SEZ in India

Special Economic Zones in India
By Dr. Mattapalli Naga Raju

Introduction :
Many developing countries including India are facing the problem of regional imbalances and capital scarcity. Vast and untapped commercial resources of an underdeveloped area can be utilized by establishing special economic zones. A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws. India was one of the 1st Asian countries to establish an EPZ in Kandla in 1965 with a view to bring expertise for the country's export sector. In April 2000, the SEZ policy was announced as a part of the Export-Import (EXIM) policy of India to overcome the shortcomings on account of absence of world class infrastructure, unstable fiscal regime, multiplicity of controls and clearances. A SEZ bill was prepared after extensive discussions with the Ministry of Commerce and Industry and many other senior officials and eventually SEZ Act was passed in Parliament of India in May 2005, which received presidential assent on 23 rd June, 2005. The SEZ Act in India came into force on 10th February 2006.

The main objectives:
- generation of additional economic activity
- promotion of exports of goods and services;
- promotion of investment from domestic and foreign sources;
- creation of employment opportunities;
- development of infrastructure facilities;

Incentives for Development of SEZs:
Many lucrative incentives are provided by the SEZ Act to attract investments. Few amongst them are: 100 percent tax exemption for industries on export profits for first five years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years; provision of 100 percent foreign direct investment in industries under automatic route; duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units; exemption from central sales tax and service tax; exemption from minimum alternate tax under section 115JB of the Income Tax Act; external commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels; exemption from state sales tax and other levies as extended by the respective State Governments; single window clearance for central and state level approvals.

Amendments:
In the Special Economic Zones Rules, 2006 in rule 5, in sub-rule (2), for clause (a) clause had been substituted, namely:-
A Special Economic Zone for multi product shall have a contiguous area of one thousand hectares or more but not exceeding 5000 hectares; Provided that in case a Special Economic Zone is proposed to be set up in Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu and Kashmir, Goa or in a Union territory, the area shall be two hundred hectares or more:
Provided further that at least fifty per cent of the area shall be earmarked for developing the processing area."

Response from Industry:
The overwhelming response to the SEZ scheme is evident from the flow of investment and creation of additional employment in the country. The SEZ scheme has generated tremendous response amongst the investors, both in India and abroad, which is evident from the list of Developers who have set up SEZs namely: Nokia SEZ in Tamil Nadu , Quark City SEZ in Chandigarh , Flextronics SEZ in Tamil Nadu, Mahindra World City in Tamil Nadu, Motorola, DELL and Foxconn, Apache SEZ (Adidas Group), Divvy's Laboratories in Andhra Pradesh, Rajiv Gandhi Technology Park, Chandigarh, ETL Infrastructure IT SEZ, Chennai, Hyderabad Gems Limited, Hyderabad.
Exports from SEZs:
Exports from the functioning SEZs during the last three years

...................Year..................Value (Rs. crore)...................Growth Rate(over previous year )
............ 2005-2006.................... 22 840........................................ 25%
............2006-2007.....................34,615.........................................52%
............2007-2008.....................66,638.........................................92%

Criticism:
The issue of SEZ has been a "hot cake" of controversy especially in politics. Some consider SEZ to be important for India's economic growth others criticize it as an official tool used by big industrialists to grab lands from farmers for making money. The protests in Nandigram and Singur against establishment of SEZs have created a lot of political turmoil. Similar protests can be seen from millions of people from the states of Haryana, Orissa, Maharashtra and others for not giving their lands for SEZ projects. Such protests are supported by important personalities, social activists, politicians and many NGOs. The threat of massive displacement from agricultural areas has been the main focus of these agitations..Most of the fertile and agricultural land is being covered under SEZs to build buildings, malls and supermarkets. Establishment of SEZs also causes huge revenue loss to the country as it encourages the tax paying businesses to shift to tax free zones.

Type of Ships - (i)

Civil ships

This major group is divided into types and subtypes depending on what the ship is going to be used for. 1.Troop-ships - their purpose is to carry freight and passengersa) freighters (also cargo ships)- As the name suggests, this category includes ships carrying both dry (general-cargo and specialized ships) and liquid cargo.
General-cargo ship
General-cargo ships - Once the most popular type, nowadays general-cargo ships are still built but in small quantities. Their carrying capacity is 4,000-6,000 t on average and may reach 16,000 - 20,000 t. General cargo includes items which are packed (boxes, barrels, bags, packages) or not packed (pipes, bricks, machinery, rolls of wire). They usually have spacious holds which occupy the larger part of the hull. Refrigerator chambers to keep perishable foods, tanks for carrying vegetable oils and air-conditioned systems for furs needing special care are being provided on modern vessels. However, the disadvantage is that loading and unloading takes a long time which causes delay. Ships for general cargo may sail on a fixed route (that is, making regular voyages between two ports) or may supply cargo wherever merchants want them to. The latter are also called trampers because they do not have a specific route. Trampers usually transport coal, timber, ores, cotton, etc.
Specialized ships - the cargo is carefully distributed according to its type and requirement of special conditions:
Reefer
Reefer - they transport perishable foods such as fruit, vegetables, meat, fish and dairy, having a carrying capacity of 8,000 - 12,000 t. They sail at a speed of 18-22 knots which is higher than that of the common general-cargo ships because these perishable goods require faster delivery. Foodstuffs are kept in holds with good heat and freezing insulation at a temperature varying from -25 C to +13 C depending on the type of cargo. Reefers are equipped to carry not only frozen stuff but also goods which first have to be refrigerated to a specific temperature for transportation.Timber carriers - one-decked ships designed to carry logs and beams; carrying capacity - 5,000 - 20,000 t, speed - 13-15 knots.

Containership
Containerships - carrying capacity - 8,000-15,000 t on average and 25,000-30,000 t for big containerships;These ships are classified as unit-load ships because freight is carried in huge boxes of standard size (units), usually from 10 to 40 t. Actually these are the same we see on trains and trucks proving one of the advantages of containerships and those boxes: the delivery can be transported to the recipient using the link wagon - car - ship with least damage of cargo. Containerships are said to have made a revolution in the history of water transport. The higher speed (of 20-26 knots) and shorter port stay are a few of their advantages over other types of ships. The boxes, also called containers, may carry anything - fruit and meat (in special refrigerator containers), chemicals and acids, textile, instruments and metals, TV sets, radios and computers, even cars and ships! Containerships tend to have a large hatch on the deck just above the hold in order to avoid moving boxes horizontally along the deck to the hold to save time and effort. Due to this peculiar ship design and method of units, loading and unloading is done much faster.Records for the fastest work have been set, the recent one being an unloading of 104 containers per hour (Hong Kong, 1982). Usually loading procedures are performed with cranes ashore at special places called "terminals" but smaller containerships have their own cargo-handling gear.


Barge-carrying Ship
Barge-carrying ships (lighter ships) -This type of ships pertains to the category of containerships but the principle is slightly different. Cargo is carried in floating containers, also referred to as barges or lighters, each with a carrying capacity of 375 t - 1050 t. As these barges cannot sail on their own, they need to be tugged or towed to the ship. There, they can be loaded aboard in different ways depending on the type of lighter ship. For example, LASH (Lighter Aboard Ship) type has a high-capacity crane at the stern which lifts the barge, moves it horizontally over the deck and arranges it. SEA BEE type has a platform at the stern which is just like an elevator - it takes the lighter on and lifts it up to the deck. From then on, another device carries the barge to its place. The "integrator" lighter ship has its hull divided into sections so that the tug can move the barge straight into its compartment. Unloading is done in the same way on the following principle - lighters are unloaded from the ship, let in the water and tugged to the pier.The advantage of this type of ships being that cargo can be carried in separate barges to and from smaller ports through a series of rivers and canals that are inaccessible for big ships.
Ro-ro Ship
Ro-ro ships - used for transporting motor vehicles and other wheeled equipment. Ro-ro is short for roll-on roll-off ships and is thus called because cargo is carried on wheeled containers or trailers. Ro-ro ships sail at an average speed of 22 knots. Roughly speaking, their shape is "boxy". Ro-ro ships usually have 2-6 decks and look like huge parking lots with stern openings and lifting platforms to sort out trailers. Needless to say, loading and unloading is quite speedy. A common "representative" of ro-ro type is the car carrier (car-loading.jpg) which usually has cars directly loaded on the ship without putting them in containers. Modern car carriers are capable of carrying about 6,500 automobiles.

Bulker
Bulk-carriers (bulkers) - designed to carry loose goods which constitute about 70% of all the shipments carried by sea; speed - 14 - 16 knots, carrying capacity - varies (there are ships with 30,000 t and others with 150,000 t); Bulkers are usually one-decked, with an engine room in the stern and a deckhouse above it. The holds are constructed with longitudinal and cross walls (called "bulkheads") and the cargo is easily stowed according to them. Bulk-carriers do not have cargo-handling gear aboard and have their goods loaded/unloaded by means of port devices. That's why all the space before the deckhouse is vacant to make load operations easier. There is an exception for some bulkers that work on a self-unloading principle. Bulk cargo is a wide term. Heavy bulk-carriers usually transport ore , coal and coke, building materials, such as cement and gravel. Light bulkers carry grain, salt and sugar. Unfortunately, goods such as ores and grain cannot simply be dumped in the hold of the ship without taking any precautions. Any careless maintenance of this cargo may result in damage of the ship. Just to give you an example - grain may ignite under particular conditions. Bulkers can also be all-purpose i.e. they may export bulk cargo and import oil or vehicles. This type tends to have many holds. An example of this type is the oil-ore carrier which may have a carrying capacity of 280,000t.
Ore ship

Heavy-cargo ships - designed to carry cranes, oil drills, machinery for factories and power stations, equipment for heavy industry and other cargo weighing 700-1000 t.
Heavy-cargo ship

Cattleships - as the name implies, these ships transport cattle