EPZS, 100% EOUS, SEZS AND

EXPORT HOUSES AND TRADING

HOUSES
 Export ProcessingZones
 First EPZ- Mayagaez, Puerto Rico-1962

 Kandla, India-1965

 Post II World War- war torn countries- assistance from USA.

 Nations independence- 1950’s- import substitution

 Lead- acute balance of payment problems

 Increased exports met with tariffs

 Compensated by fiscal measures

Export Processing Zone-EPZ

 Industrial estates- housing production/

processing/ consultancy units- exports
 Widening- net foreign exchange earnings
 Situated near seaports or airports
 Products- value-added (VA) component
 Foreign equity allowed up to-100%
 No payment of duty- import-capital goods &
raw materials for export production
Objectives
1. Encourage and generate the economic development
2. To channel the sources of foreign exchange within the system in a phased
manner- (FDI)
3. Foster the establishment and development of industrial enterprises within the
said zones
4. Encourage and generate wider economic activities -zones
5. To explore new areas for the development of Indian exports
6. Encourage establishment and development of Indian industries and business
enterprises and facilitate with proper infrastructure
7. Generate employment opportunity
8. Upgrade labor and management skills
9. Acquire advanced technology for increased productivity
10. Ensure world class quality of products
 EPZs inIndia
1. Kandla Free Trade Zone
(KAFTZ), Kandla, Gujarat

2. Santa Cruz Electronic Export

Processing Zone (SEEPZ), S.
Cruz, Maharashtra

3. Cochin Export Processing Zone

(CEPZ), Cochin, Kerala

4. Falta Export Processing Zone

(FEPZ), Falta,West Bengal

5. Madras Export Processing Zone

(MEPZ), Madras, Tamil Nadu

6. Noida Export Processing Zone

(NEPZ), Noida, Uttar Pradesh

7. Visakhapatnam Export
Processing Zone
(VEPZ), Visakhapatnam, Andhra
Pradesh
 Selection Criteria
Board of Approval favour the proposals which:-
1. Show high % of VA per unit of exports

2. Bring in new / sophisticated technology

3. Involve manufacturing processes which attempt to exclude the assembly of

“semi- knocked-down” units, bulk- breaking activities and repacking and
labeling

4. Provide evidence of technical and marketing arrangement with/ without

foreign equity participation

5. Have a large scale of operation

6. Substantial capital investment and the general standing of the promoter.

 Entrepreneurial quality, pollution possibilities, suitability of the unit to be

located in the zone, assured market possibility of linkages into the DTA are also
considered.
 Incentive Packages
1. Duty- free import of capital goods and equipments from
preferred sources

2. Exemption from customs duties on raw materials,

components and tools

3. Exemption from import licenses

4. Export incentives for locally procured supplies from DTA

5. Blanket foreign exchange sanction for business trips abroad

6. Repatriation of capital up to the extent of the original

investment
7. Repatriation of profits and dividends after the
payment of tax

8. 100% foreign equity participation

9. EPZ Boards act as nodal agencies for clearance

and approval of applications and licenses

10. EPZs have declared public utilities. Trade Union

activities- restricted, minimum wage laws- NA

11. Priority release of cement, steel, telephone and

telex connections
Fiscal Concessions-

1. Tax holiday for 5 years on all corporate profits

2. Exemption from Central excise duties on manufactured items

3. Exemption from Central Sales tax, State sales

tax, Octroi, property taxes, stamp duties on lease of the plots
etc.

4. Credit at preferential rates from Central and State financial

agencies

5. Subsidized rentals and lease rates for built-up sheds, factory

space in standard design factories and industrial plots

6. Exemption from electricity duty

7. Transport subsidy

8. Capital subsidy

9. Packaging credit facilities for a period of 180 days

without production of firm export orders or
letters of credit

10. 25 % of produce for sale in India against a valid

import license

11. Portions of waste, seconds and scrap can be sold

– DTA subject to payment of regular export duties
but without license
 Mortality of Units
Details of units approved, established, cancelled, closed down and working as on 31.03.1988

Name of Approvals Withdrawn Units Units Units

the Zone recorded / cancelled established closed working
after down
approval

KFTZ 679 81 173 44 129

SEEPZ 227 128 97 23 74

NEPZ 73 16 15 - 15

MEPZ 124 37 23 - 23

CEPZ 29 2 3 - 3

FEPZ 41 NA 2 - 2

Source:
 Reasons for HighMortality

1. Failure of marketing arrangements

2. Withdrawal of foreign collaboration
3. Financial and managerial problems
4. Shortage of export orders
5. Obsolete technology on which production is made
6. Stiff international competition
7. Recession in the International market
8. Changes in international economic relations
9. Changes in the Govt. policies of the trading countries
 Foreign Investment Inflow toIndian
EPZs
Year Total foreign Foreign investments
investments in Indian EPZs

1991 351.4 -

1992 675.2 -

1993 1786.0 -

1994 2969.9 -

1995 6393.0 88.72*

*Foreign investments made in Indian EPZs are the aggregate amounts from 1985-86
to 1994-95.
Source:
Reasons for insignificant Inflow of FIs

1. Vast and developed land area for setting up large

industrial units by FIs is not available in the Zones

2. Indian EPZs are not in a position to arrange and

supply the required quantity of electric power to
Fis

3. Environmental and pollution problems

4. Bulk-breaking, repacking and labelling facilities

enjoyed by MNCs in foreign EPZs are not
permitted in Indian EPZs owing to low vale
addition made to the end product.
 100% Export OrientedUnits

 Initiated by GOI in December 1980 to encourage and mobilise

domestic investment- export production

 Industrial unit –offers its entire production for export

 Excludes permitted levels of rejects

 Designed to create additional export capacity

 Was not normally encouraged for products subject to export

control ceilings which can be met by the existing industrial units

 Hence units- acted as mere substitution for existing units’

production- not allowed
Features

1. Required to manufacture in bond

2. Carry an export obligation- 10 years (ordinary

cases)

3. -5 years ( products are open to high degree of

technological changes)

4. Enjoy duty free import

5. Exempt from excise duty if- access to

indigenous sources
100% Export Exempted in case of:-

1. Rejects upto 5%- approved by DC- sold in the

DTA in payment of appropriate duties

2. 25% production- sold in the DTA, if valid license

and payment of duties (except motor vehicles
and liquor)

3. Agriculture and allied units- 50% produce can

be sold in the DTA

4. Electronics hardware products- sold in the DTA

if conditions laid down in the policy fulfilled
Net Effects

 99 units in 1987 took advantage of the

scheme

 Export increased from Rs.104 million (1981-

1982) to Rs.1313 million (1985-1986)

 Second Oil Price Shock, which hampered the

export activities significantly, led the
establishment of a number of Export
Processing Zones to boost the export sector
 Special Economic Zones
 Special Economic Zones (SEZs) Policy was
announced in April 2000

 SEZ Act, 2005, was passed by Parliament in

May, 2005.

 Act supported by SEZ Rules came into effect in 10th

February, 2006

 Drastic simplification of procedures

 Single window clearance – matters relating to

central as well as state governments
 Objectives
1. Generation of additional economic activity

2. Promotion of exports of goods and services

3. Promotion of investments from domestic and foreign sources

4. Creation of employment opportunities

5. Development of infrastructural activities

6. Improvement of business environment on a nation wide bases and

providing competitive platform to the Indian entrepreneur

7. To provide scale related advantages by helping to reduce manufacturing

costs

8. To become the destination of foreign investment and to serve as a

channel for both foreign investment and technology
Operational SEZs inIndia
State Sl.No Units Product
Andhra Pradesh 1. Visakhapatnam SEZ* Multi-product

Gujarat 2. Kandla SEZ* Multi-product

3. Surat SEZ* Multi-product

4. VillageVanj, Distt. Surat, Gujarat Apparel

Kerala 5. Cochin SEZ* Multi-product
Madhya Pradesh 6. Indore SEZ Multi-product
Maharashtra 7. Santa Cruz ElectronicsEPZ-SEZ Electronics, Gemsand
Jewellery
Rajasthan 8. Jaipur SEZ Gems and Jewellery
9. Jodhpur Handicrafts
Tamil Nadu 10. Madras SEZ* Multi-product

11. Mahindra City,Chennai IT, Hardware&

Bioinformatics
12. Mahindra City,Chennai Apparel & fashion accessories
13. Sriperumbudur Telecom equipment/ R&D
and services
14. Mahindra City,Chennai Auto Ancillaries

Uttar Pradesh 15. Noida* SEZ Multi-product

16. Moradabad,UP Multi-product
West Bengal 17. Falta SEZ* Multi-product
18. Manikanchan SEZ Gems and Jewellery
19. Salt Lake Electronic City, Kolkata Software development and IT
enabled services
Administrative Set-up

BOARD OF APPROVAL
(Secretary, Dept of
Commerce)

ZONE ZONE ZONE

(Development (Development (Development
Commissioner – Commissioner – Commissioner –
ex-officio chairperson- AC) ex-officio chairperson- AC) ex-officio chairperson- AC)
 Incentives and Facilities Offered to SEZs
1. Duty free import/domestic procurement of goods for development, operation and maintenance of
SEZ units

2. 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax
Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for
next 5 years.

3. Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

4. External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity
restriction through recognized banking channels.

5. Exemption from Central Sales Tax.

6. Exemption from Service Tax.

7. Single window clearance for Central and State level approvals.

8. Exemption from State sales tax and other levies as extended by the respective State
Governments.
 The major incentives and facilities available to SEZ
developers include:-

1. Exemption from customs/excise duties for development of

SEZs for authorized operations approved by the BOA.

2. Income Tax exemption on income derived from the business

of development of the SEZ in a block of 10 years in 15 years
under Section 80-IAB of the Income Tax Act.

3. Exemption from minimum alternate tax under Section 115 JB

of the Income Tax Act.

4. Exemption from dividend distribution tax under Section 115O

of the Income Tax Act.

5. Exemption from Central Sales Tax (CST).

6. Exemption from Service Tax (Section 7, 26 and Second

Schedule of the SEZ Act).
 Performance of SEZ compared to EPZ

Source:- Malini L Tantri, “Effectiveness of SEZs Over EPZs Structure:

The Performance at Aggregate Level”
Export Houses andTrading Houses

 A company which specialises in the export

of goods made by other manufacturers

 It can be defined as a registered exporter

holding a valid Export House certificate
issued by the Director General of Foreign
Trade.
OBJECTIVE

 To building marketing infrastructure and expertise

required for export promotion.

 To minimise price fluctuations as a result of seasonal

variations in supply and demand

 Arrange for storage, transportation, packaging and

processing

 Assist in marketing of the product

 Assist in getting supplies at reasonable prices

 Act as important instruments of export growth.

Eligibility

 Merchant as well as Manufacturer exporters

 Service providers

 Export Oriented Units (EOUs)

 Units located in Export Processing Zones (EPZs)

 Special Economic Zone(SEZ’s)

 Electronic Hardware Technology Parks (EHTPs)

 Software Technology Parks (STPs)

Criterion forRecognition

Category Average FOB FOB value Average NFE NFE earned

value during during the earnings during the
the preceding preceding made during preceding
three licensing the preceding licensing
licensing year, in three year, in
years, in Rupees licensing Rupees
Rupees (crores) years , in (crores)
(crores) Rupees
(crores)
EXPORT HOUSE 15 22 12 18

TRADING HOUSE 75 112 62 90

STAR TRADING 375 560 312 450

HOUSE

SUPER STAR 1125 1680 937 1350

TRADING HOUSE
Validity Period

 Status Certificate shall be valid for a period of

three years starting from 1st April of the
licensing year during which the application for
the grant of such recognition is made

 On the expiry of such certificate, application

for renewal of status certificate shall be
required to be made within a specified period .

 During the said period, the status holder shall

be eligible to claim the usual facilities and
benefits, except the benefit of a SIL (Special
Import License).
 IN A NUTSHELL
4 stages:
 EPZs were set up starting with the Kandla free
trade zone
 Lots of shortcomings
 Measures taken to check them
 1980- new scheme- EOUs
 Second Oil Price Shock
 Hampered export activities
 More setting up of EOUs and EPZs
 Economic Liberalization and restructuring of
EPZs
 Introduction of SEZs in EXIM policy 1997-2002

Presently most of the EPZs have been transformed into SPZ

 REFERENCES

 V. M. Manoharan, “ Indian Export Processing Zones and CPEZ”, Vikas pulishing

House, New Delhi, Edition-2000

 M. L. Varma, “Foreign Trade Management in India”, Vikas Publishing House

Pvt. Ltd, new Delhi, 1988

 Cherunnilam Francis, “International Trade and Export

Management”, Himalaya Publishing House,2000

 Sumati Varma, “Internatinal Business- Concepts, Environment, Structure and

Strategy”, Ane Books Pvt. Ltd, 2010

 Malini L. Tantri, “Effectiveness of SEZs over EPZs Structure: The Performance

at Aggregate Level” (article)

 Aradhna Aggarwal, “Export Processing Zones In India: Analysis Of The Export

Performance”, Indian Council For Research On International Economic
Relations, Core-6A, 4th Floor, India Habitat Centre, Lodi Road, New Delhi-110
003, November 2004
THANK YOU