Special Economic Zones (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.

The basic idea of SEZs emerges from the fact that, while it might be very difficult to dramatically improve infrastructure and business environment of the overall economy ‘overnight’, SEZs can be built in a much shorter time, and they can work as efficient enclaves to solve these problems.

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 for SEZ units under the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.
  • Exemption from Minimum Alternate Tax (MAT).
  • Single window clearance for Central and State level approvals.

Concerns with present SEZ:

  • 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 benefitted from these zones.
  • Most of India’s new generation SEZs came up not for export, but for avoiding taxes. Large fiscal sops, in the form of a bunch of reliefs from central and state taxes, lured developers into building SEZs.
  • 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.
  • States did not match the central SEZ Act with State-level legislation, which rendered the single window system ineffective.
  • Lack of robust policy design, efficient implementation and effective monitoring have seriously jeopardised India’s effort to industrialise through SEZs.

Recently, the Ministry of Commerce and Industry has notified setting up of Tripura’s first-ever Special Economic Zone (SEZ).

It will be developed by Tripura Industrial Development Corporation (TIDC) Ltd. for the industries based on rubber, textile and apparel, bamboo and agri-food processing.

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