A Special Zone

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I visited the Noida Special Economic Zone (NSEZ) yesterday expecting to see something, well, special. 'Disappointed' may be a mild word to describe the experience.

It did not start that way though. When I was stopped by security guards at the main gate for an id proof and the 'Plot number', the special-ness quotient went a few notches higher. Beyond those gates of black polished granite, I imagined a neat, world class industrial park, packed with enterprises that were busy producing and exporting things destined for the global markets.

Inside NSEZ, I just wanted to go to the telephone office (BSNL) to return a dysfunctional modem. So the guards directed me to a less special Gate-II. "Here a Rs.10 pass",  the guards there said, "Roam around as much as you like till midnight!".

Once inside, it did not take long for me to realize that even though there was a lot of area to roam around, there was nothing much to see. Wide and poorly maintained roads, shabby gardens, nondescript buildings and stray dogs lolling about in open garbage heaps. At the BSNL office, the guard was asleep on a wooden bed; a dusty, discarded microwave transmitter lay near the stairwell. Most of the office rooms were empty.

As my luck would have it, the only BSNL employee in the building was right one to take back my modem. He tried his best to dissuade me. "The speeds will improve! I guarantee!". When I insisted on withdrawing the broadband connection, he changed tack and conceded that the government enterprise had been neglecting the 'last mile'. Optic fibers had been laid till the exchanges but due to internal tussles and vested interests there were just not enough staff to service customers in Noida.

Outside the BSNL office, driving around a bit more, I realized that there was an extra-special zone within this 300 acre area, considered to be outside 'customs jurisdiction of India'. All the swanky new buildings were clustered close to the main gate.  Most of these were software companies like TechMahindra, iGate and Mosaic ITES. The service sector was obviously the flavor of the season. All the rest seemed well past their glory years.

The glory years' must have ended with the tax breaks. In India, the Special Economic Zones were first created in the late 1980s and early 1990s with the hope of repeating China's success with SEZs. Noida's NSEZ came up in 1985 and was one of the seven established by the central government. It was also the only one which was both landlocked and the only one located in North India. Companies that invested here were beyond the reach of India's convoluted labor laws and they enjoyed tax-breaks for 15-20 years.

How are the SEZs doing? My superficial view of NSEZ may have quite uninspiring, but, on the whole, they seems to be rocking. In 2004-05 they contributed 10% of India exports. Five year's later, in 2009 this share went up to 20% of total exports. 

Yet, there was no doubt that NSEZ could be managed much more efficiently. If only the government would create an incentive structure to reward professionalism, all the way from the level of the guards and BSNL employees, to the bureaucrats sipping chai in their air-conditioned offices!

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LINKS & REFERENCES

SEZ 

- http://www.nsez.gov.in/nsezwebsite/SezDevloper.aspx

- Google Maps -- https://maps.google.com/maps/ms?msid=202036517216705407893.0004b11f9c0b2060cbba5&msa=0&ll=28.538815,77.398531&spn=0.002757,0.004823

- The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006

- List of operational SEZs -- http://sezindia.nic.in/writereaddata/pdf/ListofoperationalSEZs.pdf

- 172 SEZs under the SEZA 2005: 19 established before this Act; Noida SEZ (2003) is among the seven established by the central govt.

- Noida SEZ came up in 1985, then came Vizag SEZ in 1989. The next set came only ten years' later (Kandla, SEEPZ Mumbai, Kochi and Surat in 2000)

- share of SEZ units / Export Oriented Units (EOUs) in the national exports has gone up from 10 percent in 2004-05 to about 22 percent in 2008-09. 

- Under the scheme, a SEZ Unit can be set up in any of the seven Government SEZs (erstwhile Export Processing Zones) while EOUs can be set up outside SEZ across the country as per territorial jurisdiction of concerned Development Commissioner.

* NSEZ - Noida -- http://www.nsez.gov.in/nsezwebsite/AboutUs.aspx

- NSEZ the only Central Government SEZ in the northern India, headed by the Development Commissioner, was set up in 1985 in Noida Phase-II on a 310 acre plot of land. 

- Government of India has so far invested a sum of Rs. 1177 million on its development. NSEZ provides excellent infrastructure, supportive services and sector specific facilities for the thrust areas of exports like gem and jewellery and electronics software. 

- This is the only land locked SEZ , contrary to other zones which are situated in Port Towns and hence emphasis of type of units to be set up are those with high value and low volume.

- jewellery and software development units -- These two sectors have contributed more than 30 per cent of the export turn over during the year 2008-09.

- jurisdiction of Noida Special Economic Zone is spread over EOUs in nine states namely Jammu & Kashmir, Himachal Pradesh, Punjab, Haryana, Rajasthan, Delhi, Uttar Pradesh, Uttaranchal and Union Territory of Chandigarh.

* Chapter VI: Special Fiscal Provisions for SEZs -- exemption from any duty of customs and excise

> Customs Act, 1962 or the Custom Tariff Act, 1975

> Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 

> service tax under Chapter-V of the Finance Act, 1994

> securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 

> Central Sales Tax Act, 1956 (fos goods other than newspapers!)

> Income-tax Act, 1961 (subject to a few modifications in Sch-II)

- deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations, so as to encourage - 

(a) generation of additional economic activity 

(b) promotion of exports of goods and services; 

(c) promotion of investment from domestic and foreign 

sources; 

(d) creation of employment opportunities; 

(e) development of infrastructure facilities;