For those setting up units in SEZ's, all export profits are deductible for the first 5 years and 50% in the next five years.

For those investing in SEZ companies, exemption from taxes on interest and capital gains.

Neither Minimum Alternate Tax (MAT) nor Dividend Distribution Tax for the developers of SEZ.

In India, SEZ's can be set-up by any private, joint sector or state government or its agencies including foreign companies. These SEZ's will be under the administrative control of Zone Commissioners.

An important parameter defined in the SEZ Act 2005 is the size of these SEZ's. The Act states that a multi-product SEZ must have an area of 1000 hectares or more but service sector SEZ's can have an area of 100 hectares. Then, to support sectors like Gems and Jewellery, IT, Biotechnology, where India has a competitive advantage sector specific SEZ's can be set-up with an area of just 10 hectares. Further, for developing these zones in "backward" states like Jammu & Kashmir, Himachal Pradesh, the minimum land requirement is 200 hectares and 50 hectares for multi-product and sector specific SEZ's respectively.

Problems / Bottlenecks With the SEZ Policy

The SEZ policy adopted by the Government of India lacks vision and clarity on many counts. Some of these have been discussed under: -

1) Size of Scale: In India, SEZ's have been allowed to be set-up for as low as 10 hectares in cases of certain sector-specific SEZ's like Gems and Jewellery, etc. Indian SEZ's are very small in size (just over 1000 acres on average) as compared to Chinese SEZ's, which are spread across 20,000 acres on an average. Even, in Philippines the size of SEZ's hovers around 16,200 to 28,000 hectares.

A SEZ of such larger size allows to build and provide a world class infrastructure and global scale facilities. Many of the Indian SEZ's lack the scale to build the requisite infrastructure and benefit from economies of scale.

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Gaurav Aggarwal,
Master of Business Economics (MBE),
University of Delhi, South Campus,
Delhi.