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Table of Contents 

Sr. No. 

Topics 

Page No. 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

Fundamentals of SEZ 

SEZ concept in India Past and Present 

Institutional framework for SEZs 

Operating Structures of SEZs 

Eligibility criteria for a developer 

Area requirement for SEZ 

Distribution of SEZs in India 

Operational SEZs in India 

Fiscal Benefits and Incentives 

SWOT 

SEZs outside India 

Chinese SEZs a story in contrast 

Infrastructure Need 

Issues facing SEZs in India 

Latest developments on SEZs 

Final Word 

Annexure 

4 

6 

10 

12 

14 

15 

16 

20 

26 

28 

30 

33 

34 

35 

37 

38 

40

THE CONCEPT of special zone has existed for over six decades 

now! Typically, special zones are the regions designated for 

economic development, oriented towards Foreign Direct Investment 

(FDI) and export promotion, both fostered by special 

policy incentives. 

Traditionally, the concept of Export Processing Zones (EPZs) 

evolved to facilitate exports. The standard definition applied 

by international organizations (World Bank, 1992 and UNIDO, 

1995) defines EPZ as an industrial area that constitutes an enclave 

with regard to customs’ tariffs and the commercial code 

in force, in the host country. In other words, EPZs are industrial 

clusters of units concentrated in a geographical area, share 

some common infrastructure and have a pool of trained human 

capital. EPZs were thus considered a best policy to promote 

exports and earn foreign exchange. 

Eventually, the concept of Special Economic Zones (SEZs) 

emerged which covers a broad range of more specific zone 

types, including Free Trade Zones (FTZ), Export Processing 

Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, 

Urban Enterprise Zones and others. 

An SEZ is a geographical region having minimum bureaucracy, 

best infrastructure and special economic laws related 

to export and import that are more liberal than a country’s 

typical economic laws. By offering liberalized terms, they 

attract investment and foreign exchange, impel employment, 

and propel the development of improved technologies 

and infrastructure. 

International experience indicates that 

• The size of SEZ varies from 2 to 1500 sq. kilometers 

» Size is influenced by the extent of self sufficiency and 

integration in the zone 

» A specified minimum land area is necessary to support 

desired level of economic activity 

• Strategic location and connectivity with major trading 

destinations are critical factors for success of SEZs 

» In most cases, it has been observed that the zones 

are strategically located giving an easy gateway to 

international trade 

• Countries have focused on attracting investments in specific 

industries considered strategically important for 

the economy 

• Diversity in multiple economic activities is critical for an 

SEZ to evolve as an economic entity in itself 

• Government participation in infrastructure development, 

particularly at initial stages, has played a key role in success 

of SEZs 

» Private participation in developing, operating and 

maintaining infrastructure is another key factor 

» Simplification of administrative procedures and 

mechanisms for speedy approvals is also an important 

feature in success of SEZs 

Evidently, an SEZ is almost a self contained area with high 

class infrastructure for commercial operations and residential 

inhabitation. It is believed that SEZs could facilitate infrastructure 

development through forward and backward linkages not 

only within zones but also enhance the economic activity in the 

peripheral areas. In other words, they can act as catalyst for 

foreign exchange earnings, employment generation and overall 

economic growth. 

The world’s first known instance of SEZ dates back to 1947 

wherein an industrial park was set up in Puerto Rico. In the 

1980s, China made the SEZs gain global attention with its largest 

SEZ - Shenzhen. 

5

A LITTLE OVER 30 YEARS AGO, there were 80 Special Economic 

Zones (SEZs) in 30 countries generating about USD 6 billion 

in exports and employing about one million people. Today, there 

are more than 3,000 SEZs in 120 countries and they account 

for over USD 600 billion in exports and 50 million direct jobs 

(Source: Economic Times, 9 April 2007). 

As of today, India has 101 operational SEZs. Out of these, 58 

are IT/ ITES, 12 Multi product and 31 other sector SEZs. The 

total number of operational units in these SEZs is 2301 (Source 

: Department of Commerce). India was one of the first in Asia 

to introduce the concept of EPZ. Way back in 1965, the first 

EPZ in Asia was set up in Kandla, in the state of Gujarat. The 

EPZ was set up with an intention of promoting exports in the 

country. However, the EPZ faced some drawbacks in terms of 

location issues, burdensome operations and limited policies focused 

on import minimisation (vs. trade enhancement through 

export promotion). 

To overcome these issues, in April 2000, the government announced 

the SEZ Policy with an objective of introducing worldclass 

infrastructure, creating a firm economic administration 

and to draw larger foreign investments in India. This policy 

aimed to make SEZs the driver for economic growth supported 

by quality infrastructure and attractive fiscal package, with 

the minimum possible regulations. The primary objective of 

the policy was to provide a globally aggressive and smoother 

environment to promote exports and attract foreign and domestic 

investments. 

Thus, the main objectives of this revised policy were to: 

• Provide an enabling policy environment 

• Provide flexible labour laws 

• Provide currency convertibility 

• Provide stable legal and administrative regime 

• Commit to the tenets of an open economy 

• Earn foreign exchange and promote FDI 

• Generate additional economic activity 

• Promote exports of goods and services 

• Promote investment from domestic and foreign sources 

• Create employment opportunities 

• Develop infrastructure facilities 

SEZs offer wide range of privileges like single window management, 

streamlined procedures and duty-free trade. Within 

SEZs, units may be set-up for the manufacture of goods and 

other activities including processing, assembling, trading, repairing, 

reconditioning etc, i.e. to carry out the notified activities 

only. SEZ units are self-contained and integrated having 

their own infrastructure and support services. 

As per law, SEZ units are deemed to be outside the customs 

territory of India. Goods and services coming into SEZs from 

the Domestic Tariff Area (DTA) are treated as exports from India 

and goods and services rendered from the SEZ to the DTA are 

treated as imports into India; while DTA implies the whole of 

India (including the territorial waters and continental shelf), it 

does not include the SEZ areas. 

This scheme, however, did not witness significant private sector 

participation. To overcome the same, a comprehensive 

draft SEZ bill was prepared in 2005, which came into effect 

in February 2006. The Act clearly laid down legal backup for 

establishment of SEZs and the constituents of approval and administrative 

machineries like Board of Approval, Development 

Commissioner and SEZ authority etc. 

SEZ Rules that came into effect in February 2006, deal with the 

procedures to be followed for establishment of SEZs, nature of 

units in the SEZ, terms and conditions for the developers and 

entrepreneurs in SEZ, the movement of goods from / to domestic 

Tariff Area (DTA), monitoring by the authorities etc. The rules 

also provide for simplification of procedures and single window 

clearance on matters relating to the central as well as the 

State Government. 

7

SEZs in India at a glance 

Details 

Nos 

Land Area (In Hectares) 

Set up before 2006 

No. of SEZs set by Govt. 

19 

2,610 

No. of valid In-Principle Approvals 

147 

125,163 

Set up Post 2006 

No. of Formal Approvals 

579 

73,731 (incl. notified SEZs) 

No. of Notified SEZs 

335 

39,803 

As on Dec 09 

No of operational SEZ 

101 

16,662 

Source: Ministry of Commerce & Industry, Dept. of Commerce and ICICI PSG Services estimates 

Formal approval: given when land is available to set up the SEZ 

In principle approval: given when the land has not yet been secured but all other criteria are fulfilled 

Notified : final stage after which physical development begins 

Investments and employment in SEZs as on June 2009 

The SEZs in India cater to various labour intensive manufacturing industries such as Textiles and apparels, leather footwear, automobile 

components, engineering etc. 

Particulars 

Incremental Investment 

(Rs. in Million) 

Total Investment 


Incremental 

Employment 

Total 

Employment 

Set up post 2006 Notified SEZs 

1,045,893 

1,045,893 

134,627 

134,627 

State/ Private SEZs 

49,012.70 

66,575.80 

43,422 

55,890 


Government SEZs 

11,144.50 

33,936.50 

74,686 

196,922 

Total 

1,106,050.20 

1,146,405.30 

252,735 

387,439 

Source: Ministry of Commerce & Industry, Dept. of Commerce 

8

Exports from SEZs 

Additional investment, generation of employment, rising exports and development in infrastructure are some of the benefits derived 

from the development of SEZs. These benefits further give a boost to the economic activities in the country. 

1800000 

1600000 

1400000 

1200000 

1000000 

800000 

600000 

400000 

200000 

0 

Exports from SEZs 

92% 

1700070 

71% 

996890 

52% 

39% 

666380 

50% 

32% 

25% 

346150 

138540 

183140 

228400 

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 (E) 

Value (Rs. Million) Growth Rate ( in % ) 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

Exports from these tax-free industrial enclaves nearly doubled from Rs 346,150 million in 2006-07 to Rs 666,380 million in 2007-08. 

Exports from the SEZs amounted to Rs. 996,890 million in 2008-09 thereby recording 50% growth over previous year. The first quarter 

of FY 2009-10 has already recorded exports worth Rs. 425,010 million. 

Summary of physical exports from SEZs in April-June 2009 (Rs. in million) 

Particulars 

Exports (Rs. in Million) 


Central Government SEZs 

State Govt SEZs 

180,686.80 

75,572.00 

Set up post 2006 

Notified SEZs 

168,758.80 

As on date 

Total 

425,017.60 

Key points : 

• During the period 2004-06, exports from SEZs were growing at a CAGR of 28.4% whereas during the period 2006-09, 

exports grew at a CAGR of 63.43% 

• Every additional Rs.1 million invested in SEZs during the period 2005-09 has yielded Rs. 0.82 million of additional exports 

• Every additional employment during the same period has yielded Rs.3.39 million in incremental exports 

9

LEGAL FRAMEWORK for setting up sez is defined under SEZ 

Act and State SEZ policy. The Central Government had brought 

out Model State SEZ Act to be followed by State Governments 

while forming their respective SEZ Acts. The state SEZ Acts 

provide for a regulatory framework for SEZ development in consonance 

with the SEZ Act. They also provide for single window 

clearance to the developer and fiscal benefits to the SEZ developers 

and units within SEZs. 

Following State SEZ Acts have already been notified: 

• The Indore Special Economic Zone (Special Provisions) 

Act, 2003 

• West Bengal Special Economic Zone Act, 2003 

• The Gujarat Special Economic Zone Act, 2004 

• The Haryana Special Economic Zone Act, 2005 

State 

SEZ Act 

The SEZ Rules provide for 

• Simplified procedures for development, operation, and 

maintenance of the SEZs and for setting up units and conducting 

business in SEZs 

• Single window clearance for setting up of an SEZ and setting 

up a unit in a SEZ 

• Single window clearance on matters relating to Central as 

well as State Governments 

• Simplified compliance procedures and documentation with 

an emphasis on self certification 

Administrative set up of SEZs 

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

set up, viz., 

(i) Board of Approval (BoA), the apex body, 

(ii) Unit Approval Committee (UAC) at the zonal level, dealing 

with approval of units in the SEZs and related issues, and 

(iii) Each Zone headed by a Development Commissioner, who 

is also the head of the UAC. 

SEZ Act, 

2005 

Legal 

Framework 

SEZ Rules, 

2006 

Any proposal for setting up of SEZ in the Private / Joint / State 

Sector is routed through the concerned State Government who 

in turn forwards the same to the Ministry of Commerce with its 

recommendations for consideration of BoA. 

BoA issues a formal approval in case land is available with the 

developer to set up the SEZ. If the land is yet to be secured for 

setting up of the SEZ, BoA issues an in principle approval. 

SEZ Act, 2005 

The policy relating to SEZs was earlier contained in Foreign 

Trade Policy. However, to give a long term and stable policy framework 

with minimal regulation, the SEZ Act 2005 was enacted. 

The Act envisages a key role for the state governments in export 

promotion and creation of related infrastructure. Besides, 

a single window SEZ approval mechanism has been provided 

through a 19 member inter-ministerial SEZ Board of Approval 

(BoA). The applications duly recommended by respective state 

governments are considered by this BoA periodically. All decisions 

of the BoA are with consensus. 

SEZ Rules, 2006 

SEZ Rules, 2006 are the rules which lay down the complete 

procedure which an individual is required to follow if one intends 

to develop an SEZ or one intends to establish a unit in 

SEZ. The benefits of various taxes available to a developer and 

a unit are also given in the SEZ rules. 

11

OPERATING STRUCTURES OF SEZS 

Who Can Operate 

Sector Specific 

1. State Govt. Agency 

+ Private Sector 

2. One Major Industrial 

House 

+ Other Small 

Houses 

3. Syndicate / 

Association of Major 

Industrial Players 

4. Single Industrial 

House 

Multi Product 1. Central / State Govt / 

State Govt. Agency 

+Private Sector 

2. Public Sector 

+State Govt. Agency 

+Private Sector 

3. Public Sector Alone 

Free Trade, 

Warehousing 

Zones and 

SEZ in port / 

airport 

1. Industrial House 

+ Logistics Company 


Association of 

Logistics Companies 


Association of 

Logistics, Warehousing 

and Trading 

Companies 

IT / ITES 


Association of Pvt. 

Sector Companies 

with or without Govt. 

Agencies 

2. One or more IT / ITES 

Companies 

3. Single Company 

12

• Sector Specific SEZ (Rule 2 zb of SEZ Rules, 2006) 

» Units set up for one or more products in a sector 

» One or more services in a sector 

• Multi Product SEZ (Rule 2 za of SEZ Rules, 2006) 

» Units set up for manufacturing of two or more goods in 

a sector or goods falling in two or more sectors 

» For trading and warehousing or rendering of two or 

more services in a sector 

» Rendering of services falling in two or more sectors 

• Free Trading and Warehousing Zones 

» To create trade related infrastructure to facilitate import 

and export of goods and services with freedom to 

carry out trade transactions in free currency 

» Atleast 50% of the area shall be earmarked for developing 

processing area (in a standalone case) 

» Can be set up as a part of multi-product SEZ 

(G.S.R 470 (E) 10-08-2006) 

» SEZ can be set up in an existing port or airport 

• IT/ ITEs 

» IT / ITEs SEZs come under sector specific SEZs 

» Can be established to provide hardware/ software and 

related services 

Activities in SEZ 

Both manufacturing/trading and service activities can be carried out in an SEZ. 

Following activities are permitted to be carried out in SEZ: 

Manufacturing / Trading 

Apparel, Garments & Leather 

Automobile & Auto Components 

Computer Hardware & micro-electronics 

Consumer Electronics & Appliances 

Engineering - Light, Heavy & Application 

Food Processing 

Gems, Jewellery & Diamonds 

Handicrafts 

Pharmaceuticals 

Telecom Equipment 

Service 

Business Services (Convention / Exhibition) 

Entertainment, Leisure & Recreation 

Financial Services 

Health Care 

IT enabled services Biotechnology 

Knowledge (Education) Services 

Organized Retail 

R & D Services 

Sports & Related Activities 

Warehousing & Trade Related Services 

Wood, Rubber, Plastic & Leather Products 

Source: SEZ Rules (www.sezindia.nic.in) 

Co-Developer in SEZ 

Any person who intends to provide any infrastructure facilities 

in the identified area in the SEZ or wants to undertake authorised 

operations can apply to the BoA for approval as Co-Developer. 

As such co-developer can be appointed for provision 

of infrastructure facilities in the processing area as well as nonprocessing 

area of the SEZ. 

There is no restriction on number of co-developers for an SEZ 

and as such there can be more than one co-developer in an 

SEZ providing/developing/maintaining infrastructure in different 

parts/areas of the SEZ. 

13

ELIGIBILITY CRITERIA FOR A DEVELOPER 

Net worth and investment criteria: To ensure that only financially sound entities are applying for SEZs, the BoA has fixed a minimum 

net worth and investment criteria for promoter firms. 

Category of SEZ 

Minimum Net worth Criteria 


Minimum Investment Criteria 


Multi product SEZ 

2,500 

10,000 

Sector Specific SEZ 

500 

2,500 

IT SEZs 

1,000 

- 

(Source : Economic Times dt. 22nd September 2006) 

FDI in SEZ 

The SEZ Act allows for 100 % FDI in the manufacturing sector 

through the automatic route, barring a few sectors, for establishment 

of units in the SEZs and also 100 % FDI to develop 

townships within the SEZs. 

External commercial borrowings (ECBs) of up to USD 500 million 

can be raised by the SEZ units in a year without any maturity 

restrictions and with flexibility to keep 100 % of export 

proceeds in an Exchange Earner’s Foreign Currency (EEFC) account. 

SEZ units are eligible to make overseas investments up 

to any amount under the automatic route to be funded out of 

EEFC balances of the unit. Such investments will be subject to 

an overall ceiling of USD 500 million. 

14

AREA REQUIREMENT FOR SEZ 

The SEZ Rules provide for different minimum land requirement for different class of SEZs. 

For area other than 

special category states / UTs 

For special category states / UTs 

Type 

Minimum Area 

Requirement 

Processing area 

Requirement 

Minimum Area 

Requirement 

Processing area 

Requirement 

Multi-product 1000 hectares 35% 200 hectares 35% 

One / More Services 100 hectares 50% 100 hectares 35% 

Sector Specific / Port/ Airport 100 hectares 50% 50 hectares 50% 

Electronic Hardware & Software or 

IT enabled services 

10 hectares with a 

minimum built up area of 

0.1 million sq. meters 

50% 10 hectares with a 



50% 

Gems and Jewellery 







50% 

Bio Tech/ Non conventional energy 

including solar energy equipment 

cells 







50% 

Free Trade Warehousing Zone 

40 hectares (minimum 

built up area of 

0.1 million sq. meters) 

50% 40 hectares (minimum 

built up area of 

0.1 million sq. meters) 

50% 

Source: SEZ Rules (www.sezindia.nic.in), Financial Express 07th June 2006, Assocham, 

Special category states are Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu and Kashmir 

and Goa 

Processing and non-processing area 

Every SEZ is divided into a processing area where alone the 

SEZ units would come up and the non-processing area where 

the supporting infrastructure is to be created. 

The DC of the concerned SEZ shall be the authority for demarcating 

the areas falling within the SEZ (under the provisions of 

section 6). 

Notified Area of 

SEZ 

Entry / Exit 

Points(s) 

The processing area and Free Trade and Warehousing Zone 

Non-Processing 

shall be fully secured by boundary wall or wire mesh fencing 

Area 

with specified entry and exit points. Source: CII India SEZ Summit 2006 

Processing Area 

IFSC 

FTWZ 

15

Zone-wise distribution of SEZs in India based on formal approvals, in principle approvals and notified SEZs is as below: 

Zone-wise distribution of SEZs 

Formal Approvals 

In Principle Approvals 

34% 

17% 

44% 

22% 

7% 

43% 

12% 

22% 

North South East West 


Notified 

31% 

16% 

5% 

48% 



From the above, it is evident that, South zone has maximum number of formal and notified SEZs which constitute more than 40% of 

the approvals. West zone has maximum in principle approvals (44%) and is followed by South zone at 22%. 

State-wise distribution of SEZs in India 

Maharashtra 

Andhra Pradesh 

Tamil Nadu 

Karnataka 

Gujrat 

Haryana 

Uttar Pradesh 

West Bengal 

Kerala 

Madhya Pradesh 

Orissa 

Punjab 

Rajasthan 

Goa 

D&N Haveli 

Uttarakhand 

Nagaland 

Chandigarh 

Jharkhand 

Chhattisgarh 

Pondicherry 

Delhi 

Statewise Approved and Notified SEZs 

- 20 

40 60 80 100 120 

Notified 

Formal Approvals 

Investors have shown interest in developed states like Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Gujarat. Though the 

developers have obtained in principle approval for a number of SEZs the same could not be notified due to land acquisition issues. 

17

Statewise distribution of SEZs in North Zone 

Statewise distribution of SEZs in West Zone 

States 

Formal 

Approvals 

In Principle 

Approvals 

Notified 

States 

Formal 

Approvals 

In Principle 

Approvals 

Notified 

Chandigarh 

2 

- 

2 

Dadra & Nagar 

4 

- 

2 

Delhi 

1 

- 

- 

Haveli 

Haryana 

46 

17 

31 

Goa 

7 

- 

3 

Himachal Pradesh 

- 

3 

- 

Gujarat 

50 

11 

28 

Punjab 

10 

7 

2 


14 

6 

6 

Uttar Pradesh 

34 

5 

16 

Maharashtra 

111 

36 

57 

Uttarankhand 

3 

- 

2 

Rajasthan 

8 

11 

7 

Total 

96 

32 

53 

Total 

194 

64 

103 

Statewise distribution of SEZs in South Zone 

Statewise distribution of SEZs in East Zone 

States 

Formal 

Approvals 

In Principle 

Approvals 

Notified 

States 

Formal 

Approvals 

In Principle 

Approvals 

Notified 


103 

4 

70 

Chhattisgarh 

1 

2 

- 

Karnataka 

53 

9 

29 

Jharkhand 

1 

- 

1 

Kerala 

24 

- 

10 

Nagaland 

2 

- 

1 

Pondicherry 

1 

1 

- 

Orissa 

10 

4 

5 

Tamil Nadu 

69 

18 

52 

West Bangal 

25 

13 

11 

Total 

250 

32 

161 

Total 

39 

19 

18 

Source: Ministry of Commerce & Industry, Dept. of Commerce, www.sezindia.nic.in 

• State-wise distribution of formally approved SEZs clearly 

indicates the pro-activeness of the southern states in attracting 

investors and mobilising investments in terms of formal 

approvals and notified SEZs. South has the maximum no. 

of notified SEZs (161) in India. 

• West is closely following South in terms of formal approvals 

and notified SEZs but East and North are much behind 

the south zone. North and East Zone need to implement 

effective processes to reap the benefits of SEZ policy. 

Sectorwise distribution of notified SEZs 

• Though the aim of the SEZ policy is to encourage infrastructure 

development through multi-product SEZs, specific 

product SEZs have been approved in large numbers 

• Sector-wise shares reflect that IT/ ITEs got a major share. 

This can be as a result of small size of the SEZ as compared 

to sector specific /multi product SEZs. It results in 

speedier land acquisition and commencement of activities 

in the SEZ. 

• The number of formal approvals and notifications thereon 

for multi product SEZs are very low due to large scale land 

requirements of over 1000 hectares in this category 

Sectorwise distribution of notified SEZs 

IT ITES 

Pharma / Chemicals & Bio Tech 

Textiles 

18% 

10% 

6% 4% 63% 

Others 

Multi Product / Sevices 

Source: Ministry of Commerce & Industry, Dept. of Commerce, 

www.sezindia.nic.in 

18

Sectorwise distribution of notified SEZs within each zone 

Distribution of notified SEZs in East 

Distribution of notified SEZs in West 

10% 

39% 

61% 

17% 

47% 

27% 

IT / ITES, Electronics & electronic H/W 

Others 

IT / ITES, Electronics & Electronic H/W 

Pharma / Bio-Tech / Chemicals 

Others 

Multi product / Sevices 

Distribution of notified SEZs in North 

Distribution of notified SEZs in South 

6% 

4% 

8% 

83% 

20% 

8% 5% 

67% 





Others 


Others 



• 

• 

• 

Even within each zone, IT / ITES continues to be the leader amongst SEZs in India 

Except in the west, IT / ITES SEZs have more than a 50% share 

South and West zone have a significant no. of other SEZs (SEZs apart from IT / ITES, Pharmaceuticals and Biotech and multiproduct 

and multi-services SEZs) as well 

Other industry SEZs (SEZs apart from IT/ITES, Multi Product/Multi Services, Pharmaceuticals and Biotechnology): 

The activities that can be carried out in SEZs prove the fact that the government of India is trying to promote almost every industry by 

taking the route of SEZs. Even industries like garment, leather, and food processing that are predominantly small scale in nature can 

give a boost to their export business by availing the various fiscal benefits that a SEZ offers. Various states in India already have SEZs 

notified for such industries. 

Other Industry SEZs in East 

Other Industry SEZs in West 

14% 

11% 

7% 

25% 

86% 

14% 

21% 

21% 

Food Processing / Agro Processing 

Others 

Aerospace & Engineering products 

Gems & Jewellery 

Textiles / Apparels 


Others 

Free Trade zone / port based 

Other Industry SEZs in North 

25% 

50% 

Other Industry SEZs in South 

3% 

3% 

9% 

25% 

13% 

25% 

13% 

16% 

19% 

Textiles / Apparels Aerospace & Engineering products Others 


Others 

Aerospace & Engineering products 

Textiles / Apparels 



Footwear 

Writing & Paper Mill 

Gems & Jewellery 

Maharashtra (13) followed by Andhra Pradesh (12), Tamil Nadu (11) and Gujarat (8) have maximum no. of other SEZs (SEZs apart 

from IT/ITES, multi product/multi services, pharmaceuticals and biotechnology). 

19

THE SEZ POLICY was introduced in India in the year 2000 with a purpose of boosting exports. It was also decided to convert the 

existing Export Processing Zones (EPZs) into SEZs. Accordingly the following Central Government EPZs were converted into SEZs. 

Brief details about these SEZ are as below : 

No. 

Name of the SEZ 

Location 

Type 

Year of 

commencement 

Area in 

acres 

Exports during 

the year 

2008-09 

(Rs. in mn) 

1 

Kandla Special Economic Zone 

Kandla, Gujarat 

Multi product 

1965 

1000 

25,788.51 

2 

SEEPZ Special Economic Zone 

Mumbai, Maharashtra 

Electronics and 

Gems and 

Jewellery 

1974 

93 

102,376.61 

3 

Noida Special Economic Zone 

Uttar Pradesh 

Multi product 

1984 

310 

162,956.50 

4 

Cochin Special Economic Zone 

Cochin, Kerala 

Multi product 

1986 

103 

117,066.91 

5 

Falta Special Economic Zone 

Falta, West Bengal 

Multi product 

1986 

280 

9,612.80 

6 

MEPZ Special Economic Zone 

Tamil Nadu 

Multi product 

1986 

261 

41,442.61 

7 

Visakhapatnam SEZ 

Vishakhapatnam, AP 

Multi product 

1986 

360 

10,606.91 

Source : ICICI Property Services Group 

Some state government / private sector SEZs were operational prior to commencement of SEZ Act. Brief details about these SEZs 

are as below: 

No. 

Name of the SEZ 

Location Type Year of 

commencement 

Area in 

acres 

Exports during 

the year 

2008-09 

(Rs. in mn) 

1 Surat Special Economic Zone 

Surat, Gujarat 

Multi product 

2000 

2 Indore SEZ 

Sector-III, Pithampur, 

Multi product 

2003 

District Dhar (MP) 

3 Jaipur SEZ 

Jaipur, Rajasthan 

Gems and 

2004 

Jewellery 

4 Manikanchan SEZ, W. Bengal 

Kolkatta, West Bengal 

Gems and 

2004 

Jewellery 

5 Jodhpur SEZ 

Jodhpur, Rajasthan 

Handicrafts 

2005 

6 Salt Lake Electronic City - 

Kolkatta, West Bengal Software development 

and 

2005 

WIPRO, West Bengal 

ITES 

7 

8 

9 

10 

11 

Moradabad SEZ 

Mahindra City SEZ (Auto-ancillary), 

Tamil Nadu 

Mahindra City SEZ (IT), Tamil Nadu 

Mahindra City SEZ (Textiles), 

Tamil Nadu 

Nokia SEZ 

Moradabad, UP 

Tamil Nadu 

Sriperumbudur, 

Tamil Nadu 

Handicrafts 

Telecom 

IT/Hardware and 

Bio-informatics 

Apparel and fashion 

accessories 

Telecom equipments 

/ R&D 

services 

2007 

Tamil Nadu Auto NA 

Tamil Nadu 

NA 

NA 

NA 

100 153070 

2600 4304.9 

110 

3079.9 

5 29816.7 

180.94 237.5 

16 6344.2 

100 103.77 

50.94 2468 

665.68 12226.8 

86.71 550.8 

85.37 103853 

12 

Surat Apparel Park 

Surat, Gujarat Textiles NA 

56.64 340 


21

The below graphs depict the exports and employment per acre from the Central Govt., State Govt. and private sector SEZs established 

prior to enactment of the SEZ Act. 

Potential of SEZs 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

Electronics / 

Gems & jewelary 

IT/ ITES Multi product Telecom 

equipments 

Others 

12 

10 

8 

6 

4 

2 

0 

Exports per acre 

(Rs. In mn) 

Employment per acre 

Potential of SEZs Zonewise details 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

North East West South 

12 

10 

8 

6 

4 

2 

0 

Exports per acre 

(Rs. In mn) 

Employment per acre 

The total area occupied by notified SEZs is around 39,803 hectares and that by operational SEZs around 16,662 hectares. The zonewise 

distribution of the land area is as below : 

Zonewise area distribution of Notified SEZs 

2% 

4% 

41% 

52% 

West South East North 


22

Sectorwise distribution of area 

100% 

80% 

60% 

40% 

20% 

0% 

East North South West 

Pharma / Bio Tech / chemicals 

Multi product /services 

Gems & jewellery 

Textile / Apparels 

Food processing / Agro processing 

Aluminium / Stainless Steel / Mineral based 

IT / ITES, Electronics & electronic H/w 

Footwear 

Writing & paper Mill 

Aerospace & engineering products 


Others 

• The West zone contributes highest in terms of area with 52% 

of the total notified area located in this zone. East is the lowest 

with a share of around 2%. 

• Within the West Zone, Multi product / services SEZs are 

highest contributors in terms of area with around 73% of the 

area being occupied by such SEZs. This might be on account 

of larger area requirement for multi product SEZs as compared 

to stand alone. 

• South Zone has a wide range of activities notified within 

SEZs like Pharma- Bio Technology, IT / ITES, Footwear, Gems 

and Jewelry, Textile, Food Processing port based SEZs etc. 

Such variety is not seen in any of the other zones. 

Zonewise area distribution of operational SEZs 

1% 1% 

35% 

63% 

West South East North 


Sectorwise distribution of operational SEZs 

100% 

80% 

60% 

40% 

20% 

0% 

South North West East 

Electronic Hardware Footwear Gems and Jewellery Engg. Products IT/ITES 

Multi product Textile Pharma & 

Biotechnology 

Others 

• West Zone has the highest operational area with a share of 

around 62% of the total SEZ operational area, currently, followed 

by South that accounts for almost 35% 

• Within the West zone, Multi product SEZs are the highest 

contributors in terms of operational area with a share of 

around 90% of the area within the zone 

23

Details of some of the operational SEZs in India are as below: 

No. Name of the SEZ Location Type Key Occupiers 

1 ETL Infrastructure 

Services Limited 

Tambaram Taluk, 

Kancheepuram, 

Tamil Nadu 

IT/ITES 

TCS – 8 Laks sq. ft. Fully Operational, Wipro 74,000 sq. 

ft. fully operational, HCL- 74,000 sq. ft. fully operational, 

Ford 37,000 sq. ft. fully operational, Siemens 55,000 sq. 

ft. fully operational, Polaris - 25,000 sq. ft. fully operational 

2 Manyata Embassy 

Business Park 

Bangalore, Karnataka IT/ITES IBM, Philips, NXP, Target, ANZ, Cerner, Fiedility, 

Nokia Siemens 

3 DLF Infocity 

Developers Ltd. 

Manapakkam & 

Mulivakkam Vill., 

Kancheepuram District 

Tamil Nadu 

IT/ITES 

There are around 33 Clients. IBM has 12 lakhs sq. ft. but 

has occupied only 6 Lakhs sq. ft., balance is in various 

stages of development, CSC – 1.5 lakhs sq. ft. fully operational, 

Mphasis – 2 lakhs sq. ft. Fully opeartional, Symentec 

corp tech – 2.5 lakhs fully operational, CTS – 

2 lakhs sq. ft. fully operational, Logica – 2.5 lakhs sq. ft. 

fully operational, TCS -2.0 laks sq. ft. fully opeartional, Sony 

erricsson – 1.5 lakhs sq. ft. fully opearational. Other clients 

include Barclays , I Gate, Lyca , Virtusa, Syntel, Zenta, 

Technosoft, Perot systems etc. 

4 Cessna Garden 

Developers Pvt. Ltd. 

Bangalore, Karnataka IT/ITES Cisco 

5 DLF Commercial 

Developers Ltd. 

Ranga Reddy District, 

Hyderabad, Andhra 

Pradesh 

IT/ITES 

Mahindra Satyam, App Labs 

6 L&T Phoenix Infoparks 

Pvt. Ltd. 

Mandal, Andhra 

Pradesh 

IT/ITES 

UBS, HCL 

7 

DivyaSree NSL 

Infrastructure Private 

Limited 

Ranga Reddy District, 

Hyderabad, Andhra 

Pradesh 

IT/ITES 

IBM, Wells Fargo 

8 Unitech Hi-tech 

Structures Ltd. 

Rajarhat, Kolkata, West 

Bengal 

IT/ITES 

Genpact, HCL, Capgemini, Cognizant, Infosys 

9 M/s Hiranandani 

Builders 

Powai, Maharashtra IT/ITES TCS 

10 Shriram Properties and 

Infrastructure Private 

Limited 

Perungalathur village, 

Chennai, Tamil Nadu 

IT/ITES 

Accenture, Mahindra satyam, Trianz, Mobius, Sybrent 

technologies, Redington Gulf, Take solutions 


24

Total Space Available for Comm. Activity 

Vacancy Rate 

Lease Rental 

(per sq. ft. per month) 

Operational Date 

Total Area of SEZ – 4.7 million sq. ft., Phase 

1 – 1.43 M sq. ft. is up and ready. Phase 2 – 

2.3 million sq. ft. is under various stages of 

construction and will be ready by April 2011 

1.16 Lakhs sq. ft. is available in 

Phase 1. And Phase 2 is fully 

available 

Rs.50/- per sq. ft. 

for warm shell +Rs. 

7/- per sq. ft. as 

CAM charges 

Phase 1 is functional 

since December 2006 

12 Million sq. ft. Available for construction, till 

date 5.27 Million sq. ft. area constructed 

5% 

Rs. 48/- per sq. ft. 

for warm shell 

2006 

Entire campus is of 6 Million sq. ft. approx. 

out of which, 3.2 m sq. ft. is occupied & 

operational 

2.8 million sq. ft. is available in 

various stages of construction. 

This includes Non processing office 

space also, like service appts 

& Corp. office etc. 

IT space – Rs.50 

per sq. ft. (Approx.) 

Year 2007 first quarter 

1.3 Million sq. ft. --- 

RS. 35/- to Rs. 40/- 

per sq. ft. 

2007 

50.0 lakhs sq. ft. 70% 

Rs.35/- per sq. ft. 11/01/08 

30.0 lakhs sq. ft. 91% 

Rs.38/- per sq. ft. 11/01/08 

17.6 lakhs sq. ft. 79% 

Rs.35/- per sq. ft. 12/01/09 

4.25 million square feet of office space and 

(approx.) 100,000 square feet of 

commercial space 

60% Rs. 35/- to Rs. 40/- 

per sq. ft. 

Partly operational 

since 2009 

14 Lakhs sq. ft. 0% NA 2009 

NA 3 Lakhs sq. ft. available for fitouts Rs.36/- per sq. ft. for 

warm shell + CAM 

charges. 

NA 

25

Direct Taxes 

Corporate 

Tax (Developers) 

Corporate Tax 

(Units in SEZ) 

Dividend Distribution Tax 

Minimum Alternate Tax 

Capital Gain 

Deducion of 100% of profits 

derived from developing a 

SEZ for a period of 10 consecutive 

assessment years 

out of the first 15 years from 

the year in which the SEZ is 

notified by the Central Govt. 

Units in SEZ are eligible for 

tax exemption. Details are 

as below: 

For first five years: 

100% of the eligible profits 

or gains 

Next five years: 50% of the 

eligible profits or gains 

Next five years: 

50% of the eligible profits or 

gains subject to creation of 

specified reserve 

Exemption of Dividend 

distribution tax declared or 

paid after April 1, 2005 by 

an enterprise engaged in developing 

and / or operating 

and / or maintaining an SEZ 

Exemption from the provisions 

of minimim Alternate 

Tax for Developer as well as 

SEZ Unit 

Exemption from capital 

gains on transfer of specified 

assets in consequence 

to shifting of industrial 

undertaking from urban or 

other areas to an SEZ subject 

to certain conditions 

Indirect Taxes 

Customs Duty 

Excise Duty 

Service Tax 

Central Sales Tax 

Exemption from payment 

of any duty of customs on 

import of capital goods, 

consumables, spares, etc. 

by a Developer or a Unit in a 

SEZ for authorized operations 


of any Excise duty goods 

bought from DTA to an 

SEZ or a Unit for authorized 

operations 


of service tax on taxable 

services received by a Developer 

or a Unit in an SEZ 

for authorized operations 


of Central Sales tax on 

interstate sale of goods to 

a Developer or a Unit in an 

SEZ for authorized operations 

• Exemption from local taxes like VAT / sales tax, octroi, entry tax, 

electricity duty etc, as per state SEZ Act / policy is available 

Exemption from stamp duty : Many states have exempted 

• all the transactions in a notified SEZ from stamp duty while 

some states have exempted only transactions relating to 

processing area from stamp duty 

• Supply from DTA to SEZ treated as physical export entitled 

for all exports benefits like DEPB, duty drawback, advance 

licenses and others 

• Exemption of interest income of NRI in respect of deposits in 

offshore banking units 

Duty free goods for development of SEZs as well as for setting 

up SEZ • 

units 

27

Strength 

Weaknesses 

• Recognized legal redress system 

• Bureaucracy and red tape 

• Easy availability of skilled English speaking manpower 

• High cost of capital and availability 

• World class banking and financial service institutions 

• Deficient institutional support 

• Established prowess in state-of-the-art, low cost 

design, development, research and field / clinical trials 

• Emergence of a global manufacturing & IT / ITES hub 

• Growing and evolving consumerism 

• Pull of the growing ‘Indian’ market 

• Burgeoning middle class with increasing 

purchasing power 

Opportunities 

• Major infrastructural bottlenecks – roads, railways, 

ports, warehouses, etc. leading to long time and 

cost overrun 

• Frequent changes in the political scenario 

• Old and outdated labour laws 

• Capital account convertibility 

• Complicated foreign exchanges laws and regulations 

Threats 

• Consistent GDP growth 

• Inadequate government support for land acquisition 

• Government thrust on infrastructure development 

• Modernisation of airports across the country 

• Fresh investments in the logistics and 

warehousing sector 

• Rising wage cost, India is facing competition on skilled 

manpower from other developing countries 

• Possibility of clash of interests between authorities, 

central and state, delaying the decision 

making process 

• Presents an alternate state-of-the-art 

manufacturing base 

• Focus on service oriented SEZs : 

No movement of physical goods would reduce 

infrastructural dependence 

• Over reliance on sector specific SEZs 

• Imposition of export embargoes 

• Relocation of industries / technology transfer to other 

third world countries 

• Emergency of smaller ports 

29

Shenzhen SEZ - China 

Features 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

Source: Asian Development Bank (ADB), Report on Special Economic Zones 

and Competitiveness 

Ras Al Khaimah Free Trade Zone, UAE, Dubai 

Features 

• 

• 

• 

• 

• 

• 

First SEZ to be set up in China 

Total Area of Shenzhen: 1,952.84 sq. Kms 

Area of SEZ: 327 square kilometers 

Harbouring 3.5 million people 

USD30 billion in FDI 

3 million employment 

Equipped with the state-of-the-art infrastructure 

Effective port facilities 

Simplified procedures 

Fully flexible labour policy in terms of hiring and firing 

Advantages 

• The Central Government has provided a special policy 

• framework for the Shenzhen SEZ that has helped to create 

a “soft enabling environment” to enhance the city’s 

industrial competitiveness 

• Liberal economic policies both in terms of attracting FDI and 

engaging in international trade 

» 

» 

» 

» 

Permission to set up wholly foreign-owned firms, 

Enabling easier access to land and infrastructure, 

Allowing the repatriation of profits, and 

Favourable export and import polices 

Well established infrastructure in Shenzhen 

Location advantage- Shenzhen has benefited hugely from 

its proximity to Hong Kong, China as a major international 

financial, information, and services centre 

1,684 square kilometers of land (about 2.2 percent of the 

total UAE land area), including a coastline of 55 kilometers 

Fourth largest of the UAE’s seven emirates 

Strategic location with access to more than 1 billion customers 

Transparent rules and regulations 

International access easier 

Abundant energy supply 

Advantages 

• 100% tax exemption and 100% foreign ownership 

• No restrictions on capital and profit repatriation 

• Strategic location within proximity to Dubai 

• State-of-the art communication facilities 

• Easy access to Ras Al Khaimah international airport and a 

sea port 

• Long term renewable lease 

Source: Website- RAK Free Trade Zone - http://www.rakftz.com/en 

Subic Bay Freeport, Philippines 

Features 

• The total land area of the Subic Bay Freeport Zone (former 

U.S. Military Reservation) is about 13,600.80 Hectares 

• Subic Bay Freeport (SBF) is located southwest of the Luzon 

Island in the Philippines 

• Easily accessible by all the means of transport i.e. Water, air 

and land. Approximately half of the world’s container fleet 

passes by its doorway. 

• The Subic Bay International Airport (SBIA), the gateway to 

Subic Bay Freeport, is a modern, international airport. It is 

well equipped with 10,000 sq. m. passenger terminal and is 

capable of handling 700 passengers at any given time and 

featuring the very latest technology for security and comfort. 

Advantages 

• Highly skilled manpower 

» Subic’s wage rate is highly competitive compared to 

that of other Asian countries 

• Liberal Business Incentives 

» Exemption from all local and national taxes such as 

ad-valorem and excise taxes. Investors are only required 

to pay a corporate tax of 5 percent from their 

gross adjusted income. Subic Bay Freeport Enterprises 

(SBFEs) may also avail of tax holidays if they register 

with the Philippine Board of Investments (BOI). 

» Duty-free importation of raw materials, supplies, 

capital equipment and other items for consumption 

within the Freeport 

» Foreign investors may invest up to 100% equity in 

almost any economic activity in the SBF except for 

businesses where foreign ownership is limited by 

the Constitution 

» There are no foreign exchange controls in the Freeport 

and full repatriation of profit is allowed 

» The Subic Bay Marine Authority (SBMA) also processes 

and grants special resident and investor visas. 

Temporary work permits and Subic Special Work 

Visas could also be granted to foreign nationals subject 

to certain requirements 

Source: Website- Subic Bay Free Port- http://www.sbma.com/index.html 

31

INCHEON FREE ECONOMIC ZONE, KOREA 

Features 

• The Incheon Free Economic Zone [IFEZ] consists of three 

different Incheon City Districts with a total area of 51,739 

acres: Songdo, Yeongjong and Cheongna 

• Its goal is to transform these areas into logistics, international 

business and leisure and tourism hub of the Northeast 

Asian region 

Songdo international City 

» Total investment for the project-: 10,425,300 million 

Korean Won (equivalent to USD 8,905.20 million) 

» Project period-: 2003 ~ 2020 (Phase 1: 2009, Phase 

2: 2014, Phase 3: 2020) 

» Major projects-: International Business Complex, 

Knowledge Information Industrial Complex, High-tech 

Bio Complex, Songdo Landmark City, High-tech Industry 

Cluster, Port and Support Complex (New port 

logistics complex, Aam Logistics Complex) etc. 

Yeongjong Island 

» 

» 

» 

» 

Cheongna 

» 

» 

» 

» 

A hub of international logistics, tourism and leisure 

Project cost-: 37,50,000 million Korean won (equivalent 

to USD 3,206.398 million) 

Project period-: 2006 ~ 2017 (Phase 1: 2012) 

Function-: exhibition, lodging, business, education, 

Euro-style town etc. 

Global entertainment and theme park 

Consists of International business facilities, multi 

shopping mall etc. 

Project cost: 62,00,000 million Korean won (equivalent 

to USD 5,299.32 million) 

Project period: 2007 ~ 2015 

Source: Website IFEZ-http://eng.ifez.go.kr/front.asp 

32

There are six distinctive aspects which have played a key role 

in the success of SEZs in China: large size, unique location, 

investment oriented labour laws, export-led growth, sales in 

domestic markets and decentralisation of power in favour of 

provinces and local authorities for administering the zones. 

CHINESE SEZs: 

A STORY IN CONTRAST 

India’s growth potential stems from the fact that India has lagged 

behind in building full-fledged SEZs with foreign territory status, 

till the turn of the century; although it had the advantage of building 

its first export processing zone in 1969 with certain minimum 

infrastructure and fiscal sops (seven more followed later). 

Chinese SEZs 

Size a. Each SEZ well over 1,000 hectares, the minimum 

recommended area 

b. Five mega SEZs - Shenzhen, Zhuhai, Santou, Xiamen, 

and Hainan built by the Chinese government (the 

largest being Shenzhen built over 49,500 hectares) 

Indian SEZs 

a. Sector-specific SEZs with minimum recommended 

area of 10 hectares of land 

b. Among the EPZs converted into SEZs, the one in Noida 

is the largest but extends to around 310 hectares. The 

SEEPZ, the first SEZ in India, is only 93 hectares. 

The economies of scale, which seems to have worked so well in China by reducing production costs, may not have the same effect 

in Indian SEZs. 

Location 

a. All Chinese SEZs are located near coastal regions 

b. The Chinese SEZs are close to internationally reputed 

commercial destinations like Hong Kong, Macau and 

China thus gaining easier access to foreign investments, 

modern technology and managerial expertise 

a. Several SEZS are located in landlocked states 

b. SEZs are scattered across the country 

Location of Chinese SEZs makes it easier for SEZ units to export their products and import inputs 

Labour Laws 

a. Flexibility in labour laws 

b. Workers in state sector are accorded generous job 

guarantees whereas those in the non-state sector (including 

the SEZs) are not guaranteed employment 

c. Labour policy in China is investment oriented 

a. Stringent (Old and outdated) labour laws 

b. Workers in both the public and the private sector, once employed, 

cannot be laid off without governmental permission 

c. Labour policy in India is worker oriented 

The hire-and-fire policy in SEZs has been one of the biggest attractions for foreign investors in China 

Export-led 

growth 

Achieved brisk growth on the whole driven by rapid 

manufacturing led exports 

Managed reasonable success in overall exports growth as 

compared to China, though the growth rate has picked up 

considerably only over the last few years. 

Export-led growth, largely in the labour-intensive manufacturing sector, has been the elemental difference in India’s and 

China’s economic performance during the past two decades 

Sales in domestic 

markets 

Decentralisation 

of Power 

About 50% of SEZ sales are to the domestic market 

Policy impediments to sales in the domestic market 

In China the thrust of SEZs has been to attract foreign investments and modern technology whereas in India the emphasis 

has been on exports 

Provincial and local authorities were made partners and 

stakeholders, by delegating to them powers to approve foreign 

investment 

Only State governments are allowed to set up SEZs and the 

powers for foreign investment approvals are vested with the 

Development Commissioners, who are the representatives of 

the Central Government 

Decentralisation of power was also a major reason for SEZ success in China 

33

INFRASTRUCTURE NEED 

• Infrastructure is a key for growth of any economy. Basic infrastructure 

consists of roads, railway lines, sea ports, air 

ports and energy resources at a reasonable cost. In absence 

of the basic infrastructure, movement of goods gets affected, 

production is interrupted and supply chain can not function 

properly, which adversely impacts the overall economy. 

• Though SEZ policy provides a means for world class infrastructure 

within SEZs through private sector participation, 

the need for connecting these business centers with 

other business districts and ports / airports needs to 

be addressed 

• Significant investments in infrastructure to the tune of INR 

15,000 billion over the next few years is required with an 

increased emphasis on Public - Private - Partnerships (PPP) 

Funding SEZs 

• “Infrastructure” status accorded to industrial and social infrastructure 

activities in SEZs (as per the EGoM dt. October 

25, 2008) are meant to help SEZs raise loans at cheaper 

rates from domestic banks 

• Infrastructure carries lesser risk weightage than the 

commercial sector. Accordingly lending norms for SEZs 

should be more liberal as compared to those for the commercial 

sector 

• Unlike commercial real estate projects, the major objective 

of SEZs is to develop industrial, commercial and social infrastructure 

hence they can not be treated in the same way as 

the commercial sector 

• In view of the same, the government has set up a special 

dedicated fund to provide loans to infrastructure projects. 

The proposed fund has a corpus of around INR 500 billion. 

34

ISSUES FACING SEZs IN INDIA 

Sector Specific SEZs 

• Sector specific composition of approved SEZs reflects that 

more than 60% of the SEZs are from the IT / ITES sector due 

to the erstwhile boom in IT related business 

» One of the reasons for growth in IT SEZ could be that 

land requirement for IT SEZ is much less as compared 

to land requirement of multi-product SEZ 

• Sector Specific SEZs are vulnerable to economic cycles as 

could be seen from the fact that the IT related industry, particularly 

BPO sector faced severe impacts due to the global 

slow down. As a result, significant number of approved 

SEZs of IT / ITES segment may not start their business 

due to uncertainty in the sector and insecurity over the 

future outlook. 

Thus, large scale development of sector specific small and 

fragmented SEZs may not be a viable option in the long run 

and ultimately multi product SEZs appear to be a key for overall 

economic development. 

De-notification of SEZs 

In view of the global economic slowdown, many developers 

have put on hold their plan to go for SEZs and many of them 

have applied for de-notification of the SEZs. 

Though there are no provisions for de-notification of zones in 

the SEZ Act or rules till now, the law ministry had informed 

its commerce counterpart that the board has the power to 

de-notify SEZs with the condition that the developer will have 

to give back the government all the benefits it availed while 

constructing it. The units cannot be surrendered after they become 

operational. The commerce ministry, which approves the 

SEZ projects, allows it’s de-recognition to change the end-use 

of the land earmarked as SEZs, if no construction work has 

started at the site. 

• DLF had sought for the de-notification of four IT SEZs proposed 

in Sonepat, Gandhinagar, Bhubaneswar and Kolkata, 

which was recently approved by the government thus providing 

the developer an exit from the project. DLF has informed 

the government that it wants to withdraw from the project 

because of “less demand” for space from the IT and BPO 

industry because of the economic slowdown. (Source: Outlook, 

Dec 2008). With this, DLF has scrapped plans for five of the 15 

IT SEZs envisaged across the country. The SEZs where denotification 

has been sought are yet to be constructed hence 

all four projects qualified for de-notification. 

• Real Estate Developer, K. Raheja Universal Private Ltd. had 

approached BoA for de-notification of its 13 hectares IT 

zones based in Navi Mumbai. While applying for de-notification, 

the company sighted lack of demand for space for 

IT related zones. It also stated that prospective clients have 

halted their expansion plans indefinitely due to ongoing economic 

slowdown. BoA recently accepted the said proposal 

and approved K Raheja Universal’s request to scrap its Navi 

Mumbai SEZ. 

(Source : business standard dt. 20th June 2009) 

• Maytas properties Limited had also approached government 

to de-notify one of its SEZ located at Gudlapochampally at 

Andhra Pradesh. The company applied for de-notification of 

Biotech SEZ due to weak business outlook in the sector. 

(Source : The Hindu, 24th July, 2009, AP issue) 

• Delhi-based Ansal Properties and Infrastructure Ltd and 

Parsvanath Developers have also gone slow on their proposed 

SEZs. The global downturn in the IT business and 

the overall environment of the real estate industry were the 

reasons cited for the time taken on these projects. 

(Source: The Hindu Business Line, 18 April 2009) 

35

It is to be noted that the government initially de-notifies SEZs in 

principle. The government de-notifies the SEZ only after the developer 

returns the benefits including customs, excise, income 

tax that have been availed by it. 

Since IT/ITES contributes significantly in the SEZ development 

in India (64% of the notified SEZs are IT/ITES SEZs) the reduced 

pace of growth in this industry caused by the global meltdown, 

has also reduced the demand for real estate (SEZ space) in the 

country. Thus causing realty majors like DLF, Ansal Properties 

and Infrastructure Ltd and Parsvanath Developers to either denotify 

or go slow with their projects. 

Land Acquisition 

Land acquisition for SEZs is another major issue which India 

has been facing for a long time. Cases like Nandigram in West 

Bengal and Atchutapuram in Andhra Pradesh brought the land 

issue to fore. The matter has been revolving around acquisition 

of agricultural land and rehabilitation of the farmers. 

The Ministry of Commerce and Industry, Government of India, 

vide Instruction No. 29, dated August 18, 2009:- clarified that 

the State Governments would not undertake any compulsory 

acquisition of land for setting up of the SEZs. BoA will not approve 

any SEZs where the State Governments have carried out 

or propose to carry out compulsory acquisition of land for such 

SEZs after April 5, 2007. However, cases in which all persons 

interested in the land either have not submitted any objection 

under Section 5A or have withdrawn the objections submitted 

and have thus acquiesced in the proposed acquisition of land, 

can be considered. In other cases, where there are objections 

under Section 5A, the Collector / Acquiring Authority may not 

proceed with the acquisition for the purpose of SEZ and such 

cases, if any, brought before the BoA may not be considered. 

Details 

L a n d Av a i l a b l e 

(in sq. km.) 

Land Proposed 

for SEZs 

Total Land in India 29,73,190 0.06% 

Total Agricultural Land 

in India 

16,20,388 0.12% 


The total land requirement for the formal approvals granted till 

date is approximately 73,731 hectares out of which approvals 

for State Industrial Development Corporations (SIDC) / State 

Government Ventures account for over 20,853 hectares. In 

these cases, the land already available with the State Governments 

or SIDCs or with private companies has been utilized for 

setting up SEZ. The land for the 335 SEZs which have received 

notification is approximately over 39,803 hectares only. 

Out of the total land area of 29,73,190 sq km in India, total 

agricultural land is of the order of 16,20,388 sq km (54.5%). It 

is interesting to note that out of this total land area, the land in 

possession of the 335 notified SEZs amounts to approximately 

over 396 sq km only. The formal approvals granted also works 

out to only around 730 sq km. 

Acquisition of fertile agricultural land should be avoided to facilitate 

a healthy SEZ development. The government can collate 

land banks across the country which is not fit for agriculture or 

on which a farmer is not dependent for his income. Even in such 

cases an apt compensation package should be devised by the 

government to ensure smooth rehabilitation of the farmers. 

36

LATEST DEVELOPMENTS ON SEZs 

1. 

2. 

The Central Government has drafted a Green Policy, for making 

industrial and non industrial SEZs more energy efficient. 

According to the draft guidelines, buildings in the SEZs need 

to comply with the energy conservation building code by 

laying down solar power systems to generate a minimum 

of 50 KW of power per hectare, meeting 50 % of hot water 

requirements through solar heating and implementing 100 

% water harvesting while ensuring zero water discharge. 

The draft guidelines also include minimising individual automobile 

use in the SEZ premises, encouraging pedestrian 

and bicycle use, and landscaping of 75 % of open area. 

(Source :Business Standard dated September 11, 2009) 

The Reserve bank may not treat banks’ advances for buying 

units in SEZs as exposure to commercial real estate (CRE), a 

move which is different from its earlier decision in 2006 that 

sparked protests from SEZ players. RBI had included these 

loans in CRE exposures in 2006 in order to prevent speculative 

dealings in such units. Since there are restrictions 

on transfer of such (SEZ) units and require Government 

permission, the speculative activity in sale and re-sale of 

units is unlikely to be there. Therefore, such cases should 

be more like financing of industrial units or the projects and 

if such is the case, these may not be treated as CRE Exposures, 

RBI said in its draft guidelines. However, the central 

bank may continue to treat exposure to land acquisition for 

developing SEZs as lending to commercial real estates, a 

move opposed by SEZ developers since it makes these advances 

costlier. 

(Source : The Economic Times, dated July 8, 2009) 

4. 

gates /over bridges/ underpass /culverts and also fence 

side of the road facing the processing area. No tax benefits 

would be available for measures taken to establish contiguity. 

The entire processing area would be located on one 

side of the National Highway and the formal approval from 

authorities concerned like NHAI and others would be submitted 

to the Department of Commerce and work for establishing 

contiguity would be started only after obtaining the 

requisite approvals. 

The government has tightened the norms for development 

of apartments, malls and other real estate activity inside 

SEZ. The Commerce Ministry has released guidelines on 

development activity in non processing area of SEZs, which 

limits area that can be used for housing and commercial 

construction. The new rules also make it mandatory for developers 

to maintain some amount of open space in large 

and medium sized zones. A circular by the commerce ministry 

says the BoA will now approve construction activity 

in non processing area on a case-by-case basis, depending 

on factors such as area of the SEZ, distribution pattern between 

processing and non processing area available floor 

area ratio and projected employee strength. The move is 

said to be aimed at curbing unreasonable profiteering from 

real estate development in the zones. 

(Source : business standard dt. 20th June 2009) 

3. 

The Ministry of Commerce and Industry, Government of India, 

vide instruction No 27, dated August 18, 2009;- has 

issued guidelines regarding conditions for relaxation of contiguity 

criteria in respect of SEZs. As per the guidelines, the 

developer shall maintain contiguity by dedicated security 

37

THE SEZ POLICY of the government introduced in 2006, intends 

to make SEZ an engine for fast paced economic growth, supported 

by better infrastructure facilities and a package of fiscal 

benefits with minimum possible regulations. 

Salient features of the scheme : 

• A designated duty free enclave to be treated as foreign territory 

only for trade operations and duties and tariffs 

• No license required for import 

• Manufacturing or service activities allowed 

• SEZ units to be positive net foreign exchange earner within 

three years 

• Domestic sales subject to full customs duty and import 

policy in force 

• Full freedom for subcontracting 

• No routine examination by customs authorities of export/ 

import cargo 

(Source : PIB dt. 12th August, 2009) 

From the above, it is evident that Government of India is striving 

hard to provide better opportunities for the overall economic 

development. Generation of employment and infrastructure 

development of the country are the outcomes of the same. The 

SEZ policy of the Government has gained popularity and has 

witnessed a significant amount of success. In a short span of 

three and a half years since notification of SEZ Act and Rules, 

formal approvals have been granted for setting up of 579 SEZs 

out of which 335 have been notified. 

Out of the total employment provided to 42.8 million people 

in SEZs as a whole, 29.30 million is incremental employment 

generated post February, 2006 when the SEZ Act had come 

into force. At least double this number obtains indirect employment 

outside the SEZ as a result of the operations of SEZ Units. 

This is in addition to the employment created by the developer 

for infrastructure activities. The overall growth in exports has 

been 620% over the last 5 years. 

• To ensure a healthy progress, the centre as well as the states 

are working towards enhancing the policies and guidelines 

with regards to issues like land acquisition. Today, India has 

147 SEZs approved in principle, meaning approval on paper 

and developers are yet to acquire land. There are 579 formal 

approvals for SEZs (backed by land possession), out of 

which, 335 have been notified and out of these 335, operational 

SEZs are 82, taking a total tally of operational SEZs to 

101, including the 19 set-up prior to February, 2006. 

• It is a widely accepted fact that the developer alone can not 

rely on a series of voluntary transactions, in free market, to 

mobilize large land parcels required for big industrial projects. 

Therefore, even highly capital centric markets have 

opted for government intervention to facilitate the land acquisition 

process. 

» In India, Land Acquisition Act, 1894, allows the government 

to acquire any land for public purposes, after 

paying the government-fixed compensation to individual 

landowners. An amendment to this Act was 

on the anvil to allow state governments to acquire 

30% of land required for a project, if private promoters 

have tied-up the balance 70%. However, this amendment 

is now on hold as some parties are insisting 

on no role for government, in acquisition of land for 

private industrial projects. 

» As a matter of fact, the total area for notified SEZs in 

India amounts to 314 sq.kms. which is lesser than 

China’s one SEZ – Shenzhen, spread across 327 sq. 

kms. Land requirement for formal approvals and in 

principle approvals adds up to 1,885 sq. kms. This 

works out to only 0.063% of country’s land area or 

just 0.116% of the agricultural land area. From these 

facts, it is very much evident that availability of land 

is not the concern but the same needs to be backed 

by adequate support from the government. 

» Considering this, the government is taking steps to 

reformulate the Land Acquisition Act and evolve a rehabilitation 

and resettlement policy to ensure the rehabilitation 

of the affected families. Once this policy is 

affected, the investments and thus, the economic activity 

in the country will receive a further push. These 

policies need to come into effect as soon as possible 

to avoid any further delay in the investments. 

• Training and employment opportunities provided to the rural 

youth where SEZs are being set up will fuse the agriculture 

and industrial societies 

• Adequate and strong infrastructure is one of the key elements 

for the success of SEZs. To invigorate economic activity and 

ensure global competitiveness, both state and central government 

should start building sturdy and durable infrastructure. 

With the private sector playing an important role in developing 

SEZs, the government can spend more time and money in creating 

infrastructure to support these activities. Developers are willing 

to participate in the development of the surrounding social 

environment and wish an investor friendly government policy on 

land acquisition to attract the industrial investors to India. 

A foundation has been laid, and if fostered appropriately, the 

SEZs can unleash remarkable growth potential. 

39

Annexure I : Status of SEZs in India as on 8th September 2009 

Particulars Status of SEZs in India Status of SEZs in India 

Sr. 

No. 

State / Union Territory 

Formal 

Approvals 

In 

Principle 

Approvals 

Notified 

Pharma/ 

Bio Tech / 

chemicals 

IT / ITES, 

Electronics 

& electronic 

H/w 

Multi 

product / 

services 

Others 

1 


103 

4 

70 

8 

44 

6 

12 

2 

Chandigarh 

2 

- 

2 

- 

2 

- 

- 

3 

Chattisgarh 

1 

2 

- 

- 

- 

- 

- 

4 

Delhi 

1 

- 

- 

- 

- 

- 

- 

5 

Dadra & Nagar Haveli 

4 

- 

2 

- 

1 

- 

1 

6 

Goa 

7 

- 

3 

2 

1 

- 

- 

7 

Gujarat 

50 

11 

28 

5 

11 

4 

8 

8 

Haryana 

46 

17 

31 

2 

24 

2 

3 

9 

Himachal Pradesh 

- 

3 

- 

- 

- 

- 

- 

10 

Jharkhand 

1 

- 

1 

- 

- 

- 

1 

11 

Karnataka 

53 

9 

29 

3 

21 

- 

5 

12 

Kerala 

24 

- 

10 

1 

5 

- 

4 

13 


14 

6 

6 

- 

4 

- 

2 

14 

Maharashtra 

111 

36 

57 

10 

28 

6 

13 

15 

Nagaland 

2 

- 

1 

- 

- 

- 

1 

16 

Orissa 

10 

4 

5 

- 

1 

- 

4 

17 

Pondicherry 

1 

1 

- 

- 

- 

- 

- 

18 

Punjab 

10 

7 

2 

1 

1 

- 

- 

19 

Rajasthan 

8 

11 

7 

- 

3 

- 

4 

20 

Tamil Nadu 

69 

18 

52 

1 

38 

2 

11 

21 

Uttar Pradesh 

34 

5 

16 

- 

15 

- 

1 

22 

Uttarakhand 

3 

- 

2 

- 

2 

- 

- 

23 

West Bengal 

25 

13 

11 

- 

10 

- 

1 

Total 

579 

147 

335 

33 

211 

20 

71 


41

References 

Ministry of Commerce & Industry, Dept. of Commerce 

Asian Development Bank (ADB), Report on Special Economic Zones and Competitiveness 

Website- RAK Free Trade Zone - http://www.rakftz.com/en 

Website- Subic Bay Free Port- http://www.sbma.com/index.html 

Website IFEZ-http://eng.ifez.go.kr/front.asp 

Economic Times, 14 Nov 2006: “Will India recreate China’s SEZ magic?” 

The Hindu Business Line, 10 Nov 2006: “SEZs can provide growth push” 

The Hindu Business Line, 07 May 2003: “SEZs: Go the Chinese way” 

Business Standard, 18 Apr 2009: “DLF seeks de-notification of four infotech SEZs” 

The Hindu Business Line, 18 Apr 2009: “DLF seeks de-notification of 4 special economic zones” 

Research & Consultancy 

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