New Class Presentation - Sez

Spatial distribution of SEZ’s and its contribution to employment generation

Structure of presentation

1. Aims, Objective, Need of the study, Scope and limitation 2. Identify Employment Backward District In India 3. Kandla SEZ- the Case Study 4. Conclusions and recommendations

Special economic zone-concept

EOU Cluster of EOUs & Bonded Area

EPZ

Trading

FTZ

Integrated Infrastructure

Dry Port & Duty Free Enclave

Free Port

Model Industrial Township Excellent Infrastructure Superior Governance

Special Economic Zone

Facilitative Environment

“Specifically delineated, duty-free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties & tariffs”

Special Economic Zone • • • • • •

Is a specified, delinated, Duty-free geographical region, Different economic laws from that of the country, Attracts Foreign investment, Provides high level of employment, High standard of living.

SEZ Policy Objectives • Creation of employment opportunities, • Promotion of export of goods and services, • Promotion of infrastructure facilities, • Promotion of investment from domestic and foreign sources, • Development of backward regions.

SEZ's – salient features 

Eligibility criteria for Units: Units need to be Net Foreign Exchange (NFE) positive for a block of 5 years to continue operations in the zone.

Benefits in SEZ’s i. Income Tax holiday for a 15 year period (under Section 10AA) – • 100% for the 1st 5 years • 50% for the next 5 years • 50% of the reinvested profits ploughed back into the business for the next 5 years. i. ii. iii. iv.

Exemption from Customs duty goods exported out from a SEZ to any place outside India. Exemption from Excise duty on any goods brought from DTA to a SEZ . Exemption from service tax on taxable services provided to a unit . Exemption from the levy of Central Sales taxes on the sale or purchase of goods (other than newspapers) if such goods are being used to carry out the authorized operations by a developer or unit v. Exemption from Indian stamp duties. vi. Exemption from Customs duty on any goods imported into or services provided in a SEZ. vii. FDI up to 100% allowed, infrastructure providers providing dark fibre, email and Voice mail in the telecom sector.

SEZ's – salient features viii.Sub contracting of operations allowed – to DTA, STP, EHTP units ix. No limit on domestic sales on payment of full custom duties (subject to achieving NFE) x. Facility to realize and repatriate export proceeds within 12 months xi. Profits allowed to be repatriated freely without any dividend balancing requirement xii. Duty free goods to be utilized in 5 years xiii.Re – export of imported goods found defective xiv.Capitalization of import payables Area requirements norms for SEZ’s Type

Minimum Area

Multi- product

1000 hectares

Multi-services

100 hectares

Sector specific - Port or Airport

100 hectares

IT, Gems and Jewellery, bio-tech, non10 hectares( and min. built-up area of 1 lakh sq. mtrs. conventional energy for IT) FTWZ

40 hectares (min. built up area of 1 lakh sq. mtrs.)

The main objectives of the SEZ Act (2006) are: (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

Need of study

Research Question If SEZ policy can yield more equitable regional development and employment for skilled and unskilled persons.

Objectives .

To assess spatial distribution of SEZs across India. To examine the contribution of SEZ in employment generation.

To

draw inferences from case study which could be

taken into consideration while future planning SEZs.

Approach & methodology Regional Level Employment Contributing Factors Population

Literacy Rate

Urbanization

Primary Survey of KASEZ

Key Findings & Way Forward

Density

Sex Ratio

S.T .Percentage

Primary Survey

Marginal Workers

Decadal Growth Rate

Stakeholder Perception

Employment issues

Industries analysis

Summary

Summary of findings of the study and way forward for next stage

Suggestion

Conclusion

Proposal

SEZ's in world Estimates of SEZ’s in world 1975

1986

1995

1997

2003

No. of countries having EPZ's/SEZ’s

25

47

73

93

116

No. of EPZ's/SEZ’s

79

176

500

845

app3000

22.5

42

Employment in EPZ's (million) Source- Aggarwal, ICRIER

Benchmarking of SEZ’s policies

Country

Corporate Tax Tax Customs after Holiday VAT Holiday Tax Period

Philippines China UAE Indonesia Poland Panama Thailand J ordan India

High

Average

Lower

DTA Sales

Repatriatio Foreign Employment n of Ownership & Policies/VISA Capital Investment Permission and Profit

Activity Allowed

SEZ's in china •China’s objective was to open its essentially closed economy and experiment with foreign investment • The geographical area of the SEZ is astronomically large: 1. Shenzen : 327 sq. Km 2. Zhunan : 121 sq km 3. Hainan : 34000 sq km (entire island) 4. Shantou : 234 sq km 5. Xiamen : 131 sq km •Unique locations – of the five SEZs, all are located in backward area.

4 2

1

5

•Large size with government and local authorities providing improved infrastructure with foreign collaboration

3

•SEZs are not just industrial parks. rather, they are entire parts of cities.

Shenzhen in 1982

Shenzhen Today

Evolution of SEZ's in India Policy for growth of export process in India a)Export Processing Zone (EPZ) Policy b)Export-oriented Units (EOU) Policy c)Software Technology Park (STP) Policy d)Export-oriented Hardware Technology Park (EHTP) e)Export Promotion Capital Goods (EPCG) Policy f)Advance Licensing and “deemed” exports Policy g)Free Trade Zone (FTZ) Policy SEZ Growth Timeline I. Initial Phase: 19651985(KASEZ,SEEPZ) II. Expansion Phase: 1985-1991 (Noida, Falta, Cochin, Madras, Vizag) I. Consolidating Phase: 1991-2000 II. Emergence Phase: 2000 Onwards Source- ministry of commerce ,India

Evolution of SEZ's in India Three things are analysed here. 1) Gross EPZ exports registered an impressive growth rate over the period 1966 to 2002 . 2) Gross exports rose much faster than employment in these zones. As a result, exports per employee increased at the annual growth rate of 24% and a trend growth rate of 14.6%. 3) Growth of value addition had not been promising over this period. Average annual growth rate of value addition was as low as 2.9%. Share of EPZ in total export manufactured export & employment Average Annual Growth Rate

Trend Growth Rates

Export

42.4

39.2

Import

39.9

38.8

Value addition

2.9

1.5

Employment

21.2

21.6

Exports/employment 24.3

14.6

Therefore Exports and foreign exchange earnings of Export Processing Zones (EPZ's) , in absolute terms, increased substantially but the value addition remained stagnated.

Evolution of SEZ's in India

6 5 4 3 2

4.2

4.4

4.7

5.1

Growth Rate of Export per Employee

Growth %

Percentage

SEZ Export as %share of indias Export

5

3.9

1 0 200001

200102

200203

200304

200405

200506

50 45 40 35 30 25 20 15 10 5 0

44.2 34.7

33.4

28.9 15.2

13.7 8.7

3.5 19661970

19711975

19761980

Year

19811985

19861990

19911995

19962000

20012003

Time Period

Source- ministry of commerce ,India

Prior to 1990, USSR and other East European countries were the major destination of EPZ exports ,Kandla was almost completely dependent on the USSR markets for exports. Exports to these countries were possible because of the protected export markets offered to the Indian firms under the umbrella of bilateral trade arrangements (Kumar 1989). Sectorwise Export Performance 70 59

60

% Share

50 40 30

Year 1991 27

26

25

10

Year 2006 17

20 9 4

11 5

9 2

6

0 Drugs & Pharma

Textiles

Gems & Jewellery

Engineering Goods

Sectors Cateogary

Electronics

Others

Present status of SEZ's in India Till now there are 234 valid formal approvals and 162 in principle approvals. Out of the formal approvals, 63 SEZs have been notified. Estimates on SEZ’s 234 No. of valid formal approvals: 63 No. of notified SEZs: 171 No. of formal approvals pending notification 162 No. of in-principle approvals: Land requirement: SEZs notified 67 sq km SEZs formally approved 350 sq km In-principle approvals 1400 sq km Total area for proposed SEZs (FA+IP) 1750 sq km At present 63 notified SEZs Investment Rs 13,435 crore Employment 18,457 People Projected (by December 2009) By the 63 notified SEZs Investment Rs 53,561 crore Employment 15,75,452 If 234 formal approvals become operational Investment Rs 3,00,000 crore Employment 4 million additional jobs Source- ministry of commerce ,India

Source- ministry of commerce ,India

•It is estimated that agriculture one acre of land supports four people for nine months while IT SEZ with 2.5 FSI with 1 lakh sqft built-up space spread on one acre can house more than 1000 IT workers which has multiplier effect of 4 times.

Present status of SEZ's in India

N O O F S EZ a p p r o ve d

80 70 60 No of SEZ

50 40 30 20 10 0 1 s tate

A n d h r a Pr a d e s h C h h a tis g a r h Goa G u ja r a t Hary ana H im a c h a l Pr a d e s h Jh a r kh a n d K a r n a ta ka K e r a la M a d h y a Pr a d e s h M a h a r a s h tr a O r is s a Pu n ja b R a ja s th a n T a m il N a d u U tta r Pr a d e s h U tta r a n c h a l W est Bengal C h a n d ig a r h D a m a n & D iu D e lh i Po n d ic h e r r y

Source- ministry of commerce ,India

•Six states Maharastra, Karnataka , Andhra Pradesh , Harayana, TamilNadu, and Gujarat account for more than two third of all the SEZs approved. •These are more developed states and SEZ scheme could end up accentuating the regional skewed development.

Spatial distribution of SEZ's

Methodology for spatial analysis of SEZ’s in India Parameters To Find Employment Backward Districts Of India i. Total Population ii. Percentage of literacy population to total population iii. Sex Ratio iv. Decadal Growth Rate v. Density of population per sq KM vi. Percentage of urban population to total population vii. S.T. population Percentage to total population viii.Marginal Worker Percentage to total workers Steps To Find Employment Backward Districts Of India i. District wise Census figure was compiled for analysis. ii. To find weightage for each parameter standard deviation was calculated for each state up to 3 Standard Deviation. iii. Maximum waightage 5 and minimum 1 was assigned to each district for each parameter based on its correlation with employment generation contribution. iv. Individual Weighted values were summed up to get the rank of that district. Hence higher the rank (EPI) more the backwardness in terms of employment. Finally all rank values were cateogarised in 5 equal intervals and each interval was named as very good (11-16), good (17-21), average (22-26), poor (27-31), very poor (32-36) respectively.

Identification of employment backward districts.......... Population Density

Very High High Average Low Very Low

Identification of employment backward districts Literacy

Very High High Average Low Very Low

Identification of employment backward districts........ Sex ratio

Identification of employment backward districts........ Urbanization

Very High High Average Low Very Low

Identification of employment backward districts.......... Decadal Growth Rate

Very High High Average Low Very Low

Identification of employment backward districts.......... S.T. Percentage

Very Low Low Average High Very High

Identification of employment backward districts.......... Marginal workers

Very Low Low Average High Very High

Spatial distribution of SEZ’s & employment backward regions

Identification of employment backward districts.......... The distribution of backward area in the country may be described in terms of four extensive continuous belts and some small pockets outside these belts. i.

Main contiguous territory of backwardness in the Central Part of India, extending from the Northern (Telengana) district of Andhra Pradesh, Madhya Pradesh, Chhattisgarh, Orissa, eastern and northern districts of West Bengal, Bihar, eastern UP and Central and Western UP districts.

ii. Second stretch of backward areas runs as a contiguous belt in the Himalayan foot hill zone including the districts of Jammu and Kashmir, Himachal Pradesh and the hill districts of UP. iii. Third belt, which is not so continuous, stretches in the west through Rajasthan and Gujarat and is linked with the western Madhya Pradesh districts iv. Fourth Belt extending through the States and Union Territories in the North East Region & Somewhat detached from all these backward area belts are the few scattered pockets.

Spatial distribution of SEZ’s & employment backward regions Now proposed SEZ are superimposed on spatial distribution map of SEZ in India, it is found that most of proposed SEZ’s are around metro cities (Delhi, Mumbai, Ahmedabad, Hyderabad, Bangalore, Chennai, Vizag) which has good industrial base. Delhi Corridor

Ahmedabad Corridor Kolkatta Corridor Vizag Corridor Mumbai- Pune Corridor

Hyderabad Corridor

Bangalore Corridor Chennai Corridor

Case study

Kandla –Regional significance KASEZ was selected for case study because this was only developed SEZ& was established in 1965 . This was Asia's first FTZ/EPZ/SEZ, converted from Free Trade Zone to SEZ & situated in backward areas. Kandla Port Trust Is planning Authority for port area and SRC (Gandhidham-Adipur Area Development Authority) is for Gandhidham and Adipur town.

GANDHIDHAM TALUKA

KANDLA SEZ REGION

STUDY AREA

16 of 42

Kandla SEZ - catchment

2 km:

Kidana village, Ganesh Nagar

5 km:

Antrajal Village, Galpadar village, Gandhidham, IFFCO township, Gandhidham GIDC, Nakti creek

10 km: Kandla port, Adipur, IFFCO unit, Kandla creek, Salt pans

2 km

5 km

10 km

Demography Total Population: 192482 Name of village

Area (Ha)

No. of households

Population

Literates

Total

Male

Female

Male

Female

Galpadar

779.94

715

3518

1780

1738

1004

603 (60%)

MithiRohar

3600.75

923

4960

2577

2383

853

321 (37%)

Kidana

2970.84

940

4699

2416

2283

1097

438 (40%)

Antrajal

964.45

707

3305

1691

1614

955

500 (52%)

Source: District Handbook, 1991 and Census of India 2001

Note: Figure in brackets are sex ratio

Galpadar, Mithi Rohar, Kidana and Antrajal are the four villages which came under the study region (10 km from KASEZ). People from all these four villages work in KASEZ. These villages are affected by the development in Kandla port and Kandla Special Economic Zone. Two urban areas came under this region i.e Gandhidham and Kandla.. Both these towns are affected by the floating population, as these cities are lacking in basic infrastructure.

Population

Gandhidham

Kandla

RATE OF GROWTH -17.4

1991-2001

1981-91

45.3

1981-91

70.2

1971-81

1971-81

58.1

1961-71 20

40

-40

60

87.11

1961-71

46.7 0

33.2

-20

0

20

40

60

80

80

Gandhidham Source: District Handbook, 1991 and Census of India 2001

Kandla

100

Occupation pattern

(Gandhidham Town) workers

Cultivators Agriculture Labourers I Livestock, Fishing and other allied activities V Mining and queering a Manufacturing industries b other household industries I Construction activities II Trade and Commerce III Transportation, Storage and Communications X Other services Source -District Census Handbook, Kachchh 1991

Workers (Kandla N.A,) Majority of 25%,61% Workers respectively Involved in transportation sector, followed by 28%,20% involved in household industries.

Study area profile Literacy %age

80

61.63 53.01 43.41

60 40

43.42 32.4 20.78

64.63 56.53 47.41

64.26 52.75 40.89

73.13 61.29 48.64

20

Literacy Rate Of Study Area is 53% & was same as Kutchh District.

0 Total

R ural

Urban

S tudy Area

K ac hchh distric t

Gujarat state

Total Literacy rate Male Literacy Female Literacy

which was higher than kutchh district (7.8%).

Employmen t

35 30

31.01 29.53

36.28

33.78

% people employed

30.54 30.78

22.56

25 20 15 10

Main workers

40.23

40

7.17

5.12

7.53

5

7.8 3.43

3.79 2.01

% main w orkers in transportation % of main w orkers in construction

0

1317

1400

Number of workers

45

In Study Area work participation was 31% and 29% workers involved in transportation section

1200 1000

1293

928

868

600 400 200

222

Rural Study Area

Urban Kachchh

Gujarat

district

state

Source: District Handbook, 1991 and Census of India 2001

Female

294 149

169

0 Galpadar

Mithi Rohar Village

Total

Male

800

Kidana

Antrajal

Primary survey-KASEZ The KASEZ was inaugurated by the prime minister of India, late shri Lal Bahadur Shastri on march 7,1965. Zone was setup with a objective of earning foreign exchange for the country, developing more employment opportunities in the industrially backward area of kutchh and assisting in the growth of kandla port by generating more cargo . At present KASEZ provide direct employment to 14300 persons and indirect employment to 2500 persons. 1/3 sample was taken for primary survey from each type of industries. S.N.

Sector

No. of Units

% Units NO of Samples

Primary survey was comprises of

% of Samples

a) Industries survey

1Engineering

26

16

9

16

2chemical

25

15

8

15

3Garment

39

23

13

23

4Plastic

31

19

10

19

8

5

3

5

6Trading/service

23

14

8

14

7Miscellaneous

14

8

5

8

166

100

55

100

5Intrazone

TOTAL

b) Labour survey

Primary survey- industries SEZ witnessed a very sluggish growth in the Initial Years due to relatively modest growth in the number of industrial units. Net Foreign Earning has increased over period of time, employment is increased but growth rate was slow comparatively. Source- SEZ authority, Kandla

66.7% of industries has come after year 2000 this clearly shows that industries were established because of govt. incentives. Commencement of Industries 66.7

80.0

70-80

60.0

80-90

40.0 20.0

3.3

20.0

10.0

90-00 After 2000

0.0 1 Year

Source- Primary Survey

Source- Primary Survey

Primary survey- industries Export Preference

Import Preference

33%

33% 67%

67% Foreign

Foreign

DTA

DTA

Industries responded that the 67% of import and Export with international market. Advantage at KASEZ

Su b s id ar y A ct ivity in DT A

17%

33% Yes No

67% Govt.Incentive

83%

Port

Source- Primary Survey

About 83 % entrepreneur responded that they do not have subsidiary activities in DTA which shows that forward & backward linkages was missing in KASEZ.

Primary survey- industries Foreign Investment

17% No Yes

83%

By primary survey it was found that 83% industries don't have foreign investment. This shows that foreign investors were not interested in KASEZ due to its unattractiveness. Other reason can be due to due to custom & regulation administrative hassles.

P o r t f o r Im p o r t a nd E x p o r t

F u t u r e E x p a n s io n

33%

17%

50%

22%

Y es

33%

K a n d la

No

Mun dra

D o n ’t K n o w

A ll 45%

Source- Primary Survey

45% of industrial units use Mundra and Kandla both port for export and import & 22% industries uses other ports including Mumbai port. this was due to inefficiency of kandla port.

50 % of industries don't have future expansion plan, according to SEZ authority 300 acre land is acquired and will be use for upcoming 33 new units.

Primary survey-KASEZ

Primary survey- industries W o r k Pe r fo r m an ce

L o b o u r C a tc h m e n t

0% 33%

17 %

50%

17%

<1 1to 5

Lo cal

5 t o 10

O utsid er

>10

83%

Source- Primary Survey

Approximately 87% of industries had perception that performance of outsider workers was better than local people. From primary survey It was found that 50 % of labours travel from distance of 5 km & 33 % travel from up to 10 km. Therefore primary catchment area of KASEZ was 2 Km, secondary catchment was 5 km & tertiary catchment was 10 Km .

Primary survey- employee

Percentage

M o n th ly Salar y 60 50 40 30 20 10 0

Average salary paid to workers was in range of 4000 to 6000 Rs/month and was comparatively better than workers in other industries

50 <2000 20

20 10

2000 To 4000 4000 To 6000

0

6000 To 10000

58% workers were from outside Gujarat which mean that SEZ didn't have advantage for local workers.

>10000

1 Salar y

Almost 66 % workers are working since 95 onwards. Skilled workers were from Andhra Pradesh, Tamilnadu and unskilled workers were from mostly Bihar & Uttar Pradesh W o r k in g S in ce 80

6 6 .7

Percentage

7 5 To 85

40

25 .0 0

8 .3

8 5 To 95 9 5 To 05

0 1 Ye ar

Percentage

6 5 To 75

60

20

N a t iv e P la c e 8 0 .0 6 0 .0 4 0 .0 2 0 .0 0 .0

5 8 .3 8 .3

2 5 .0

G andhi dham 8 .3

k u tc h h G u ja r a t

1 P la c e

Source- Primary Survey

o u t s id e

Primary survey- employee Working Hours

Inc om e from othe r M e m b e r of Fa m ily

Subsidary Occupation

0%

22%

40 %

44% 6 To 10

yes

10 To 14

no

56%

>6 0 0 0

Housing Rent

40.0

80.0

50.0 20.0

20.0

10.0

20.0

Ow n hous e Rented Staf f Hs g

0.0 1 T yp e o f A cco m o d atio n

Slum

Percentage

Percentage

60.0

40.0

Ar e a of Ho u s e 50

60.0

60.0 20.0 20.0

20.0

500 To 1000

40

1000 To 1500

30

>1500

0.0 1 Monthly Rent

20 0 0 to 40 00 40 0 0 to 60 00

60 %

78%

Ho u s in g Facilitie s

<2 0 0 0

44 33

<500 SQF T 500 To 1000

20

11

11

1000 T o 1500 >1500

10 0 1 A rea in S Q F T

Source- Primary Survey

Since SEZ is public entity so labour laws are flexible in SEZ .But Labours were in better position than other industry outside SEZ. Housing is not provided by any of industries . 50% workers had their own house. About (20%) mostly migrants workers stay in slums .

Inferences from case study

Summary of primary survey in KASEZ

Textile And Engineering Sectors are providing Employment To Maximum Workers. KASEZ had positive impact on woman employment. About 54% workforce were women in KASEZ & out of this 54% labour was local.

Source- Primary Survey analysis

Conclusion & recommendation

Issues from study issues identified through Kandla SEZ might not hold true for every existing and proposed Special Economic Zone. But few issues found are general in nature and hold true for every SEZ. Possible to address these issues. Macro Issues Implication on employment

Implication on urban settlement

Opportunity for workers in urban areas only More employment opportunity in large size SEZ's Employment pattern will change

Migratrion from backward area Burden on city to urban area infrastructure Clean environmental with world class infrastructure Self sustainable town Opportunity for better Displacement environment

Transportation unavailability

Unattaractive for skilled people

growth of slums

Human resources scarcity Tax holiday

Migrant workers NA

Unaffordable housing NA

Waste & scrap disposal Forward & backward linkages

NA Employment generation even outside SEZ

Housing unavailability

Attraction for skiiled/unskilled workers Effect on living condition

Regional disparity

size of SEZ Rehabitation & resettlements

Implication on environment and infrastructure

Strategy

Decentralize SEZ's location Develop SEZ in backward area with stategic location According to land

Micro Issues

NA Economic generation activities

Traffic problem Unhygenic living condition NA Environmental degradation NA Unaffordable housing with high rental

Entrepreneur responsibility SEZ authority maitain demand & supply gap of employee NA Environmental norms for SEZ's Incentives for DTA subsidary unit also SEZ authority must ensure housing availability for employee

Mitigation

Suggested M itigation Scale : M acro/microTarget ( area (employmentTime frame (long Concerned authority policy level, urban generation, regional term, short term, planning level) disparity, infrastructure,immediate) environment) etc. M acro Issues Regional disparity Policy level Size of SEZ Policy level Rehabitation & resettlements Policy level

Regional disparity Employm ent generation Infrastructure

Long term Long term Imm ediate

M inistry of comm erce M inistry of comm erce M inistry of comm erce

Transportation unavailability Micro level Human resources scarcity Urban planning level

Infrastructure Employm ent generation

Imm ediate Long term

Developer/Entrepreneur SEZ authority

Tax holiday Policy level W aste & scrap disposal Micro level Forward & backward linkages Micro level Housing unavailability Micro level

Econom ic growth Environment Employm ent generation Infrastructure

Short Short Short Short

M inistry of comm erce SEZ authority SEZ authority Developer/SEZ authority

M icro Issues

term term term term

Thank you

FOR REFERENCE Spatial distribution of SEZ’s and its contribution to employment generation

Submitted By Basant Soni

Under The Guidance of Prof. Madhu Bharti

Dissertation: 2006-07 F a c u l t y

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( C E P T ) Ahmedabad