Concept Note on Special Economic Zone

Structure of the Presentation

Part A : Part B : Part C : Part D : Part E : Part F : Part G : SEZs Physical Concept Formats for SEZs in India SEZ Institutional Framework Developer Operations in SEZs SEZ Approval Procedure Fiscal Provisions for SEZ Units IL&FS Association in SEZs and Scope

Special Economic Zone Physical Concept

Notified Area of SEZ
Boundary Wall of specified construction 2.4 m height above plinth level, including 0.6 m high barbed wire fencing Entry / Exit Point(s) The DC of the SEZ responsible for demarcating processing / nonprocessing areas

Processing Area

FTWZ Non-Processing Area IFSC

Developer may allot the land in the nonprocessing area for business and social purposes such as: Educational institutions Hospitals Hotels Recreation and entertainment facilities Residential and business complexes DTA units not allowed to set up

Facilities such as Free Trade & Warehousing Zones, International Financial Services Centre may be approved for establishment within the Processing Area

Land / built-up space in the processing area to be leased: To entrepreneurs holding valid letters of approval, with lease period co-terminus with LOA For facilities for exclusive use of the Units such as canteens, public telephone booths, first aid centres, creches, etc. To a person desiring to create infrastructure facilities for use by prospective Units

The Formats for Special Economic Zones in India

Special Economic Zone for Multi-Product
Minimum size = 1,000 hectares Contiguous area required; fulfillment of this to be determined case to case by the Board of Approval on merits Minimum size of processing area = 25%

Special Economic Zone for Multi-Product, in Special States

Minimum size = 200 hectares Contiguous area required Minimum size of processing area = 25%

Special Economic Zone for Multi-Services

Minimum size = 100 hectares Contiguous area required Minimum size of processing area = 25%

The Formats for Special Economic Zones in India

Special Economic Zone for Specific Sector
Minimum size = 100 hectares Contiguous area required Minimum size of processing area = 50%

Special Economic Zone in port / airport

Minimum size = 100 hectares Contiguous area required Minimum size of processing area = 50%

Special Economic Zone for Specific Sector in Special States

Minimum size = 50 hectares Contiguous area required Minimum size of processing area = 50%

The Formats for Special Economic Zones in India

Special Economic Zone for IT, Biotech, Nonconventional Energy or Gems & Jewellery
Minimum size = 10 hectares Contiguous area required Minimum size of processing area = 50% Minimum built-up space (for IT SEZ) = 100,000 sq.m.

Special Economic Zone for Free Trade & Warehousing

Minimum size = 40 hectares Contiguous area required Minimum built-up space of 100,000 sq.m. May be set up as part of an SEZ for multi-products May be set up as part of an SEZ for specific sector, with area not exceeding 20% the zone area

International Financial Services Centre

GOI may approve the setting up of up to 1 IFSC in each SEZ Regulations to be framed by the RBI, SEBI, IRDA and other relevant agencies

SEZ Institutional Framework - Overview

Development Commissioner
Grant all local and state level clearances, etc. delegated by the Central / State Government. Monitor such approvals, licenses, registrations, etc. Make town planning regulations

Board of Approval
Approving proposals to set up SEZs Approval of authorized operations in an SEZ FDI Approvals to Developers, Units Approvals for infrastructure provision (through co-developers, etc.)

SEZ Authority Approval Committee

Approve imports of goods and services into the SEZ Approve proposals for establishment of SEZ units Allow foreign collaborations / FDI proposals duly cleared by the Board of Approval Monitor compliance by SEZ Developer, units

Special Economic Zone

Developer
Planned development of SEZ Prepare development plan Demarcate and develop sites Allocate and transfer plots, buildings Regulate the erection of buildings in accordance with the plan Develop, operate, maintain infra Demarcate Zone boundary

Monitoring of infrastructure services & export performance of the SEZ

Proper Officer
Customs administration

Township Authority
May be appointed by the State Government, with powers and functions as may be prescribed

Co-Developer
Provider of infrastructure facilities

Major Authorities
The Board of Approval: The Board shall have the duty to promote and ensure orderly development of the Special Economic Zones.
Constitution Function of the board

Development Commissioner: To ensure speedy development of the Special Economic Zone and promotion of Special exports therefrom
Appointment Function

Approval Committee: Approvals for SEZ Units; approval for importation of goods into the SEZ; monitoring of importation goods utilisation & operations of Developer / Unit
Constitution Function

The SEZ Authority: Duty of Authority to undertake measures for the development, operation and management the of the Special Economic Zone
Constitution Responsibility

The Township Authority: The Municipal Government equivalent

Indicative responsibility domain

State SEZ Act

Developer Operations in SEZ An Introduction

SEZ Developer:
May be the Central Government, a State Government or any other Person Person
In the context of MP, the State Government shall appoint the Developer Developer

The holder of a Letter of Approval for establishment of a SEZ

Co-Developer:
The holder of a Letter of Approval for provision of specific infrastructure facilities and services within a infrastructure Special Economic Zone
Infrastructure facilities include industrial, commercial or social infrastructure or other facilities necessary for the social development of a Special Economic Zone or such other facilities which may be prescribed

Such Letter of Approval to be issued subject to agreement between the Developer and Co-Developer between Co-

Entity:
Special Purpose Vehicle(s) established by the Developer / Co-Developer for the creation of business, Coresidential or recreational facilities in the SEZ The Developer, or Co-Developer as the case may be, required to own at least 26% equity in any Coequity Entity to be created for the discharge of any services as per authorised operations authorised

SEZ Approval - Procedure

Form-A Proposal by Person intending to set up SEZ to the concerned state government Proposal may also be made directly to the Board; after approval by the Board, the person will require to obtain State Government concurrence within a period of 6 months

The state government forwards the proposal along with its recommendations to the Board

Within 45 days; the state government to ensure that requirements of minimum land area, and that exemptions of taxes at state level, delegations of powers to DC as recommended are made available to Developer & units

Approval by Board?

Board may approve proposal with or without modification; or reject proposal In practice, the Board accords in-principle approval pending land acquisition

Form-B

Issuance of Letter of Approval by the Government of India

Within 30 days of receipt of BOA recommendation; LOA will incorporate any additional conditions imposed by the Board in its recommendation LOA validity for 3 years, during which time Developer shall take effective steps to implement the approved proposal

SEZ Notification - Procedure

Developer completes the process of land acquisition Land may be acquired freehold or leasehold; if leasehold, the lease tenure must exceed 20 years Land should be contiguous, vacant and have no public thoroughfare. These conditions may be relaxed on case to case basis

Developer submits to the GOI Exact particulars of land Proof of legal ownership and possession Certificate from state govt. that land is unencumbered Acceptance of LOA terms Notification by the GOI will be guided by the following objectives: Generation of additional economic activity Promotion of exports of goods and services Promotion of investment from domestic and foreign sources Creation of employment opportunities Development of infrastructure facilities Approval Committee notification within a period of 6 months from the date of establishment of the SEZ

GOI notifies the identified area as a Special Economic Zone

GOI appoints DC, constitutes and notifies the Approval Committee

DC demarcates areas within the SEZ as processing / nonprocessing zone

Grant of Approval for Authorised Operations

The Developer submits to the Board details of operations proposed in the SEZ Details may be submitted at the time of seeking approval or thereafter. Exemptions, drawbacks, etc. to be available on the basis of authorised operations only after notification

The Board may authorise the Developer to undertake such operations as the GOI may authorise The Developer submits to DC application, certified list of goods for authorised operations

Certification by Chartered Engineer

The Approval Committee approves import or procurement from DTA of goods and services for authorised operations

Exemptions, drawbacks & benefits available to a Developer are also available to a contractor appointed by the Developer; however, the responsibility for proper utilisation of goods lies with the Developer

The Developer undertakes various steps preparatory to commencement of authorised operations:

Execution of Bond cum LU Application for IEC number CST exemption application Excise Registration application

Fiscal Provisions Relating to SEZ Units

SEZ units may import or procure from the domestic sources, duty-free, all their requirements of capital goods, raw materials, consumables, spare, packing materials, office equipment, DG sets, etc. for development, maintenance and operations Sales to DTA by SEZ units to be treated as import and shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975, where applicable, as leviable on such goods when imported SEZ Units to be entitled to tax exemption on Income Tax for a period of 15 years (5+5+5) years (at 100%, 50% and 50% reinvestment respectively) u/s 10AA of the Income Tax Act

IL&FS Experience in development of SEZs

Mumbai Special Economic Zone (SEZ): IL&FS has been appointed as Financial Advisor, Syndication Manager and Co-Developer by the Maha Mumbai Special Economic Zone. The assignment is completed

Mangalore SEZ Project: Spread over 3300 acres, the Multi Product SEZ is being set up jointly by IL&FS, ONGC, KCCI and KIADB. IL&FS has been appointed as Transaction Advisor to undertake all project development activities including SEZ approvals, Preparation of Project Information Memorandum, Selection of co-developer etc

Gurgaon IT SEZ : Spread over 75 acres, the IT SEZ is being set up by a private developer. IL&FS has been appointed at Project Advisor to undertake all project development activities including SEZ approvals, Preparation of Project Information Memorandum, Selection of co-developer, financial syndication etc

SEZs by Government of Maharashtra : IL&FS has been appointed as Co-partner under PDPP arrangement for development of 4 SEZs in Maharashtra State.

IL&FS Experience in development of SEZs

Expansion of Surat SEZ Project: Surat SEZ is an expansion project and entails the development of land, roads, sewage disposal facilities, electricity distribution and a water supply system. IL&FS has been appointed as Project Advisor. The assignment is completed Handicraft Special Economic Zone: This project is to develop a Product Specific Special Economic Zone for handicrafts, Carpets, Jute and other related product at Gautam Buddha Nagar in NOIDA. Kakinada Special Economic Zone: The project entails development of a Port-based Special Economic Zone at Kakinada in Andhra Pradesh. SEZ at Vishakhapatnam: The project is being developed under PDPP arrangement with Andhra Pradesh Industrial Infrastructure Corporation. The project involves a commercialised infrastructure development project(s) on 3500 acres land in Phase-I Sterling SEZ, Gujarat: The project entails development of a Multi Product SEZ over 8000 acres in Bharuch, Near Vadodara, Gujarat. IL&FS has been retained as Project Development Advisor to carry out entire project development activities

Services by IL&FS in SEZ Development

Project Preparatory Activities
SEZ formal / informal approvals SEZ notification State support assistance Other regulatory & statutory approvals Proposal for government grants (if any)

Project Implementation Structure

Project bundling/ unbundling Project execution and O&M arrangements Financial structuring Development of detailed term sheet Legal assistance, marketing/ organization structure/ strategy

Project Development Activities

Carrying out feasibility study Site connectivity Business plan & financial modeling Risk management framework Strategy for co-developers/ partners

Project Financing
Arranging Financial closure

Project Execution
Engineering & procurement Project management & supervision

Contact Information

Anil Goyal
AVP & Head SEZ Business Group
IL&FS Infrastructure Development Corporation Ltd. IL&FS Financial Center, Bandra Kurla Complex, Bandra (E), Mumbai 400050 Tel : +91-22-2659 3359 +91- 22Fax : +91-22-2653 3038 +91- 22E-mail: Anil.Goyal@ilfsindia.com

Delhi Office
Umesh Soni
Vice President, IL&FS IDC Core 4B, India Habitat Centre, Lodhi Road, New Delhi Tel : +91-11-4179 0200 +91- 11Fax : +91-11-2468 2070 +91- 11E-mail: Umesh.Soni@ilfsindia.com

Kolkata Office
Saibal De
Vice President, IL&FS IDC Constantia, 3rd Floor, 11 Dr. U.N. Brahamchari Street, Kolkata 700 017 Tel: +91-33-2280 7358-63, +91- 337358Fax: +91-33-2283 5003 +91- 33E-mail: Saibal.De@ilfsindia.com Saibal.De@ilfsindia.com