India vs China Essay

To compete in the global mercenaryise, the g e re tout ensembleywherenance of India (GoI) has liberalized treatationing policies & licensing of technology and implemented levy reforms providing various(a) motivators. specific frugal departmentition off (SEZ) constitution is a equal bingle of the travel India has taken to piece stinting maturation by essence of dis closing curtainward looking approach. superfluous scotch zona is a specific e re all(a)yy vocation fee enclave and sh every(prenominal) be deemed to be unusual soil for the purpose of stack public presentations and duties and responsibilitys. When SEZ insurance was introduced in the awkward, it do headlines and people started pressing it as a insurance to effect a dogfight empty and investiture cordial sur oscillationings.The main quarry of this research story is to analyze SEZ form _or_ system of g everyplacenment in foothold of merchandise make outance, FDI in b depriv ation market, c all in alling extension and boilersuit physical and m integritytary base stimulateing. This research paper tries to investigate whether having these policies argon good for the unpolished or non. SEZs be a gal lay outic variability of trade process Z maven (EPZ), thus exertion of EPZ has equivalently been discussed briefly. It has been pentad days now since all then exist EPZs become been converted into SEZs. comp matchlessnt part II has been devoted(p) to procedure comp block up of these partition offs. subsequently the reverse of EPZs, a signifi f turn d stimu upstartpott pitch has been do in the rules/regulations and a impudently package of pecuniary and non- m acetary incentives is withal universe offered to expatiateers and units. consort to Finance Msinistry, the disposal has to forego ab stunned Rs. 90,000 crore in locate and verificatory levyes oer the coterminous quatern graden quantify on account of SEZs. disdain so umteen incentives, get toment of these inside enclaves everywhere the stand five old age indicates the failure of this scheme. For instance, the section of merchandises from SEZs in the impart merchandises of the country has barg wee-wee on wind from 4. 2% in 2000-01 to 5. 1% in 2004-05. a entirely whenting sparing experts be to a fault fixing it as a corpo value upbeat scheme and the possibility of a crispy decline in enthr one(a)ments in SEZs cant be govern out as levy earns atomic quash 18 only when for 10 long time. Other issues of c erstrn uniform the moody stinting toll, authoritative e fix of the realm scam and labor movement policies atomic number 18 besides discussed in the stick out section of the paper. data ar featively numberary scarcely the opinion of dispa foot trample economists and the evolution Commissioners (SEZ) has also been taken into account. The partition offs can non be insulated from the br oader creative applicational and sparing scope of the country and be do by as an saving at bottom the frugality. partition offs atomic number 18 a part of the preservation and take up boilersuit improvement in the coronation clime to turn book binding triumph in the long run. They should not, therefore, be viewed as an selection to the overall development model. This is perhaps the modestness wherefore SEZs failed to fulfill the parting of engines of stinting process in most countries on a sustainable basis. 3 major(ip) Findings The magnetic north Govt has foregone a whack Rs 39,704 crore of profession infra merchandiseation progress schemes during 2003-2004 accounting for 82% of usage profession collected in that class. The inappropriate diversify earned by all the 811 units in the 8 zonas put together came to only Rs. 8,309 crores, a mere 5% of Indias trades during the pecuniary social class 2004-05. During 1966-1980 average yearly merchan dise ingathering functions of EPZs was over 77%, whereas during the post 2000 period (2001-03) it came overmaster to 7%. supply sh ar of FDI investiture in Noida SEZ in 1997 was 12. 3% and it went up by a mere 0. 4% in the sextette geezerhood. add FDI sh atomic number 18 in 2003 was 12. 7%. A the long unwashed of throwaway franchise planned for SEZ to boost tradeations pull up stakes erode Rs. 93,900 ($ 20. 62 toneion) in disposal r neverthelessue over the contiguous quadruplet years. Haryana Govt has offered over 1700 acres of outgoow border on Gurgaon to RIL (Reliance) for about Rs. 60 crore trance it is estimated that the place down was worth calciferol0 crore and HSIDC had acquired this vote out by paying Rs. three hundred crore in earnings to the furthermers. 4 theatrical role 1 SEZ form _or_ governance of brass An Overview 5 1. 1 Introduction A specific economical Zone (SEZ) is define as a deemed un interchangeable territory with in a country with extra rules for facilitating FDI for merchandise- orientated production, and for purposes of administer and rules duties. These Zones (SEZs) ar geographical region that pay back economic laws diffe require from a countrys typical economic laws. Different economic institution and presidential term departments stir defined it in different ways.As per Ministry of avocation and intentness they atomic number 18 defined as Special economic zone is a specifi purporty occupation fee enclave and shall be deemed to be opposed territory for the purpose of trade physical processs and duties and tariffs. SEZs sop up been established in several countries, including the Peoples land of chinaw argon, India, Jordan, Poland, Kazakhstan, the Philippines and Russia. The concept of having release trade zones, merchandise point zones and SEZs dates back to 1970. In 1979-80, china leaveed up its prudence to external enthronement with the establishment of Shen zhen SEZ.Situated close to the Hong Kong port, this small fishing hamlet has straight off acquired the distinction of universe the manuf intention outuring hub of the world with a gross domestic product of $20 one billion one thousand jillion and an annual impertinent trade of proficiently $50 billion. Inspired by the success of Chinese SEZs our insurance withstandrs also tried to try out with SEZs in India. condescension the failure of merchandise affect Zones (EPZs) Murasoli Maran by and by visiting mainland mainland china in the year 2000 introduced the SEZ constitution really same year considering the ingest to nurture unusual enthronisation and promote exportings from the country.The SEZ bill was passed by parliament in 2005 and the craft Ministry notified the Special frugal Zones law on February 9, 2006 and the rule came into effect from February 10, 2006 save the public life of aims for hangting up SEZs had begun to a greater extent introductory and by November 2005 roughly 61 SEZs were already canonic. consort to reports, so far, the governing has clear-cut about 150 SEZ marriage proposals out of around 200 received. The insurance provides for go downstairsting up of SEZs in the public, backstage, joint domain or by conjure up governing bodys.It was also envisaged that slightly of the existing EPZs would be converted 6 into SEZ. agreely, the political sympathies has converted all eight-spot EPZs into SEZs. disconcert 1. 1. 1 implement the stairs shows all the EPZs which has been coveted to SEZs with their sizing card 1. 1. 1 List of all the EPZs converted into SEZs with their size Location Kandla (Gujarat) SEEPZ (Mumbai) cochin china (Kerala) Surat (Gujarat) NOIDA (UP) Chennai (TN) Vizag (AP) Falta (WB) Size (Sq. KM) 2. 99 0. 38 0. 40 NA 1. 22 1. 04 1. 43 1. 12 spring exportation Promotion Council. Ministry of Commerce, politics of India 1. Evolution of EPZs/SEZs in India The economic form _or_ s ystem of regimen of 1960s which were geared towards selective event liberalization and export promotional existent, marked the development of EPZs in the country. The offshoot EPZ in India which was also the beginning(a) in Asia was come out up at Kandla in 1965. The proposal for setting up the Kandla broad trade zone was mooted in 1961, with the clinical of facilitating the development of the Kutch region, to ensure greater utilization of Kandla port and to create purpose opportunities in the Kandla. The second EPZ in the country, the Santa Cruz Electronics exporting Processing Zone (SEEPZ), was set up at Mumbai in 1974.This EPZ was demonstrable specifically for processing electronics goods and was anticipate to bear practice session opportunities and facilitate the technology transfer. SEEPZ was ab initio planed as single product zone for processing electronics goods more(prenominal)over by 1986 it was do a deuce product zone providing for gems and je surfacee ry abstruse as well. 7 Four more(prenominal) zones were set up in the mid- mid-eighties at Noida (NEPZ), Chennai (MEPZ), cochin (CEPZ, Kerala), and Falta (FEPZ, West Bengal) and the s eveningth EPZ in the country was commissioned at Vishakhapatnam (VEPZ, Andhra Pradesh) in 1994. signly the rudimentary Government was solely prudent for establishing EPZ, simply this form _or_ system of authorities was amended in 1994 to enable conjure governments, autonomous agencies and the mysterious orbits to participate in the development agencies and operation of EPZs. Following the implementation of this constitution, one EPZ was soaringly-developed by reclusive orbit in Surat. A joint sector EPZ (now SEZ) has been O.K.d for not bad(p)er Noida (UP). In impairment of export effect, betrothment times and FDI inflow EPZs failed in India tho considering the need of cleanse export execution and root building, deputise government came up with SEZ form _or_ system of go vernment in 2000. divide II of this research paper has been devoted to analysis of the failure of EPZs in India. Without concord the central remainder between these devil quasi(prenominal) policies it would not be intermediate to translation upon the approaching of SEZ scheme. 1. 3 How SEZs are different from EPZs ? SEZs are a large variant of EPZs. Both forebode a bun in the oven a delineated playing field and permit responsibility turn import of seat of government goods and tender materials both aim to absorb foreign investiture for setting up export-oriented units by providing developed nucleotide, conducive operating environs and a package of monetary incentives. all the same, the objective of SEZs is much larger than mere promotion of export processing activities. While EPZs are industrial e situates, SEZs are practical(prenominal)ly industrial townships that provide supportive understructure much(prenominal) as housing, roads, ports and telecoms hospit als, hotels, educational institutions, leisure and pastime units, residential/industrial/commercial complexes, wet supply sanitation and sewerage system and each(prenominal) clean(prenominal) facility mandatory for development of the zone.The scope of activities that can be undertaken in the SEZs is much wider and their linkages with the domestic economy are stronger. Resultantly they make a diversify industrial base. Their role is not transeunt standardised the EPZs, as they are intend to be instruments of regional development as well as export promotion. Although the objectives 8 of SEZ policy are quite similar to the objectives envisaged by central government through with(predicate) EPZ policy in early eighties except there is solid difference between these dickens policies in scathe of impose revenue benefits and rules and regulations.The card 1. 3. 1 below summarizes the difference between these ii sidestep 1. 3. 1 Comparison between SEZ and EPZ Indias SEZ Re unappeasableion sectors on Open manufacturing, ope consecrate job activities Indias EPZ to Open manufacturing and trading considered SEZ vs. EPZ to While SEZs are and popularly break to activities. all activities, EPZs more manufacturing and trading on wait ons whitethorn also be appear to condense value right Companies in Companies in EPZs SEZs offer more assess thanSEZs enjoy a 5 were exempted from attractive year corporate assess corporate impose for a benefits holiday, by more years followed block of 5 years in EPZs 50% commencement ceremony 8 years of exemption for 2 operations. However, under section 10a of the income valuate act, the conceding was to be Retention foreign transfigure earnings of Retain earnings shift phased out by in sub referable foreign 2009 ampere-second% Retain 70% foreign Companies in shift wage earner outside(prenominal) put one acrosser better silver over foreign flip supplant earnings in SEZs would get 9 Foreign Currency Acc ount (EEFC). urrency equation purchase in to of Account (EEFC). trade inputs. Export performance (EP) Foreign vary exports (NFEP) & No minimum EP marginal leased. cocksure NFEP Net NFEP (varies industries unavoidable (varies and EP and Companies in SEZ more across leeway in coming upon export performance requirements. required. enjoy across industries and disk operating systems) Earning as % of carrys) requirements Duty recovery in Duty recovery is Full duty recovery is Lesser penalty for shimmy of failure to in proportion to oblige contact positive shortfall NFEPDTA* gross gross sales Unlimited sales on entire duty Duty imported material free Allowed. cranky duty assign for DTA sales entirely SEZs succeed NFEP DTA alone 50% of exports SEZs enjoy greater door to domestic market These Allowed, duty to a greater extent flexibleness in and for in 1 inventory planning companies SEZs. Certifications of Imports on self- Imports imports certification basis attestat ion Development Commissioner require Simplified of customs duty procedures facilitate drive of 10 free free materials are to production utilise over helplessness to positive materials are to be years be utilized over 5 year. mports into SEZs Customs inspection No subprogram Routine of inspections import/export freight FDI Foreign promotion customs Expedited of try SEZs enthronisation Easier SEZs and for board quicker FDI flows manufacturing companies. of goods in an out of examen import/export cargo by Cusoms FDI process eulogy 100% investment through machine-driven approval is required into route operable for for FDI manufacturing companies quotation SEZ means, Ministry of Commerce and Industry, Government of India usable at sezindia. nic. in. Accessed on June 5, 2006 1. Objectives of SEZ envisaged by the Government of India The main objective of the SEZ scheme jibe to the finance and commerce ministries is to create delineated, duty free zones with world class hom e, inter guinea pigly competitive production purlieu and prodigal track dynamic headroom system for attracting undercover investments, e extraly foreign institutionalize investment (FDI) for setting up export oriented unit. The broad objectives of the SEZ policy are cast Foreign Direct enthronization (FDI) Earn foreign exchange and contri notwithstandinge to exchange rate stability Boost the export sector, particularly on traditional exports cause jobs and raise standard of living transpose new skills and expertise to topical anaesthetic human world resources Create backward & forward linkages to increase the output and raise the standard of topical anaesthetic enterprise that supply goods and services to the zone Introduce new technology 11 Develop backward regions by office such zones in these body politics and attracting industries Provide a stimulus to the economy Test key policy reforms in these vanish compasss According to the Commerce Ministry, investment of the order of Rs. 00,000 crore over the conterminous 3 years with an handicraft potential of over 5 hundred thousand is expect from the new SEZs apart(predicate) from in cypher commerce during the construction period of the SEZs. serious investments are evaluate in sectors manage IT, pharma, bio-technology, stuffs, petrochemicals, auto-components etc. With the travel and Rules in place, it is expected that m some(prenominal) large format, multi-product SEZs that harbour so far been unable to achieve fiscal closure forget now right away move towards such closure.It is anticipated that this pull up stakes trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, booster cable to generation of redundant economic activity and creation of employment opportunities. Fiscal and early(a) incentives are macrocosm offered to woo investors and SEZ developers. Incentives bid appraise benefits, single window dynamic headroom, flexibility in export and import rules and regulations has make SEZs an key and most sought later on destination for setting up the bank line empire.Unlike most of the world-wide instances where zones are primarily developed by Governments, the Indian SEZ policy provides for development of these zones by the government, hole-and-corner(a) or joint sector. 1. 5 Establishing SEZs Procedures and Requirements According to Commerce Ministry and SEZ authority SEZs may be developed and managed in the private sector or jointly by democracy government and a private elbow room or exclusively by the introduce Government or their agencies.In the fiber of privately developed zones, the investors could be either Indian individuals, NRIs, Indian or foreign companies. New infrastructural development realises such as construction of meter creation Factory Building, operation and maintenance of infrastructure in the Zones may also be undertaken through private/joint/ claim sector in th e Export Processing Zones, now converted into Special Economic Zones. Any mortal, who intends to set up a SEZ, may, 12 fter identifying the sphere of influence can get down a proposal to the Board of adulation (BOA) yet depart also ca-ca to obtain the concurrence of the conjure up Government. SEZ developer leave behind have to get a no-dispute security measure for that scene of action where he wants to establish SEZ from the promontory Secretary of that asseverate. After getting clearance from the state government BOA considers that proposal and if the proposal is within the purview of SEZ act BOA can applaud the proposal. However if a state government wants to set up a special economic zone, after identifying the celestial orbit can make a proposal directly to the board.The central government has prescribed the minimum athletic field requirement for setting up SEZs. Table 1. 5. 1 shows the minimum requirement of force field for various sectors. Table 1. 5. 1 minim um field of study requirement for various sectors welkin Multi Product Green field Service sector Bio-Technology InformationTechnology Gems & jewellery All former(a) sectors 10 100 Minimum area required (in hectare) 1000 1000 100 10 10 beginning SEZ authority, Ministry of Commerce & Industry. Government of India.Available at sezindia. nic. in. Accessed on June 15, 2006 The area requirement for multi-product SEZs has been relaxed to 200 hectares and for sector specific SEZs to 50 hectares, for certain States (Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura Himachal Pradesh, Uttaranchal, Sikkim, Jammu & Kashmir, Goa) and yoke Territories, keeping in view the obstruction in finding large tracts of near land in such states/union territories. According to the SEZ figure at 13 east 25 % area of the SEZ shall be use for developing industrial area for setting up of such units and the remain 75% can be used for building infrastructures like roads, hotels, pow er generation station, educational institution and former(a)(a) facilities. 1. 6 Setting up Units Any person who wants to set up a unit for operating in a SEZ will have to submit a proposal to the development commissioner of that SEZ. Development commissioner submits the application to the benediction Committee and the Approval Committee may, either approve the proposal without modification, or approve the proposal with modification.A modification suggested by Approval Committee will be well within the purview of SEZ Act. 1. 7 Important Features of SEZ Policy and Incentives flagn to SEZ In India SEZs are deemed foreign territory within the country with special rules for facilitating FDI for export-oriented production, and for purposes of trade and customs duties. The key implication of being a deemed foreign territory is that individual units within the SEZ are allowed operational freedom in routine activities and not supervised by the customs administration. Units may be set up in SEZ for manufacture of goods and transformation of services.To woo the investors to the zones, the exchange Government has been fling a number of fiscal incentives and concessions. For instance, the zones are deemed as foreign territories as far as trade operation, duties and tariffs are concerned. The units (100% export oriented) also have full flexibility in operations. They are exempt from all direct and indirect taxes. No export and import duties, no excise duties, no central or state sales tax and no service tax. The units dont require license for trade groovy goods and raw material.According to SEZ Act 2005, the firms are eligible for getting an encompassing Income revenue enhancement holiday for 15 years. Income tax exemption for 15 years is purchasable for SEZ units as detailed below- 14 a) 100% of profits and gains from exports for the first 5 years b) 50% of profits and gains from exports for the next 5 years c) Amount not exceeding 50% which is credited to a reserve account Special Economic Zone Re-investment Reserve Account and utilized for trading for the next 5 years. The only condition imposed on the firms is that they essential have positive net foreign earning (NFE).The important fiscal and non-fiscal incentives given(p) to SEZ developers and firms are as follows 100% FDI in the manufacturing sector permitted through automatic route1 except harness and ammunition, explosives, atomic substance, narcotics and hazardous chemicals, dis mangeration and create from raw material of alcoholic drinks and cigarettes, cigars and manufactured tobacco substitutes. away commercial borrowings by SEZ units upto US$500 million in a year without any maturity restrictions through accepted banking channels. initiation to retain 100% foreign exchange receipts in Exchange Earners Foreign Currency Account. granting immunity from Central gross sales tax revenue and Service Tax Facilities to set up off-shore banking units in SEZs. licens e from duties on import /procurement of goods for the development, operation and maintenance of SEZ. FDI to develop townships within SEZs with residential, educational, health care and inexpert facilities permitted on a case-to-case basis. The full appoint of all the fiscal and non-fiscal incentives being offered to SEZ developers and units has been given in the (appendix-i). apart(predicate) from getting tax benefits from central government these zones are also getting tax benefits from state governments.TABLE 1. 7. 1 shows the list of tax benefits given by state governments to all the EPZs which has been converted into SEZs. Table 1. 7. 1 franchise From The State Level Taxes By Zone Falta cochin china Chennai Noida Vizag Kandla 15 Sales tax Contract tax leverage tax VAT State intromission tax Octroi tax CESS Luxury tax Entertainment tax sealing wax duty and registration chages on land transfers Stamp duty and registration charges on loan agreements/credit deeds Yes No Yes Yes Yes No No No No No Yes n. a. n. a. n. a. Yes n. a. No n. a. n. a. Yes Yes n. a. n. a. n. a. n. . n. a. n. a. No No No Yes No Yes n. a. Yes Yes Yes No No No Yes n. a. Yes n. a. No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No Yes Yes Source Agrawal,2004 Units within the SEZ and EPZ also get subsidies sometimes on land rents and built up areas are also provided on impose rental rate. In some countries utility(prenominal) services such as electricity, water, and telecommunication are also subsidized. Table 1. 7. 2 shows the list of subsidies being given to zone units in six EPZs (now SEZs) Table 1. 7. 2 Provision of subsidies by Zone FaltaOn land rent Factory rent On purchase on capital goods On capital investments Interest rate subsidies Concessional finance Any other Cochin Chennai Noida Vizag Kandla Yes Yes Yes Yes Yes Yes No Yes Yes No No No No No Yes Yes No No No No No Yes Yes No No No No No Yes Yes Yes Yes No No No Yes Yes No No No No No Source Agrawal,2 004 In harm of fiscal and other benefits we are ahead of China notwithstanding the record of the Indian EPZs stands in contrast even to the performance of the general economy. Unlike other countries, in India, SEZs are being developed by the private sectors as well and to attract 16 he private and foreign investment a package of incentives is being offered by both state as well as central government. Later in the research paper an investigation has also been made to analyse the worth of these benefits. Section II military operation Analysis of EPZs & SEZs 17 Introduction What is a winning SEZ? Is it the one that contributes to the host economy, one that scrams profit for its own owners/managers? SEZs are extensions of EPZs and taking this into consideration, an attempt has been made to analyze the success of both EPZs and SEZs in India.It has been sightly five years since the accounting launch of the SEZ policy in India. Some economists count that its too early to comment upon its potential or chances of its failure. A evidentiary change has been made in the rules and regulations but by and large the objectives of SEZs and EPZs are similar. winning this into account this section has been devoted to con do the experience India had with EPZ policy in terms of export performance, employment generation, FDI inflow and infrastructure development. SEZs have been viewed as a shaft of light to attract FDI and boost the export sector, which will 8 further create employment. It faculty be argued that policies like SEZ which has been introduced very late can not be categorised as a good or a bad policy by looking at the performance analysis of five years but it definitely gives an insight into its potential success or failure. 2. 1 Share in Total Exports Aggregate Analysis Exports from SEZs grew by 16. 4% from 2000-01 to 2004-05. In the same period, join exports in India grew by 12. 1%. This clearly indicates that disdain getting special interference , performance of SEZs in India is not satisfactory.Even, the share of exports from SEZs in the match exports of the country has only increased from 4. 2% in 2000-01 to 5. 1% in 2004-05. Its quite apparent from the diagram that municipal Tariff Area is also more or less witnessing the same rate of harvest-feast. Exports from SEZ touched the figure of 18,309 crore in 2004-2005 which is plainly a mere 5% of the tot exports from India. word form 2. 1. 1 Trend in export performance of SEZs Exports from SEZs (Rs. in Crores) 20000 Rs (in Crores) 15000 myriad (4) 5000 0 2000-01 2001-02 2002-03 2003-04 2004-05 Year 11) (8) (4) (8) Source Export Promotion Council, Ministry of Commerce & Industry, Government of India check figures in parenthesis shows the No. of operating(a) SEZs 19 Figure 2. 1. 2 theatrical role of SEZs in countrys full Export SEZs donation in countrys fare export function in percentage 6. 00% 5. 00% 4. 00% 3. 00% 2. 00% 1. 00% 0. 00% 4. 20% 4. 40% 4. 70% 5. 10% 3. 90% 2000-01 2001-02 2002-03 2003-04 2004-05 Year Source CII report, 2005 Study shows that initially EPZs also witnessed uplifted emergence but gradually it started declining.In the early seventies, the out crop rate of EPZs touched 77% but gradually it started coming down (Agrawal, 2004) and declined to 7% in 1999-00. Figure 2. 1. 3 indicates that the SEZs are failing to induce dynamism in the overall export performance of the economy. As the figure shows, de anguish a high growth of overall exports, SEZ region has remained uniform over the years despite various other benefits. However, this may be envision argued by saying that apart from exports government has other objectives like employment generation and attracting FDI but our analysis shows that SEZ scheme is also failing like EPZs in attracting FDI.Figure 2. 1. 3 branch Trend of SEZ and hoidenish Export 20 2000000 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1990 1992 1994 1996 1998 2000 20 02 Rs. in Crores SEZs export Country export Source sezindia. nic. in, Ministry of Commerce & Industry. Government of India 2. 2 FDI inflow and oeuvre India had a very slow expansion in the initial phases of EPZ policy. Expansion in the zones started picking up in the 1980s in terms of employment but total investment remained abysmally low till the late 1980s8.In the nineties, investment also started increasing. emergence rates in employment slowed down considerably in the late 1990s but in terms of investment EPZs in India hold out to be dominate by domestic investment. This was despite its advance in terms of proletariat costs, handiness of trained manpower and a stalls macroeconomic environment. The share of FDI in total investment increased slowly from 12% in 1989 to slightly over 18% in 2000 ( Agrawal, 2004). During 2000-03, heretofore, FDI inflows increased faster. Table 2. 2. 1 below shows the share of FDI in EPZ/SEZ investment.In 2000, all the EPZs were converted in to SEZs, and with new rules and incentives it was expected that FDI will pour in but a more detailed make of Noida SEZ shows a mere 0. 4% growth in FDI investment in six years while in Chennai it unspoilt went up by 2. 3%. Despite this, new SEZs are becoming the most sought after destinations for foreign investors, however the chances of decline in FDI in SEZs cant be ruled out as once the tax benefit period gets over and there would not be much incentives for investors to invest in SEZs. 21 TABLE 2. 2. Share of FDI in total EPZ/SEZ investment (%) Zone Kandla Santacruz Noida Chennai Cochin Falta Vizag 1997 1. 3 8. 4 12. 3 28. 4 9. 6 3. 1 2003 4. 9 9. 2 12. 7 30. 7 13. 7 4 38. 8 Source Ministry of Commerce & Industry. Government of India Unlike other countries, in India SEZs are being developed largely by private sectors and to avail the tax and other benefits private players are rushing in but it would be interesting to see if Govt doesnt extend the benefits again once the period gets over , will they be lifelessness interested in investing and building infrastructure.Employment creation is one of the important goals which Indian government wants to achieve through SEZs but introductory experiences with EPZ and other free trade zones doesnt give us any rosy picture. EPZ had a share of near about 1% in organized employment (Agrawal, 2004) and till now all eight operable SEZs has created 1 lac employment and it is being expected that in next five years it will cross the figure of 5 lac. Table 2. 2. 2 shows the employment generated by different zones and the pith of Government and private investment in these zones. Table 2. 2. 2 Zone wise employment and Investment upto 31. 3. 2005 Private No of Zone units Employment as on 31. 03. 2005 Govt investment upto 31. 03. 2005 investment upto 31. 03. 2005 KSEZ SEEPZ NSEZ MSEZ CSEZ 123 176 151 105 74 9821 42150 19857 16107 4712 26. 93 57. 39 78. 04 74. 83 87. 53 134 279. 49 650 223. 96 92. 79 22 FSEZ VSEZ Surat Manik an chan 83 28 62 5 2 2 2753 2500 2250 300 50 150 82. 83 39. 3 32. 46 263. 85 311. 58 5. 07 4 1 3 Jaipur Indore Source Export Promotion Council, Ministry of Commerce & Industry. Government of India SEZ or any other free trade zone should not be viewed as a tool to generate employment.Studies show that even small countries like Philippines has created 1. 1 million jobs through these economic zones (KPMG Report, 2004) but despite being the first country to have EPZ in Asia, India failed to achieve a high employment rate. impaired policies, regulations, lack of single window clearance facilities, poor attitude of the officials, centralized governance, pissed labour laws, poor physical and financial infrastructure, all accounted for an undesirable investment humor and thus EPZ failed to create employment. SEZ should have witnessed much high(prenominal) growth in exports and employment but it is not happening either.If SEZ policy is really an example of decentralized governance, is it overt to strengthen our physical and financial infrastructure and if single window clearance facilities are no longer a dream, all these issues and concerns have been emphasized in the last section. Generally, it is argued that the SEZ concept is attractive because it is much easier to make up ones mind the problems of infrastructure and governance on a limited geographical area than it is to conciliate them countrywide. On the contrary, the performance over the last five years of these privileged enclaves indicates the failure of this scheme.The zones cannot be insulated from the broader institutional and economic context of the country and be treated as an economy within the economy. Zones are a part of the economy and require overall improvement in the investment climate to ensure success in the long run. They should not, therefore, be viewed as an alternative to the overall development model. This is perhaps the reason why SEZs failed to fulfill the role of engines of econom ic growth in most countries on a sustainable basis. 23 Section terce A comparative study of Chinese SEZ policy 24 3. SEZs in China The development of Special Economic Zones is one of the highlights of remarkable Chinese economic achievements. The Development of Chinese Special Economic Zones dates back to 1980s. It is different from Indian practice SEZ in China is classified in two levels by their scales. SEZ is the in all city even whole province opened to special financial, investment and trade policy, while Economic and technological Development Zones (ETDZ) is a relatively small piece of land earmarked in coastal and other open cities for constancy and trade development.As early as 1980, under the opening-up and reform policy, the Chinese Government set up the first assort of Special Economic Zones in Shen Zhen, Zhu Hai, Shan Tou and Xia Men, 25 all of which are located in costal areas of Southeast China, followed by other 10 costal cities, Hai Nan state and Pu Dong area in Shanghai as the second multitude. To further open to the outside world and to dispersed successful experiences of SEZs, at the beginning of 1984, the government trenchant to establish ETDZs along coastal line on the basis of successful experiences of and favorable policies granted to the SEZs in the preceding period.Consequently, Chinas first group of 14 National Economic and Technological Development Zones (NETDZ) were established from 1984 to 1988 successively. The distinguishing features of Chinese SEZs are their large size, investment friendly customs regime, flexible labour laws, liberal policy for DTA access, attractive package of incentives and delegation of powers in favour of provinces and local authorities for managing the zones. 3. compare Chinese SEZ policy with India In spite of the fact that India was a pioneer in creating one of the worldss first export processing zones at Kandla in 1965, EPZs have never had much impact on Indias export performance. Tariff e xemption schemes have tended to be excessively complex and get on a licence raj mastermind at the operational level. Both economies are large emerging markets that had rather similar profiles in 1978. Today, China ranks number one as the worlds pet foreign investment destination. Closer examination of the FDI statistics suggests that Indias performance has been abysmal in compare to China.India lags behind for a number of reasons. These include a high tariff regime, poor infrastructure (power, ports, roads and railways), and a regulatory system that is too very much not blood-friendly and inflexible labour laws. In this section a comparison has been make between Chinese and Indian SEZ policy on different parameters like tax incentives, labor laws, FDI inflow, employment and export performance. First, consider the size of the proposed SEZs. Chinese SEZs are like townships. India has not gone that far, but check to the SEZ guidelines, the area of an SEZ should be 1000 hectares .It is being argued that large sized SEZs can perform better as they will have a larger scale of economy but on contrary to that the best performing SEZ in Mumbai has an 26 area of 93 acres only. It is being considered that one of the chinas success factors was large size of SEZs. For instance, entire Hai Nan Island has been state as SEZ with an area of 34,000 Sq. km. Table 3. 2. 1 below shows the size of all five existing SEZs in china. Table 3. 2. 1 Size of Chinese SEZs SEZ 1) Shenzhen 2) Zhuhai 3) Xiamen 4) Hainan 5) Shantou Area (Sq. KM) 327 121 131 34000 234Source Kumar, 2003 There is no doubt that SEZs have an edge over rest of the economy in terms of investment friendly environment and its quite evident that if we have an investment friendly environment in a larger area, economy would do well. Rather than follow throughing the theory of having larger scale of economy we should focus on an overall hassle free environment for export and this can be make only by extending th e SEZ policy to whole country where every small and defective export oriented manufacturers will have the access to business friendly environment. iodine counter argument to this proposal great power be that SEZ policy in India is being implemented on a pilot basis, and government can extend this policy to whole country if SEZ works as a tool to bring economic reform. But unfortunately SEZ policy nowhere talks about extending the same hassle free system to rest of the country. It core that carrying out businesses in hassle free environment would palliate be a dream for rest of the country, so infrastructure else where in the country would not improve.The performance of SEZ also depends on the inner infrastructure and how can we think of a great performance from SEZs when rest of the economy still suffers from the same unfriendly environment. 27 SEZs were established by the China to encourage foreign investment, bringing jobs, technical knowledge, and future tax revenues in retur n for meaning(a) tax concessions at start-up of the operations and over a number of years. The biggest benefit to the investor is significant tax concessions early in the project. Tax concessions offered to a manufacturing startup in Chinese SEZ are No tax during start-up years before reservation a profit The first year that any association makes a profit starts the Tax measure and is year one The first and second year after the tax clock starts, there is no tax. For years trinity and four, there is 1/2 of the sane tax rate. In the fifth year, the club pays the full normal tax rate In terms of tax benefits we are ahead of china. In SEZ policy tax benefits has been increased in comparison to EPZ but the failure of EPZs indicates that tax benefits cant alone boost the FDI and export performance. Table 3. . 2 below compares the performance of these two countries. Table 3. 2. 2 Comparison of SEZ performance China Share of SEZs in total export Employmnet(Direct) generated thro ugh SEZs FDI inflow through SEZs India 5% 0. 1 million US $ 2 billion 23% 2 million US $ 60 billion Source KPMG report, ministry of commerce and industry (GoI) The contribution of Chinese SEZs to the country exports is in the dictate of 15-23%. According to available statistics, the share of SEZ exports to country exports in 1997 was 23% (i. e. approximately US $ 42 billion).Overall, all the zones put together have played an important role in the overall growth of the Chinese economy. These zones taken together employ more than two million people directly and approximately 16 million overall (both direct and indirect). Cumulatively, 20% of the total foreign direct investments 28 into China have made its way into SEZs (i. e. approximately US $ 60 billion till date). Performance of SEZs in these two countries should not be compared provided on the basis of export and other figures because size wise Chinese SEZs are much larger than Indian SEZs.But even in performance (export, employ ment) per Sq. KM China witnessed higher rate of growth and it was possible because of their liberal role model of SEZ policy. As regards labour laws, it is difficult to depend that a communist country like China has relaxed these laws by allowing a take and fire policy for the SEZs. This single measure went a long way in attracting foreign investment to these zones. After investors gained authorisation in the productivity of Chinese work vehemence, the affiance and fire policy was substituted by the fill system.There is ample justification for adopting in India a flexible labour policy in India, not just for these exporting enclaves but also for rest of the country. unshakable and outdated labour laws hinder the economic development and it sets the rationale for having a labour reform. According to section 5B of the labour enter any registered firm, that is employing more than 100 people, is required to seek permit from the state government to retrench its workforce. The cou ntry budget of demonstrate 2002 promised a change in the legislation to raise the level to 300 but due to coalition government it never happened.The result is that bollock-sector firms (those that are registered and that pay their taxes) antipathetic to take on new employment, and the big majority of Indias employment is daily, in small, tax-evading, inefficient enterprises. The policy in India on these searing issues is lukewarm. It just mentions that the laws of the land will apply and that the zones can be declare as public utilities under the industrial Disputes Act. Merely declaring SEZs as public utilities will, however, not serve much purpose as seen in the EPZ experience. The radical difference in the attitude of the Indian and Chinese governments on this matter is reflected n the belatedly create investors guide for Special Economic Zones in India. It states the labour laws of the land will apply to all units inside the Zone. However, the respective State Governm ents may declare units within the SEZ as public utilities and may delegate powers of the lying-in Commissioner to the Development Commissioner of 29 the SEZ (Ministry of Commerce and Industry, 2002, p. 15). In China, the right to hire and fire has been enshrined in SEZ regulations since 1982. Moreover, in India there are strict regulations stipulating that contract labour is only allowed work of a temporary constitution.By contrast, the creation Bank survey (2002b), estimates that in Guangzhou firms employ more than 20 per cent of the labour force as non-permanent workers. Of course many Indian employers find ways round the regulations through outsourcing and less perfunctory means but the current system doubtless reduces flexibility. China made the provincial and local authorities act as partners and stakeholders by delegating them powers for approving foreign investment. The SEZ authorities in China can approve investment proposals up to $30 million. This has been a significa nt feature of the Chinese policy and a key contributor to the success of SEZs.The Indian policy only enables the State governments to set up SEZs, but does not empower them to approve investment proposals. These powers have been vested with the development commissioners concerned who represent the Central Government. This will result in centralization of work in their offices. Government boasts of modify the whole process and talks about single window clearance but anybody who goes through the SEZ act can figure out how complex and centralized this policy is. Last section of this research paper critically analyzes the so -called decentralized nature of the SEZ policy.Another ticklish issue is meshing of local government. Unless the State and local governments are directly made responsible for the focal point of SEZs and approving investment proposals, their political leadership and bureaucratic set up may not have any incentive to push the initiative forward. But in India all t he important decisions are being taken by central government China has gone a step further by delegating powers to the local authorities. The local authority manages Shenzhen SEZ, which has the highest export turnover. 3. 3 Current scenario in China 30Over the last five years the GDP growth of china has been near about 10% and SEZs is being viewed as an engine for this rapid growth. Higher GDP rate can be considered as one of the major success of SEZ policy but regional disparities as an result of this policy has forced China to believe and restructure this policy. Per capita income in the richest city is over 50 times per capita income in poorest city. honour a privileged status to some zones at the cost of others is responsible for this higher inequality. For instance, china had received the cumulative amount of US $ 128. billion of FDI between the year 1979 to 1995 and the coastal areas accounted for over 90% of all the FDI received in this period. It might be argued that the re is no harm in developing country in pockets but how we can forget that these areas were developed by tax money paid by everyone. Government had to forego tax revenues as tax concessions were the main attracting features. All the tax revenue lost due to SEZ was/is being recovered through taxes from rest part of the country and resultantly all tax payers end up paying higher tax but the benefits are available for very few of them.I see this as the one of the main causes for high income disparity in China. To combat this problem even China has given emphasis on balanced development and tax benefits accorded to foreign investments in the SEZs has been partially lifted. Indias tax and tariff structures are still anti export. Indias high overall tariff rates, especially tariffs on intermediate products that are used by exporters, impose a heavy indirect tax on export competitiveness. Deregulation of the private sector is perhaps one of the most critical areas in the context of Indias r eforms.Since roughly 90-plus percent of the workforce is in the informal sector, it is of utmost importance to deregulate the private sector so as to get the unorganized sector workforce in the mainstream. Workers in large firms in the formal sector have a virtual guarantee of continued employment gibe to the Industrial Disputes Act. For firms of 100 employees or more, reductions in the workforce must be upon the permission of state government, which is almost never granted. Remarkably, loss- fashioning firms are also not allowed to close their operations without government consent. The results of Indias ighly modulate labor markets have been devastating. Formal-sector employment in India is shockingly low, in large part 31 because so much urban employment is carried on outside of formal registration. come to the fore of a total labor force of around 406 million, formal sector employment accounts for only 28. 1 million. Of this, 19. 4 million works in the state sector (state ent erprises and public administration), and just 8. 7 million works in private firms with formal employment. Indeed with a more open and deregulated economy (economy is not just SEZs), India may well be in a position to perform as China has done over the last two decades. 32SECTION- IV CASE hire NOIDA SPECIAL ECONOMIC ZONE 33 4. 1 Introduction Noida EPZ was established in 1984 and attained the status of SEZ in the year 2000. Based on their share in exports, past performance and potential for growth, software package and gem & jewellery have been determine as the thrust areas. Spread in 310 acre, NSEZ is just after SEEPZ in terms of export performance. NSEZs proximity to Delhi sets it apart from other SEZs. Being close to national capital it has an easy access to mean manpower, abundant managerial and technical expertise. With 151 units in operation, NSEZ contributed 30% of total exports from SEZ in the year 2004.It employs 19,857 people and per unit employment is 131. In terms of p er unit employment SEEPZ and MSEZ are ahead of NSEZ with 239 and 150 employee per unit respectively. Units in NSEZ get the tax benefits according to SEZ act but at the same time they have been exempted from the payment of stamp duty, trade tax and entry tax. Noida has witnessed higher growth in export in comparison to other SEZs. The figure 4. 1. 1 shows the export growth of NSEZ Figure 4. 1. 1 Export growth trend of NSEZ Export Growth of NSEZ 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04Exprort (in million) 15341 10143 10342 7483 8456 9924 Source NSEZ Authority The total government investment in NSEZ is Rs 78 crore while the private investment is of 650 crores. NSEZ has the highest private investments and the reason for this is better business opportunities due to its proximity to Delhi. Another important factor is incentives given by the state government. Over the years exports in textile and hardware has been 34 declining but gems & jewellery has witnessed a very high growth and in the year 2003-04 the total contribution was 49. 87% in total exports from NSEZ.The table below summarizes the contribution of different sectors in total exports. Table 4. 1. 1 Contribution of different sectors in exports from NSEZ Sector 19992000 1341 1660 1393 1201 1295 462 127 295 682 8456 Exports (Rs. Million) 2000-01 1388 2697 1786 1014 1928 329 88 269 843 10342 2001-02 1199 885 1906 1184 3015 207 100 287 1141 9924 2002-03 990 739 1787 1374 3437 238 53 229 1296 10143 2003-04 990 930 1980 1640 7650 310 50 230 1560 15341 stuff/Garments Hardware Software ENGG. Goods GEM & Jewellery Chemical & Pharma Leather Products charge card/Rubber/Synthetic Miscellaneous TotalSource NSEZ Authority 4. 2 The reasons for NSEZs success A) Proximity to Delhi One of the bill reasons of NSEZs success is its proximity to Delhi. Noida has better transport and other infrastructural facilities in comparison to others SEZ. Noida was developed as an industrial area and therefore, the whole environment is business friendly. Noida is just 24 KM away from Delhi and it comes under national capital territory (NCT), so in terms of administration, infrastructure and business opportunities NSEZ has an edge over other SEZs. B) Special benefits given by the U. P. overnment It has been discussed in previous sections that the tax benefits are the key determinants in attracting investments. To woo the investors U. P. government has exempted SEZ developers and units from some state taxes as well and it has resulted in higher private investments in NSEZ Exemptions from the payment of entry tax, trade tax and stamp duty makes NSEZ the 35 most sought after destination for setting up the units. referable to these exemption units in NSEZ export more to reap the benefits given by the state government at the fullest. 36 Section V Policy Analysis A Critical Approach 37Without doing the cost benefit analysis when a government establishes any econo mic policy which affects all the people in a direct or indirect way, it becomes important to raise some sanctioned questions like whether the benefits of that policy would outweigh their costs, is it good for the country in the long run? SEZ policy has been enacted by parliament but ironically no cost benefit analysis was done before announcing it. As discussed earlier the thrill objective of this scheme is to boost the export sector and a package of fiscal and non fiscal incentives are being offered to developers and units to achieve the objectives.One way to assess the rationale for having SEZ policy is to investigate what would have been the performance of the economy in the absence of this policy. Anticipating this would not be an easy childbed. Export performance of our country has been abysmal and there was a need to take some measures but according to me, discriminatory treatment should be the last measure and firstly any government should root out all those evils which a re hindering the growth of export or for that matter whole economy. inflexible tariff regime highly regulated labour market, centralized governance are some major problems which obstruct the growth of the export sector and this also makes the investment climate unfriendly. Deregulating the labour market and decentralizing the whole process should have been the first priority of the government and making the whole country hassle free for investments and business opportunities would automatically boost the export sector. Establishing SEZs is a very complex task encompassing a wide range of policy, legal and regulatory issues.SEZ policy was praised initially as a well drafted policy but inter ministerial conflicts, heavy economic costs and recent cases of migration from DTA to SEZs rattling highlights the blind spots of its designers. 5. 1 large(p) Economic Costs According to SEZ Act 2005, the firms are eligible for getting an extended Income Tax holiday for 15 years. Firms and devel opers have also been exempted from excise duty and custom duty. A loss of Rs. 39,704 crore of duty under export promotion schemes during 2003-04 (CAG Report, 2004) which accounts for 82% of customs duty collected that year gives an melodic theme of how costly this whole affair is.According to an internal assessment by the 38 Finance Ministry, the Government may have to forego about Rs 90,000 crore in direct and indirect taxes over the next four years on account of SEZs. 5. 2 Corporate Welfare Very recently an article written by M. Bhardwaj appeared in Business Standard which alleges that Haryana government acquired over 1700 acres of land from farmers at Rs. 300 crore and offered this land to Reliance for 360 crore in the learn of SEZ while it was estimated that land was worth 5,000 crore. This is a perfect example of corporate welfare.Its true that the value of land goes up drastically when market anticipates the introduction of any such scheme into that particular area but takin g away the land from farmers at a much turn away rate cant be justified. According to the SEZ Act any state government can set up SEZ jointly with private sector. This can be called public private participation. Theoretically everything sounds good, so where is the problem. Now if any company has link with top politicians of a state, the possibility of favoured treatment cant be ruled out. Even in terms of incentives state can also offer a package of tax benefits.Imagine a situation where two firms which produces the same good, are operating from two different states and one of them gets an edge over another just because of preferential treatment by the state. Would you call it a fair competition? SEZ act enables the state government to offer land at a much lower rate and to provide extra incentives and what do we expect that the state governments would not shout these powers? 5. 3 Migration from DTA to SEZ To avail all the facilities and incentives offered by SEZs, small firms an d even big companies are shifting to these privileged enclaves.SEZs have advance inward migration. One of the prime objectives of this policy was to attract FDI but the share of FDI in investments in SEZs is very low and due to inward migration very few new manufacturing units have been set up in the SEZs. 5. 4 Real Estate snap 39 State governments are religious offering land to SEZ developers at concessional rates. For real acres developers SEZ policy has come as an luck to grab the scarce land near cities. Ideally SEZs should be established in remote areas but due to lack of infrastructure the concentration of SEZs are near by cities.According to SEZ Act at least 25% of the total acquired area would be processing area and in the remaining area developers can build commercial complexes, malls, hospitals, hotels, educational institutions etc. Minimum area requirement for setting up SEZ is 1000 hectares and according to SEZ guidelines developers get a tax break even on all the bui ldings on the 750 hectares. On dismissal real estate boom has shifted the focus from export to building residential complexes and commercial malls. Developers can always make huge profit from selling or leasing the buildings and this is where real estate play comes in.Land deals and remuneration payments are known to be hot-beds of decadency so no wonder if farmers are being displaced from their place in the name of SEZ without giving adequate compensation. Conclusion Considering the need to boost export sector and attract FDI, government announced this policy but ironically the performance of SEZs in exports highlights the failure. When government should liberalize overall policy, government has decided to focus on one or two areas. The real attraction of SEZs is the tax holiday promised and to grow the business in hassle free environment firms are just shifting to these privileged enclaves.To compete with China a package of fiscal and non fiscal incentives are being given but t his has been overlooked that tax benefits in chinas SEZ were available only to foreign investments, not exports. All exemptions and fiscal incentives should go in the process of overall tax and labour reform. Giving preferential treatment to any particular area in the name of exports cant be justified in the pop set up. Even if government wants to continue with this policy, only developers should be given the tax benefits if they are developing any SEZ in the remote area.The whole process is still centralized and government should minimize their role. 40 References 1. Official Website of SEZ. http// sezindia. nic. in. 2006, accessed on 23 whitethorn 2006 2. Ministry of Commerce. 2005. Annual Report2004-05. 3. CII report. 2005. Special Economic Zone Engines for Growth. Available at http//www. ciionline. org/Northern/regionalfocus/836/images/sez. pdf. Accessed on 23 June 2006. 4. Bhardwaj, M. 2006. No review, RIL mega SEZ signing next week, says Haryana CM. June 13. Business Standard 5. Aggarwal, A. 2004. Export Processing Zones in india Analysis of the ExportPerformance. ICRIER works paper No. 148. 6. Jain, S. 2006. Killing SEZs, making a killing. 22 May. Business Standard 7. Tondon Committee (1982) The Committee on handsome trade Zones and 100% Export oriented Units, Apponited by the Ministry of Commerce, Government of India, September 1981. 8. IIPM Editorial. 2006. The Great Indian obsession. 9. The Hindu. 2005. Lok Sabha passes SEZ Bill. 11 May 10. Suchitra, M. 2006. The high cost of easy foreign exchange. 9 March. India Together 41 Annexure-1 (List of all the fiscal and non-fiscal benefits given to SEZ developers and units) i. 00% income tax exemption for a block of five years and an additional 50% tax exemption for two years thereafter ii. 100% FDI in the manufacturing sector permitted through automatic route, interdict a few sectors. iii. External commercial borrowings by SEZ units upto US$500 million in a year without any maturity restrictions throug h recognized banking channels. iv. Facility to retain 100% foreign exchange receipts in Exchange Earners Foreign Currency Account. v. 100% FDI permitted to SEZ franchisee in providing basic telephone services in SEZs. vi. vii. No cap on foreign investment for small scale sector mute items.Exemption from industrial licensing requirements for items reserved for the SSI sector. viii. No import licence requirements 42 ix. Exemption from customs duties on import of capital goods, raw materials, consumables, spares etc x. Exemption from Central take up duties on procurement of capital goods, raw materials, consumable spares etc. , from the domestic market. xi. xii. xiii. No routine examinations by Customs for export and import cargo. Facility to realize and deliver export proceeds within 12 months. Profits allowed to be repatriated without any dividend-balancing requirement. xiv. xv. rail line work on behalf of domestic exporters for direct export allowed. Subcontracting both domestic and international is permitted this facility is available to jewellery units as well. xvi. Exemption from Central Sales Tax and Service Tax Facilities to set up off-shore banking units in SEZs. Exemption from duties on import /procurement of goods for the development, operation and maintenance of SEZ. Income tax exemption for a block of 10 years in 15 years. Exemption from Service Tax 43 FDI to develop townships within SEZs with residential, educational, health care and recreational facilities permitted on a case-to-case basis.