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Business Environment

Notes was set up in 1965. The country has had four phases in the evolution of the EPZ policy since then.
Following is a brief overview of the evolution of the EPZ policy in India through these four
phases.

Did u know? The first zone was set up in Kandla in a highly backward region of Kutch in
Gujarat as early as in 1965. It was followed by the Santacruz export processing zone in
Mumbai which came into operation in 1973.

There was however no clarity of objectives that the government wanted to achieve. Kandla and
Santacruz EPZs were set up with different sets of objectives (Tandon Committee, 1980).
Operationally, an overall inward looking trade policy with umpteen controls and regulations
influenced the EPZ policy also (Kundra 2000). The policies were rigid and the package of incentives
and facilities was not attractive. Zone authorities had limited powers. There was no single
window facility within the zone. Entrepreneurs had to acquire individual clearances from various
state government and central government departments. Day-to-day operations were subjected
to rigorous controls. Custom procedures for bonding, bank guarantees and movement of goods
were rigid. FDI policy was also highly restrictive. According to the business environment rating
index which rated investment climate in 43 countries on the basis of 18 independent factors,
Indian, zones were placed at the bottom for FDI.
Towards the end of the 1970s, India's failure to step up significantly the volume of her
manufactured exports in the background of the Second Oil Price Shock began to worry the
policy makers. To provide fillip to exports, the government decided to establish four more
zones in 1984. These were at Noida (Uttar Pradesh), Falta (West Bengal) Cochin (Kerala) and
Chennai (Tamil Nadu). Thereafter, Visakhapatnam EPZ in Andhra Pradesh was established in
1989, though it could not become operational before 1994. All these zones with the exception of
Chennai were set up in industrially backward regions. The primary objectives of the zones were
still not specified and there were no significant changes in other laws and procedures pertaining
to the EPZs.
In 1991 massive dose of liberalization was administered in the Indian economy.
In this context, wide-ranging measures were initiated by the government for revamping and
restructuring EPZs also (See Kundra 2000 for details). This phase was thus marked by progressive
liberalisation of policy provisions and relaxation in the severity of controls and simplification
of procedures. The focus had been on delegating powers to zone authorities, providing additional
fiscal incentives, simplifying policy provisions and providing greater facilities. The scope and
coverage of the EPZ/EOU scheme was enlarged in 1992 by permitting the agriculture, horticulture
and aqua culture sector unit also. In 1994, trading, re-engineering and re-conditioning units
were also permitted to be set up.

11.2.1 Key Features of SEZ Scheme

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed
to be foreign territory for the purposes of trade operations and duties and tariffs. Goods and
services going into the SEZ area from DTA shall be treated as exports and goods and services
coming from the SEZ area into DTA shall be treated as if these are being imported. SEZ units
may be set up for manufacture of goods and rendering of services.

SEZ unit may import/procure from the DTA without payment of duty all types of goods and
services, including capital goods, whether new or second hand, required by it for its activities or
in connection therewith, provided they are not prohibited items of imports in the ITC(HS). The
units shall also be permitted to import goods required for the approved activity, including

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