SEZzling Reliance

On June 19th, the Chairman of Reliance Industries announced a Rs 250 billion mega deal buying 25000 acres of land from the Haryana Government. If this was not big enough, we are expecting two massive SEZs across 14,000 hectares in Navi Mumbai and Maha Mumbai in collaboration with the Mahrashtra Government.
An SEZ, or a Special Economic Zone, is like a foreign territory within a country. An SEZ is governed by a special set of rules to facilitate foreign direct investment for export-oriented production. SEZs are free trade zones and customs authorities do not supervise them.
These zones are typically marked by minimum bureaucracy, best infrastructure, generous tax holidays, unlimited duty free imports of raw, intermediate and final goods as well as capital goods. Basically, governments look to SEZs to overcome difficulties in bureaucracy and fiscal measures.

Advantage to units located in a SEZ

• 100 per cent FDI allowed through automatic approval
• Sales to hinterland of India permitted with incentives on achieving positive net foreign exchange
• Sub-contracting allowed to units in domestic tariff zone
• "Public utility" status to in-zone units preventing flash strikes by workers
• 15-year income-tax exemption on export profits
• Imports exempted from customs duty and local taxes
• Freedom to retain foreign exchange earnings

Incentives to developers and co-developers

• Generation, transmission and distribution of power in SEZ allowed
• Full freedom to allocate developed plots in SEZ on commercial basis
• Income-tax exemption for a block of any 10 years in 15 years at the option of the developer
• Exemption from service tax
• Developer can import without payment of duty for the development, operation and maintenance of SEZ

Incentives to developers in the state

• Developers exempt from stamp duty and registration fees
Developers can sell surplus electricity outside the SEZ zone; also permitted to distribute other utilities like water, gas, telecom within the zone
Developers to be declared the "Special Planning Authority" for planning, and the "Township Authority" for the development, management operations and maintenance of the SEZ

On the face value, the concept seems to be a great one. We can surely repeat the success story of rival global locations like Dubai's Jebel Ali, or Malaysia's Bandar Nusajaya Industrial Park, or even SEZs in China. But is the Government loosing more in lurch for more lucre? Only time will tell...