Special economic zone (SEZ)

Special economic zone (SEZ)

Special economic zone (SEZ)


Around 250 fishermen and their families from Kattukuppam in Ennore protested on Monday demanding that the Tangedco stop construction work on a coal conveyor belt.

Special economic zone (SEZ)

  • A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country.
  • SEZs are located within a country’s national borders, and their aims include increasing trade balance, employment, increased investment, job creation and effective administration.
  • To encourage businesses to set up in the zone, financial policies are introduced. These policies typically encompass investing, taxation, trading, quotas, customs and labour regulations.
  • Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.


Reasons for SEZ

  • The creation of special economic zones by the host country may be motivated by the desire to attract foreign direct investment (FDI).
  • The benefits a company gains by being in a special economic zone may mean that it can produce and trade goods at a lower price, aimed at being globally competitive.
  • In some countries, the zones have been criticized for being little more than labour camps, with workers denied fundamental labour rights

The SEZ Rules provide for:

  • Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs;
  • Single window clearance for setting up of an SEZ;
  • Single window clearance for setting up a unit in a Special Economic Zone;
  • Single Window clearance on matters relating to Central as well as State Governments;
  • Simplified compliance procedures and documentation with an emphasis on self-certification


Objectives of SEZ

  • Creating additional economic activity.
  • Boosting the export of goods and services.
  • Generating
  • Boosting domestic and foreign
  • Developing infrastructure facilities.


Challenges of SEZ:

Unutilized Land in SEZs: Due to lack of demand for SEZ space and disruptions caused by the pandemic.

Existence of Multiple Models: There are multiple models of economic zones such as SEZ, coastal economic zone, Delhi-Mumbai Industrial Corridor, National Investment and Manufacturing Zone, food park and textile park which pose challenges in integrating the various models.

Competition from ASEAN Countries:

In the past few years, many of the ASEAN countries have tweaked their policies to attract global players to invest into their SEZs and have also worked on a developmental set of their skilling initiatives.

Consequently, Indian SEZs have lost some of their competitive advantages globally and hence need to have fresher policies.


Performance of SEZ

Source: Report of the Comptroller and Auditor General of India (2012-2013)

  1. As on 30th September 2014 Incremental employment has shown growth rate of 49.61% in 2007-2008. It has shown an increasing trend from 25.41% in 2008-2009 to around 46.89% in 2010- 2011.
  2. However, incremental growth rate registered a decline from 2013 to 2016 on account of continuous de-notification of number of SEZs as a result of several adverse market conditions.
  3. SEZs have generated employment from 1, 34,704 employees in 2006 to 18, 23,451 employees in 2017-2018 (i.e., more than 13 folds).

However, SEZs has created an employment but there is a shortfall between the projected and actual employment.

Download Yojna IAS Daily Current Affairs of 26th July 2021

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