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Establishment Procedure

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Special Economic Zone

Special Economic Zone is a geographical region having liberal economic laws which functions as a Free Trade and Warehousing Zone for manufacturing goods and rendering services. It aims at providing an internationally competitive hassle free environment for exports and increasing foreign investment by giving tax and business incentives to the Developers / Units in Special Economic Zones.

PROCEDURE FOR SETTING UP A SPECIAL ECONOMIC ZONE:

A Special Economic Zone may be established by the Central or State Government, or any other person in the public, private or joint sectors.

APPLICATION PROCEDURE:

1. For a person: A person who wishes to set up a Special Economic Zone needs to first identify the area and then make a proposal to the concerned State Government for setting it up.
Such a proposal can also be directly made to the Board of Approval, constituted by the Central Government, in accordance with the Special Economic Zones Act, 2005. In such a case, upon receiving the Board’s approval, the person concerned needs to obtain the concurrence of the State Government within 6 months from the date of such approval.
2. For a State Government: A State Government intending to set up a Special Economic Zone needs to make a proposal directly to the Board of Approval, after identifying the area.
3. For the Central Government: The Central Government can, on its own, set up and notify the Special Economic Zone after identifying the area and consulting the State Government concerned. It does not need to make a proposal to the Board of Approval.

You can download an Application Form for setting up a Special Economic Zone (Form A) from: www.mepz.gov.in/content/downloads/APPLICATION%20FORM%20FOR%20SEZ%20DEVELOPERS.doc

The Second Amendment (dated 16.03.2007) to the SEZ Rules, 2006 has brought about the following Amendments to Form-A: Amendments to Form-A.

PROCESSING OF THE PROPOSAL:

1. By the State Government: The State Government upon receiving a proposal for setting up a Special Economic Zone forwards the same to the Board of Approval within 45 days along with its recommendations.
2. By the Board of Approval: The Board of Approval upon receiving a proposal for setting up a Special Economic Zone may either approve it subject to certain terms and conditions, modify or reject it.
The Board may insist compliance with the following requirements, as prescribed by the Central Government, for establishment of a Special Economic Zone:

  • the minimum area of land and other terms and conditions subject to which the Board shall approve, modify or reject any proposal received by it for setting up a Special Economic Zone.
  • the obligations and entitlements of the Developer as well as the terms and conditions under which he shall carry out the authorized operations.
The proposal, if approved without modifications, shall be communicated by the Board to the Central Government.

If the proposal is approved with modifications, the Board shall communicate the modifications to the person or the State Government concerned. Once the person or the State Government concerned accepts the modifications, the approved proposal shall be communicated by the Board to the Central Government.

If the Board rejects the proposal, it shall record the reasons for such rejection and communicate the rejection to the Central Government. The Central Government shall then communicate the rejection to the person or the State Government concerned.

3. By the Central Government: The Central Government, upon receiving the communication of approval of the proposal by the Board, shall, within 30 days, grant a letter of approval to the Developer who may be the person or the State Government concerned. The letter of approval shall be on such terms, conditions, obligations, and entitlements as may be approved by the Board and may also contain additional conditions laid down by the Board.

In a Special Economic Zone, more than one developer may be approved by the Central Government if one Developer does not possess the prescribed minimum area of contiguous land for setting up a Special Economic Zone.

REQUIREMENTS TO BE MET:

1. Minimum Area of Land prescribed for different classes of Special Economic Zones:
The following is a list of the nature of a Special Economic Zone activity and the minimum area of land prescribed for it by the Special Economic Zones Rules, 2006:

Special Economic Zone Activity Area Prescribed
1. SEZ for Multi-product Contiguous area of 1,000 hectares
  • SEZ to be set up in Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu & Kashmir, Goa or in a Union Territory
200 hectares or more
  • For developing Processing Area
At least 35% of the area – which may be relaxed up to 25% by the Central Government on recommendation of the Board for the reasons to be recorded in writing.
2. SEZ for a specific sector or for one or More services or in a port or Airport Contiguous Area of 100 hectares or more
  • Exclusively for electronics hardware and software, including information technology enabled services
10 hectares or more with a minimum built-up processing area of 1,00,000 square metres
  • Exclusively for bio-technology, non-conventional energy, including solar energy equipments / cell, or gem and jewellery sectors
10 hectares or more with a minimum built-up area as under:
  1. Exclusively for bio-technology and non-conventional energy production and manufacturing
40,000 square metres
  1. Exclusively for the gem and jewellery sector
 50,000 square metres
SEZ for a specific sector to be set up in Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, Manipur, Tripura, Himachal Pradesh, Uttaranchal, Sikkim, Jammu & Kashmir, Goa or in a Union Territory 50 hectares or more for the SEZs not covered under activities exclusively for electronics hardware and software, including information technology enabled services; and activities exclusively for bio-technology, non-conventional energy, including solar energy equipments / cell, or gem and jewellery sectors
For developing processing area at least 50% of the area
3. SEZ for Free Trade and Warehousing 40 hectares or more with a built-up area of not less than 1,00,000 square metres
  • In a stand alone Free Trade and Warehousing Zones
at least 50% of the area for developing processing area
  • Free Trade and Warehousing Zones
may also be set up as part of a SEZ for Multi-products
  • Free Trade and Warehousing Zone may be Located in a Special Economic Zone for a specific sector
permitted with no minimum area requirement, subject to the condition that the maximum area of such Free Trade and Warehousing Zone shall not exceed 20% of the processing area.

2. Requirements of the land under acquisition:

The area of land acquired by the Developer must fulfill the following requirements:

  • The legal possession and irrevocable rights to develop the said area as a Special Economic Zone shall vest with the Developer;
  • The area shall be free from all encumbrances;
  • If the Developer has a leasehold right over the identified area, the lease shall be for a period not less than 20 years;
  • The identified area shall be contiguous and vacant, having no public thoroughfare.

VALIDITY OF THE LETTER OF APPROVAL:

The letter of approval granted by the Central Government has a validity of 3 years which may be extended for a period not exceeding 2 years if the Developer’s request for such an extension satisfies the Board.

SUBMISSION OF PARTICULARS OF THE IDENTIFIED AREA:

After being granted the letter of approval, the Developer shall submit the exact particulars of the identified area to the Central Government. Such particulars shall include proofs regarding the fulfillment of the requirements of the land under acquisition, as mentioned above. Such proofs may be in the form of a certificate from the concerned State Government or its authorized agency.

NOTIFICATION OF SPECIAL ECONOMIC ZONE BY CENTRAL GOVERNMENT:

The Central Government, after being satisfied that all the requirements have been met, shall notify the specifically identified area in the State as a Special Economic Zone. It may also subsequently notify any additional area to be included in the Special Economic Zone previously notified. The Central Government before notifying an area as a Special Economic Zone shall ensure that setting up a Special Economic Zone in such an area will:

  • generate additional economic activity;
  • promote exports of goods and services;
  • promote investment from domestic and foreign sources;
  • create employment opportunities;
  • develop infrastructure facilities; and
  • maintain the sovereignty and integrity of India, the security of the State and friendly relations with foreign States.

APPROVAL FOR AUTHORIZED OPERATIONS:

The Developer is required to submit to the Board, the details of operations which would be undertaken in the Special Economic Zone. The Board may authorize the Developer to undertake such operations in a Special Economic Zone as authorized by the Central Government.

DEMARCATION OF AREAS FALLING WITHIN A SPECIAL ECONOMIC ZONE:

The Central Government or any other authority specified by it can demarcate the areas falling within a Special Economic Zone into the following:

1. Processing Area: This refers to an area for setting up Units for activities relating to manufacture of goods or rendering services.
2. Storage Area: This area is for exclusive trading or warehousing purposes.
3. Non-processing Areas: This area is for all other activities not specified above.

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