Special Economic Zones (SEZ)

The Special Economic Zones Act was introduced in April 2000 with a view to overcome the shortcomings of international trade, introduce global standards of infrastructure and attract foreign investors. The SEZ was designed to instill confidence among investors and signal the commitment of the government toward foreign trade. The general idea was to generate employment and foreign trade on a larger scale.

Following extensive consultations, the Special Economic Zones act became effective on 10th Feb. 2006. The aim of the SEZ act was:

Generation of additional economic activity.
Promotion of the export of goods and services.
Promotion of investment from domestic and foreign sources.
Creation of employment opportunities.
Development of infrastructure facilities.

The introduction of Special Economic Zones was expected to trigger a flow of foreign and domestic investments, enhance infrastructure and productive capacity with the greater goal of improving the country's economic conditions.

The SEZ Rules provide for

"Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs
Single window clearance for setting up of an SEZ
Single window clearance for setting up a unit in a Special Economic Zone
Single Window clearance on matters relating to Central as well as State Governments
Simplified compliance procedures and documentation with an emphasis on self certification

The mechanism for set up of SEZs

The developer submits his application for the approval of a special economic zone to the state government, who then submits the petition to the board of approval within 45 days of the date of receipt. The petition can also be submitted directly to the board of approval too.

The board of approval was constituted under the central government in exercise of the powers of the SEZ act. It consists of 19 members which is headed by the secretary of the department of commerce who is the chairman.

Administrative set up

The functioning of the SEZs is governed by a three tier administrative set up.

The Board of Approval is the apex body and is headed by the Secretary, Department of Commerce.
The Approval Committee at the Zone level deals with approval of units in the SEZs and other related issues.
Each Zone is headed by a Development Commissioner, who is ex-officio chairperson of the Approval Committee.

Once an SEZ has been approved by the Board of Approval and Central Government has notified the area of the SEZ, units are allowed to be set up in the SEZ. All the proposals for setting up of units in the SEZ are approved at the Zone level by the Approval Committee consisting of Development Commissioner, Customs Authorities and representatives of State Government. All post approval clearances including grant of importer-exporter code number, change in the name of the company or implementing agency, broad banding diversification, etc. are given at the Zone level by the Development Commissioner. The performance of the SEZ units is periodically monitored by the Approval Committee and units are liable for penal action under the provision of Foreign Trade (Development and Regulation) Act, in case of violation of the conditions of the approval.