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Comprehensive News & Analysis

25-08-2021 | 15:42 PM

Special Economic Zones (SEZs) 

Context: The government has proposed to free up unused built-up area worth about ₹30,000 crore and idle land inside Special Economic Zones (SEZs) for other economic activity. SEZs account for about 30% of India’s exports. 

About SEZs 

• Special Economic Zones (SEZs) are geographically delineated enclaves in which regulations and practices related to business and trade differ from the rest of the country and therefore all the units therein enjoy special privileges. 

Objectives of the SEZs: 

• To create additional economic activity. 

• To boost the export of goods and services. 

• To generate employment. 

• To boost domestic and foreign investments. 

• To develop infrastructure facilities. 

Facilities and incentives for SEZs: 

• Duty-free import/domestic procurement of goods for development, operation and maintenance of SEZ units. 

• Income tax exemption on export income. 

• Exemption from Minimum Alternate Tax (MAT). 

• Single window clearance for Central and State level approvals. 

Present Issues: 

• SEZs in India have not been as successful as their counterparts in many other countries. Several Asian economies, particularly China, Korea, Malaysia, and Singapore, have greatly benefited from these zones. 

• Most manufacturing SEZs in India have performed below par due to their poor linkages with the rest of the economy. Weak connections of coastal SEZs with their hinterlands inhibited these zones from utilising their full potential. 

• Many states did not match the central SEZ Act with State-level legislation, which rendered the single window system ineffective. 

• Lack of a robust policy design, efficient implementation and effective monitoring have seriously jeopardized India’s effort to industrialise through SEZs.