One of the top economic nations in the globe, according to predictions, will be India. Additionally, it highlights the importance of having thorough awareness of the corporate environment in India, including its advantages, disadvantages, and consequences for Asia, Europe, and the rest of the industrialised world. Indian Commerce and Industries Minister Murosoli Maran came up with the Special Economic Zones (SEZs) Scheme while visiting Special Economic Zones in China in 1999. A unique jurisdiction established within a nation to enable international trade is known as a special economic zone (SEZ). SEZs are considered to be foreign jurisdictions for import and export and taxes, according to Section 53(1) of the Special Economic Zones Act, which was passed in 2005. Businesses are given significant tax exemptions, modern infrastructure, few constraints, and attractive economic incentives within SEZs to boost the nation’s economy through overseas trade. SEZs are found in several nations, including China, India, Russia, the Philippines, Jordan, Poland, North Korea etc.
The Special Economic Zones Act, 2005, which comes into force on April 1, 2005, formalized the idea of SEZs in India, which had been formally launched on April 1, 2000, as an element of the Export-Import Policy. Before the enactment of this Act, the SEZ policy was established through changes to several statutes and executive regulations, which created a grave obstacle in the way of FDI (foreign direct investment) into India. Currently, the Department of Commerce, Ministry of Trade and Commerce’s SEZ Authority is in charge of overseeing SEZs.
THE WORLDWIDE CONFLICT ON SEZs
SEZs are typically established in the guise of free merchandise inside a financial state that is influenced by macroeconomics along with interchange by-laws as well as additional governing constraints. According to an established theory of development economics, foreign financing, especially for special economic zones (SEZ), accelerates industrialised evolution by generating horizontal and vertical pillars. Technical knowledge leaks together with governance expertise from global corporations to regional sector rivals are examples of horizontal pillars. Additionally, vertical pillars are known for forwarding and reverse links. Horizontal pillars turn up from incitements for an organization to expand the supply chain through technology passed on to suppliers of the Multinational corporations also those to whom these MNCs act as distributors. These pass on comprise personnel training, administrative expertise, together with increased mass manufacturing effectiveness. Nevertheless, research from around the world indicates that horizontal pillars are trivial because big corporations are hesitant to establish businesses where automation breaches favour rivals. However, research from developing nations like China and Indonesia indicates the enormous positive spillovers of vertical links. The MNCs focus on creating local supply chains that support the growth of local industries elsewhere. A technology automation park established in 1947 in Puerto Rico to lure investors out of the United States Of America mainland is considered to have been the first SEZ anywhere in the globe
Consequently, in 2000, the new Export-Import (Exim) Policy for Export Business and Incentives. Export and Import Policy authorized the formation of SEZs by state governments, the private sector, or a combination of both. There were eight EPZs that became SEZs. In total 19 SEZs were created before the official SEZ Act was passed, and they were subsequently recognised as SEZs under the new Act in 2005. Over the years, formal or “in principle” approval for more than 400 SEZs has been granted. SEZs have been empowered to provide an internationally competitive and hassle-free environment for exports. Factories for product and service production may be established in SEZs. All import/export activities performed by SEZ units are self-certified. Sales made by SEZ entities within the local excise zone are subject to the full remittance of customs duties as well as the current import regulations. Additionally, SEZs are permitted to host offshore bank transactions.
Who is eligible to create an SEZ and what conditions must be met?
For (1) producing commodities, (2) delivering assistance, (3) undertaking these two activities, or (4) creating an unrestrained commerce and logistics region, any entity, including the central government, a state government, or a foreign corporation, may jointly or singly establish an SEZ (FTWZ). The necessary amount of land needed to establish an SEZ is specified in the SEZ Rules. This criterion is determined by the type of SEZ that will be created. Regarding some smaller states, the standards for the SEZ’s required minimum size are reduced. A lower limit of 200 and 50 acres or over, correspondingly, is now required for sector-specific or multi-product SEZs. As in the following states or union territories: Assam, Meghalaya, Nagaland, Arunachal Pradesh, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu & Kashmir, Mizoram, Goa. A rock bottom limit of 50% of the space must be set aside for building the processing area in a multi-product or sector-specific SEZ. SEZ Rules demonstrate the extremely particular criteria for sector-specific operations. The apex Government may authorise multiple developers if the person intending to create an SEZ does not have the required minimum contiguous area. In these situations, all developers will be regarded as the land’s developer of it owns. Considering that formerly there was the absence of restrictions on the largest volume of an SEZ, On April 5, 2007, the empowered group of ministers met, resulting in a cap of 5,000 hectares, that can still be violated by states under Indian constitutional law because land matters are state matters.
PROBLEMS OF SEZs
The private sector reacted euphorically in 2005 when the SEZ Act was passed. Most people felt which the administration had eventually opened up expansion and provided incentives for the private sector to flourish in emerging industries like IT-ITES, BT, the real estate sector, and medicines. The central government’s outbound marketing approval of more than 250 SEZ projects, state governments’ extensive land acquisition, leasing out/selling for SEZ development, and private entrepreneurs seizing this opportunity have all contributed to the unprecedented rise in SEZ fever over the last years.
People who believe that SEZs will not help them but will instead make it harder for them to support themselves and their families economically have expressed alarm about each of these. These worries are not unjustified, either. The following are some of the main issues that farmers’ organisations, fishing communities, marginalised associations, also additional changes have with the government’s SEZ policy:
- Extensive and unjustifiable purchase of lands.
- Deficient strategies together with plans for resettlement and also rehabilitation
- SEZs don’t provide enough jobs for the locals, which causes them to lose their livelihood.
- Natural resource depletion, environmental degradation, and local communities’ estrangement from these resources are all factors.
- SEZs generating real estate zones and fueling the real estate boom
- Potential income loss from SEZs’ extensive financing
The main challenge being raised by concerns and protests all around the nation is: if SEZs are designed to spur growth, what kind of growth is envisioned and who does it serve? According to the SEZ blueprint, a non-public surplus appears to exist for the gauge of expansion and the policy prefers for private actors to drive the expansion of the country. However, the link between growth and development as well as the issue of development is absent.
India’s SEZ policy gradually relaxed its operational and administrative restrictions. Since 1991, this policy has undergone extensive and major revisions. It is thought that the SEZ performance is heavily influenced by the overall EPZ investment climate. However, in India, the success of the zone has not been much impacted by a supportive policy framework. Despite amazing absolute increases in gross exports, foreign exchange earnings, and employment, these variables’ growth rates have significantly slowed. A decline in export performance is indicated by the slowing growth in exports per unit of employment.
Author(s) Name: Riyanshi Kandelwal (Vivekananda Institute of Professional Studies)