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EXPORT PROCESSING ZONE (EPZ)
1.INTRODUCTION
A free trade zone (FTZ) or export processing zone (EPZ) is an area of a country
where some normal trade barriers such as tariffs and quotas are eliminated and
bureaucratic requirements are lowered in hopes of attracting new business and
foreign investments. It is a region where a group of countries has agreed to reduce
or eliminate trade barriers. Free trade zones can be defined as labor intensive
manufacturing centers that involve the import of raw materials or components and
the export of factory products. The world's first Free Trade Zone was established in
Shannon, Co. Clare, Ireland Shannon Free Zone. This was an attempt by the Irish
Government to promote employment within a rural area, make use of a small
regional airport and generate revenue for the Irish economy. It was hugely
successful, and is still in operation today.
Most EPZs are located in developing countries: Brazil, Indonesia, El Salvador,
China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica,
Honduras, Guatemala, Kenya, and Madagascar have EPZ programs. In 1997, 93
countries had set up export processing zones (EPZs) employing 22.5 million
people, and five years later, in 2003, EPZs in 116 countries employed 43 million
people.
Corporations setting up in a zone may be given tax breaks as an incentive. Usually,
these zones are set up in underdeveloped parts of the host country; the rationale is
that the zones will attract employers and thus reduce poverty and unemployment,
and stimulate the area's economy. These zones are often used by multinational
corporations to set up factories to produce goods (such as clothing or shoes).
1
Free Trade Zones are also known as Special Economic Zones in some countries.
Special Economic Zones (SEZs) have been established in many countries as testing
grounds for the implementation of liberal market economy principles. SEZs are
viewed as instruments to enhance the acceptability and the credibility of the
transformation policies and to attract domestic and foreign investment.
In 1999, there were 43 million people working in about 3000 FTZs spanning 116
countries producing clothes, shoes, sneakers, electronics, and toys. The basic
objectives of EPZs are to enhance foreign exchange earnings, develop export-
oriented industries and to generate employment opportunities.
2
2. EPZ IN INDIA
The Export Processing Zones in India had gone through four significant stages of
development. The initial stage witnessed the establishment of the Kandla Free
Trade Zone in the city of Gujarat in the year 1965 and the consequent
establishment of the Santacruz Electronics Export Processing Zone. The
limitations faced by these zones are lack of a proper policy and administrative
control, weak infrastructure, limited scope for concessions, and lack of adequate
incentives.
Therefore, the government of India has been setting up various committees to
suggest measures About EPZ in India, in order to check these existing
shortcomings. Moreover, in the year 1980 a new scheme was formulated by the
government known as the Export Oriented Units Scheme to bring about an overall
development in these zones. The second stage witnessed the Oil Price Shock,
which hampered the export activities significantly and led the establishment of a
number of Export Processing Zones to boost the export sector. Thus, Export
Processing Zones were set up in West Bengal, Tamil Nadu, Kerala, Uttar Pradesh
and in Andhra Pradesh and were named as:
Falta Export Processing Zone
Chennai Export Processing Zone
Noida Export Processing Zone
Cochin Export Processing Zone
Visakhapatnam Export Processing Zone
3
The third stage witnessed economic liberalization in India and restructuring of the
entire export processing zone framework in the year 1991. The stage incorporated
various measures for example:
More Fiscal Incentives,
Simplification of Policy Provisions
Incorporation of more industries like horticulture, re-engineering, agriculture,
aqua culture
The fourth stage witnessed the introduction of the concept of special economic
zones in the EXIM policy of 1997-2002. Presently, most of the export-processing
zones have been transformed into special economic zones. The special economic
zones extended their scope to include private companies together with the
government organizations and offered space to be used for residential as well as for
industrial purpose. They offer various fiscal and non-fiscal benefits to the
inhabitants in the form of tax exemption, relaxation in duties, and various
incentives to enhance the Indian economy. Some of the most eminent free-trade
and Export Processing Zones in India and their contact details have been listed
below:
Santa Cruz Electronics Export Processing Zone
http://www.seepz.com/
Andheri (East)
Mumbai 400 096,
India
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Tel: 91-22-836 7143
Fax: 91-22-832 1169
Falta Export Processing Zone
http://www.fepz.com/
2nd MSO Building
4th Floor, Room No. 4, Nizam Palace
234/4, A J C Bose Road
Calcutta 700 020, India
Tel: 91-22-247 7923
Fax: 91-33-247
2263
Cochin Export Processing Zone
http://www.cepz.com/
CPZ Administrative Building
Kakkanad, Cochin 682 030, India
Tel: 91-484-422 530, 422 551
Fax: 91-484-422 530
Noida Export Processing Zone
http://www.busdir.com/business/nepz
PHD House, 3rd Floor
Khel Gaon Marg,
5
New Delhi 110 016, India
Tel: 91-11-685 5061
Fax: 91-11-685 5061
Kandla Free Trade Zone
Ghandhidham
Kutch 370 230, India
Tel: 91-2836-521 94
Fax: 91-2836-522 50
Madras Export Processing Zone
http://www.mepz.com/
Administrative Building
GST Road, Tambaram
Chennai 600 045, India
Tel: 91-44-236 8220
Fax: 91-44-236 8218
Visakhapatnam Export Processing Zone
http://ns.stph.net/vepz
Udyog Bhavan Complex,
Shripuram Junction
Visakhapatnam 530 003, India
Tel: 91-891-551 259, 554 577
Fax: 91-891-551 259
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Export Processing Zones (EPZ) Location Map:
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3. How to set-up an Export Oriented Unit
How to set-up an Export Oriented Unit (EOU)?
“How to set-up an Export Oriented Unit (EOU)” is a step-by-step process in 5
parts.
a) Eligibility Criteia
b) Prior to Approval
c) How to apply
d) Approval Procedure
e) After Approval (what to do for commencement of Production)
IN DETAIL
I. ELIGIBILITY CRITERIA
Who is eligible to become an EOU?
An EOU can be set up by any entrepreneur for manufacturing of goods and also for
rendering services. An EOU can be set up for repair, reconditioning, re-making
and re-engineering also.
EOU unit is required to achieve only positive Net Foreign Exchange (NFE) over a
period of 5 years.
EOU can also be set up in the following sectors: -
Agriculture
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Animal Husbandry
Aquaculture
Floriculture
Horticulture
Pisciculture
Viticulture
Poultry or
Sericulture
Conversion of existing DTA/EPCG (Export Promotion Capital Goods) units
to EOU Scheme
Existing DTA units or EPCG units are permitted for conversion into EOU Scheme
as one time option. In case there is an outstanding export commitment under the
EPCG Scheme, it will be sub summed in the export performance (EP) of the unit.
If the unit is having outstanding export commitment under the Advance Licensing
Scheme, it will discharge the same as well, as per its conditions before conversion
into EOU Scheme. However, duties of Customs and Central Excise already
suffered shall not be refunded on conversion into EOU.
II.PRIOR TO APPROVAL
1) Planning your venture:
Is it your own or
Is it with foreign participation and, if so, nature of participation (foreign
investment allowed 100%)
2) What process do you intend to do i.e. Manufacturing, rendering and export
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of services or: -
Agriculture
Animal Husbandry
Aquaculture
Floriculture
Horticulture
Pisciculture
Viticulture
Poultry or
Sericulture
Repair, reconditioning, re-making, re-engineering etc.
3) Technology to be used:
Indigenous/ foreign
Related cost and conditions
4) Feasibility report:
On your own or with help of consultant
5) The finances involved:
Land, structure, buildings etc. (Please note, building construction material is not
exempted from duty).
Capital Goods, machinery etc.
Payment for royalties etc.
Administration and establishment
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Others: like interest on loans, related taxes and levies etc.
6) The current competition overseas:
Main competitors
Demand and price levels.
7) The import laws and other requirements in target markets:
Any fiscal/ non-fiscal barriers, like anti-dumping laws.
Quota restrictions.
Preferential treatment to competitor countries.
8) Location of the Unit:
The first thing before setting up an EOU the entrepreneur has to decide the location
of unit: -
I. Close to port or rail/ road.
ii. Availability of raw material and
iii. Environment clearance needed if unit is located within 25 kms of an urban
town
Accordingly the application will be submitted to the concerned Development
Commissioner under whose jurisdiction that state comes.
9) Capital goods, machinery and equipment to be used:
Indigenous or foreign (allowed duty free)
Related cost
11
10) The raw materials and other inputs, like consumables etc. that would be
required:
Source (allowed duty free)
Cost
Monthly, quarterly and annual requirements.
11) The production process:
Whether production process requires air-conditioning plant, special furnaces or
kilns etc.
Details and cost. (Please note, air-conditioning equipment permitted duty free only
if it is essential for production process).
12) The production capacity and spare capacity:
Do you intend to utilize the same by doing sub-contracting work for other export
units in DTA or Export Oriented Units?
Whether you want to get job work done outside the EOU.
Details of sub-contractors.
Related costs.
13) Any by-products turned out in the production process:
Details of by-products
12
Whether these would be exported or sold in Domestic Tariff Area (DTA)
14) Effluents or waste-material:
How do you propose to treat these or discharge them.
15) Packaging
Details of packaging (packaging material allowed without payment of duty)
Source
Cost
16) Power:
Whether the normal grid could supply adequate power.
Or there would be a need for a captive power plant.
Cost of power plant
Fuel required for captive power plant (e.g. furnace oil, LPG, HSD, coal etc.)
(allowed duty free)
17) Other information:
Firm/company should be duly registered and details about Proprietor/Partner/
Directors etc.
A current account with the bank authorized to deal in foreign exchange should be
opened.
Sale tax registration to be obtained from the Sale Tax Department.
Investment details
18) Mandatory clearances from State Government: -Pollution clearance
13
certificate.
Approvals of building plan in cases where building is proposed to be constructed.
Registration as a small scale industrial unit, if applicable
Registration under Factories Act.
III. HOW TO APPLY
All applications are to be filed with the concerned Development Commissioner of
Special Economic Zone (For jurisdiction of Development Commissioner)
Appendix 14-I- K
The unit/ promoter has to apply in the application form, to be given in triplicate
given in Handbook of Procedures in Appendix 14-1A ( Please click here )
Project Report including a write up on the background of the promoters
establishing their credentials and standing.
Please see Appendix 14-1B (Please click here) for documents required by the
Development Commissioner for approval.
For sector specific conditions Please see Appendix 14-1C (Please click here)
DD for Rs. 5,000/- drawn in favour of The Pay & Accounts Officer, Ministry of
Commerce and Industry, Department of Commerce, payable at the Central Bank of
India, Udyog Bhavan, New Delhi.
Registration –cum-Membership Certificate (RCMC) should be obtained from the
office of the concerned Development Commissioner.Import Export Code: If the
unit does not have an Import Export code (IEC), it will apply in the prescribed
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form (Appendix 18-B) to the Zone Administration for the same.
IV. APPROVAL PROCEDURE
Letter of Permission (LOP)
After submitting the application form and if everything is in order, Letter of
Permission (LOP) is issued by the Zone Administration within 2 weeks after
interview of the promoter by the Approval Committee. For format of LOP please
see Appendix 14-IE (Please click here)
Legal undertaking (LUT)
A legal undertaking in the prescribed form undertaking to abide by the terms and
conditions of the LOP has to be executed by the unit in format given at Appendix
14-1F .
A Green Card will be issued to the unit by the Zone Administration on request.
Approval from State Government Agencies:
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V. AFTER APPROVAL
After the approval from the Development Commissioner concerned, the
manufacturing and other activities have to be undertaken under customs bond for
which formal application is to be made to the jurisdictional Assistant
Commissioner/ Deputy Commissioner of the Customs/ Central Excise for issuance
of a Private Custom Bonded Warehouse Licence under section 58 and 65 of the
Customs Act, 1962. The application shall be accompanied by the following
documents/information: -
Copy of notification whereunder the place (proposed location of unit) has been
declared as warehousing station under section 9 of the Customs Act. In case the
approved place is not a notified warehousing station, a separate application for
issuance of such notification is to be submitted to the Commissioner of Customs
through the jurisdictional Assistant Commissioner/ Deputy Commissioner.
Copy of LOI/LOP issued by Development Commissioner concerned and LUT
accepted by the Development Commissioner.
Details of the premises including ground plan, purchase/rent/lease deed, allotment
letter from Industrial Development Corporation/ Authority (if any)
Details about the constitution of the firm/company including its
Proprietor/Partners/Directors etc.
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Project Report indicating stage wise manufacturing process.
List of raw material, consumables and capital goods etc. required.
Undertaking that cost recovery and other charges shall be paid.
After verification of the premises and relevant documents, the requisite licence
under section 58 and 65 of the Customs Act will be issued by the Assistant
Commissioner/ Deputy Commissioner Customs/ Central Excise on priority basis.
B-17 Bond:
B-17 bond is a multi – purpose surety bond which the unit has to execute with the
Jurisdictional Assistant/ Deputy Commissioner Customs/ Central Excise on a non-
judicial stamp paper of Rs. 300/-. Format of the Bond is prescribed under
Notification No. 6/98 CE (N.T) dt. 2-3-98.
B-17 Bond is a surety bond and in case valid surety cannot be arranged security
@5% of the bond amount has to be furnished. The bond amount shall be equal to
25% of the duty foregone on the capital goods required in the next 5 years plus
duty foregone on the value of raw material for a period of 3 months.
B-17- Bond covers the following activities:-
Duty free import/ procurement of goods as per relevant notification and
warehousing/storage in the unit and their utilization.
Transshipment of import/ export of goods duty free between port of import/ export
and units premises.
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Movement of duty free goods for job work and return.
Temporary clearance for repair and display in exhibitions, testing/ approval etc.
However it dose not cover differential duty amount against advance DTA sale for
which a separate bond is to be executed.
The unit has also to take a Central Excise Manufacture Code No. from the
Superintendent, Central Excise to enable them to sell in the domestic market.
The Development Commissioner is empowered to grant approvals on the
following matters: -
Import of additional capital goods
Enhancement of production capacity
Broad-banding/diversification
Change in name/ constitutions
Change of location/expansion
Extension of validity of LOP/LOI/LOA:
Import of Office equipment:
Merger of two or more EOU/SEZ Units
Import of spares and accessories of DG sets
Eligibility certificates for grant of employment visa to low level foreign
technicians to be engaged by EOUs as per Ministry of Home Affairs Letter No.
250227/7/99-F-1 dated 20-9-1999 (Annexure-XI).
Sale of goods in DTA.
De-bonding/ Exit from EOU scheme.
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Approval from State Government Agencies:
The unit has to secure approval for its wiring and electrical plan from the Electrical
authorities.
It has also to secure power allocation and wiring approval from the State
Electricity Board.
The industrial water supply is undertaken by the
The unit has to take a registration under the State Government Sales Tax Act and
Central Sales Tax Act.
In case the unit already has a registration with the State Sale Tax Department the
address of the additional premises should also be endorsed in the registration
certificate.
The unit has also to take Small Scale Industry (SSI) Registration from the District
Industries Center to apply for State Government’s Investment Subsidy.
In case there are effluents or emissions the unit has to secure approval form the
Pollution Control Board.
Every Zone has a statutory Single Window Clearance Board.
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4.PROCEDURE TO SET UP INDUSTRIES IN SEEPZ
Administrative Support - With a thorough understanding of an entrepreneur's
desire to get down to the business of manufacturing and exporting as soon as
possible, SEEPZ has designed a set of procedure to deal swiftly with all your
Queries, requests or applications.
Under the Automatic Approval Scheme, Project applications fulfilling the
stipulated conditions are approved by the Development Commissioner within 15
days.
Project applications falling outside the purview of Automatic Approval Scheme
are approved by the SEEPZ Board of Approvals within 45 days. Swiss Air and
IMR are just two of many instances who can testify to the speed of approvals
given.
The Board is competent to give clearance in respect of industrial approvals, foreign
collaborations, etc. We call it single-window clearance.
The Zone Administration is under the overall charge of the Development
Commissioner and includes Customs and Security Wing, Investment Promotion
Cell and Utilities Wing. The Development Commissioner is able to help you in
quickly getting power supply, water and telephone/ communication facilities.
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5. SEEPZ
(INTRODUCTION)
Santacruz Electronics Export Processing Zone (SEEPZ) is a Special Economic
Zone in Mumbai, India. Situated in the Andheri East area, it is subjected to liberal
economic laws as compared to the rest of India to promote rapid economic growth
using tax and business incentives and attract foreign investment and technology.
Seepz was created in 1973 and was seen as export processing zone. Since then
many other SEZ’s have been created in rest of India. SEEPZ mainly houses
Electronic Hardware Manufacturing Companies, Software Companies and
jewellery exporters of India. More than 40 percent of India’s total jewelry exports
($2,222.31 million) out of $5,210.69 million during year 2006-2007 came from
units within SEEPZ. Despite its name, it is located near to Andheri that lies further
north.
More than 150 units operate in SEEPZ. Prominent companies that have offices
within Seepz include: Navteq, Renaissance Jewellery Ltd, Gitanjali Gems Ltd,
Vaibhav Gems Ltd, and D’damas for Jewelry. IT Companies include Blue Star
InfoTech Ltd,CGI Third ware, Patni Computer Systems, Polaris Software Lab
Limited, Tata Consultancy Services, Geodesic Limited, Trigyn Technologies
Limited, Syntel Limited etc.Buildings in SEEPZ are called Standard Design
Factories(SDF). The SEZ is a high security entry zone. Employees of various
companies need to have permanent SEEPZ gate pass to gain entry. Visitors need
special permits to enter. Due to these hassles government proposed making SEEPZ
a Free Trade Zone (FTZ) in 1999. However, gate pass and visitor pass rules
continue till date. Making SEEPZ a FTZ meant that it would be treated as outside
the customs zone of India. This meant no excise or customs duty will be levied on
21
raw material but companies would also not be able to sell their products in
domestic market.
6. GOVERNMENT SCHEMES RELATED TO EPZ /SEZ
22
AS SEZ/EPZ is a geographical region that has economic laws that are more liberal
than a country's typical economic laws. An SEZ is a trade capacity development
tool, with the goal to promote rapid economic growth by using tax and business
incentives to attract foreign investment and technology. Today, there are
approximately 3,000 SEZs operating in 120 countries, which account for over US$
600 billion in exports and about 50 million jobs. By offering privileged terms,
SEZs attract investment and foreign exchange, spur employment and boost the
development of improved technologies and infrastructure.
There are 13 functional SEZs and about 61 SEZs, which have been approved
and are under the process of establishment in India.
Most developing countries in the world have recognized the importance of
facilitating international trade for the sustained growth of the economy and
increased contribution to the GDP of the nation. As part of its continuing
commitment to liberalization, the Government of India has also, since the last
decade, adopted a multi-pronged approach to promote foreign investment in India.
The Government of India has pushed ahead with second-generation reforms and
has made several policy changes to achieve this objective.
The SEZ policy was first introduced in India in April 2000, as a part of the Export-
Import (“EXIM”) policy of India. Considering the need to enhance foreign
investment and promote exports from the country and realizing the need that level
playing field must be made available to the domestic enterprises and manufacturers
to be competitive globally, the Government of India in April 2000 announced the
introduction of Special Economic Zones policy in the country deemed to be
foreign territory for the purposes of trade operations, duties and tariffs. To provide
an internationally competitive and hassle free environment for exports, units were
23
allowed be set up in SEZ for manufacture of goods and rendering of services. All
the import/export operations of the SEZ units is on self-certification basis. The
units in the Zone are required to be a net foreign exchange earner but they would
not be subjected to any pre-determined value addition or minimum export
performance requirements. Sales in the Domestic Tariff Area by SEZ units are
subject to payment of full Custom Duty and as per import policy in force. Further
Offshore banking units are being allowed to be set up in the SEZs.
The policy provides for setting up of SEZ's in the public, private, joint sector or by
State Governments. It is also being envisaged that some of the existing Export
Processing Zones would be converted into Special Economic Zones. Accordingly,
the Government has converted Export Processing Zones located at Kandla and
Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta (West
Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and Noida
(Uttar Pradesh) into a Special Economic Zones. In addition, 3 new Special
Economic Zones were approved for establishment at Indore (Madhya Pradesh),
Manikanchan – Salt Lake (Kolkata) and Jaipur and have already commenced
operations.
India is one of the first countries in Asia to recognize the effectiveness of the
Export Processing Zone (EPZ) model in promoting exports. Asia’s first EPZ was
set up in Kandla in 1965. With a view to create an environment for achieving rapid
growth in exports, a Special Economic Zone policy was announced in the Export
and Import (EXIM) Policy 2000. Under this policy , one of the main features is
that the designated duty free enclave to be treated as foreign territory only for trade
operations and duties and tariffs. No LICENCE required for import. The
manufacturing, trading or service activities are allowed.
24
To provide a stable economic environment for the promotion of Export-import of
goods in a quick, efficient and hassle-free manner, Government of India enacted
the SEZ Act, which received the assent of the President of India on June 23, 2005.
The SEZ Act and the SEZ Rules, 2006 (“SEZ Rules”) were notified on February
10, 2006. The SEZ Act is expected to give a big thrust to exports and consequently
to the foreign direct investment (“FDI”) inflows into India, and is considered to be
one of the finest pieces of legislation that may well represent the future of the
industrial development strategy in India. The new law is aimed at encouraging
public-private partnership to develop world-class infrastructure and attract private
investment (domestic and foreign), boosting economic growth, exports and
employment.
The Ministry of Commerce and Industry lays down the regulations that govern the
setting up and administering of the SEZs. The Central Government is functioning,
while the State Governments play a significant lead role in the development of
SEZs in their respective States by stipulating the conditions to be adhered to by an
SEZ and granting the necessary approvals. The policy framework for SEZs has
been enacted in the SEZ Act and the supporting procedures are laid down in SEZ
Rules.
The Special Economic Zone Act 2005 came into force with effect from 10th
February 2006, with SEZs Rules legally vetted and approved for notification. The
SEZs Rules, inter-alia, provide for drastic simplification of procedures and for
single window clearance on matters relating to central as well as state
governments. Investment of the order of Rs.100, 000 crores over the next 3 years
with an employment potential of over 5 lakh is expected from the new SEZs apart
from indirect employment during the construction period of the SEZs. Heavy
investments are expected in sectors like IT, Pharma, Bio-technology, Textiles,
25
Petro-chemicals, Auto-components, etc. The SEZ Rules provides the simplification
of procedures for development, operation, and maintenance of the Special
Economic Zones and for setting up and conducting business in SEZs. This includes
simplified compliance procedures and documentation with an emphasis on self-
certification; single window clearance for setting up of an SEZ, setting up a unit in
SEZs and clearance on matters relating to Central as well as State Governments; no
requirement for providing bank guarantees; contract manufacturing for foreign
principals with option to obtain sub-contracting permission at the initial approval
stage; and Import-Export of all items through personal baggage.
With a view to augmenting infrastructure facilities for export production it has
been decided to permit the setting up of Special Economic Zones (SEZs) in the
public, private, joint sector or by the State Governments. The minimum size of the
Special Economic Zone shall not be less than 1000 hectares. Minimum area
requirement shall, however, not be applicable to product specific and port/airport
based SEZ. This measure is expected to promote self-contained areas supported by
world-class infrastructure oriented towards export production. Any
private/public/joint sector or State Government or its agencies can set up Special
Economic Zone (SEZ).
ADMINISTRATIVE SET UP FOR SEZS:
EPZs is governed by a three tier administrative set up
26
a) The Board of Approval is the apex body in the Department,
b) The Unit Approval Committee at the Zonal level dealing with approval of
units in the SEZs and other related issues, and
c) Each Zone is headed by a Development Commissioner, who also heads the
Unit Approval Committee.
APPROVAL MECHANISM OF SEZS
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
Department of Commerce with its recommendations for consideration of the Board
of Approval. On the other hand, any proposals for setting up of units in the SEZ
are approved at the Zonal level by the Approval Committee consisting of
Development Commissioner, Customs Authorities and representatives of State
Government.
Approval given for setting up new SEZs in Private/Joint/State Sector
Approvals have so far been given for setting up of 117 new Special Economic
Zones (including 3 Free Trade Warehousing Zones) spread over 15 States and 2
Union Territories in the Private/Joint Sector or by the State Governments and its
agencies. Of the 117 SEZs approved for establishment, 7 SEZs have already
become operational, 6 SEZs are now getting ready for operation and the other are
at various stages of implementation.
27
7. SHORT LOOK ON GOVERNMENT POLICY
No LICENCE required for import.
Exemption from Central Excise Duty in procurement of capital goods, raw-
materials, consumables spares etc. from the domestic market.
28
Exemption from customs duty on import of capital goods, raw materials,
consumables spares etc.
Reimbursement of Central Sales Tax (CST) paid on domestic purchases.
Supplies from DTA to EOUs treated as deemed exports.
Reimbursement of duty paid on furnace oil, procured from domestic oil
companies to EOUs as per the rate of drawback notified by the Directorate
General of Foreign Trade.
100% Foreign Direct Investment permissible.
Exchange earners foreign currency (EEFC) Account
Facility to retain 100% foreign exchange proceeds in EEFC Account.
Facility to realize and repatriate export proceeds within twelve months.
Further extension in time period can be granted by RBI and their authorized
dealers.
Re-export of imported goods found defective, goods imported from foreign
suppliers on loan basis etc.
Exemption from industrial licensing requirement for items reserved for SSI
sector.
29
Profits allowed to be repatriated freely without any dividend balancing
requirement
Access to Domestic Market up to 50% of FOB value of export on concessional
rate of duty.
Duty free goods to be utilized in two years. Further extension granted on
liberal basis.
Job work on behalf of domestic exporters for direct export allowed.
Conversion of existing Domestic Tariff Area (DTA) unit into an EOU
permitted.
Can procure duty-free inputs for supply of manufactured goods to advance
licence holders.
Supply of ITA-I items in the domestic market which would be counted for
fulfillment of NFE.
EOUs in agriculture and horticulture engaged in contract farming may be
permitted to take out duty free goods listed in Appendix 14-I to the fields of
contact farmers for production.
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8. TAX IMPLICATION OF EPZ /SEZs
Special provisions in respect of newly established hundred per cent export-
oriented undertakings.
10B. (1) Subject to the provisions of this section, a deduction of such profits and
gains as are derived by a hundred per cent export-oriented undertaking from the
export of articles or things or computer software for a period of ten consecutive
31
assessment years beginning with the assessment year relevant to the previous year
in which the undertaking begins to manufacture or produce articles or things or
computer software, as the case may be, shall be allowed from the total income of
the assessee :
Provided that where in computing the total income of the undertaking for any
assessment year, its profits and gains had not been included by application of the
provisions of this section as it stood immediately before its substitution by the
Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in
this sub-section only for the unexpired period of aforesaid ten consecutive
assessment years:
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The following second proviso shall be inserted to sub-section (1) of section 10B by
the Finance Act, 2002, w.e.f. 1-4-2003:
Provided also* that for the assessment year beginning on the 1st day of April,
2003, the deduction under this sub-section shall be ninety per cent of the profits
and gains derived by an undertaking from the export of such articles or things or
computer software:
Provided also that no deduction under this section shall be allowed to any
undertaking for the assessment year beginning on the 1st day of April, 2010 and
subsequent years.
(2) This section applies to any undertaking which fulfils all the following
conditions, namely:-
(i) It manufactures or produces any articles or things or computer software;
32
(ii) it is not formed by the splitting up, or the reconstruction, of a business already
in existence: Provided that this condition shall not apply in respect of any
undertaking which is formed as a result of the re-establishment, reconstruction or
revival by the assessee of the business of any such undertaking as is referred to in
section 33B, in the circumstances and within the period specified in that section;
(iii) It is not formed by the transfer to a new business of machinery or plant
previously used for any purpose.
Explanation.-The provisions of Explanation 1 and Explanation 2 to sub-section (2)
of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they
apply for the purposes of clause (ii) of that sub-section.
(3) This section applies to the undertaking, if the sale proceeds of articles or things
or computer software exported out of India are received in, or brought into, India
by the assessee in convertible foreign exchange, within a period of six months
from the end of the previous year or, within such further period as the competent
authority may allow in this behalf.
Explanation 1.-For the purposes of this sub-section, the expression "competent
authority" means the Reserve Bank of India or such other authority as is authorized
under any law for the time being in force for regulating payments and dealings in
foreign exchange.
Explanation 2.-The sale proceeds referred to in this sub-section shall be deemed to
have been received in India where such sale proceeds are credited to a separate
account maintained for the purpose by the assessee with any bank outside India
with the approval of the Reserve Bank of India.
33
10[(4) For the purposes of sub-section (1), the profits derived from export of
articles or things or computer software shall be the amount which bears to the
profits of the business of the undertaking, the same proportion as the export
turnover in respect of such articles or things or computer software bears to the total
turnover of the business carried on by the undertaking.]
(5) The deduction under sub-section (1) shall not be admissible for any assessment
year beginning on or after the 1st day of April, 2001, unless the assessee furnishes
in the prescribed form11, along with the return of income, the report of an
accountant, as defined in the Explanation below sub-section (2) of section 288,
certifying that the deduction has been correctly claimed in accordance with the
provisions of this section
(6) Notwithstanding anything contained in any other provision of this Act, in
computing the total income of the assessee of the previous year relevant to the
assessment year immediately succeeding the last of the relevant assessment years,
or of any previous year, relevant to any subsequent assessment year,-
(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1)
of section 36 shall apply as if every allowance or deduction referred to therein and
relating to or allowable for any of the relevant assessment years ending before the
1st day of April, 2001(inserted vide Finance Bill 2003), in relation to any
building, machinery, plant or furniture used for the purposes of the business of the
undertaking in the previous year relevant to such assessment year or any
expenditure incurred for the purposes of such business in such previous year had
been given full effect to for that assessment year itself and accordingly sub-section
(2) of section 32, clause (ii) of sub-section (3) of section 32A, clause
34
(ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second
proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not
apply in relation to any such allowance or deduction;(ii) no loss referred to in sub-
section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so
far as such loss relates to the business of the undertaking, shall be carried forward
or set-off where such loss relates to any of the relevant assessment years ending
before the 1st day of April, 2001(inserted vide Finance Bill 2003);
(iii) No deduction shall be allowed under section 80HH or section 80HHA or
section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of
the undertaking; and
(iv) in computing the depreciation allowance under section 32, the written down
value of any asset used for the purposes of the business of the undertaking shall be
computed as if the assessee had claimed and been actually allowed the deduction in
respect of depreciation for each of the relevant assessment year.
(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall,
so far as may be, apply in relation to the undertaking referred to in this section
as they apply for the purposes of the undertaking referred to in section 80-IA.
(7A) Where any undertaking of an Indian company which is entitled to the
deduction under this section is transferred, before the expiry of the period
specified in this section, to another Indian company in a scheme of
amalgamation or demerger-
35
(a) No deduction shall be admissible under this section to the amalgamating or
the demerged company for the previous year in which the amalgamation or the
demerger takes place; and
(b) the provisions of this section shall, as far as may be, apply to the
amalgamated or the resulting company as they would have applied to the
amalgamating or the demerged company if the amalgamation or demerger had
not taken place.";
(c) Sub-section (9) and (9A) shall be omitted with effect from the 1st day of April,
2004;
(d) Explanation I shall be omitted with effect from the 1st day of April, 2004;
(e) After Explanation 3, the following Explanation shall be inserted at the end,
with effect from the 1st day of April, 2003 namely:-
"Explanation 4. - For the purposes of this section, "manufacture or produce"
shall include the cutting and polishing or precious and semiprecious stones.".'.
(Inserted vide Finance Bill 2003)
(8) Notwithstanding anything contained in the foregoing provisions of this section,
where the assessee, before the due date for furnishing the return of income under
sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in
writing that the provisions of this section may not be made applicable to him, the
provisions of this section shall not apply to him for any of the relevant assessment
year.
Explanation 1 - Omitted vide Finance Bill 2003
36
Explanation 2.-For the purposes of this section,-
(I) "Computer software" means-
(a) Any computer programme recorded on any disc, tape, perforated media or other
information storage device; or
(b) Any customized electronic data or any product or service of similar nature as
may be notified by the Board*,
which is transmitted or exported from India to any place outside India by any
means;
(ii) "convertible foreign exchange" means foreign exchange which is for the time
being treated by the Reserve Bank of India as convertible foreign exchange for the
purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any
rules made hereunder or any other corresponding law for the time being in force;
(iii) "export turnover" means the consideration in respect of export 12[by the
undertaking] of articles or things or computer software received in, or brought into,
India by the assessee in convertible foreign exchange in accordance with sub-
section (3), but does not include freight, telecommunication charges or insurance
attributable to the delivery of the articles or things or computer software outside
India or expenses, if any, incurred in foreign exchange in providing the technical
services outside India;
(iv) "hundred per cent export-oriented undertaking" means an undertaking which
has been approved as a hundred per cent export-oriented undertaking by the Board
appointed in this behalf by the Central Government in exercise of the powers
37
conferred by section 1414 of the Industries (Development and Regulation) Act,
1951 (65 of 1951), and the rules made under that Act;
(v) "Relevant assessment years" means any assessment years falling within a
period of ten consecutive assessment years, referred to in this section.]
15[Explanation 3.-For the removal of doubts, it is hereby declared that the profits
and gains derived from on site development of computer software (including
services for development of software) outside India shall be deemed to be the
profits and gains derived from the export of computer software outside India.]
Explanation 4. - For the purposes of this section, "manufacture or produce"
shall include the cutting and polishing of precious and semi-precious stones.'
(Inserted vide Finance Bill 2003)
*
"In exercise of the powers conferred by clause (b) of item (i) of Explanation 2 of
section 10B of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct
Taxes hereby specifies the following Information Technology enabled products or
services, as the case may be, for the purpose of said clauses, namely:
1. Back-office Operations
2. Call Centre’s;
3. Content Development or Animation;
4. Data Processing;
5. Engineering and Design;
6. Geographic Information System Services;
7. Human Resource Services;
38
8. Insurance Claim Processing;
9. Legal Databases;
10. Medical Transcription;
11. Payroll;
12. Remote Maintenance;
13. Revenue Accounting;
14. Support Centre’s, and
9. GROWTH OF EPZ IN INDIA
The EOU Scheme introduced in early 1981, is complementary to the SEZ scheme.
It adopts the same production regime but offers a wider option in location with
reference to factors like source of raw materials, port of export, hinterland
facilities, availability of technological skills, existence of an industrial base, and
39
the need for a large area of land for the project.
Over the last decade, Export Oriented Units have evolved as a major player in the
country's export effort. They have grown consistently at double digit level, and
recorded a growth of about 27.48% during the year 2004-05
cExport Oriented Units (EOUs) now constitute a very important sector in the
country’s Export Production scenario. They have become dominant players in our
export strategy, and their share in the Country’s export performance is about 10%.
The export growth rate of 30% compares very favorably with the National export
growth rate.
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41
42
11. SEEPZ (STRUCTURE OF ORGANISATION)
SEEPZ OFFICERS AS PER GRADE
S.R
no
NAME DESIGNATION
1 Ms. Anita Agnihotri Development
Commissioner
2 Miss. Reshma Lakhani Jt. Development
Commissioner
3 Shri P.S. Raman Dy. Development
Commissioner
4 Shri O.M.Dave Pay & Accounts Officer
5 Shri S.T. Mane Asstt. Development
Commissioner
6 Smt. T. Idiculla E.A . to Development
Commissioner
7 Smt. M. J. Kulkarni Asstt. Development
Commissioner
8 Shri R.V. Ketkar Assistant
9 Smt. Mariamma Chandrabose Stenographer Gr.I.
10 Smt. T.N. Teckchandani Upper Division Clerk
11 Smt. P.S. Yadav Lower Division Clerk
12 Shri B.R. Pawar Duplicating Machine
Operator
13 Shri S.B. Desai Staff Car Driver ( Sr )
43
SEEPZ (STRUCTURE OF EMPLOYEE)
CUSTOM OFFICERS AS PER GRADE
S.R
no
NAME DESIGNATION
1 Shri Pravin Chandra Dy. Commissioner of Customs
2 Shri C. P. Singh Appraising Officer
3 Shri Munna Lal Preventive Supdt.
4 Shri S. R. Suvarna Examiner
5 Shri M. B. Mhatre Preventive Officer
44
12. INDUSTRIES IN SEEPZ
AS SEEPZ IS CONSIDERING BEING THE INDIA ‘S LARGEST FINANCE
OPERATING EPZ THE INDUSTIES ARE MAINLY CONSISTS OF AS
FOLLOWS:
1. HARDWARE
2. GEMS AAND JEWELLERY
3. SOFTWARE
4. TRADING
5. MISCELLANEOUS
THE EXPORT ORRIENTED UNITS ARE:
1. AGRO PRODUCTS
2. CHEMICAL PLASTIC AND ALLIED INDUSTIES
3. ELECTRONIC AND HARDWARE
4. ELECTRONIC AND SOFTWARE
5. ENGINEERING INDUSTRIES
6. FOOD AGRICULTURE AND FOREST PRODUCT
7. GARMENTS AND TESXTILE
8. GEMS AND JEWELLERY
9. GRANITES
10.LATHER ANS SPORTS GOODS
11.MINERALS AND ORES
12.TRADING UNITS
13.YARN
45
COMPANIES OF ELECTRONICS AND HARDWARE
46
COMPANIES OF ELECTRONICS AND HARDWARE
47
COMPANIES OF ELECTRONICS AND HARDWARE
48
COMPANIES OF JEMS AND JEWELLERY'S
49
COMPANIES OF JEMS AND JEWELLERY’S
50
COMPANIES OF JEMS AND JEWELLERY’S
51
COMPANIES OF GEMS AND JEWELLERY’S
52
COMPANIES OF GEMS AND JWELLERY’S
53
COMPANIES OF GEMS AND JWELLERY’S
54
COMPANIES OF GEMS AND JEWELLERY
55
COMPANIES OF GEMS AND JEWELLERY
56
COMPANIES OF GEMS AND JEWELLERY
57
ELECTRONIC AND SOFTWARE COMPANIES
58
TRADING COMPANIES
TRADING COMPANIES
59
60
AGRO PRODUCT BASED COMPANIES
61
CHEMICAL, PLASTIC AND ALLIED BASED COMPANIES
ENGINEERING INDUSTRIES
62
GRANITES AND MARBLE COMPANIES
63
LEATHER AND SPORTS COMPANIES
64
LEATHER AND SPORTS COMPANIES
65
13. GROWTH OF SEEPZ (IN TERMS OF EXPORT AND
IMPORT)
66
EXPORT DATA (APR-2008-FEB-2009 /APR-2009-FEB2010)
67
ANALSYS OF DATA
The above data of export commodity from seepz is clearly indicating about the
rapid growth of the SEEPZ in terms of export. The above data is of two
consecutive years i.e. 2008 -09, 2009-10 of various commodities (allowed by the
EPZ policy). The commodities like non-ferrous metal, petroleum products and
gems and jewellery’s are exported in large quantity. The growth of non- ferrous
metal is of 183.58% followed by the other commodities by 117.2% and petroleum
products by 58.98%.The gems and jewellery’s has shown a slight upward direction
of 0.59%. The policy of year 2008-09 was mainly focus to increase the export of
average commodities and fabrics which help these product to increase about 2.69%
growth . in totality the seepz as an epz in india has made it own remarkable growth
of 40% in year 08-09 and 88% growth in 09-10.
( note :- the above % growth are in term of US$ in millions )
14. FUNCTION OF EXPORT AND IMPORT IN EPZ
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An Export Processing Zone (EPZ) is a Customs area where one is allowed to
import plant, machinery, equipment and material for the manufacture of export
goods under security, without payment of duty. The imported goods are subject to
customs control at importation, through the manufacturing process, to the time of
sale/export, or duty payment for home consumption.
The whole function is detailed in the question answer format
1. Who is the licence authority of EPZs?
A. EPZs are licence the Ministry of Trade in the different Partner States.
2. Q: What are the importation procedures followed by an importer in the
EPZ? (Reg. 169)
A. The importer should:
· Make a declaration of the imported goods in the prescribed Form C 17
· Execute a security bond using Form CB. 14. The bond secures the duty
amount that would have otherwise been payable at the time of importation.
The bond also takes care of the taxes due in the event the goods are
consumed elsewhere other than the EPZ or disposed off in the domestic
market without authority
· Present the imported goods together with Form C 17 to the proper officer
in charge of the EPZ for receipt and deliveries recording
· Provide examination facilities within the EPZ where imported goods are
examined or verified. The Commissioner may on reasonable grounds direct
a Customs officer to carry out examination of the goods at the port of entry.
3. Q: Who keeps records of goods that go in or out of the EPZ? (Reg. 170)
69
A. An operator of an enterprise within an EPZ shall maintain stock records of
the raw materials and the finished products in a monthly return register and
produce the same for inspection by a Customs officer as requested and on a
monthly basis before the fifteenth day of the following month.
· If goods are found missing on inspection, the operator shall be liable to a
penalty equivalent to twice the amount of duty payable.
4. Q: What are the export procedures followed by an operator in the EPZ?
(Reg. 171)
A. Goods intended for exportation from EPZ should be entered using Form C 17
· A bond for the removal of goods from an EPZ to the port of exportation
shall be executed using Form CB 14
· The goods together with a copy of the export entry shall be taken to the
port of exportation. If the seals placed by the EPZ officer have been
tampered with, re-examination of goods shall be done by the Customs
officer at the border.
· A certified copy of Form C 17 confirming that exportation of the goods
has taken place shall be given to the owner for the purposes of security bond
cancellation.
5. Q: What are the procedures followed when moving goods from one EPZ to
another (Reg. 172)
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A. Enter the goods to be moved from one EPZ to another EPZ using Form C 17
· Execute a bond for the movement of goods from one EPZ to another
EPZ using Form CB. 14.
· Obtain a certified/endorsed copy of Form C 17from the officer at the
receiving EPZ for the purposes of bond cancellation
· If the movement of goods is within the EPZ, the person in charge of an
enterprise shall inform the proper officer of such movements of goods.
· If the movement of goods is within the EPZ, the person in charge of an
enterprise shall inform the proper officer of such movements of goods.
· Execute a Security bond using form CB14
6. Q: What are the procedures followed when moving plant and machinery
from an EPZ to any other area? (Reg. 173)
A. · Plant, machinery and equipment may be removed for repair, servicing or
maintenance, from an EPZ to a Customs territory this seems to be incorrect,
where they shall be accorded temporary importation facilities and shall be
entered using Form C 17.
· The form used to execute a security bond in respect of the plant, machinery
and equipment, is Form CB. 10.
7. Q: What is the procedure for waste disposal and destruction? (Reg. 175)
71
A. Waste disposal or destruction may be carried out within an EPZ under the
supervision of the Customs officer. A certificate of destruction must be
issued thereafter by the officer.
. Normal import procedures are to be applied for waste that the importer may
wish to sell in the home market.
8. Q: Are there specific conditions when transporting EPZ goods (Reg.
177/178)
A. Goods shall be transported in sealed vehicles, except those of exceptionally
heavy or bulky objects authorized by the Commissioner. Small packages and
samples may be transported in any vehicle, in locked boxes made of steel,
sealed by the Customs.
15. FUTURE OF SEEPZ
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SEEPZ, Santacruz Electronics Export Processing Zone, originally was an Export
Processing Zone. Established in 1973, SEEPZ was originally a uni-product zone
exclusively for manufacture and export of electronic items. Later on it was decided
to add some more products to its kitty. In 1987-88 it was decided to permit
manufacture and export of gem and jewellery items. Excepting the fact that gems
and jewellary items like electronic items are of higher value and lower volume and
environment friendly, there is nothing common between SEEPZ's then existing
product profile and the newer ones.
However huge market Potential of gems and jewellery forced the government to
allow the manufacturing of gems and jewellery from EPZ. Government's decision
appears to be correct one as exports from gems and jewellery from SEEPZ far
exceeds software and hardware exports. When a new Special Economic Zone
(SEZ) scheme was introduced in the Export & Import Policy of 2000, SEEPZ was
converted into an SEZ.
SEEPZ-SEZ is constrained because of lack of space. In terms of area, the SEZ has
just111 acres of land and there is not much scope for expansion by acquiring
additional land. Further a lot needs to be done to improve the surrounding traffic
infrastructure, which is further complicated by the ongoing work on Jogeshwari-
Vikhroli Link road. Plans are under way to implement the FSI approval from the
State Government for expansion in the working space and efforts are on for grant
of additional adjoining land for SEZ premises. However it may take some more
time before things are crystallized.
As on now, there are total 188 units, of which, 25 are electronic hardware units, 98
are Gem & Jewellery units and 65 are Software units. There are about 30 Gem &
Jewellery units which are starting their operations in near future.
SEEPZ SEZ has chalked out plans for its future. Its future plans are aimed at
further improvement in the channelization of facilities for further better value
73
addition activities in the Zone. The SEEPZ-SEZ is poised to increase the share of
Indian Gem & Jewellery industry in the International Jewellery market, especially,
the branded departmental stores of USA, Europe and Japan markets.
15. CONCLUSION
Steps taken by the Government to arrest deceleration of export -- (1) Excise duty
reduced across the board by 4% for all products except petroleum products and
74
those products where current rate was less than 4%; (2) Interest subvention of 2%
has been provided till 31.3.2009, to the following labor intensive sectors for
exports: Textiles (including Handlooms), Handicrafts, Leather, Gems & Jewellery,
Marine Products and SMEs; (3) Additional funds of Rs.350 crore provided for
export incentive Schemes; (4) All items of handicrafts included in Vishesh Krishi
and Gram Udyog Yojana; (5) Back-up guarantee to ECGC for up to Rs.350 crore;
(6) Rs1,100 crore provided to ensure full refund of claims of CST/Terminal Excise
duty/ Duty drawback on deemed exports; (7) Additional funds of Rs.1400 crore
provided for textile sector to clear the backlog claims of TUF; (8) Export duty on
iron ore fines eliminated, and for lumps, reduced to 5%; (9) Import duty on
naphtha for power sector eliminated; (10) Some pending issues relating to Service
Tax refund on exports – resolved.
SEZs have created employment for large number of unemployed rural youth. Even
in the services sector, 12.5 million sq meters space is expected in the IT/ITES
SEZs which as per the NASSCOM standards translates into 12.5 lakh jobs. It is,
therefore, expected that establishment of SEZs would lead to fast growth of labour
intensive manufacturing and services in the country. The total investment in the
SEZs, as on 30th September 2008 were Rs 93507.93 crore and the total employment
generated so far to 3,62,650 persons
Out of the 531 formal approvals given till date, 174 approvals are for sector
specific and multi product SEZs for manufacture of Textiles & Apparels, Leather
Footwear, Automobile components, Engineering etc. which would involve labor
intensive manufacturing. Exports from SEZs during the year 2000-09 was to the
tune of Rs.66,638 crore with a growth of 92% over 2007-08 (overall growth of
exports of 381% over past four years (2005-06). The export projection for 2008-09
is Rs.1, 25,950 crore.
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BIBLIOGRAPHY
1. http://www.eouindia.gov.in2. http://www.seepz.com3. http://www.infodriveindia.com4. http://commerce.nic.in5. http://www.eac.int/customs/index.
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