CHAPTER 4 : SPECIAL ECONOMIC ZONES (SEZs) IN INDIA AND

GUJARAT

4.1 Special Economic Zones - History And Policy

4.1 1 World History
4.1.2 History of Export Promotion and SEZ Policy in India
4 1.2.1 Initial Phase : 1964 - 19S5
4.1.2.2 The Expansionary P hase: 1985 - 1991
4.1 2.3 The Consolidating P hase: 1991 - 2000
4.1.2.4 The Emergence Phase: 2000 onwards
4 1.3 Export Promotion Policy and SEZ Policy of India
4.1.3 1 Current Export Promotion Policy in India
4.1.3.1.1 Foreign Trade Policy 2009 - 14
4.1.3.1.2 EXIM Policy
4 1.3.2 SEZ ACT 2005
4.2 Present Organization, Structure and Export of SEZs in India
4.2.1 Classification of SEZs in India
4.2 2 State - wise and Activity - wise Functional SEZs m India
4.2.3 Location of Textile SEZs m India
4.2.4 Export Performance of SEZs in India
4.2.5 Government Initiatives for Promotion of SEZs in India
4.3 Special Economic Zones m Gujarat
4.3.1 Special Economic Zones in Gujarat - History
4.3.1.1 History of SEZs in Gujarat
4.3.2 Gujarat Policy Provisions for SEZ
4.3.2.1 Gujarat State SEZ Act 2004
4.3.2.2 Gujarat State SEZ Rules 2006
433 Classification and Distribution of SEZs in Gujarat
4.3.4 Export Performance of SEZs in Gujarat
4.3.5 Apparel Parks in Gujarat
4 3.5.1 Surat Apparel Park
4.3.5.2 Ahmedabad Apparel Park
 CHAPTER 4 : SPECIAL ECONOMIC ZONES (SEZs) IN INDIA
AND GUJARAT

In this chapter, the discussion of SEZs begins in general level at world and, then the
Indian situation is discussed. Gujarat is discussed in the last part of the chapter. The
chapter discusses SEZ units in a macro environment where SEZ policy is a major
part. Thus, the SEZ policy of the Central Government and the Gujarat State
Government is discussed in detail followed with the organization, structure and export
performance of SEZs in India and Gujarat. Finally, the initiatives taken by the Central
Government in the form of schemes and other steps taken for boosting the growth of
SEZs in India are discussed. The last part of the chapter discusses Surat Apparel Park
- SEZ and Ahmedabad Apparel Park - SEZ m detail as the units situated m them are
the subject of study in this research.

4.1 Special Economic Zones - History and Policy

The following section discusses the history, classification, performance and policy
related to special economic zones in India.

4.1.1 World History

For SEZs, the governments world over, have a typical modus operandi. Like
industrial clusters, export processing zones are typically an enclave of units operating
m a well-defined area within the geographical boundary of a country where certain
economic activities are promoted by a set of policy measures that are not generally
applicable to the rest of the country. One important feature of these zones is that they
are brought into existence only to promote exports. These zones are known by
different names such as Free Trade Zones (FTZ), Industrial Free Zone, Export
Processing Zones (EPZ), Bonded Free Zones, Maquiladoras (Mexico) and Special
Economic Zones (China and India) (source: adopted from an online information
portal - www.wikepedia.com).

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The concept of export processing zones is not a new one. An International Labor
Organization (ILO) report, states that some of the earliest references of export
processing zones date back to thirteen century in Spam and The Free Zone
Consortium of Cadiz was founded in 1929. In Spain a free zone was set up before the
First World War, but it took off only after the Second World War. In recent times, the
first export processing zone (EPZ) was set up in 1959 at Shannon, in Ireland and in
1962 Puerto Rico established an EPZ in the island. India became one of the first
countries in Asia to recognize the effectiveness of the Export Processing Zone (EPZ)
model in promoting exports by setting up Asias first EPZ in Kandla in 1965. While,
one most famous Special Economic Zones was adopted by the government of the
Peoples Republic of China under Deng Xiaoping in the early 1980s (Wong, 1987).

4.1.2 History of Export Promotion and SEZ Policy in India

The history of SEZs m India suggests that the seeds of the basic concept of Special
Economic Zone (SEZ) were sown in the mid sixties on the basis of the concept of
Export Processing Zones Attempts to promote the EPZ as an export platform on the
basis of economic incentives, such as the free provision of infrastructural services and
tax holidays, has been a feature of Indian development thinking since the 1960s. The
country has had four phases in the evolution of the EPZ policy (Aggarwal, 2005,
2004) Following is an overview of the evolution of the EPZ policy in India through
these four phases.

4.1.2.1 Initial Phase: 1964-1985

The first zone was set up in Kandla as early as 1965. It was followed by the Santacruz
export processing zone 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 multiple objectives (Tondon Committee, 1982). Operationally,
an overall inward looking trade policy with umpteen controls and regulations
influenced the EPZ policy also (Kundra 2000). With rigidity and not so attractive
package of incentives and facihties the 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

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procedures for bonding, bank guarantees and movement of goods were rigid. EDI
policy was also highly restrictive.

Three committees were appointed by the government of India during this period to
review the working of the only operational zones (Kandla and Santacruz) during the
period. Kandla was reviewed by the Kaul Committee m 1978 while Santacruz was
reviewed by the Review Committee on Electronics in 1979. Tondon Committee
(1982) reviewed both these zones The policy regime however remained virtually
static.

4.1.2.2 The Expansionary Phase : 1985-1991

Excessive protectionism led to high cost of production structure and reduced the
competitiveness of Indian exports. Therefore, as per the recommendation of Tondon
Committee (1981), the government decided to establish four more zones m 1984 that
included Noida (Uttar Pradesh), Falta (West Bengal) Cochin (Kerala) and Chennai
(TamilNadu) export processing zones. Later, the Visakhapatnam EPZ in Andhra
Pradesh was established in 1989. Thus, this phase witnessed the establishment of 5
zones. There were however no significant changes in other laws and procedures
pertaining to the EPZs.

4.1.23 The Consolidating Phase : 1991-2000

In 1991, with administration of liberalization in the Indian economy, new policy

initiatives and wide-ranging measures were initiated by the government for revamping
and restructuring EPZs (Kundra 2000). Arora (2003) shows that there were in all 146
circulars on EPZs/EOUs issued by the Central Board of Excise and Custom, DGFT
and RBI during this penod of 10 years. These constituted over 62% of total circulars
issued on EPZs/EOUs till 2003. During this phase, the focus had been on (1)
delegating powers to zone authorities, (2) providing additional fiscal incentives, (3)
simplifying policy provisions and (4) providing greater facilities.

The scope and coverage of the EPZ/EOU scheme was also enlarged m 1992 to
include the agriculture, horticulture and aqua culture sector unit also. In 1994, trading,
reengineering and re-conditioning units were also permitted to be set up in EPZ.

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4.1.2.4 The Emergence Phase: 2000 onwards

This period witnessed a major shift in direction, thrust and approach of EPZ. With a
view to overcome the shortcomings experienced on account of the multiplicity of
controls and clearances; absence of world-class infrastructure, and an unstable fiscal
regime and with a view to attract larger foreign investments m India, Special
Economic Zones were announced by the government of India in April 2000 as a part
of the Export-Import policy (1997-2002) of India. After the introduction of SEZ
scheme in the EX3M Policy from 01.04.2000, all existing FTZZEPZ have been
converted to SEZ.

The present day Special Economic Zone policies of India are well complemented by
the provisions of the Acts and Rules of Special Economic Zone. A number of
meetings were held across India for the formulation of - 'The Special Economic Zones
Act, 2005', which was subsequently passed by Parliament in May 2005. The SEZ Act,
2005 and SEZ Rules became effective on and from 10th February 2006. According to
this Act, SEZs were permitted to be set up in the public, private, joint sector or by the
State Governments with a minimum size of not less than 1000 hectares (while SEZ
Scheme of EXIM Policy 2000 allowed the establishment of SEZs in less than 100
hectares also). The SEZ Act 2005 defines the key role for the State Governments m
Export Promotion and creation of high class infrastructure facilities for commercial as
well as residential inhabitation. The units operating in these zones are to be deemed as
outside the countrys customs territory and will have full flexibility of operations.
Several measures have been adopted to improve the quality of governance of the
zones. These measures have been covered in the following section that discusses the
measures and benefits of SEZ ACT 2005 m detail.

4.1.3 Export Promotion Policy and SEZ Policy of India

This section gives a summary of the current export promotion and SEZ policy of
India.
4.1.3.1 C urrent Export Promotion Policy in India

The export promotion efforts of the Indian government have been described in
the'Foreign Trade Policy (FTP) 2009-14 and EXIM Policy 2002-07 (adopted from
FTP). For implementation of policy measures, Export Promotion Schemes were
introduced under which separate Export Promotion Councils have been set up for

128
each sector that prevails in India. Since the current study is related to the textile
sector, the policy measures and efforts related to only this sector have been studied.

4.1.3.1.1 Foreign Trade Policy 2009-14

The mam objectives of the FTP were to bring the country back on high export growth
path with alteast 25% of export growth per annum. To meet this objective the
government has followed a mix of policy measures that includes

(a) Fiscal incentives like income tax exemption to 100% EOUs and STPI units

(b) Institutional changes

(c) Support for procedural rationalization for enhanced market access across
the globe and diverification of export markets

(d) Improvement in infrastructure related to exports

(e) Technological Upgradation through EPCG scheme at zero duty for textile
and apparels including other sectors.

(f) Recognition of Towns of Export Excellence

(g) Duty Credit Scrips given for procurement of capital goods with actual user
condition for textile and apparel including other sectors.

(h) 90% of production can be sold in DTA

(i) EOUs allowed CENVAT Credit Facility for the component of SAD and
Education Cess on DTA sale

(j) More flexibility provided to exporters in relation to customs duty, import

of restricted items, reimports and transit loss claims

(k) Simplification of procedures related to samples, shipping bills and

payment of excise duty

(l) Reduction in transaction cost by making procedures online through EDI

implementation programme and

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 (m)Provision of full refund of all indirect taxes and levies on exports.

The thrust areas of the Foreign Trade Policy 2009-14 have been textile, leather and
handicrafts.

4.1.3.1.2 EXIM Policy

The EXIM Policy 2002-07 that has been adopted on the basis of FTP of India
executes all the initiatives of the FTP. Over and above these, it has initiated the
following export promotion measures specifically for the textile and apparel sector

(a) Duty free import facility for service sector.

(b) Annual Advance Licence Facility and Duty free import entitlement for
status holders having incremental growth of more than 25% in free foreign
exchange.

(c) Removal of quantitative restrictions related to import and export item

ceiling.

(d) Upgradation of infrastructure m existing clusters or industrial locations

under the Department of Industrial Policy and Promotion (DEPP) Scheme
to increase overall competitiveness of export clusters.

(e) Supplemental efforts made under ASIDE Scheme to bridge technology

and productivity gaps m identified clusters.

(f) Rehabilitation of sick units under BIFR Scheme.

(g) Special Economic Zone (SEZ) Scheme with special benefits to exporters
located in these zones.

(h) Export Oriented Umts (EOU) Scheme with special benefits to 100%
export onented units situated anywhere in India.

(i) Export Promotion Capital Goods (EPCG) Scheme where imports of capital
goods for certain sectors are promoted at zero percent duty

130
 (j) Duty Entitlement Pass Book (DEPB) Scheme to encourage diversification
and promotion of exports of new products.

(k) Duty Free Replenishment Certificate (DFRC) Scheme extended to deemed

exports.

(l) Advance license for deemed exports for supplies to EOU/SEZ/EHTP/STP.

4.1.3.2 SEZ ACT 2005

Amidst WTO and GATT, special economic zones have attained a centre stage.
Though SEZs emerged out of the attempt to improve the EPZ policy, m the year
2000, a separate policy was announced for SEZs as a part of one of the chapters of the
General Foreign Trade Policy or Scheme of EXIM Policy. Ministry of Commerce and
Industry, Directorate of General Foreign Trades foreign trade policy, 2004 to 2009
has a special chapter (Chapter 7) on special economic zones. Therefore, until now,
SEZs were functiomng under the provisions of Chapter 7 on SEZ in the Foreign Trade
Policy 2000, which is also called the SEZ Policy 2000. Later there was an enactment
of the SEZ ACT 2005. This ACT extends to the whole of India. The ACT received
the assent of the President on 23rd June 2005 and has come into force on the 10th of
February, 2006. Chapter 2 of SEZ Act 2005 provides the legal framework for
establishment of SEZs and also for units operating in such zones.

The central government has enacted the SEZ Act with the major objective of
generation of additional economic activity, promotion of export of goods and
services, investment from domestic and foreign sources and creation of employment
opportunities. This ACT is unique as it helps in backward and forward integration of
the economy. According to this Act, Special Economic Zone (SEZ) is a specifically
delineated duty free enclave which is 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 are treated as exports and goods coming from the SEZ area into DTA are
treated as if these are being imported. SEZ units are usually set up for manufacture of
goods and rendering of services

The SEZ Act 2005 and the Rules were enacted with the key objectives of (1)
generation of additional economic activity (2) promotion of exports of goods and

131
services (3) promotion of investment from domestic and foreign sources (4) creation
of employment opportunities and (5) development of infrastructure facilities The
SEZs require special fiscal and regulatory regime in order to impart a hassle free
operational regime encompassing the state of the art infrastructure and support
services. Therefore, legislation on SEZs covered the concepts of the developer and co
developer, labor policy flexibility, simplified documentation and provided for
Offshore Banking Units (OBUs). Over and above of these, the following non-fiscal
incentives and fiscal incentives (fiscal concessions under the Income Tax and
Customs Act) have been extended to the units operating in SEZs.

Non fiscal Incentives

(a) Ready infrastructure benefits are gamed as it is the responsibility of the

developer of a Zone to develop, construct, install, operate, manage and
maintain all the infrastructural facilities, amemties and services in the Zone

(b) Ready availability of basic facilities like facilities of water, road, bridges, gas
distnbution network etc. in the area of the Zone.

(c) Single Window clearance advantage to the unitholders by way of getting a

common application form for approval, clearance, licence, registration and no
objection certificate under the various laws and to submit single return for two
or more laws.

(d) Application of flexible labor policy in the Zone.

(e) Exemption from industrial licensing for manufacture of items reserved for
SSIs and no cap on foreign investment for these items.

(f) 100 percent EDI investment through automatic route to manufacturing SEZ
umts (barring a handful of sensitive industries1).

(g) FDI upto 100% is allowed for: the ISPs not providing gateways (both for
satellite and submarine cables), Infrastructure Providers providing dark fibre
(IP Category - 1), electronic Mail and Voice Mail m the telecom sectorii

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(h) Facility to retain 100% foreign exchange receipts m EEFC Account. Facility
to realize and repatriate export proceeds within 12 months.

(i) Re-export of imported goods found defective, goods imported from foreign
suppliers on loan basis etc. without G.R. Waiver under intimation to the
Development Commissioner.

(j) "Write-off' of unrealised export bills upto 5%.

(k) Commodity hedging by SEZ units permitted.

(l) Capitilization of import payables.

(m) Profits allowed to be repatnated freely without any dividend balancing

requirement.

(n) No fixed wastage norms.

(o) Full freedom for subcontracting including subcontracting abroad and taking up
job-work on behalf of other units in the same SEZ.

(p) Duty free goods to be utilized in 5 years.

Fiscal Incentives

With a view to attract the industrialists and entrepreneurs to establish industrial units
m the Zone, the Government of India has proposed to grant the following fiscal
benefits under SEZ Act 2005.

(a) 100% income tax exemption for a block of five years,50% tax exemptions for
two years and upto 50% of the Profits ploughed back for next 3 years under
section 10-A of Income tax Act 1961.

(b) 100% Income-tax exemption for 3 years & 50% for 2 years under section 80-
LA of the Income-tax Act for off-shore banking units.

(c) Supplies from DTA to SEZ to be treated as exports under 80HHC of the IT
Act and exemption from excise duty, sales tax and other taxes like cess under
the State laws given on such goods.

133
(d) Drawback or other such benefits on goods brought or services provided from
DTA m SEZ or services provided in SEZ by service providers located outside
India.

(e) Reimbursement of Central Sales Tax paid on domestic purchases.

(f) Provision of carry forward of losses.

(g) Exemption from Central Excise duty on procurement of capital goods, raw
materials, consumable spares etc. from the domestic market.

(h) The unit which intends to set up captive power plant in the Zone exempted
from payment of electricity duty for a period of ten yearn

(i) The stamp duty and registration fee payable on transfer of land in the Zone
exempted and no registration fee or stamp duty leviable on loan agreement,
credit deeds, mortgages executed by the unit in the processing area of Zone.

(j) The sales tax, purchase tax, motor spirit tax, luxury tax, entertainment tax and
other taxes and cess payable on sales and transactions exempted.

(k) Every developer and entrepreneur entitled to exemption from duty of customs
on imported goods.

(l) Every developer and entrepreneur entitled to exemption from duty of customs
on goods exported from SEZ outside India.

(m) Exemption from service tax on taxable sem es to developer and units of SEZ.

(n) Exemption from the securities transaction tax leviable m case the taxable
securities transactions are entered into by a non-resident through the
international financial services centre.

(o) Exemption from the levy of taxes on the sale or purchase of goods other than
newspaper.

Thus, export promotion and SEZ policy of India reflects that 1978 onwards, the
Government of India changed the focus from an inward looking policy to an outward
looking policy. History of development of SEZs highlights that the first SEZ policy of

134
India came into existence because of the economic reforms promulgated and
implemented in the early 1990s. The concept of developing SEZ came into India from
China. Development of the SEZ policy 2000 (over and above the reforms m EPZ
Policy) was directed to provide better facilities, greater incentives and better
governance to improve investment climate and hence the performance of the special
economic zones. After the SEZ Act 2005 was introduced, it was implemented through
Central Government SEZ Rules 2006. 2006 onwards, changes and amendments were
made till 2010. These changes and amendments in the provisions show an increasing
trend. Subsequent changes showed more provisions. Thus, SEZ Rules 2006 were
amended to make provisions better and simpler so that export promotion m India
shows a positive effect on the balance of payment.

4.2 Present Organization, Structure and Export of SEZs in India

The following section lists the classification of SEZs in India that further leads to
details of state-wise and sector-wise establishment of SEZs. Establishment of SEZs
related to textile sector have been listed in detail and comparison has been made of
export performance of SEZs on the basis of difference m activity and governance.
This section also highlights the growth trend of export performance of SEZS and their
share in total economy exports.

4.2.1 Classification of SEZs in India

SEZ Policy highlights that m India, the normal procedure of establishing a textile
special economic zone (or any other SEZ) is getting approval on the basis of
fulfillment of SEZ ACT 2005 and SEZ rules 2006 The normal procedure for approval
of SEZ is divided m three steps Firstly, they get a formal approval when land is
available to set up an SEZ. Then the SEZ receives an in-Pnncipal approval when the
land has not yet been secured but all other cntena are fulfilled. The SEZ is then
notified when the land is also secured and it is all ready for beginning the physical
development of work. Majority of SEZs in India are of less than 49 hectares m area.
Finally, the SEZ completes with development of required infrastructure and allots
plots to unit holders. When the production work is finally started by the unit-holders,
the SEZ gams the title of being operational.

135
SEZs in India can be categorized on the basis of four categories namely, on the basis
of sector, on the basis of function or location, on the basis of governance and on the
basis of requirement of having processing as well as non-processing areas

A detailed classification can be seen in the table 4.1 given below:

136
 Table 4,1: Classification of SEZs in India

CLASSIFICATION OF SEZs IN INDIA

SECTO FUNCTION OR LOCATION GOVERN REQUIREMENT OF HAVING PROCESSING OR NON

R ANCE PROCESSING AREAS

Sector Multi-product SEZ in a port Governanc Processing Non-Processing Area

Specific SEZ or airport Area
SEZ

1. 1. Manufacture 1. SEZ in an 1. 1. Processing 1. Non-processing area is intended to provide

Manufac multiple goods m existing port or Established area is the support facilities to SEZ processing area and
ture one one sector or airport for and run by demarcated may include:
or more across multiple manufacture of Central area in SEZ
goods in sectors goods falling m Govemmen where units
a two or more t can be located
particula sectors or for for
r sector trading and 2. manufacture
warehousing or Established of goods or
rendering or jointly by rendering of
services. State servi ces
Govemmen
t or Private
Developers
prior to
SEZ ACT

137
 2005

2. (i) GO 2. Minimum (i) (ii) (Hi) (iv) (V )

Render Tradin Render processing Hospit Recreation Residentia
one or g and two or area has been Educ als Hote and 1 and
3, Notified business
more Wareh more uniformly alion Is entertainm
under SEZ ent complexes
services ousing services fixed at al
ACT 2005, instit facilities
in a m a
developed
particula sector or ution
and run by
r sector multiple s
State
sectors (ii)
Govemmen (i)
t under
x% y%
SEZ ACT
for for
2005 or
Multi produ
SEZ Rules
produ ct
2006
ct specif
SEZs ic
SEZ

138
4.2.2 State-wise and Activity-wise Functional SEZs in India

A total of 130 SEZs was exporting in India, winch include seven central government
SEZs and 12 state/private SEZs, set up prior to enactment of SEZ ACT 2005. However,
since 2006, in addition to the seven SEZs that preceded the SEZ Act 2005, a large
number of SEZs have been established and many more are in the pipeline. As of 31st
October 2011, 583 formal approvals have been granted for setting up SEZs, of which 381
have been notified and 143 are exporting. Their distribution across States and Sectors is
described in Table 4.2 and Table 4.3, respectively:

Table 4.2: Distribution of SEZs across States in India

SEZs SEZs Established by SEZs Notified

Established by State Government or Under SEZ ACT
Central Private Developers 2005, State
Name of the State Government Prior to SEZ ACT Government

AndraPradesh 1 - 35

Kerala 1 - 6

Karnataka - - 20

Tamil Nadu 1 4 23

Gujarat 1 2 10

Uttar Pradesh 1 1 4

Haryana - - 3

West Bengal 1 2 2

Rajasthan - 2 2

Chandigarh - - 1

Madhya Pradesh - 1 -

Maharashtra 1 - 17

Orissa - - 1

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Total 7 12 124
Source: http://sezindia.nic.in/writereaddata/pdf/ListofoperationalS:iZs.pdf downloaded
on 5 May 2010

Table 4.3: Activity-wise Functional SEZs in India

SEZs Established
SEZs SEZs Notified
by State
Established By Under SEZ ACT
Business Activity of SEZ Government or
Central 2005, State
Private Developers
Government Government
Prior to SEZ ACT

IT/TFES - 2 78

Pharma - - 6

Multi-Product 6 2 9

Electronics 1 - 0

Engineering - - 8

Jems and Jewellery 1 2 1

Apparel - 2 1

Textile - - 2

Handicrafts - 2 -

Biotechnology - - 2

Food Processing - - 3

Footwear - - 2

Auto Ancillary - 1 -

Animation and Gaming - - 1

Aviation - - 3

Building Products - - 2

Conventional Energy - - 1

140
 Non-Con ventional
Energy - - 2

Port Based - - 2

Power - - 1

Telecom Equipments - 1 -
Transport Equipments - - 1

Total 8 12 123
Source: http://sezindia.nic.in/writereaddata/pdf/ListofoperationalSEZs.pdf downloaded on 5

May 2010

Out of these 143 SEZs, almost 53 are textile related SEZs in India. The graph 4.1
below shows the classification of legal status of textile related SEZs in India. It highlights
that notified and operational SEZs comprise a very small proportion of textile SEZs in
India.

Graph 4.1: Legal Status of Textile SEZs in India

N u m b e r of Textile SEZs in India

Pr n c p a l Approvals
F o rm a t iXp;cc-vcrfs

Holife'd
Opr-r.a! :-n a

Source: http://sezindia.nic.in/writereaddata/pdf/ListofoperationalSEZs.pdf downloaded on 5

May 2010

141
However, out of these operational textile related SEZs, Gujarat stands fifth in the list of
states with highest number of SEZs followed by Andra Pradesh, Tamil Nadu, Karnataka
and Maharashtra (Source: DNA Money, 17-3-2011). This can also be seen proved from
the table number 4.4 related to Location of Textile SEZs in India.

4.2.3 Location of Textile SEZs in India

SEZs in India have been established starting with SEZ Policy 2000 and under SEZs ACT
2005 and SEZ Rules 2006. Textile SEZs have various types of related SEZs under its
umbrella that include Textile Parks, Apparel Parks, Textile and Apparel Special
Economic Zones, Textile and Apparel Parks, Apparel and Fashion Accessories. Though
all are related to textile industry activities, the only difference is that while Textile Park
carries out manufacturing activities related to all types of textiles, the apparel parks can
only carry out activities related to readymade garments manufacturing. It means an
apparel park is necessarily a part of textile activity but a textile park may not have any
apparel manufacturing units. Though there are in all 53 textile related SEZs in India, just
5 out of them are m operation. These five SEZs are highlighted in table 4.4 below that
lists location-wise number of textile and textile related SEZs in India:

Table 4.4: Location of Textile and Textile Related SEZs in India

No. of
Location Type SEZs

Andhra Pradesh Textile 2

Andhra Pradesh Textile and Apparel 3

Andhra Pradesh Apparel 2

A ndhra Textile and Apparels, Garments and Fashion

Pradesh Accessories 1

Karnataka Textile and Apparels, Garments and Fashion Accessories 1

Karnataka Textile and Apparel 3

142
Karnataka Apparels and Fashion Accessories 1

K arnataka Textile 1

Tamil Nadu Textile 2

Tamil Nadu Textile and Apparel 2

Apparel and fashion accessories (1 out of 3 is

Tamil Nadu functioning) 3

Maharashtra Apparels and Fashion Accessories 6

Maharashtra Textile and Garment 4

Maharashtra Textile 3

Gujarat Textile and Garments 2

G ujarat Apparel (2 out of 3 a re operating) 3

Gujarat Textile 1

Punjab Textile and Garments 3

Punjab Textile 2

Haryana Apparel 3

Rajasthan Apparel 2

Uttar Pradesh Textile and Garment 2

Orissa Textile and Garments 1

Dadra Nagar
Haveli Textile and Apparels, Garments and Fashion Accessories 1
Source: http://www.sezindiainvest.com downloaded on 3 November 2011

These five operating textile and textile related SEZs include Mahindra City SEZ in Tamil
Nadu, Surat Apparel Park and Ahmedabad Apparel Park in Gujarat, Brandix India
Apparel City Private Ltd. in Visakhapatnam, AndraPradesh and KIADB in Karnataka.
Tables 4.2 and 4.3 show that after 2005, maximum numbers of SEZs have been
developed by the state governments under SEZ Act 2005 and a few have been developed

143
by private developers. This shows the active interest that state governments across India
have taken in development of infrastructure and export promotion. Table 4.2 highlights
that maximum numbers of SEZs are in AndraPradesh, TamilNadu, Karnataka,
Maharashtra and Gujarat. The same trend can be seen in textile SEZs given in table 4.4,
Table 4.3 displays that sectoral growth of SEZs in India has been quite lop-sided. Out of
the total of 143 SEZis in India, 78 of them are IT/ITES related and the remaining is of
almost equal promotion in each sector. This reflects the role of government rather that the
economic theory of spacial concentration and locational advantage. Thus, there has
been considerable shift in industrial focus in the post SEZ era.

4.2.4 Export Perform ance of SEZs in India

Export performance is the main objective of SEZs. Moreover it is the only way to judge
the effectiveness of SEZ in a country. Therefore it is important to see the growth rate in
exports of SEZs in India since their legal formation. Exports from SEZs in 2010-2011
registered a growth of 43.11% over 2009-2010. Table 4.5 below shows governance-wise
export performance of SEZ in India,

Table 4.5 Establishment-wise Exports from SEZs

Establishm ent Type of SEZ Export Value (Rupees in Crores)

2009-10 2010-11

Central Govt SEZs 58036.86 53466.93

State Govt/pvt. SEZs established prior to 44728.93 66186.369

SEZ Act, 2005

SEZs notified under SEZ Act, 2005 117945.6 196214.551

Total 220711.39 315867.85

Source- http://www.sezindia.nic.in/about-ep.asp downloaded on 5 January 2012

Highest value of SEZ export performance is obviously from SEZs notified under SEZ
Act, 2005 because highest numbers of SEZs are also established under the same

144
governance. The following table highlights the export performance, growth trend of
Indian SEZs and their share in total economy exports for the last eight years.
Table 4,6 Contribution of SEZs in Indias Export Performance

YEAR TOTAL GROWTH SEZ EXPORTS GROWTH SHARE OF

ECONOM RATE ( over VALUE (in RATE ( over SEZs IN
Y previous year) crores of previous year TOTAL
EXPORTS rupees) ) EXPORTS
OF INDIA OF INDIA
(in crores (in %)
of rupees)
2003- 15%
293367 13854 39% 4.7
2004
2004- 23%
375340 18314 32% 4.9
2005
2005- 26%
456418 22840 25% 5.0
2006
2006- 25%
571779 34787 52% 6.1
2007
2007- 15%
655864 66638 93% 10.4
2008
2008- 28%
840755 99689 50% 11.9
2009
2009- 0.6%
845534 220712 121.40% 26.1
2010
2010- 26.01%
1065488 315868 43.11% 30.0
2011
Source: http://www.sezindia.nic.in/about-ep.asp downloaded on 5 January 2012

145
Graph 4.2 below shows the distribution of SEZ exports across sectors in 2010-11.

Graph 4.2: Distribution of SEZ Exports across Sectors in 2010-11

Ctaem & P h arm a

lNT--stjte and
C o m p u t e r / E le c t r o n ic s o f t m a r e
Garment; G t-m i and .*?<*-:-!lery
T ra d ir^ a i d se rv es
E tec I ron >;sh a d.va re
rviK.
E n g n e e iirg
T e x t ile s a i d g a r m e n t s
P to r r o r ^ e n tio r ia l arid S o la Energy
P tas li: and rubttet
E le c t r o n ic s
Fcc-d and A gro Industry
Biotech
L eather. t o : r * * e a arid s p o rts goods

D i s t r i b . t o n o f SEZ E < f :rts a rre s s S e c to rs n Z 0 1 'C r-Il

Source: http://www.sezindia.nic.in/writereaddata/updates/SEZ_REVIEW.pdf
downloaded on 10 January 2012

Table 4.6 shows that after the implementation of SEZ ACT 2005, the export growth rate
of SEZs had gone up in the following two years and then equally went down in the year
after that. However, in 2009-10 it once again shot up. Moreover, it can be seen in the
above table that the trend of SEZ export growth rate performance is much higher than
that of total economy exports. Further, share of SEZs in total economy exports has also
increased consistently. Therefore, it can be clearly said that, with the efforts of the
government, the exports from SEZs have also grown. But this effort has not been even
for sectors and states. Only those states have high export performance of SEZs where the
State Government has shown a proactive interest and only those sectors have performed
in SEZ export growth which either have government assistance or strong historical base.

146
4.2.5 Government Initiatives for Promotion of SEZs in India

Establishment of SEZs has boosted international trade in India. To promote and

consistently boost the export performance of these operating SEZs, The Export
Promotion Council for EOUs and SEZ units, used the tool of giving awards to the SEZs
with highest export growth. Table 4.7 show the list of SEZs awarded the EPCES Export
Awards.

147
Table 4.7: Export Promotion Council for EOUs and SEZs Export (Product Specific) Awards for the year 2006-07

Product Award Location Export Product Award Location Export

Performance Performance
Category Category
(Rs. Crores) (Rs. Crores)

Gems and Best SEZ Maharashtra Rs.471.81 crore Food & Agro Products, Best SEZ Gujarat ; Rs. 150.15
Jewellery NON Agriculture and - NON crore
SSI Plantation Product SSI

Best SEZ West Rs. 191.86 Best SEZ Gujarat Rs. 80 crore
-S S I Bengal crore -S SI

Electronics and Best SEZ Tamil Nadu Rs. 424.05 Chemicals and Allied Best SEZ Tamil Rs. 35 crore
Computer NON crore Products, Drugs and NON Nadu
Software SSI Pharmaceuticals and SSI
Products Allied Products
Best SEZ Kerala Rs. 59.73 crore Best SEZ Gujarat Rs. 108.78
-S S I -S S I crore

Engineering and Best SEZ Tamil Nadu Rs. 216.48 Textile and Textile Best SEZ West Rs. 13.59 crore
Metallurgical NON crore Products - NON Bengal
Products SSI SSI

Best SEZ Gujarat Rs. 28.71 crore Best SEZ West Rs. 97.03 crore
-S S I -S S I Bengal

Readymade Best SEZ Tamil Nadu Rs. 160.57 Leather and Leather Best SEZ Tamil Rs. 66.41 crore
Garments NON crore Products - NON Nadu
SSI SSI

148
 Best SEZ West Rs. 76.24 crore Best SEZ Tamil Rs. 20.23 crore
-S S I Bengal -S S I Nadu

Best SEZ Maharashtra Rs.471.81 crore Best SEZ NIL

NON NON
Gems and SSI SSI
Handicraft
Jewellery
Best SEZ West Rs. 191.86 Best SEZ West Rs. 55.32 crore
-S S I Bengal crore -S S I Bengal

Best SEZ Tamil Nadu Rs. 66.96 crore Best SEZ Tamil Rs. 35 crore
- NON Chemicals & Allied - NON Nadu
Computer SSI Products, Drugs & SSI
Hardware Pharmaceuticals &
Best SEZ Tamil Nadu Rs. 9.75 crore Allied Products Best SEZ Gujarat Rs. 108.78
-S S I -S S I crore

Source- eoumdia.gov.in/epces_cieculars/Awards0607.pdf

149
The above table 4.7 shows that readymade garment is one of the top five products that
have received awards for export performance in India. Moreover, textile is the top
seventh sector for receiving performance awards for export from SEZs. This makes it one
of the important sectors for the government to take interest in and develop it (especially
for export generation) at the regional as well as national level. These awards and similar
incentives by the government have boosted the export performance of SEZs in India. But
through these awards, it is more important that the government identifies the top
performing sectors and fuels it with funding and investment for its growth. Growth and
performance of SEZs have also shown the investors that it is a sun-rising sector and is
playing an important role in the development of the Indian economy.

4.3 Special Economic Zones in Gujarat

Special Economic Zones (SEZs) are growth engines that can boost manufacturing,
augment exports and generate employment. The Government of Gujarat has enacted
Special Economic Zones Act, 2004 in order to provide a hassle free operational regime
and encompassing state of the art infrastructure and support services. The Government of
India has also enacted the Special Economic Zones Act, 2005. Board of Approval (BOA)
in MOCI, New Delhi has accorded approvals to 60 SEZs in Gujarat at the end of
September-2009. The total proposed investment by the SEZ Developers is around
Rs.267374 crore.

4.3.1 Special Economic Zones in Gujarat - History

The following section displays the history, classification, performance and policy related
to special economic zones in Gujarat.

150
4.3.1.1 History of SEZs in Gujarat

SEZs have been set up m Gujarat with a view to provide an internationally competitive
and hassle free environment for exports. Special Economic Zones (SEZs) are growth
engines that can boost manufacturing, augment exports and generate employment.
Gujarat has remained in the forefront of industrial development. The establishment of
first SEZ in the country has been approved in Gujarat under SEZ Policy of GOI. In
addition, the existing Free Trade Zones namely Kandla Free Trade Zone and Surat Export
Processing Zone were converted into Special Economic Zones and these are in operation
in the State. After these two, many special economic zones have been established under
Gujarat State SEZ Act 2004 either developed by the State Government or by the private
players.

The Board of Approval (BOA) in Ministry of Commerce and Industries (MoCI), New
Delhi had accorded approvals to 51 SEZs in Gujarat by the end of September 2007 and
around 60 (9 more than those in 2007) by the end of 2010. There are 130 functional SEZs
in India out of which 15 of them are in Gujarat. (Source: www.sezindia.nic.inl. This
means though there are around 60 SEZs in Gujarat, hardly 23% of them are fully
functional and contributing to the states and nations exports. The existence of SEZs in
Gujarat has its roots in natural infrastructure available to Gujarat State. According to
Gujarat Maritime Boards official website, Gujarat is a peninsula with a coastline of 1600
kms. This coastline is developed with almost 41 small, intermediate and large ports.
These ports have been used for all kinds of shipping activities and are taking care of
maximum import-export activities being undertaken in Gujarat and India. These minor
and intermediate ports of Gujarat handle about 8.5% of national shipping cargo. They
handle about 16 million tones of cargo annually, which accounts for 70% of the total
cargo handled by all minor ports of India. An average annual export growth rate from the
year 2000 to 2010 of these ports is 37. 39%.

The fundamental logic of establishing a SEZ is that it should be completely engaged in

export activity and thus should be near to either a sea-port or an airport making export
transmission convenient and hurdle-free. Thus, the harbors or ports have boosted the
growth of the number of SEZs in Gujarat. Gujarat has 41 ports along a coastline of 1600

151
kms; 11 are intermediate ports and 29 are minor ports. With 41 ports, there are almost 60
SEZs m Gujarat today. And potential of number of SEZs envisaged to be set up in
Gujarat by 2020 is 23,150.

4.3.2 Gujarat Policy Provisions for SEZ

The Central Government has offered various incentives and facilities both to developer of
SEZ as well as the industrial units coming up in SEZ. All kind of units namely
manufacturing, trading or service activities are permitted in SEZ. All approvals are to be
given by the Development Commissioner for establishment of the unit in SEZ. The State
Governments are required under the scheme to offer specified facilities and concessions
for promotion of units in SEZs.

In the context of Government of India guidelines for the establishment of SEZs, the
matter of formulating a policy regarding the dispensations which the State Government
would accord to promote the development of SEZs, had been under consideration of the
State Government since quite some time. Therefore, as a part of developing infrastructure
in Gujarat, the State Government had enacted the Special Economic Zones Act 2004 in
order to provide a hassle free operational regime and encompassing state of the art
infrastructure and support services.

4.3.2.1 Gujarat State SEZ Act 2004

Gujarat SEZ ACT 2004 was commenced to provide for the operation, maintenance,
management and administration of a Special Economic Zone in the state of Gujarat and
to constitute an Authority and for matters connected therewith or incidental thereto. This
Act was applied to all SEZs in the State namely Kandla SEZ, Surat SEZ and proposed
SEZ at Positra, Mundra and Dahej and at any other locations where SEZ came up in
Gujarat, subject to the framework for SEZ determined by Government of India from time
to time. The Gujarat Special Economic Zone Act 2004 approves establishment of SEZs
with the objectives of:

152
(a) generation of additional economic activity
(b) promotion of exports of goods and services;
(c) promotion of investment from domestic and foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities;

The resolution of Gujarat State SEZ Act 2004 includes the areas of management of
zones, power, environment, water, labor regulations, sales tax and other levies and law
and order. Full detail of the Act is given in annexure number VI.

4.3.2.2 Gujarat State SEZ Rules 2006

On the basis of this ACT, certain amendments were made and later in the year 2006, SEZ
Rules 2006 were announced by the government of Gujarat. Chapter II of SEZ Rules 2006
adopted from SEZ Act 2004 describes the process of establishment of special economic
zone and appointment of developer. As per these Rules every Special Economic Zone
shall be under the administrative control of a Development Commissioner. These Rules
provide Fiscal as well as non-fiscal benefits. The following section throws light on both
these types of benefits provided for by the Rules.

a. Non-Fiscal Benefits

The following non-fiscal benefits are provided for in SEZ Rules 2006.

(i) Single window clearance prescribed a common application for approval,

clearance, licence, registration and no objection certificate under one or more
laws

(ii) Infrastructure facilities and services that include generation and supply of
electricity; water extraction, treatment, transmission and distribution; waste water
treatment and solid waste management; provision of minor port and related
services; provision of roads and bridges; provision for gas distribution network;
provision for communication and data network transmission; and any other
services as may be prescribed by the regulations.

153
(iii)Supply of electricity

(iv) W ater, road, gas and other facilities

(v) Delegation of powers of L abour Commissioner to Development

Commissioner in which powers, duties and functions conferred on Commissioner
of Labour or any officer under those Acts shall be exercised by the Development
Commissioner or any officer authorised by him in this behalf.

b. Fiscal Benefits

Chapter 8 of SEZ Rules states the fiscal benefits that the developer and the unitholder
in the zone can avail of.

(i) State Taxes and Levies-

All sales and transactions within the processing area of the Zone shall be exempt
from all taxes, cess, duties, fees or any other levies under any State law to the
extent specified below:

(a) Stamp duty and registration fees payable on transfer of land meant for approved
Units in the Zone.

(b) Levy of Stamp duty and registration fees on loan agreements, credit deeds and
mortgages executed by the Unit, industry or establishment set up in the processing
area of the Zone.

(c) Sales Tax, Purchase Tax, Motor Spirit Tax, Luxury Tax, Entertainment Tax and
other taxes and cess payable on sales and transactions.

(d) Inputs (goods and services) made to Zone Umts from Domestic Tariff Area shall
be exempted from sales tax and other taxes under the State laws.

(e) The Developer shall also be entitled to the benefits of exemption provided in
subsections (1) and (2) for the entire Zone.

154
 c. Over and above of the fiscal and non-fiscal benefits, the Rules mention norms
related to

a. Processing area

b. Non-processing area

c. Concession to contracts in SEZs (All Exemptions and concessions are

allowed to Contractor appointed by a Developer or Co-developer)

d. Exemptions for infrastructure for social purposes in non-processing area

of the Zone

e. Norms related to minimum area requirement for setting up of SEZ.

f. Norm for the Developer or Co-Developer to have at least 26% of the

equity in the entity proposing to create business, residential or recreational
facilities in an SEZ

g. Clearance to be given by State Government because while recommending

a proposal for setting up of an SEZ to the Board, the State Government
indicates whether the proposed area falls under reserved or ecologically
fragile area

h. The State Government certifies details of land area

Thus, the industry friendly SEZ policy of Gujarat has taken Gujarat from traditional
industrial clusters to industrial estates and has further advanced to establish 60 SEZs by
the end of 2009-10.

4.3.3 Classification and Distribution of SEZs in Gujarat

Gujarat has emerged as a leader in SEZ led industrial development for boosting exports.
There are around 58 SEZ at present in Gujarat, covering an area of approximately 20,858
hectares. These can be classified as under,

155
 Functional SEZs 15

Notified, but non-functional : 17

Formal Approvals 13

Valid in-principle approvals : 13

Total 58

15 out of 58 are functional SEZs at present, covering an area of 6,201 hectares and 13 out
of 58 are formally approved SEZs in Gujarat. These formally approved SEZs are
involved in several sectors such as. Biotechnology. Power, Handicraft/Artisan. Gems &
Jewellery and Port based multiproduct.

Following graph 4.3 shows sector-wise classification of functional SEZs in Gujarat.

Source: http://www.scribd.eom/doc/50705042/8/Ahmedabad-Apparel-Park accessed on

17 January 2012

156
Graph 4.3 and 4.7 show that textile and apparel SEZs comprise of 13% of the total
functioning SEZs m Gujarat. This is a significant percentage considering the requirement
and establishment of a dedicated industry specific special economic zone. Considering
the fact that there are more than 10 industrial sectors prevailing in India, export of textile
and apparel is promoted through a special scheme called special economic zones is
commendable. Moreover, instead of including these products as a part of multi-product
zone, the government has shown interest in establishing a dedicated textile special
economic zone is even more noteworthy.

Table 4.8 and graph 4.4 shows the district-wise distribution of these SEZs in Gujarat.

Table 4.8: District-wise Classification of SEZs in Gujarat

DISTRICT NO. OF SEZ ACTIVITY

SEZs

Ahmedabad 12 Apparel and Textile, Pharma, IT/1TES, Industrial Machinery &

Ancillary

Amreli 2 Engineering, Alternative Energy & Ancillaries

Bharuch 8 Multi-product, Ceramic & Glass, Chemicals, Pharmaceuticals,

Hydrocarbon

Gandhinagar 7 Electronics, IT/1TES

Jamnagar 2 Multi-product

Kutch 12 Port based Multi-product, Power, Textile & Garments, Handicraft &
Artisan, Polymer based, Flat Steel, Engineering, FTWZ

Surat 5 Gems and Jewellery, Apparel, Engineering, Power

Vadodara 3 Engineering, Biotech, IT/ 1TES

Source: http://ic.gujarat.gov.in/promo-sch/sezlist.html accessed on 10 December 2011

157
Graph 4.4: Location-wise classification of SEZs in Gujarat

S E Z s in G u j a r a t - D is p e r s e d L o c a t io n s

51 S E Z A p p r o v a ls

# P h a rm a

C h e m ic a ls

E n g in e e r in g

Q IT /IT E s / B T

d T e x t ile / A p p a r e l

C e r a m ic s

G e m s & J e w e lr y

Pow er

^ M u lti-p r o d u c t

Source: Industrial Statistics 2007, Industries of Gujarat

Table 4.8 and graph 4.4 highlights that more SEZs have developed only in those regions
which are near to seaports. Development of SEZs away from seaports infers the existence
of international airports and similar developed infrastructure availability for the smooth
running of SEZs in those regions. Table 4.9 below shows the sectoral classification of
SEZs in Gujarat.

Table 4.9: Activity-wise Classification of SEZs in Gujarat

SEZ ACTIVITY NO. OF NAME OF NO. OF TOTAL

DISTRICTS DISTRICTS SEZ SEZs
UNITS

Multi-product 6 Surat 1 12

Bharuch 2

Jamnagar 2

Kutch 5

158
 Ratanpur and 1
Phirojpur

Ahmedabad 1

Electronics 1 Gandhinagar 2 2

IT/ITES 3 Ahmedabad 4 10

Gandhinagar 5

Vadodara 1

Engineering 5 Surat 1 5

Vadodara 1

Amreli 1

Ahmedabad 1

Kutch 1

Pharmaceuticals & Chemicals 2 Ahmedabad 3 6

Bharuch 3

Apparel and Textile 3 Ahmedabad 2 4

Kutch 1

Surat 1

Biotech 1 Vadodara 1 1

Power 2 Kutch 1 2

Surat 1

Gems & Jewellery 1 Surat 1 1

Other like (industrial 4 Ahmedabad 1 6

machinery and ancillary,
ceramic and glass, polymer Bharuch 1
based, flat steel, FTWZ and
alternative energy and Kutch 3

159
 ancillaries) Amreli 1

Jems and Jewellery 1 Surat 1 1

Source: http://ic.gujarat.gov.in/promo-sch/sezlist.html accessed on 10 December 2011

Table 4.8 shows that while Ahmedabad is the district with highest number of SEZs
established, Table 4.9 shows that maximum number of SEZs are established in multi
product (12) followed with IT/ITES (10) sectors of Gujarat. As seen in table 4.9, while
three districts cover 4 apparel and textile related SEZs, Ahmedabad alone has 12 potential
SEZs related to this sector.

Thus, the large proportion of functional and notified SEZs in Gujarat, reflect government
efforts promising future for export growth and promotion of the industry in the global
market.

4.3.4 Export Performance of SEZs in Gujarat

Though Gujarat ranks fifth at national level as far as the total export performance is
concerned, it tops the list of states with export performance from SEZs. The following
Table 4.10 and Graph 4.5 support this statement.

Table 4.10: Distribution of SEZ Exports across States in 2010-11

Exports
Exports Exports
Value
Value Value
State State State (Rupees
(Rupees (Rupees
in
in crores) in crores)
crores)
Madhya
Gujarat 146877.7 Kerala 18750.65 Pradesh 1242.65
Karnataka 46717.99 Andhra Pradesh 13359.17 Rajasthan 899.39
Tamil Nadu 43704.6 West Bengal 10883.57 Chandigarh 318
Uttar Pradesh 10703.17
Maharashtra 19480.05 Haryana 2807.01 Orissa 123.87

Source: Office of Development Commissioner, Dahtj SEZ, Ahmedabad.

160
 Graph 4.5: Distribution of SEZ Exports across States in 2010-11

D is t ^ bcrticn o f S E Z E x p o r ts a c c e s s S t a t e s in 2 0 1 0 - 1 1

i6C o::*

Source: Office of Development Commissioner. Dahej SEZ, Ahmedabad.

Gujarats top position in SEZ exports can be explained with the help of the growing SEZ
export pattern over the last five years. Export growth trend of Gujarat SEZs in the last
five years can be seen in table 4.11 below:

Table 4.11: Export growth of SEZs in Gu jarat

YEAR EXPORT VALUE OF GROWTH RATE

SEZs (rupees in crores)
(in %)

2005-06 3438.65 -

2006-07 6716.16 95

2007-08 14367.77 114

2008-09 24017.00 65

2009-10 114850.00 375

161
2010-11 1,61,087.00 40
Source: Office of Development Commissioner, Dahej SEZ, Ahmedabad.

The above table shows that though the export value has been consistently increasing, the
trend in growth rate of SEZ exports is not the same. Table 4.12 shows the trough and
crest pattern of export growth rate of Gujarat SEZs. It displays the data related to activity
wise exports trend from functioning SEZs over the last two years.

Table 4.12: Activity-wise Exports from Functioning SEZs of Gujarat

Activity Type Proportion 2010 Exports 2011 Exports

Multiproduct 23% 101436.1 146039.3

Engineering 9% 3092.961 392.885

Pharmaceutical 19% 242.63 334.6054

Apparel 8% 48.9832 59.5613

IT/ITES 24% 5.11 27.63

Conventional Energy 17% 0 23.77

Source: Office of Development Commissioner, Da lej SEZ, Ahmedabad.

The above 4.12 shows that multi-product SEZs that form a major portion of functioning
SEZs gave an output of highest level of exports in 2110 and 2011. However, it is a
noticeable fact that IT/1TES SEZs which largest in number gives quite a low output
which is second to the last and apparel SEZs that are lowest is number are better export
performers. This shows the importance of location and thrust area of investment and
government support.
Following table 4.13 shows that Gujarats top position in exports from SEZs is the result
of high investment in appropriate location and sectors.

162
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Os
U ON 00 r1 On cn

201C
O T*
2009
cn 14
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u vi NO
no
o
o s CN <N 00 $
Table 4.13: Zone and Sector-wise Export Performance Trend of Functional SEZs in Gujarat

3 CN xt* GO 't 00 C4
1t
00
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cn CN ^j* CN in r-
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2008-

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163
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 Synefra Baroda

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0.94 14.421 49.815

00
Engineering and Engineering 595.50
Construction SEZ 1
l_____________________

OS
Dahej SEZ Bharuch Multi-product 9683.78 83.57 435.59

Ahmedabad Ahmedabad

oTH
Apparel 54.02 0.30 0.30 0.3532 7.5613
Apparel Park

Euro MultiVision Bkaeliau Non-coaventional

o

o
45.09

T <
174.12
SEZ Energy o

o
s a u /u
r 4

cs
L&T SEZ Baroda 223.35 20 51
ZVL
o

Aqualine SEZ Gandhinagar IT/ITES 117.50

CO
Source: Office of Development Commissioner, Dahej SEZ, Ahmedabad

164
Table 4.13 highlights the fact that most SEZs developed in Gujarat in 2005-06 have
started functioning only since the last two years. One of the sinking points is that huge
investment has been made in Dahej, Mundra Port and Reliance SEZs. Yet, if returns are
compared to the investment made in these SEZs, they percentage is negligible. Further,
investment made in SEZs developed by the Central Government (Kandla SEZ) and State
Government SEZs (Surat Apparel Park, Surat SEZ and Ahmedabad Apparel Park) is
relatively low and yet they have given returns on a more consistent scale. The
contributing factors to return on investment of the above listed zones may be location and
nature of activity including the factor of governance.

4.3.5 Apparel Parks in Gujarat

Textile is an important industrial sector in Gujarat with 14.9 percent share in industrial
production of the State. The Government of India has introduced Textile Modernisation
Fund for the development of textile industry. In this connection, Garment and Apparel
Parks are being developed at Surat, Ahmedabad and other locations. For success of these
parks, trained manpower is developed as critical input under the Industrial Policy 2009.
The State Government has introduced a various schemes for providing assistance to
textile and apparel sector. These provisions include:

(a) 5% interest subsidy in Spinning, Weaving Knitting Apparel and Machine

Carpeting

(b) 6% interest subsidy in Technical Textiles.

(c) Establishment of Centre of Excellence at ATIRA and MANTRA for

providing training in Technical Textiles.

(d) Financial Support to A U RA and MANTRA for training weavers, jobbers

and powerloom owners.

(e) Sdpend to trainees in all 5 Powerloom service centres in Gujarat.

(f) Assistance for Technology acquisition and upgradation

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 (g) Assistance to Apparel Training Institutions and Trainees.

(h) Scheme for setting up of Textile and Apparel Parks any where in the State
on PPP mode.

Considering the employability in readymade garments, Apparel Park Operator Training

Programme have been started .with Modem Technology, at 25 ITIs with a 1270 seating
capacity. Training is being imparted at National Institute of Fashion Technology (NIPT),
Gandhinagar.

Following section gives a detailed study of Surat Apparel Park and Ahmedabad Apparel
Park.

4.3.5.1 Surat Apparel Park

Surat Apparel Park is located at Vanj village, Choryasi taluka of Surat District in Gujarat.
The developer company is Gujarat Industrial Development Corporation (GEDC). It legal
status is notified - functional.

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Graph 4.6: Surat District Map
uUlfM
n et M p
PAKISTAN

kMAN S t A

SURAT
Gujarat

MAHARASTRA
To B h u i a v il

Source: http://www.scribd.eom/doc/50705042/8/Ahmedabad-Apparel-Park
accessed on 17 January 2012

It fulfills the mandate of SEZ ACT 2005 of having road, rail, air and port connectivity. It
also fulfills the requirement of providing the infrastructure facility that includes internal
roads, power, water and drainage system. Apart from these, being an apparel
manufacturing SEZ, it has provision for Apparel Training Centre which is established by
ALT training college. Other infrastructure facilities provided by SAP includes
development of land, street lights, fire safety arrangements, facilities in non-processing

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areas, administration building, parking zone and other common facilities in processing
area. It is a sector specific SEZ for apparel and covers an area of 56 hectors. In this SEZ,
all kind of apparel manufacturing industries are permitted. The following table 4.14 gives
the details of operating unit-holders in SAP - SEZ developed by GIDC in Surat.

Table 4.14: SEZ Units: Surat Apparel Park, Surat

Sr. Name of Party Register &

Plot No & Address Product
No. Administrative Office
Plot no : 61,Surat Plot No. A-Z 15-17 Readymade
Apparel Park, SEZ, Sardar Patel Road, Garments
M/s Ginza
1 Village Vanz, Taluka Udhna Udyog
Industries Ltd.
Choryashi, Sachin, nagar,Udna.
DistSurat
M/s Plot no : 56,Surat 21 A - Nannibai Readymade
Benchmark Apparel Park, SEZ, Estate, Naupada,LBS Garments
2 Clothing P.Ltd Village Vanz, Taluka Marg, Kurla (W),
Choryashi, Sachin, Mumbai - 70.
DistSurat Plot No. 53
Plot no : 5 & 6,Surat Gopal Bhavan 5 th Readymade
Apparel Park, SEZ, Floor 199 Princes Garments for
M/s Banswara
3 Village Vanz, Taluka Street Mumbai 400 men
Syntex
Choryashi, Sachin, 002
DistSurat
Plot no : 25,Surat Readymade
Apparel Park, SEZ, J.R.House, opp. Garments for
M/s J.R.
4 Village Vanz, Taluka Abhishek Market children
Fashions
Choryashi, Sachin, Ring Road, Surat
DistSurat
M/s Sarthak Plot no : 35 & 509,510 Jeevandeep Readymade
5
Creation 43,Surat Apparel Complex, Opp. Garments for

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 Park, SEZ, Village J.KTower, Ring Road, women
Vanz, Taluka Surat
Choryashi, Sachin,
DistSurat
M/s.Milan 62,Surat Apparel Readymade
Apparel Park, SEZ, Village Garments for
508, Siddique Society,
6 Exports Vanz, Taluka women
Abajan Patia, Surat
Pvt.Ltd Choryashi, Sachin,
DistSurat
M/S.P.K. Plot no : 58,Surat Y.A. Chunawala Ind . Readymade
International Apparel Park, SEZ, Estate, Andheri (E), Garments for
7 Village Vanz, Teluka Mumbai 400 059 women
Choryashi, Sachin,
Dist. Surat
Plot no : 70,Surat 30, Gaurav Co.op. Ind. Readymade
Apparel Park, SEZ, Estate, Bail bazar kale Garments for
M/s.Page-3
8 Village Vanz, Taluka marg, kurla children
Fashions
Choryashi, Sachin, (W),Mumbai.
DistSurat
Source: Surat Apparel 5ark, Sachin, Surat

4.3.S.2 Ahmedabad Apparel Park

Ahmedabad Apparel Park is located near Khokhra Bridge of Ahmedabad District in

Gujarat in the total area of 38 hectares. The developer company is Gujarat Industrial
Development Corporation (GIDC). It legal status is notified.

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Graph 4.7: Ahmedabad District Map

PAKISTAN

ASIAN SKA

AHMEDABAD To M e h s a n a
(O s s tn c t H e a d q u a r t e r )
G u ja ra t MEHSANA

To H im a in o g a r
( D i s t r ic t H e a d q u a r t e r ) t h r u
Ga n d h i N'S*'
QANOHI MAGAR

SURENORANAGAR
To S u ro n d ra n a g a r
( D is t r ic t H a d q u .a r t B * )

T o K ite d a
KHEDA

B H AVNA O A R

Source: http://www.scribd.eom/doc/50705042/8/Ahmedabad-Apparel-Park
accessed on 17 January 2012

Ahmedabad Apparel Park (AAP) fulfills the mandate of SEZ ACT 2005 of having road
(it is 8 km from National Highway (NH8)), rail (Ahmedabad broad Gauge is the nearest
rail head), air (it is 10km from Ahmedabad International Airport) and port (it is 320 km
from Hazira Port, 500km: Kandla Port) connectivity. Since it is still at the notified state
and yet to be declared functional, its infrastructure development is of Phase - I only. Its

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available infrastructure in Phase - 1 includes internal roads, power argumentation, water
supply and drainage system. It also has a provision for Apparel Training Centre which is
established by ALT training college. Other infrastructure facilities provided by AAP
includes development of land, four and two - lane RCC roads with adequate street-
lighting, paved footpath and underground RCC drains, fire safety arrangements,
uninterrupted water and power availability, Common Facility Center in processing and
non-processing area, administration building, training center, bank, office spaces,
restaurants, conference room and a parking zone. In this SEZ, all kind of apparel
manufacturing industries are permitted. There are 19 units approved for functioning m
Phase - 1 and plot availability is ready for Phase - II. The following table 4.15 gives the
details of operating unit-holders m AAP - SEZ developed by GIDC in Ahmedabad.

Table 4.15 SEZ Units: Ahmedabad Apparel Park, Ahmedabad

Sr. Name of Register & Administrative

Plot No & Address Product
No. Party Office
Prithvi Hi- Apparel Park(SEZ), 192, Top Floor, New
Tex Pvt. GIDC, Khokhra,, Cloth Market, O/S Raipur
1 Lungi
Ltd. AHMEDABAD 380 008. Gate, Ahmedabad
Gujarat, India
Artex Artex Apparels 50 Artex Apparels 50
Apparels Apparel Park(SEZ), Apparel Park(SEZ), Denim
2 Pvt. Ltd. GIDC, Khokhra,, GIDC, Khokhra,, garments
AHMEDABAD 380 008. AHMEDABAD 380 008. for children
Gujarat, India Gujarat, India
Source: Ahmedabad Apparel Park, Ahmedabad

On the basis of the description of pokey and current status of SEZs in India and Gujarat,
it can be concluded that the SEZ ACT 2005 has tried and made all provisions to prove the
SEZ model to be successful in India.

In Gujarat 15 SEZs already functional and further development is going on. Rs. 78,000
crore of investment has already been made and employment generated is about 80000

171
persons. The contribution of SEZs in enhancing exports and creating employment has
been substantial so far and is expected to multiply mamfold in the next four to five years
when the upcoming SEZs and new units therein become fully functional and operational.
18 SEZs that are notified in Gujarat are in various stages of implementation and expected
to be operational in next one to two year. Major multi-product SEZs like Dahej SEZ,
Sterling SEZ, Mundra Port and Sector Specific SEZs like Zydus, Synefra, Euro
Multivision and IT SEZs are expected to contribute substantially to exports in times to
come.

However, the basic fact is that SEZs are beneficial only in certain ways but are not
capable of attracting all exporter in an export business market. This may be because of
the following loop-holes in advantages of the SEZ model:

(a) Single window clearance and hassle-free documentation (with technology

inclusion, online registration, online exports documentation and transaction
procedures even the domestic exporters have a hassle-free environment at the
click of the button.)

(b) Zero duty on imports of raw material (is an advantage only if the raw material (or
raw-material of the same quality) is not available in the domestic market

(c) Tax holidays of 10 years (is beneficial when the unit-holder starts making profit)

Further informal discussions with several SEZ unitholders and apparel exporters outside
SEZ have revealed the following facts:

i. A domestic exporter is happier in business as compared to SEZ exporter. This

may not be true in case of all SEZs. It differs and depends from industry to
industry.

ii. Significantly, apparel is the second largest retail category in India. It accounts for
about 10 per cent of the US$ 37 billion Indian retail market, and with the
continuing boom in consumer demand is estimated to grow at the rate of 12-15
per cent annually. Thus, as far as the textile SEZs are concerned, their survival is

172
 conditional rather than smooth. This is because though SEZ package comes with a
list of benefits to its unit-holders, these advantages are quite conditional and not-
so-great as compared to domestic exporters.

Thus, the SEZ model can be successful only if there can be drawn a stark difference
between the benefits of being an SEZ unit exporter. Otherwise, there would be no (or
hardly any) incentive to establish a unit in a textile park and the efforts of the government
to boost exports through SEZs may completely fail.

' These include, arms and ammunition, explosives and allied items of defence equipment, defence aircraft
and warships; Atomic substances; Narcotics and psychotropic substances and hazardous chemicals;
distillation and brewing of alcoholic drinks, and cigarettes, cigars and manufactured tobacco substitutes)

However, FDI upto 100% is allowed in these services subject to the condition that such companies would
divest 26% of their equity in favour of Indian public m 5 years, if these companies are listed in other parts
of world. Besides, proposals for FDI beyond 49% shall be considered by FIPB on case to case basis

173