Evolution and Performance of Indian EPZs/SEZs

A Special Economic Zone (SEZ) is defined as a specially delineated duty free enclave for trade operations. This area is reckoned as a foreign territory for the purpose of duties and tariffs. Movement of goods/services between SEZ and Domestic Tariff Area (DTA) is treated as exports and imports. SEZ units can be set up for export of goods and services including trading. Establishment of EPZs/SEZs is essentially a post World War-II syndrome when import substitution was gradually discarded to adopt export led growth – opened up/free trade policy. Rationale for setting up EPZs/SEZs emanates from natural endowments and other resources of different countries. The developing countries have plenty of cheep labour but they lack in export related infrastructure, technology and even access to their products in overseas markets. The first example of EPZ – Shannon Export Processing Zone – designed to liberalize trade/FDI debuted in Ireland during 1956. First FTZ in India was set up at Kandla in 1965. Then came the establishment of EPZs at SEEPZ (1974), Cochin, Chennai, Visakhapatnam, Falta, Noida and Surat. As a part of its Export & Import Policy, the Government of India had announced setting up of SEZs in April 2000. The Government of India has enacted SEZ Act, 2005 in June 2005. At present, 14 SEZs are operating and approvals have been given for establishment of 64 more such enclaves. The paper attempts to throw light on the major issues involving evolution and performance of Indian EPZs/SEZs.