc., are planned to be developed in order to cement NMSEZ's position as a leading industrial township

Administration of SEZ

The overall administrative responsibility for the SEZ shall vest with the designated DC of the SEZ. The DC shall function as a quasigovernment body, and shall perform all the functions as laid down in the Handbook of Procedures, Vol. 1. As per the SEZ policy, powers of several state & central government departments, including the Labour Commissioner, Pollution Control Board and many others shall vest with the DC, thus making the DC the single, point authority for the SEZ. The SPV management will work in close coordination with the DC.

 

 

 

 

 

 

 

 

 

 

 

 

 

Upcoming SEZs in India 

 

With the announcement of the previous two successive EXIM Policies favouring the establishment of SEZs, most of the states have decided to be a part of the SEZ revolution. The details of the major SEZs and their stages of completion are given below:

 

Positra SEZ – Gujarat 

 

This is the most hyped SEZ project in India these days. The location is the Port of Positra (near Pipavav in Jamnagar), Gujarat and the expected area covered will be around 200 square kilometres. Those involved in developing the island city-state of Singapore will undertake the designing; master planning and detailed engineering of Positra SEZ.

 

Project Description

The project is considered to be the first of its kind in the world, as similar SEZs across the world including the ones in China, Hong Kong or Mauritius are owned and run by the respective governments. The Indian project is expected to become operational in three years.

 

In the first phase, to be completed by 2003 at a cost of Rs 40 billion, the central business district covering 40 square km will be set up alongside the roads, railways and airport. The second phase will cover construction of the seaport and jetties, while in the third phase entertainment facilities and development of the outer periphery of the zone for chemical industries would be undertaken. All the companies and services inside the zone will have to adhere to a minimum Euro II standards-these are environmental norms for industries which are located in coastal areas.

 

USP

The unique value proposition of PSEZ, according to its promoters, is a powerful IT infrastructure, complete with an in-zone optic fibre cable backbone and data storage centres. The SEZ is positioned as world’s first digitised economic zone. The whole idea is to build a global class and globally competitive infrastructure to give a tough competition to other SEZs in this part of the world such as Shenzen, Shintou, Tinjiang, Jebel Ali and Taiwan.

 

Financing

The Gujarat Positra Port Infrastructure Ltd (GPPIL) equity pie has already been carved up between the SKIL (54 per cent), the Gujarat Government (11 per cent), the Jurong Town Corporation and the Sumitomo Corporation (10 per cent each) and three FIIs (5 per cent each).

 

As per original projections, the equity was to the tune of Rs 1,272 crore while long-term debt was marked at Rs 3,180 crore. The remaining Rs 1,200 crore was to be raised through ’lease deposits' from those units who planned to set up shop at the SEZ.

 

The total investment in the economic zone plus the project cost (which is direct investment) is pegged at $2 billion or around Rs 9,200 crore.

 

Latest Developments

THE Rs 5,652-crore Positra SEZ, being put up by the Gujarat Positra Port Infrastructure Ltd (GPPIL) is now faced with the task of relocating its jetty site to Okha, 20-odd km away from the originally mooted site at Positra. The cost overruns may be to the tune of Rs 500 crore as the GPPIL will now be forced to undertake construction of a breakwater, a 3-4 km-long trestle to the offshore jetty site and considerable amount of dredging at Okha.

 


Nangunery SEZ – Tamil Nadu

Tamil Nadu is going to house the country’s first greenfield Special Economic Zone (SEZ). The SEZ will be set up at Nangunery and be developed by the state government and the Tamil Nadu Industrial Development Corporation (TNIDC) in collaboration with some private companies, the main promoter being Advanced Technologies Manufacturing and Assembly City (ATMAC). The SEZ will be totally pollution-free and geared to attract hi-tech investments to boost exports. Besides the industrial area, the Nangunery SEZ will include a golf course, modern recreation centres including movie halls and multi-cuisine restaurants, battery-operated buses, upmarket schools, glitzy retail arcades and a hi-tech hospital. It will target big software companies including the US-based Intel, Sun Microsystems and Cisco, among others.

 

Atchutapuram-Rambili SEZ – Andhra Pradesh

The exact site for this zone has not yet been finalized. In fact, KPMG Consulting has been hired to recommend the location and cost of the SEZ. The consultant was appointed to help the state government in selection of site, outlining the role of the state government in the project and also in suggesting policy changes required to be effected in the present laws. The initial investment for the proposed special economic zone in Andhra Pradesh has been pegged at Rs 1,860 crore. The zone is proposed to be located on the east coast in Atchutapuram-Rambili area. While part of the base infrastructure is likely to be provided by the government, the project has been will be implemented entirely through private initiative.

 

Hassan SEZ - Karnataka

KARNATAKA plans to set up special economic zone with an area of 2,000 acres at Hassan. As per the plan, the state government is to provide infrastructure and the union government would take care of excise, customs and taxation. The Centre has cleared the proposal. Hence, the Infrastructure Development Corporation of Karnataka (IDecK) has been asked to give a detailed project report (DPR) on the proposed Special Economic Zone (SEZ) at Hassan.

 

Mundhra SEZ – Gujarat

After the earthquake, the government has announced special tax incentives for investors in Gujarat. It is to avail of these benefits that the Adani group proposes to develop the Mundra port as a special economic zone at a cost of Rs 500 crore. The Gujarat government will shortly request the Central government to sanction this project proposal. Once the Mundra SEZ proposal is approved by the Center, the state government will acquire the necessary land and hand it over to Adani for developing industrial parks with complete infrastructure facilities. The Mundra SEZ will accommodate only exporting units.

 

Gopalpur SEZ – Orissa

Tatas have finally got a permission to set up a SEZ in Gopalpur after their plan to set up a 10-mn steel plant did not materialize. The proposed SEZ will be built on the 3,500-acre land that Tata Iron and Steel Company had originally purchased to set up the steel plant. The group has already spent Rs1.5bn to buy land for the steel project and to rehabilitate the displaced owners. The Orissa state government has granted the proposal to build SEZ after its move to develop Gopalpur, the only deep-water port in eastern India.

 

It has been reported that Adani Exports, part of the Rs.35 bn Adani Group, has already signed an agreement with the state government for the development of the port. This would be a build-own-operate-transfer scheme for a concession period of 30 years.

 

Tatas reportedly came up with the idea after the Orissa government started developing the Gopalpur port which can easily cater to big cape-size vessels over 120,000 tonnes. It would help any industry that wants to focus on volumes, as they would need such big cape-size vessels to enjoy the freight advantage. Tisco plans to develop the SEZ with infrastructure facilities and then lease it out to potential investors.

Other SEZs

  • Punjab is assessing the viability of setting up a Special Economic Zone (SEZ). The likely choice of location is Ludhiana or any other suitable place the industry may suggest.
  • Goa has decided to ask Tata Consultancy Services (TCS) to study various aspects of its proposal to set up a special economic zone (SEZ) in the port town of Mormugao in south Goa. The state government was exploring the possibility of having tourism and hospitality sectors along with industrial growth as the main focus of the SEZ.

 

List of SEZs approved for establishment (8.1)

Name of the SEZ

Name of Promoter

Positra SEZ

Gujarat Positra Port Infrastructure Limited, Ahmedabad

Nanguneri SEZ

Tamil Nadu Industrial Development Corporation, Madras

Bhadohi SEZ

Kanpur SEZ

Secretary, Small Scale Industries & Export Promotion, Govt. of UP, Lucknow

Kakinada SEZ

Principal Secretary (Industries), Govt. of AP, Hyderabad

Paradeep SEZ Gopalpur, SEZ

Secretary (Industries), Govt. of Orissa, Bhubhaneshwar

Kulpi SEZ

Principal Secretary, Commerce and Industries Dept, Govt. of West Bengal, Kolkota

Indore SEZ

Principal Secretary, Commerce and Industries Dept, Govt. of Madhya Pradesh, Bhopal



Current development on SEZs

After suffering ceaseless bashing from the skeptics for years, special economic zones (SEZs) have finally caught the fancy of India’s Inc. Investment worth Rs 10000 crore have been lined up for the next three  years and SEZs fever has caught all categories including private sector companies. PSUs, state government and foreign investors. From MNCs like Nokia and Hewlett Packard, to domestics giants like Reliance Energy, Wipro, Reliance Industries and Mahindra, states like Jharkhand, and PSUs like MMTC and Cochin Port Trust are busy finalizing ambitious investment plans, Commerce and industry minister Kamal Nath. Had quoted that the investment are flowing in industries, like telecom, IT, software, auto ancillaries, gems, and jewellery, textiles, handicrafts and electronics.

 

Private sector‘s Busy BEE queue in development of SEZs

  • Reliance Energy has acquired 1000 hectares in Ghaziabad for multi-product SEZ
  • IT major Wipro has committed an investment of Rs 1710 crores in seven locations. Wipro’s SEZ are to be located in Hyderabad, Chennai, Pune, Bangalore, West Bengal and Noida (UP). The biggest SEZ investment of the IT major is earmarked for Chennai at Rs 450 Crore.
  • HP is investing Rs 3000 crore in an IT SEZ in Bangalore.
  • Nokia is pumping in Rs 675 crore in Sriperumbudur near Chennai for telecom equipments well as services.
  • Reliance industries has committed Rs 5000 crore for a petro product SEZ at Jamnagar in Gujarat
  • Mahindra has lined up Rs 300 crore in separate projects in Tamil Nadu
  • Cochin Port Trust has obtained permission from the government to invest Rs 800 crore in a port based SEZ which will be located close to Puthuvypeeen or Vailarpadam in Kerela .
  • Maharashtra Airport Development Company has sought permission for a 1300 hectare SEZs in Nagpur.

And many more SEZ have been lined up to be opened in the country

 

 

State Government investments in SEZs

  • State Government of Jharkhanad is planning to invest Rs 1156 crore in 1200 hectare facility in Ranchi.
  • Haryana State Industrial Development Corporation has obtained approval of investing Rs 2000 crore in Gurgoan
  • UP State Industrial Development Corporation is planning an investment of Rs 2100 crore in Kanpur
  • AP State Industrial Development Corporation has obtained a permission to invest Rs 2000 crore in Visa State Industrial Development Corporation khapatnam
  • As many as 55 SEZs have been approved so far and more application are coming in

 

PSUs (Public Sector Units) Investment in development of SEZs

  • MMTC (Mineral and Metal Trade Corporations) Is setting up a warehouse SEZ at Haldia in West Bengal.
  • ONGC is working with Gujarat State Industrial Development Corporation for multi-purpose SEZ at Dahej at a cost of Rs 294 crore
  • Delhi Metro Has been allowed to set up a Rs 170 crore SEZ at Shastri Park in Delhi

Exports from Special Economic Zone

Zone

2003-2004(Rs. in crores)

2004-2005(Rs. in crores)

Kandla SEZ

1018.82

1060.14

SEEPZ-SEZ

7832.81

8298.59

Noida SEZ

1534.17

4266

Madras SEZ

1037.96

1376.91

Cochin SEZ

298.91

462.99

Falta SEZ

825.34

569.15

Visakhapatnam SEZ

435.67

579.27

Surat SEZ

869.9

1539.72

Jaipur SEZ

 

5.27

Indore SEZ

 

55.02

Manikanchan SEZ

 

95.54

Total

13853.58

18309

Conclusion

Importance of a SEZ

SEZs attract foreign investment resulting in the fusion of advanced technology, thereby improving standards of quality and efficiency in products offered in the export market. High employment and technology tranferthrough the FDI

SEZs continue to be efficient vehicle for increased exports. It  can bring a double digit growth. With its preferential fiscal policies it helps to create jobs and reduce regional disparity.

Migration of capital labor and technology across geographical boundaries would reduce disparity at all levels and lift the economy to higher levels of growth.

Analysis of the SEZ Scheme in India

The decision of the Union Minister for Commerce and Industry Mr. Murasoli Maran to set up Special Economic Zones in India based on the successful Chinese models to attract foreign investment and boost exports is a move in the right direction. . But the objectives of this move will be met only if certain essential conditions are met. Simply designating certain areas won’t do the trick. The success of the SEZs hasn’t come merely from wishing it. The following fundamental factors can be identified as influencing China’s success, and it is these that India should bear in mind when working out the plans for its SEZs:

 

Community Support

The Chinese SEZs have enjoyed support from the Chinese communities in Hong Kong, Taiwan, and elsewhere. In fact, nearly 70 per cent of all foreign investment in Shenzhen is from Hong Kong just as most investments in Zhuhai are from Taiwan. This provided the bedrock on which Shenzhen was able to build and the early momentum that made its task of attracting other foreign investors easier.

 

India’s proposed SEZs would need a similar initial push, and that could come only from the vast expanse of Indians worldwide. India should try and reach out to the successful industrialist families abroad. This community has not been given the importance it deserves, and as such has been ignored till now. There are many successful patriotic Indians who want to do their bit for the country. When such alumni can donate huge funds to institutes like IIT, they would surely be interested in any such venture, which would help develop their nation.

 

Strategic Location & Linked Growth

Almost all the Chinese SEZs and ETDZs are located in, around, or not too far from provincial capitals, economic strongholds, or transport hubs. In fact, the entire initial bunch of 14 ETDZs that China established in 1984 involved existing coastal cities, such as Dalian, Tianjin, Shanghai, and Guangzhou. Being close, the zones and the cities nourished one another and created an irresistible dynamism for growth.

The lesson here is simple: SEZs won’t succeed if they remain isolated enclaves out in the boondocks, simply as collections of factory buildings and sheds. The best example is the Navi  Mumbai  SEZ which is strategically located. Navi Mumbai is well connected to Mumbai both by wide roads and mass rapid rail systems. Travel time from Mumbai's central business district at south Mumbai varies from 45 minutes (water transport) to 60 minutes (road/rail transport). India's busiest domestic and international airport Chatrapati Shivaji International Airport - is just 90 minute drive from Navi Mumbai.

 

Scale & Magnitude

A very important factor in the success of China is the scale and magnitude of special economic zones. The five largest such zones in China – Shenzen, Zhuhai, Santou, Ziamen and Hainan – exported $ 26 billion in 1994, almost 22 per cent of the total exports.

 

The Indian Commerce Minister said “Taking the size into consideration, I propose to consider them (Positra of 880 hectares and Nangunery SEZ of 1012 hectares) as our country's two first Special Economic Zones''. He further said: “We expect that the minimum size of the Special Economic Zone shall be 400-500 hectares or more''. (One square km consists of 100 hectares).

 

It would serve little purpose if such tiny areas were being considered for the establishment of SEZs in India. The first four SEZs set up in China in 1980 had areas as follows: Shenzen with 328 sq kms; Zhuhai with 121 sq kms; Shantou with 234 sq kms; and Xiamen with 131 sq kms. China subsequently set up two more SEZs – Pudong with 518 sq kms and Hainan (a whole island and a province) with 34,000 sq kms. India cannot even dream of replicating the Chinese success if it goes in for very tiny SEZs.


The proposal to allow tiny SEZs in India would perhaps imply that the concept of the Chinese SEZs has not been understood. While the small EPZs operating in India, ranging from 40 hectares to 300 hectares, are meant only for export-manufacturing, the Chinese SEZs permit foreign investments in a whole range of economic activities – hence the appellation ‘Economic’ Zone - such as industrial production, agriculture, commerce, tourism, housing, etc.


This would obviously imply that one should look at SEZ size similar to a taluka/district or even a province. The SEZ concept envisages multi-sectoral foreign investments bringing about all-round regional development while promoting foreign capital inflow, export production, technology transfer and employment generation.


A large chunk of Raigarh district (Maharashtra) forming the hinterland to the Nhava-Sheva Port (Mumbai) could make an ideal SEZ. Also, the whole of Goa (3702 sq kms) can be another ideal SEZ. We should look at the landmass where foreign corporates would be attracted to come and invest in exporting industries as well as in hotels, resorts, agriculture, telecommunications, power-generation, etc. Recently companies like Reliance Energy  and Mahindera and Mahindera are acquiring more 1000 hectares of land to develop SEZs.

 

In India, as per norms prescribed for SEZs, the area has to be around 1,000 to 2,000 acres. Naturally advantage went to states like Gujarat, Maharashtra, Tamil Nadu etc. Now the government is considering reducing the size of SEZ to benefit more states. If this is the way location and sizes of SEZs are going to be decided in India, we should be ready for another potential failure in the government’s string of export promotion measures.

 

Considering all the implications of size on the success of an SEZ, this factor has to be given due consideration and all decisions related to it have to be based on objective facts and figures, and not otherwise.

 

Legal Autonomy & Labour Laws

The Chinese SEZs have their own legislature and can enact their own laws and regulations, including labour laws. The SEZs are marked by decentralised administration. The SEZs are administered by PASEZ (the Provincial Administration of Special Economic Zones). This effectively ensures the involvement of the provincial administration in the management of the SEZs.

 

There are also some special provisions for industrial relations applicable to the industries and other ventures in the Chinese SEZs. Foreign companies in the Chinese EPZs enjoy tremendous flexibility in terms of labour laws. Employment is contractual, the wages – subject to a minimum between 120 per cent and 150 per cent higher than state enterprise wages – are fixed by the companies themselves, and retrenchment is permitted. These apart, the governor of the SEZs in China has enormous powers, including the right to approve projects involving investments up to $ 30 million, and grant concessions and incentives to foreign players.

 

However, in India, the EPZ management has been vastly Centre-driven. Despite the freedom from import and export licensing as well as tariffs, our EPZ enterprises have been having a difficult experience with the customs administration. The Central government should invest customs responsibility and powers in the development commissioners manning the SEZs if unnecessary red tape and harassment to the zone-exporters have to be minimized.

 

Additionally, India has a large labour force and if we were to move over to capital-intensive industries there will be more unemployment. But the need of the hour is to accelerate growth, which can come only if we reverse our operating stance from that of a labour-intensive industry to that of a capital-intensive industry.

 

In India, the only ray of hope for units in SEZs is that the Development Commissioner of the zone (who is appointed by the Commerce Ministry) will double up as the Labour Commissioner. This is expected to minimize the time taken to settle labour disputes. That's small comfort, given the country's rigid labour laws.

 

The issue of simplification of labour laws for SEZs was left unanswered by Mr. Maran in the EXIM Policy. Without this authority for independent economic management, SEZs will remain a cripple, always depending on provincial or federal support and, therefore, ever susceptible to political influences.

 

Infrastructure and Facilities

Every nation requires a good infrastructure to for a consistent growth and development. It is said that when United Nation of America became independent the first thing which they developed was their infrastructure. China is ahead i.e. is growing fast then India because it has first-class infrastructure in place. Recently one of the important agenda in India’s planner is to develop its infrastructure and progress in the construction of the SEZs is one of the ways towards it. As SEZ does not concentrates only on developing industrial estates but endeavors in the development of township. 

 

All Chinese SEZs and EDTZs have superior logistic support and transport and communication links. A major contributor to China’s success is its investment in the infrastructure. The Chinese government has spent $ 3 billion in the infrastructure alone in Pudong & it is committed to spending 744 billion in infrastructure in 1995-2004. As opposed to this, a paltry few billions were proposed to be spent on infrastructure in India, in the Union Budget of 1999-2000. In fact, a major part of China’s post-open door infrastructure spending has gone into creating, strengthening, and expanding these links to bring the zones closer to ports, airports, and railheads as well as to major cities across the country.

 

Moving over to Dubai, the Jebel Ali Free Trade Zone, famous for its state-of-the-art technology and logistics, has fuelled economic growth of Dubai. The FTZ contributes almost a quarter of all outbound trade from the United Arab Emirates.

 

Structuring India’s SEZs along the lines of overseas SEZ models can be risky. For, the ground conditions are vastly different in India. So, India should take care to ensure free flow of financial and fiscal concessions in these Indian SEZs. For instance, in Jebel Ali Free Trade Zone there is an uninhibited free flow of capital and profits. There are no currency restrictions there, nor is there any corporate or personal income tax. The Sharjah Airport’s International Free Zone has the biggest air cargo hub in West Asia and Africa. Apart from no import restrictions, this FTZ allows 100 per cent ownership and repatriation of funds.

 

India has a complicated market structure and if it wants to set up SEZs like those in the rest of the world, it will have to put in place the logistics of market structure and functioning. SEZs function independent of the rest of the market and differ in their market policies. These zones should in fact function in an environment free from complex and irksome regulations and high tariff rates.

 

To facilitate such wrinkle-free functioning of SEZs, the Indian government will have to integrate the various departments involved such as customs, sales tax, environment and pollution control. Such integration is possible only if a forward-thinking foolproof policy is put in place and no tinkering is done thereafter. Without such a logistical framework, just setting up SEZs will not work.

 

Eventually, nothing pleases an investor more than developed infrastructure and a working environment that’s free of bureaucratic hassles.

 

 

Government Attitude

 

The attitude of the Chinese government has been marked by strong determination and commitment when it comes to liberalizing, even though it is in selective areas. There have been no half-hearted steps in any direction. There has also been no lagging behind, when it comes to taking steps to ensure success of its endeavors. This is evident especially from the proactive measures taken by the government in matters related to SEZs.

 

Even India has had a series of EPZs in the past. But today, they have lost their relevance and are in no way better off despite all the policy announcements and liberalisation measures. They have become non-operative blocks. All this is because, In India, there is little convergence of objectives and strategies between the union and state governments. As such, policies are short-lived and lack long-term vision. There is dilly-dallying in implementation of policies. With a change of government at the centre, there is a change in stance and perception of policies resulting in a lot of confusion among the exporters. There is then no initiative on their part to increase volumes.

 

India has good economic advisers but sadly enough their policies only gather dust. A Free Trade port was to be set up in Tuticorin, Goa and Andaman Nicobar islands according to a suggestion. Ten years have passed and the policy-makers have forgotten the issue.

 

China used a different exchange rate system in the initial years to kick-start investments. A unified exchange rate was introduced only in 1994. A recommendation to do the same thing was given in the Raunaq Singh Committee Report (1985) that recommends a different exchange rate, or currency, for SEZs (following the argument that an undervalued currency would boost exports). The Indian government was not even willing to consider this recommendation for reasons unknown.

 

SEZ was created to set up a special enclave where companies could have incentives and infrastructure to focus on exports and avoid the reams of red tape they usually face. Instead, the New Act could end up merely providing a new and lucrative tax shelter for corporate India, with little impact on export growth. And the government could lose valuable tax revenue in the process.

 

Let us discuss the provision of the New Act

 

 

 

 

According to Ardhana Agarwal an associate professor at the department of business economics in Delhi University who has researched the impact of SEZ is  of the opinon that in India , companies who shift  to an SEZ purely take advantage of tax benefits, And when the tax benefits expire they shift out.

 

In past Indian companies have been making such use of indirect tax holidays given by various states like Himachal Pradesh or union territory like Silvassa for years. Once a company uses up the sales or excise tax benefits in one states it simply shutsthe unit and shifts it to another state where it can get those benefit all over again

 

Experts are skeptical about whether the Act will actually promote exports. For instance, Nokia which is setting up a plant in Sriperumbuerur SEZ for manufacturing handsets and telecom equipments , has no plans of exporting from there as now.

 

But the act provides no concession on the labor laws, which is fully be applied in the SEZs

 

The Indian government always takes a very short-term view and caught in its fiscal mess has no better option but to stall the project. With too many windows in the administrative setup, complications are bound to arise and misunderstandings will take place. Unless and until an overall liberal framework is designed to look into monetary, trade, fiscal, taxation, tariff and labour policies, all other efforts will go waste.

 

To sum up SEZ will be the launch pad for future economic growth and have come to stay

 

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