DESCRIPTION OF THE MAIN THEME OF THE PROJECT WORK

JSL LIMITED, KNIC, DANAGADI, JAJPUR, ORISSA

Learning Objectives : 1. Programmed goal, objective & coverage a. Training Objectives.. b. Scope of the Study.. c. Evolution of SEZ. d. Concept of SEZ. e. Description about SEZ. f. Jindal Stainless to develop SEZ in Orissa.

2.1

1PROGRAMMED GOAL, OBJECTIVE & COVERAGE1

The programmed goal was to impart knowledge and skills on the tools and techniques used for identification, selection, preparation and appraisal of projects, their implementation, monitoring, control and evaluation.

2.1...1
1) 2) 3) 4) 5)

The Training Objectives are,

To create awareness and develop appreciation for tools in Special Economic Zone (SEZ) in the development sector of JSL Limited, Jajpur, Orissa. To develop appropriate skills about the Employment Generation provided by SEZ. To know how SEZ attract Foreign Investment. To know about the SEZ gives benefits to the Company by the way of Foreign Exchange Earnings. To know how Technology transforms by SEZ.

13

6) 7)

To know how SEZ raises the level of Economic Activities. To provide proposals for possible future action to pay attention to words financial weakness of the organization.

2.1...2
1) 2) 3) 4) 5)

The Scope / Contents for the workshop were,

Financial & cost Analysis covering reliable financial information about economic resources & obligations of the firm. Estimating financial requirements. Managing Cash flows Identification of the overall strength & weakness of the firm and its Working Capital Management. Liquidity, Solvency & profitability analysis of the Firm.

2.2.

Evolution of SEZ :

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (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 with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes. To instill confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through the establishment of SEZs, a comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments.

14

2.3. 2.4.

The Concept of SEZ :

Minimum Regulatory control Special Fiscal policy Liberal FDI policy A deemed foreign territory

Impact of SEZ :
Quantum jump in exports Increase in manufactured exports Enhanced flow of FDI Technology up-gradation Managerial & technical skills up-gradation

2.5.

Scheme to Develop / Operate / Maintain SEZ:

SEZs developed and managed by

Public Joint Private State Sector

15

2.6.. qDescription

about Special Economic Zone (SEZ) :

16

2.6..I

Agenda :
Introduction Procedure for Setting up SEZ Procedure for Setting up SEZ Unit Offshore Banking Unit IFSC FT&WZ

2.6..2

Some Definitions :

Developer means a person who, or a State Government which, has been granted by the Central Government a letter of approval and includes an Authority and a Co-Developer . ( Section 2(g) of SEZ Act ,2005) Unit means a Unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre( Section 2(zc) of SEZ Act ,2005)

2.6..3

Definition of person :

Person includes An individual, whether resident in India or outside India, A Hindu undivided family, Co-operative society, A company, whether incorporated in India or outside India, A firm, Proprietary concern, or An association of persons or Body of individuals, whether incorporated or not, Local authority and Any agency, office or branch owned or controlled by such individual, Hindu undivided family, co-operative, association, body, authority or company. ( Section 2(v) of SEZ Act, 2005)

17

2.6..4

Setting up SEZ:

Special Economic Zone

18

2.6..5

Procedure for setting up SEZ-Sec 15 :

Any person, who intends to set up a Special Economic Zone, may, after identifying the area make a proposal in Form A to either of the following a)State Government concerned b) Board of Approval 25 Copies of Form A are to be given along with Project report outlining the economic and commercial viability of the project

No application fees

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2.6..6

Suo moto set up of SEZ :

Central Government may:(a) After consulting the State Government concerned; (b) Without referring the proposal for setting up the Special Economic Zone to the Board; and (c) After identifying the area; suo moto set up and notify the Special Economic Zone (Proviso to sub section 4 of section 3 of SEZ Act, 2005)

2.6..7

CRITERIA FOR APPROVALS

SEZ size not to be less than 1000 Hectors. Sector specific SEZ can be set up in lesser area. Local Laws, Rules / Regulations applicable to SEZ and Units. Units to be approved under the SEZ Scheme. At least 25% area in integrated SEZ to be earmarked as processing area.

2.6..8

Flow Chart for Setting up SEZ :

SEZ CAN BE FORMED IN 2 WAYS

By Applying to SG

By Applying to Board of Approval

SG forward the proposal to BOA

BOA Approves the proposal 20

Flow Chart for Setting up SEZ contd..

Central Government shall issue letter of Approval to developer

Central Government shall issue letter of Approval to developer

Developer shall furnish to Central Government information about area

Central Government will notify the area as SEZ

21

2.6..9

Contents of Form A :
Location of SEZ Distance from the nearest Sea Port/Air Port/Rail or Road Details of Lease of Land Proposed investment details Means of financing Equity holdings Details of areas (Processing areas and non-processing area) used for various purposes in SEZ Activities Proposed in Processing and non-processing area Details of employment likely to be generated

2.6..9

Area requirements :

Requirement laid down in Rule 5 in the Special Economic Zones Rules Due consideration given to whether SEZ is
a) Multi-product or sector specific. b) Located in special category states- Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, J&K, Goa or Union territory. c) For special sector- IT, Gems & Jewelery, Bio-tech, Non-conventional energy. Sikkim,

22

2.6..9

Kinds of SEZ :

2.6..9a

Definition of Kinds of SEZ :

SEZ for multi-product means a SEZ where Units may be set up for manufacture of two or more goods in a sector or goods falling in two or more sectors or for trading and warehousing or rendering of two or more services in a sector or rendering of services falling in two or more sectors. (Rule 2(1)(za) of SEZ Rules,2006 ) SEZ for specific sector means a SEZ meant exclusively for one or more products in a sector or one or more services in a sector . ( Rule 2(1)(zb) of SEZ Rules,2006 ) SEZ in a port or airport means a SEZ in an existing port or airport for manufacture of goods in two or more goods in sector or goods falling in two or more sectors or for trading and warehousing or rendering of services;
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(Rule 2(1)(zc) of SEZ Rules,2006 )

2.6..10 Minimum

Contiguous Area Requirement:

Area For specific states/UT Min. Processing Area

Type

Multi-product

1000 hectares

200 hectares

25 % (old) 35% (new) ( may be relaxed to 25% by CG on Board recommendation) 25%

Multi -services

100 hectares

100 hectares

Sector specific

100 hectares

50 hectares

50%

Electronic 10 hectares( and 10 hectares and 50% Hardware and min. built up area min. built up area software of 1 lakh sq.mtrs) of 1 lakh sq.mtrs) Minimum Contiguo us Area Requirement Type Biotechnology/ Nonconventional energy Area 10 hectares (old) 10 hectares( with a min. built up area of 40000 sq.m) (new) For specific states/UT Min. Processing Area

10 hectares (old) 50 % 10 hectares( with a min. built up area of 40000 sq.m) (new) 10 hectares (old) 50 % 10 hectares ( with a min. built up area of 50000 sq.m) (new)

Gems and 10 hectares (old) jewellery 10 hectares( with a sector min. built up area of 50000 sq.m) (new)

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Minimum Contiguous Area Requirement

Type Area For specific states/UT Min. Processing Area

Free Trade 40 hectares and (with 1 Lac square Warehousing meter built up area) Zone Stand alone Free Trade and Warehousing Zone - SEZ for a specific sector No minimum area requirement but subject to max area not exceeding 20% of the processing area

40 hectares 50 %(new) (with 1 Lac square meter built up area)

No minimum area requirement but subject to max area not exceeding 20% of the processing area

25

2.7

Minimum processing area for multi- product shall be at least thirty-five per cent of the area which may be relaxed up to twenty-five per SEZ AMENDMENT cent by the Central RULES,2006 Government on recommendations of the Board for the reasons to be recorded in writing.

2.7..1

SPECIAL SECTOR The area shall be ten hectares or more with a minimum built-up area as under : i. Forty thousand square meters in case of a Special Economic Zone proposed to be set up exclusively for bio-technology and nonconventional energy sectors including solar energy equipments/cells but excluding a Special Economic Zone set up for non-conventional energy production and manufacturing; Fifty thousand square meters in case of a Special Economic Zone proposed to be set up exclusively for the gems and jewellery sector.

ii.

FREE TRADE AND WAREHOUSING ZONES : In a stand alone Free Trade and Warehousing Zone at least fifty per cent of the area shall be earmarked for developing processing area :
26

Provided further that a Free Trade and Warehousing Zone may also be set up as part of a Special Economic Zone for multi-product;

aRule 5A.a
Infrastructure requirements relating to information technology In case of a Special Economic Zone relating to information technology, the following facilities shall be ensured, namely : (a) (b) (c) (d) Twenty-four hours uninterrupted power supply at stable frequency in the zone; Reliable connectivity for uninterrupted and secure data transmission; Provision for central air-conditioning system and A ready to use, furnished plug and pay facility for end users..

aRule 18 (4) g.a

No proposal shall be considered for: The use of any plant or machinery previously used for any purpose in Domestic Tariff Area.(DTA) Area conversion factors

27

2.8

28

 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; and Maintenance of sovereignty and integrity of India, these curity of the
State and friendly relations with foreign States.

2.9 9Specific requirements for SEZ-Rule 5(5)

Before recommending any proposal for setting up of a SEZ, the State Government Endeavor that following are made available in the State to the proposed SEZ and Developer:

a. Exemption from the State and local taxes, levies and duties. b. Exemption from electricity duty or taxes on sale, of self generated or purchased electric power. d. Allow generation, transmission and distribution of power within a SEZ providing water, electricity and such other services. e. Delegation of power to the Development Commissioner under the Industrial Disputes Act, 1947 and other related Acts in relation to the Unit.

29

f. Declaration of the Special Economic Zone as a Public Utility Service under the Industrial Disputes Act, 1947. g. Providing single point clearance system to the Developer and unit under the State Acts and rules.

2.10 9Forms

Useds

A B C

Application for setting up SEZ Format for letter of approval for SEZ developers Format for Letter of approval for providing Infrastructure facilities in SEZ

Bond-cum Legal Undertaking for developers

30

Format for Quarterly and half-yearly report for SEZ developer/co-developer to be furnished to Development commissioner

F G H I J K

Consolidated Application Form Format for letter of approval for Unit Bond-cum Legal Undertaking for SEZ unit Annual Performance report for units Form for Appeal Permanent Identity Card

2.11 Check list for the proposals to be taken up by BOA

a. Name of the Developer. b. Proposed area of the location of the SEZ. c. Status of recommendation of the proposal by the State Government (if available). d. Whether proposal is for formal or in-principle approval? (In case land is in possession of the promoter, it is considered for formal approval) e. Is it a multi-product SEZ? f. If it is a sector specific SEZ, the sector is. g. Whether it meets the area requirements.

31

h. Area of the SEZ (in hectares). i. Whether Form- A has been filed? j. Whether undertaking and affidavit has been submitted? k. Whether project report has been submitted? l. Whether land is owned/leased and is in possession of the Developer? m. Does the proposal meet the area requirements of the Rules? n. Whether the land has existing structures or is vacant? o. Whether the land is contiguous? p. Projected investment in the project. q. Projected exports from the project. r. Projected employment from the project. s. Share capital and Reserves of the Developer Company. t. Source of funds for the project. u. Audited Accounts of the Developer for last 3 years (for all the constituents in case the Developer is a SPV). v. Extent of FDI w. Source of FDI x. Whether provisions contained in the Press Note No. 5 (2005 Series), issued by the Ministry of Commerce and Industry have been followed in respect of Telecom/IT SEZ development?

2.12 aProcessing and Non Processing areas

The areas falling within the Special Economic Zones may be demarcated by the Central Government asA. The processing area for setting up Units for activities, being the manufacture of goods, or rendering services; or

32

B. The area exclusively for trading or warehousing purposes; or

C. The non-processing areas for activities other than those specified under clause (a) or clause (b) ( Section 6 of SEZ Act,2005) The processing area and Free Trade and Warehousing Zone shall be fully secured by boundary wall with specified entry and exit points. Rule 11(2) of SEZ Rules ,2006)

2.13a Usage of Land in SEZ-Rule 11sa

The developer holding land on lease basis shall assign lease hold right to the entrepreneur holding valid Letter of Approval.(Rule 11(6). The lease period shall be co-terminus with the validity of the Letter of Approval. (Rule 11(5). Developer may grant on lease land or built up space, for creating facilities such as canteen, public telephone booths, first aid centres, creche and such other facilities as may be required for the exclusive use of the Unit. .( Proviso to Rule 11(5)) The Developer may allot land in the processing area on lease basis to a person desiring to create infrastructure facilities for use by the prospective Units. (Rule 11(8)) The Developer shall not sell the land in a Special Economic Zone. (Rule 11(9))

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2.14 aSEZ

in INDIAs

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (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 with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes. To instill confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through the establishment of SEZs, a
34

comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments.

2.15 aMain

Objectives of SEZ Act :s

The main objectives of the SEZ Act are:

a. b. c. d. e. 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. It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.

2.16 aEnvironmental

Clearances

35

 Any person who desires to undertake any new project in any part of India or the expansion or modernization of any existing industry or project shall submit an application to the Secretary, Ministry of Environment and Forests, New Delhi. The application will be accompanied by an Environmental Impact Assessment Report, Environment Management Plan. Public hearing is not required in respect of units in SEZ. Only 30 categories of industries proposed to be established in SEZ need to take EIA approval like drugs ,Pesticides , Nuclear power Projects, Petrochemicals, Paper Pulp etc (Environment impact assessment notification S.O.60(E), dated 27/01/1994)

2.17 sIncentives

for Developers of SEZ s

a. Foreign Direct Investment (100%) allowed b. Income Tax benefit 100% in 1st 5 years & 50% in next2 years c. Duty free import/domestic procurement of goods for development, operation and maintenance of SEZs d. Exemption from Service Tax

36

2.18 sSEZ

Unit s

37

2.19

Procedure for establishment of Unit

( if proposal not related to Foreign collaboration and FDI)

38

2.20

Letter of Approval to a Unit- Rule 19(2) and (3)

39

An entrepreneur holding Letter of Approval shall only be entitled to set up a Unit in processing area of the Special Economic Zone or Free Trade and Warehousing Zone, as the case may be.

The Letter of Approval shall specify interalia

(i) (ii) (iii) (iv)

Items of manufacture Particulars of service, trading or warehousing activities Projected annual export for the first five years Projected Net Foreign Exchange earning for the first five years of operations

40

2.21

Validity period of Letter of approval

The Letter of Approval shall be valid for one year within which period the Unit shall commence production or service or trading or Free Trade and Warehousing activity .(Rule 19(4) of SEZ Rules ,2006) Further extension may be granted by the Development Commissioner for valid reasons to be recorded in writing for a further period not exceeding two years upon a request by the entrepreneur.( Proviso to Rule 19(4) of SEZ Rules ,2006) The Development Commissioner may grant further extension of one year subject to the condition that 2/3 rd of activities including construction, relating to the setting up of the Unit is complete and a chartered engineers certificate to this effect is submitted.(Proviso to Rule 19 of SEZ Rules ,2006) The Letter of Approval shall be valid for five years from the date of commencement of production or service activity It shall be construed as a license for all purposes related to authorized operations After the completion of five years from the date of commencement of production, the Development Commissioner may, at the request of the Unit, extend validity of the Letter of Approval for a further period of five years, at a time.(Rule 19(6) of SEZ Rules ,2006)

41

2.22

Foreign Companies in SEZ :

Foreign companies can also set up manufacturing units as their branch operations in the Special Economic Zones in accordance with the provisions of Foreign Exchange Management (Foreign exchange derivatives contracts) Regulations, 2000.

2.23

Some Contents of Project Report :

Overview of the entire project Details of Activities proposed Direct and indirect employment likely to be generated Project cost and means of finance Financial/Technical, etc. tie ups Details of Backward and Forward integrations Details of Past experience Infrastructure: About the Land, Factory premises, Equipment, Office premises Risks associated with Project Implementation schedule

42

2.24

Matters that can be included in applicationRule 17(1)

(a) Setting up of unit in a SEZ. (b) Annual permission for sub-contracting. (c) Allotment of Importer-Exporter Code number. (d) Allotment of land/industrial sheds in the SEZ. (e) Water connection. (f) Registration-cum-Membership Certificate. (g) Small Scale Industries Registration. (h) Registration with Central Pollution Control Board. (i) Power connection. (j) Building approval plan. (k) Sales tax registration. (l) Approval from inspectorate of factories. (m) Pollution control clearance, wherever required. (n) Any other approval as may be required from the State Government.

43

44

45

46

47

2.25

Contents of Form F

Nature of industrial undertaking. Items of manufacture activity/service activity . Investment in Plant and machinery. Import and indigenous requirements of material and other inputs . Infrastructure requirements. Details of Foreign collaboration. Pattern of shareholding . Foreign Exchange Balance sheet for the 5 years. Details of Industrial license or LOI/LOA under SEZ/EOU /STP/EHTP Scheme. Details of sub-contracting in manufacturing operations .

2.26

More Contents of Form F

SEZ.

DD of Rs 5000 in favor of Pay and Accounts Officer of the concerned Project report giving details of activities proposed . Certificate of Incorporation, Articles of Association and Memorandum of .Association in case of Company Partnership deed in case of Partnerships firms. Affidavit. Proof of residence.
48

 Income tax returns and audited Balance sheet for the last three years.

2.27

SEZs-

leading to the growth of labour

intensive manufacturing industry:

Out of the 531 formal approvals given till date, 174 approvals are for sector specific and multi product SEZs for manufacture of Textiles & Apparels, Leather Footwear, Automobile components, Engineering etc.. which would involve labour intensive manufacturing. SEZs are going to lead to creation of employment for large number of unemployed rural youth. Nokia and Flextronics electronics hardware SEZs in Sriperumbudur are already providing employment to 14577 and 1058 persons. Hyderabad Gems SEZ for Jewellery manufacturing in Hyderabad has already employed 2145 persons. majority of whom are from landless families, after providing training to them. They have a projected direct employment for about 2267 persons. Apache SEZ being set up in Andhra Pradesh will employ 20, 000 persons to manufacture 10,00,000 pairs of shoes every month. Current employment in Apache SEZ is 5536 persons. Brandix Apparels, a Sri Lankan FDI project would provide employment to 60,000 workers over a period of 3 years. Even in the services sector, 12.5 million sq meters space is expected in the IT/ITES SEZs which as per the NASSCOM standards translates into 12.5 lakh jobs. It is, therefore, expected that establishment of SEZs would lead to fast growth of labour intensive manufacturing and services in the country.

2.28

Benefits derived from SEZs

Benefit derived from SEZs is evident from the investment, employment, exports and infrastructural developments additionally generated. The benefits derived from multiplier effect of the investments and additional economic activity in the SEZs and the employment generated thus will far outweigh the tax exemptions and the losses on account of land
49

acquisition. Stability in fiscal concession is absolutely essential to ensure credibility of Government intensions.

2.29

Jindal Stainless to develop SEZ in Orissa

Jindal Stainless Steel Ltd has submitted a proposal to the government to develop a SEZ spread over 2,500 acres of land in Jajpur in Orissa. A project will also be developed in the proposed SEZ.

We plan to invest over Rs 10,000 cr in the SEZ. The steel producing capacity of the project will be 1.6 mmt per annum, said R.K Goyal, Director-Commercial of Jindal Stainless Steel.

Along with the SEZ proposal, the company has lined up quite a few initiatives for the coming few months, starting with focussing on the sugar industry.

The company has presented proposals on the standards of raw materials used in the sugar industry and is developing various grades of Chrome-Manganese Austenitic (200 Series) to cater to wider markets.

It has also come up with a new forward integration service across the country. The service center would provide customize products and distribution serives in stainless steel to meet specific requirements of customers in consumer durables and automobile segments among others. The service centers would be set up soon in Mumbai, Chennai and Vadodara shortly.

There is likely to be a special focus on Gujarat since it is emerging as our strongest growth market, said Goyal who added that the turnover from was over Rs 500 crore.

The recent floods in and some parts of are indicators that infrastructure needs to be stronger and anti-corrosive, which would be fulfilled by stainless steel, he said.

50

The company is on an expansion spree at a national and international levels. The production plant at Hisar is all set to get an expanded production capactity to 720,000 MT fromthe earlier capacity of 6,00,000 MT.

This is in addition to the 1.6 million ton integrated steel plant being set up in Orissa and the 60,000 MT stainless steel cold rolling plant in to cater to the South East Asian markets.

A warehouse is being set up in and new offices are also being set up in , , and to consolidate its international presence.

2.30

Consideration of proposals-Rule 18(2)

1) Positive net foreign exchange earning. 2) Availability of space and other infrastructure support applied for is confirmed by the Developer in writing, by way of a provisional offer of space. 3) Applicant undertaking to fulfill the environmental and pollution control norms. 4) Applicant submitting proof of residence. 5) Applicant submitting the Income tax returns, along with annexure of the Proprietor or Partners, or in the case of a company, audited balance sheet for the last three years.

51

2.31

Net Foreign Exchange EarningsRule 53

The Unit shall achieve Positive Net Foreign Exchange to be calculated cumulatively for a period of five years from the commencement of production according to the following formula, namely:-

Positive Net Foreign Exchange = A B >0

2.32

Orissa drops SEZ in Kalinga Nagar

Amidst a nationwide hue and cry over the setting up of special economic zones (SEZs), the Orissa government has decided to drop one of five SEZs in the state that had received formal approval from the Centre. This was announced by Industries Minister Biswabhusan Harichandan while replying to a query in the assembly on the status of SEZs in the state. He informed the House that an SEZ spread over 250 acres for metallurgy-based engineering and downstream industries at Kalinga Nagar in Jajpur district had been dropped "for the time being". Harichandan, however, did not reveal the reason behind the dropping of the SEZ at Kalinga Nagar, which hit the national headlines after an incident of police firing 52

there on January 2, 2006 that claimed the lives of 13 people who were opposing the acquisition of land for industry. "The proposed SEZ area that is temporarily dropped is part of the Kalinga Nagar industrial complex," said an official in the industries department. Though Orissa received 17 proposals for setting up of SEZs in the state, only five had received formal approval and eight others were approved "in principle" by the Centre. Of the five SEZS, four were being developed by the state-run Infrastructure Development Corporation of Orissa while one was given to private sector Jindal Stainless Limited.

53

OFFSHORE BANKING UNIT

54

2.33

Setting up of Offshore Banking Unit-Rule 21

The application for setting up and operation of Offshore Banking Unit in Special Economic Zone shall be made to the Reserve Bank of India in the Form VI prescribed under Banking Regulation (Companies) Rules, 1949 under section 23 of the Banking Regulation Act, 1949. The terms and conditions subject to which an Offshore Banking Unit may be set up and operated in a Special Economic Zone shall be as specified in the Notification number FEMA 71/2002-RB dated 7th September, 2002 by the Reserve Bank of India, as amended from time to time.

2.34

Foreign Exchange Management (Offshore Banking Unit) Regulations, 2002

55

2.35

Scheme for Setting up OBU in SEZ

The parent bank would be required to provide a minimum of US$ 10 million to its OBU. OBUs would be exempt from CRR, SLR . Deposits of OBUs will not be covered by deposit insurance. The OBUs would be required to scrupulously follow "Know Your Customer (KYC)" and other anti-money laundering instructions issued by RBI from time to time. OBUs will be regulated and supervised by RBI through its Exchange Control Department, Department of Banking Operations and Development and Department of Banking Supervision.

56

2.36

IFSC AND FT & WZ

57

The Central Government may approve the setting up of an International Financial Services Centre in a Special Economic Zone and may prescribe the requirements for setting up and operation of such Center: The Central Government shall approve only one International Financial Services Centre in a Special Economic Zone. The Central Government may, subject to such guidelines as may be framed by the Reserve Bank, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and such other concerned authorities, as it deems fit, prescribe the requirements for setting up and the terms and conditions of the operation of Units in an International Financial Services Centre.

Project Report of Sabir Kumar Dash (MBA) on FINANCE

2.37

Free Trade and Warehousing Zones Rule 5(2)

58

Special Economic Zone for Free Trade and Warehousing shall have an area of forty hectares or more with a built up area of not less than one lakh square meters A Free Trade and Warehousing Zones may also be set up as part of a Special Economic Zone for multi-products In a Special Economic Zone for a specific sector,

Free Trade and Warehousing Zone may be permitted with no minimum area requirement but subject to the condition that the maximum area of such Free Trade and Warehousing Zone shall not exceed 20% of the processing area.

Project Report of Sabir Kumar Dash (MBA) on FINANCE

59

60

2.38

List of authorised operations eligible for approval by the Board of Approval

The Board of Approvals in its meeting held on 21st September, 2006 discussed and decided the procedure to be adopted by the Board of Approval while approving infrastructure in the non-processing area of the Special Economic Zones. In this regard, the Central Government has notified a list of authorized operations. This list would be used by the Board of Approval for authorizing operations which only would qualify for exemptions, concessions and drawback.

2.39

Criteria to be followed by the Board for approval of SEZ Developers

Minimum Investment or Net worth of the Promoter Company & all Group companies & Flagship companies as follows a) Sector specific SEZs: Minimum investment of Rs.250 crores or net worth of Rs.50 crores . b) Multi product SEZs: Minimum investment of Rs.1000 crores or net worth of Rs.250 crores . Proposals not meeting the above minimum investment or net worth criteria with enough Approvals. justification for the same, to be considered on merits by the Board of

2.40 No SEZ on prime agriculture Land

The Centre has directed the states that mainly waste and barren land and if necessary single crop agricultural land alone should be acquired for the SEZ. It has been further clarified that if perforce a portion of double-cropped agricultural land has to be acquired to meet the minimum area requirements, the same should not exceed 10% of the total land required for the SEZs.

61

2.41 Special Features of JSL SEZ

First Land Locked SEZ. Skilled manpower available at competitive rate. Close to Technology and other educational institutes of repute. Connected to Super Highway. Facilities available. Overseas Banking Unit . National Banks. Insurance . Handling & Clearing agents. Telecom . Duty free Oil depot. Powers of Labour Commissioner delegated to DC. Public Utility status granted by the Orissa Government. Exemptions given by the Government of Orissa. Payment of Stamp Duty. Payment of Trade Tax. Payment of Entry Tax.

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Summary:

The attraction of the SEZs lies in the extraordinary achievements that they made in the past two decades with a view the experiments in economic reforms are valuable to both China and the world. A Company with SEZ can be able to export & import canalized items freely. No license required for import. The Board of Approval has been constituted by the Central Government in exercise of the powers conferred under the SEZ Act. All the decisions are taken in the Board of Approval by consensus. The Board of Approval has 19 Members. Once an SEZ has been approved by the Board of Approval and Central Government has notified the area of the SEZ, units are allowed to be set up in the SEZ. All the proposals for setting up of units in the SEZ are approved at the Zone level by the Approval Committee consisting of Development Commissioner, Customs Authorities and representatives of State Government.
Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units.

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