Nishanth Naidu Vadduri

RCG School of Infrastructure Design and Management

Indian Institute of Technology Kharagpur

Development of SEZ and case study of Visakhapatnam Special

Economic Zone

Back groud
Liberalization of trade in goods and services, new integrated transport networks, information and
communication technology developments have created unique opportunities for trade and
transport industry. Export processing zones (EPZs) are an international phenomenon influencing
increasing share of trade flows and employing a number of workers. India was one of the first in
Asia to recognize the effectiveness of the EPZ model in promoting exports, with Asia’s first EPZ
set up in Kandla in 1965. 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 to attract larger foreign investments in India, the Special Economic Zones
(SEZs) Policy was announced in April 2000.

Need for Study

SEZs when operational are expected to offer high quality infrastructure facilities and support
services, besides allowing for the duty free import of capital goods and raw materials. However,
as SEZs have developed, several issues have arisen that need to be addressed to unleash this
potential. Lack of enough land required for setting up huge units and lack of clarity over the
labour laws in a SEZ are turning big entrepreneurs away from these SEZs. SEZs lack social
infrastructure. Even though, on paper, SEZ legislation calls for a single-window clearance
system, in practice, multiple clearances are required. There are other issues and irritants like
bureaucratic devices, computation of fiscal benefits, and jurisdiction of other entities over SEZs,
basis of user charges for infrastructure services, etc.With a large number of special economic
zones (SEZ) set to come up within the next few years across the country, the urban development
ministry has expressed concerns regarding urban planning nightmares that may arise in the form
of unplanned new townships on the periphery of these SEZs. “Infrastructure is the main
determinant of SEZ success.” In light of this the study is been taken up to study the
development of SEZs and identify various issues and their impacts.

Objective and Scope

To identify various infrastructure issues in the development of special economic Zones and
assess impacts. The scope is restricted to Special Economic Zones in Andhra Pradesh region.
SEZ Concept
SEZs, the new engines for export led economic growth, is defined as: “Specifically delineated
duty-free enclave and shall be deemed to be foreign territory for the purposes of trade
operations and duties and tariffs”
The objectives behind setting up of SEZs are Generation of additional economic activity,
Promotion of investment from domestic and foreign sources, creation of employment and
development of infrastructure facilities.
SEZs have contributed to the growth and development of the Indian economy in terms of
exports, employment and investments. It is the key growth driver of nation’s economy and has
made the country globally competitive. There are 73 SEZs in Andhra Pradesh, covering an area
of approximately 27,722 hectares. Andhra Pradesh owns one functional SEZ, Visakhapatnam
SEZ, covering an area of 536.54 hectares.

Findings from the Literature Case studies:

The success of the SEZs attributes to the following factors.
• Strategic Location
• Multi modal connectivity
• Bigger size and multiple productivity
• Provision of infrastructure facilities in processing as well as in non processing area(Social
Infrastructure)
• Liberal Economic policies and incentive packages
• Proper planning and management
• Administrative framework
• Flexible Labour laws
• Export performance and Total investments
The issues have been identified based on the above factors and these issues were studied for the
VSEZ

Identified Issues for the study

Based on the literature case studies the issues have been classified in to 7 major issues.
�Physical Issues: Location and Accessibility, Size of SEZ, Connectivity, Industry Focus and
Infrastructure Facilities in processing Area
�Social Issues: Infrastructure facilities in non processing area(Social Infrastructure),
employment, quality of life of workers, Labour laws and regulations
�Economical Issues: Export/Import Performance, industry growth and investment
�Environmental Issues: Environment Regulations, Provisions to protect
environment(environmental Infrastructure)
�Spatial Issues: Socio-economic characteristics of the city, Growth of the city, Land use
pattern
Governmental Issues: Policy framework, Administrative set up and Fiscal Incentives
�Planning and Construction Issues: Planning of infrastructure facilities, Land use, Policy
issues, Environmental considerations.

Data Analysis
The data based on identified issues were gathered through two questionnaires. The first
questionnaire was for the industries which mainly included the physical, Economical,
Governmental and Environmental Issues. The second questionnaire was for SEZ employees
which was mainly focused on the quality of life and working conditions of the employees in the
SEZ.
Physical Issues
�Mode of Transportation for Import/Export
Road and port are the two modes used maximum for import and export. Though the Gangavaram
port is nearby the zone, the industries prefer Visakhapatnam port for import and export. Because
of the lower draught (12.5 m) it cannot accommodate large vessels and Gangavaram port is not
in full operation.
�Physical Infrastructure facilities
There is a no scarcity of water supply. So the units have to purchase water from VSEZ and
payment will be done as per the usage which is measured by the standard water meter. Garment
and chemical industries are facing maximum price due to excess water supply. Existing drainage
system is poor which needs to be upgraded. Non trade effluent waste is discharged through the
drainage. There is no separate drainage for chemical industries. The satisfaction level of power
and telecommunication is very high, for transportation it is high but utilities it is bad.

Social issues
�Social Infrastructure facilities
The Visakhapatnam SEZ lacks in providing social infrastructure. The housing colony is not
provided either for the administration staff nor for the employees. There is no provision of other
social infrastructure such as hospitals, schools, commercial facilities within the zone. The
satisfaction level for social facilities is average.
�Employment Generation
There is an increase in the employment after 2002 which is one of the successes of the VSEZ.
Out of total, 40 to 45% is the female employment. Engineering units give maximum employment
to skilled and semi skilled workers. These units also provide good training facilities for the
workers.
�Primary Survey of Workers
The workers are classified in three categories namely skilled, semi skilled and unskilled. The
survey results show that semi skilled and unskilled workers are predominant in all types of
industries. The maximum workers are of age more than 30. No child labour is engaged in any of
the industries.
�Working conditions
Mostly the workers are working hours are 6 to 10 hours a day. Unskilled and semi skilled
workers are paid on daily basis as per working hours. One of the adverse problems that the
workers are facing is frequent unavailability transportation. The wages are given as per the
Minimum Wage Act. The working condition in SEZ is an indicator to assess social impact on the
lives of workers. For maximum workers, the working conditions are average. Majority of the
workers are satisfied with what they have in terms of salary as they are paid as per their work but
there are no infrastructure facilities for them.
Spatial Issues
VSEZ contributes to the largest share of factory employment in the district of Visakhapatnam.
The Zone plays a catalyst role in the socio-economic development of this region. Two towns
(Duvvada and Gajuvaka) are affected by the floating population because of development of
Ganagvaram Port and Visakhapatnam Special Economic Zone. There is a lack of social
infrastructure such as schools, colleges, hospitals in the Duvvada town because of which lot of
people have moved towards Gajuvaka. Duvvada region is not fit for cultivation as
Visakhapatnam region falls under coastal zone. Only 2% land is used for agricultural purpose.
VSEZ has maximum industrial area which covers almost more than 70%, which according to
new guidelines should be 50% for SEZs having area more than 100 hectors. Not much land is
provided for social infrastructure.

Environmental Issues
There is no common effluent treatment plant in the zone. So all the units dispose of the waste
and scrap in the dumping yard and then it is transported for further process. All the units have
approval of APPCB and the type of waste and pollutants that each industries produces are within
APPCB limit.

Governmental Issues
VSEZ administration offers an export friendly environment through simplified procedures to
provide a single window clearance system Though there is a facility of single window clearance
from the central and state level approvals, 55% of the industries are facing problems regarding
single window clearance. There are long delays in decisions by the officials at the time of pre
establishment services

Planning of Infrastructure facilities

The infrastructure in the Visakhapatnam SEZ area has been provided keeping the various
planning principles of sustainability, resource conservation and to provide state-of-the art
infrastructure.
�Drainage: No proper drainage facilities are provided.
�Water: Abundant and good quality water is made available from a nearby reservoir. Besides,
adequate alternate arrangements have also been made for supply of ground water. The charges
are Rs.40/- per KL.
�Power: A dedicated 132/33 KV sub-station. The tariff for power is as per the rates prescribed
by the A.P. Transco from time to time..
�Telecommunication: The Department of Telecommunications will be requested to provide
with a 200MB-bandwidth connection with connections using fiber-optic cables.
�Social infrastructure: This is provided to serve the population at different level, viz. at the
City Level, Zonal level and the Layout Plan Level. In the present case, Social Infrastructure is to
be provided to serve a population of 3,00,000 at City Level; for 1,00,000 population at the Zonal
Plan Level and 15,000 population at the Layout Plan Level..
Economical Analysis
The Export of the VSEZ has been consistently increasing in a very less amount. So puss up to be
done by the administration either by publicity or marketing or encouraging domestic players

Impact Analysis of VSEZ

VSEZ is responsible for three major success factors Employment Generation and employment
for females, Revenue Generation for Government and earning foreign exchange. Land,
labours and raw materials are easily available because of the Strategic location of VSEZ. It also
has multimodal connectivity so there is convenient transportation of goods and services. The
multiple industries have more investment. The administration is export friendly which have
increased the opportunities of investment. The Zone doesn’t provide adequate infrastructure
facilities and it lacks in providing social infrastructure. Environment monitoring is also very poor
which has lead to environment degradation in the surrounding region. Environmental regional
planning is such that it unlikely pose any threat to the ecological sensitive area. There is
protection of environment by provision of wind breaks, water recycling and STP, CETP and
green shelters at required locations. Efficiencies of operations would be improved and there are
chances of more investment because of sufficient supply of physical infrastructure facilities. The
social infrastructure and townships would give better quality of life and living standards to the
employees. The only negative impact that the Mundra SEZ possesses is large size that needs
acquisition of large piece of land. The land acquisition and land leveling process may change the
hydrology pattern and drainage and may create pollution during process of land clearing.

Recommendations
Impact at local level is more than at regional level. But this impact can be kept under control by
improving in zone infrastructure, developing social amenities and providing proper
environmental management systems.
• Certain guidelines should be prepared for collection and disposal of the waste.
• There is a foremost need to develop a secure landfill site in zone for disposal of scrap.
• There is no green belt in Visakhapatnam special economic zone as of now; 30 m will be kept
for green belt on all sides of zone as per the guidelines.
• Development of SEZs needs to be integrated with existing Master Plans and Regional Plans.
There is need to develop regional/sub regional plan around the SEZ areas. Here, State Town and
Country Planning/Urban Development Authority should play a key role.