Page 249 - DMGT401Business Environment

Business Environment

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Example: As a first step, four existing Export Processing Zones (EPZs) – at Kandla, Santa
Cruz, Cochin and Surat – were converted into SEZs with effect from 1st November, 2000. Setting
up of new SEZs in the areas has been progressing steadily: Positra (Gujarat), Nangunery (Tamil
Nadu), Kakinada-Vizag (Andhra Pradesh), Paradip (Orissa), Kulpi (West Bengal) and Bhadohi
(Uttar Pradesh).
It is too early to judge their success. However, their success will depend on how effectively
domestic regulations and infrastructure bottlenecks are eliminated in these zones. In order to
provide an impetus to infrastructure development, deemed export benefits have been extended
to infrastructure projects with a minimum investment of 100 crore.
With a view to making exports a national effort by involving all the State Governments, a
Scheme has been evolved for granting assistance to the States on the basis of their export
performance for development of export related infrastructure. To facilitate an equitable allocation
of resources, this amount will be distributed on the basis of absolute export performance as well
as on the basis of incremental one. To begin with, an allocation of 2.5 billion is proposed for
2001-02, which would be suitably increased in the subsequent years. There would be subsequent
annual allocation for this Fund. The amount would be utilised by the States for complementary
export related infrastructure, such as roads connecting the production centres with Ports, research
and development of state specific ethnic products, development of cold chains for agro exports,
development of minor ports, creation of new export promotion industrial parks, human resource
development and for the purpose of developing marketing infrastructure. The units may be
allowed to dispose of obsolete or unusable capital goods, spares and other goods in the Domestic
Tariff Area (DTA) on payment of applicable customs duty. Such disposal shall, however, be
subject to the Import Policy in force.
Under the SEZ scheme, the goods cleared from the Zone will be treated as imported goods.
Therefore, in case of DTA clearances, though the duty charged will be central excise duty, this
duty will be equal to the aggregate of all duties of customs (WTO). In other words, the SEZ units
will have to pay full customs duty (applied duty) on their DTA clearances. The only laws which
will operate within the SEZs will be those related to labour and banking.

A SEZ unit shall maintain proper account financial year-wise, of all foreign exchange inflow by
way of exports and other receipts, all foreign exchange outflows on account of imports, payment
of dividend, royalty, fees etc., consumption and utilisation of the materials and ale in the DTA.
RBI will permit banks to open branches in the SEZ and permit transactions to be operated in
dollars for all units. Most of the units within SEZ may be employing less than 1000 workers.
With the recent change in the labour laws announced in the Union Budget 2001-2002 that a firm
employing less than 1000 employees is not required to get the approval from the Government
to layoff any employee or to close down the unit, labour laws particularly may not be a constraint.
Further, the new law allows outsourcing and employing contract labour, which facilitates
reducing employer-employee frictions in work places (Ministry of Finance).
With the view that agriculture is the responsibility of State Governments, the Central Government
has insisted through the revised EXIM policy of 1997-2002 that the state governments should
identify and develop product-specific Agricultural Export Zones (AEZ). It is expected that the
states will identify product-specific AEZ for end-to-end development from a geographically
contiguous area. They will also have to evolve a comprehensive package of services provided
by all state government agencies, agricultural universities, and some Central institutions and
agencies for 'intensive delivery' in these zones. The AEZ would have access to the Centre's
proposed market access initiative, which will provide market research, warehousing and retail
marketing infrastructure in select countries, and direct market promotion activities. Two AEZ
exist, one in Tamil Nadu and another in Gujarat.

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