Export Processing Zone (EPZ) in India

India was a pioneer in recognizing the potential of Export Processing Zones (EPZs) as a tool for promoting exports. In 1965, Asia’s first EPZ was established in Kandla, and seven more zones were subsequently created. However, these EPZs faced challenges in effectively boosting exports due to factors such as excessive controls, clearance delays, infrastructure limitations, and an unstable fiscal regime.

Key Facts

  1. Establishment: India was one of the first countries in Asia to recognize the effectiveness of the EPZ model in promoting exports. The first EPZ in Asia was set up in Kandla in 1965, and seven more zones were established thereafter.
  2. Transformation into SEZ: The EPZs in India were not able to effectively promote exports due to various factors such as controls, clearances, infrastructure limitations, and an unstable fiscal regime. To address these shortcomings, the Special Economic Zones (SEZs) Policy was introduced in April 2000, which aimed to make SEZs an engine for economic growth with quality infrastructure and attractive fiscal incentives.
  3. SEZ Features: The SEZ scheme in India offers several features and incentives to promote investment and exports, including:
    • Designated duty-free enclaves treated as foreign territory for trade operations and duties.
    • No license required for imports.
    • Manufacturing or service activities allowed.
    • SEZ units required to be positive net foreign exchange earners within three years.
    • Domestic sales subject to full customs duty and import policy.
    • Freedom for subcontracting.
    • No routine examination by customs authorities of export/import cargo.
  4. Conversion of EPZs: All the eight EPZs in India, located in Kandla, Surat, Santa Cruz, Cochin, Chennai, Visakhapatnam, Falta, and Noida, have been converted into Special Economic Zones.

Transformation into Special Economic Zones (SEZs)

To address these challenges and enhance the effectiveness of EPZs, the Indian government introduced the Special Economic Zones (SEZs) Policy in April 2000. This policy aimed to transform EPZs into engines of economic growth by providing quality infrastructure and attractive fiscal incentives. The SEZ scheme offers several features and incentives to promote investment and exports, including:

  • Designated duty-free enclaves treated as foreign territory for trade operations and duties.
  • No license required for imports.
  • Manufacturing or service activities allowed.
  • SEZ units required to be positive net foreign exchange earners within three years.
  • Domestic sales subject to full customs duty and import policy.
  • Freedom for subcontracting.
  • No routine examination by customs authorities of export/import cargo.

Conversion of EPZs into SEZs

All eight EPZs in India, located in Kandla, Surat, Santa Cruz, Cochin, Chennai, Visakhapatnam, Falta, and Noida, have been converted into Special Economic Zones. This conversion reflects the government’s commitment to creating a more conducive environment for investment and export growth.

Conclusion

The establishment of EPZs and their subsequent transformation into SEZs have been significant steps taken by the Indian government to promote economic growth and boost exports. By offering a range of incentives and features, SEZs aim to attract investment, generate employment, and enhance India’s competitiveness in the global market.

References:

  1. Unacademy. (n.d.). Full Form of EPZ. Retrieved from https://unacademy.com/content/full-forms/full-form-of-epz/
  2. Press Information Bureau, Government of India. (2022, December 16). IT companies at STPI, SEZs export software worth Rs 11.59 lakh crore in 2021-22. Retrieved from https://pib.gov.in/newsite/erelcontent.aspx?relid=51797
  3. Wikipedia. (2023, January 19). List of special economic zones in India. Retrieved from https://en.wikipedia.org/wiki/List_of_special_economic_zones_in_India

FAQs

What is an EPZ?

An Export Processing Zone (EPZ) is a designated duty-free enclave within a country where businesses can import raw materials and components, manufacture or assemble products, and export them without paying customs duties.

When was the first EPZ established in India?

The first EPZ in India was established in Kandla in 1965.

Why were EPZs converted into SEZs in India?

EPZs in India faced challenges in effectively promoting exports due to factors such as excessive controls, clearance delays, infrastructure limitations, and an unstable fiscal regime. The conversion to SEZs aimed to address these challenges and create a more conducive environment for investment and export growth.

What are the key features and incentives offered by SEZs in India?

SEZs in India offer several features and incentives to promote investment and exports, including:

  • Designated duty-free enclaves treated as foreign territory for trade operations and duties.
  • No license required for imports.
  • Manufacturing or service activities allowed.
  • SEZ units required to be positive net foreign exchange earners within three years.
  • Domestic sales subject to full customs duty and import policy.
  • Freedom for subcontracting.
  • No routine examination by customs authorities of export/import cargo.

How many EPZs were there in India, and what happened to them?

There were eight EPZs in India, located in Kandla, Surat, Santa Cruz, Cochin, Chennai, Visakhapatnam, Falta, and Noida. All of these EPZs have been converted into Special Economic Zones (SEZs).

What is the difference between an EPZ and an SEZ?

EPZs are specifically designed to promote exports, while SEZs have a broader focus on economic growth and development. SEZs offer a wider range of incentives and features compared to EPZs, and they can be used for both export-oriented and domestic-oriented activities.

What are the benefits of setting up a business in an SEZ in India?

Setting up a business in an SEZ in India offers several benefits, including:

  • Tax and duty exemptions.
  • Simplified regulatory procedures.
  • Access to world-class infrastructure.
  • Availability of skilled labor.
  • Proximity to markets.

What are some examples of successful SEZs in India?

Some examples of successful SEZs in India include:

  • Kandla SEZ.
  • Surat SEZ.
  • Cochin SEZ.
  • Chennai SEZ.
  • Visakhapatnam SEZ.

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