An all-inclusive export zone

Print edition : December 19, 2003

The Santacruz Electronics Export Processing Zone in Mumbai, home to some of the leading software companies of the world, is a major supplier of quality software on a global scale.

IT is not often that a city proudly calls an industrial area one of its landmarks. But that is precisely the status the Maharashtra government has accorded to the Santacruz Electronics Export Processing Zone or SEEPZ, with its wide roads, lush greenery and even a man-made lake. In recognition of the catalytic role electronics technology has played in global development, the government gave the electronics industry top priority in its new industrial policy. A significant expression of this commitment was the establishment in 1974 of an export promotion zone exclusively for electronics at SEEPZ in the heart of Mumbai.

SEEPZ is primarily committed to boosting exports by providing exporters a host of facilities for value-addition to their products. The focus of the zone is on software, an industry that has earned an envious reputation in the past decade. SEEPZ has become home to some of the leading software companies of the world and is now ranked among the major suppliers of quality software on a global scale.

SEEPZ is the second Special Economic Zone (SEZ) in India. (The first one was set up in Kandla, Gujarat.) SEEPZ has access to Mumbai's vast commercial, industrial and social infrastructure with its efficient communication network, competent ancillary base, well-developed financial and credit structure and skilled urban workforce. Despite its location on a small area - 100 acres (40 hectares) leased through the Maharashtra Industrial Development Corporation compared to most new SEZs which are spread over areas as large as 2,400 acres (960 ha) - SEEPZ has made big strides with annual exports totalling Rs.6,400 crores.

Joint Development Commissioner Baldev Singh said that in the coming year the exports were expected to rise to Rs.7,600 crores. Initially SEEPZ functioned as a uni-product export promotion zone, exclusively for the manufacture and export of electronic items. In 1987, the zone was opened to the gem and jewellery sector. At present there are 80 electronic units and 100 jem and jewellery units, together employing more than 45,000 people on a three-shift basis. The gem and jewellery industry was included in view of its high economic potential and non-polluting nature.

One of SEEPZ's biggest attractions is its location: Mumbai's international airport at Sahar is just 6 km away and the dockyards are about 30 km away from the zone. Point-to-point dedicated data communication facilities are available at the zone.

Administrative support in the zone is comprehensive and is in keeping with the unofficial motto of developing a thorough understanding of the entrepreneur's desire to get down to the business of manufacturing and exporting as soon as possible. A specially designed set of procedures to deal swiftly with queries, requests and applications is a pleasant experience to new entrepreneurs. Under the automatic approval scheme, project applications fulfilling the stipulated conditions are approved by the Development Commissioner within 15 days. Applications that fall outside the purview of the scheme are approved by the SEEPZ Board of Approvals within 45 days. The Board is competent to give clearance in respect of industrial approvals and foreign collaborations, among other things. It is a single-window clearance system for export-import-related matters.

The SEEPZ Service Centre houses various public utilities, such as a post-office, a public telex office and banks with ATM facilities. The administration of the zone is under the overall charge of the Development Commissioner and includes the customs and security wings, an investment promotion cell, and the utilities wing. The Development Commissioner is able to help new businesses in getting power and water supplies and communication facilities installed without delay.

Units at the special economic zone are entitled to certain privileges. They are eligible for a tax holiday as per the provision of the Income Tax Act. Duty-free import of capital goods and equipment from preferred sources is allowed. They are exempted from customs duty on imported capital goods, raw materials, components, consumables, spares, tooling and packaging materials. Exemption from excise duty and other levies is also granted on products manufactured within the zone. Furthermore, excise duty exemption on capital goods, raw materials and computers procured from the Domestic Tariff Area is permitted. There are special dispensations and relaxations in local laws and levies, including octroi, sales tax and property tax. Capital goods and all other inputs supplied to the zone from the rest of the country are treated as deemed exports and are eligible for deemed export benefits such as duty drawbacks and terminal excise duty. This enables easy availability of materials at international prices at zero inventory.

The SEEPZ service centre within the zone is a one-stop shop that caters to all the needs of the units. The supportive administrative system helps new firms to get down to production within the shortest possible time, concentrate on export activity and run their operations smoothly. The zone has its own ports of entry with a fully staffed customs wing and simplified procedures in order to ensure speedy clearance of incoming and outgoing consignments. Hence there is no need for the same to be carried out either at the airport or at the docks.

The prime reason for anyone to set up business at SEEPZ is the availability of inexpensive factory space or land. Units set up in the zone are charged rent for lease of industrial plots and standard design factory buildings as per the rate fixed from time to time. A company can lease plots for a period of 30 years at an annual rate of Rs.10 per square metre.

While all interior decorations, wiring and air-conditioning are to be carried out by the entrepreneur, SEEPZ undertakes the responsibility of securing permissions and clearances for construction and the procurement of building supplies. Optionally, pre-constructed standard design factories are available in areas of 500 sq m on a five-year, renewable lease basis, at the annual rate of Rs.1,060 a sq m, plus municipal taxes as per the annual assessment of municipal land service charges. Private bonded warehouses can be set up in the zone for the purpose of import, stocking and sale of goods and for trading, including re-export, after re-packing and labelling. Of particular interest is the fact that precious and semi-precious stones can also be traded through these warehouses.

Uninterrupted power supply, guaranteed by the generating stations of western Maharashtra, is a huge benefit offered to entrepreneurs at SEEPZ. The zone is statutorily exempt from power cuts. The average charge for power consumption is approximately Rs.6.90 a unit. The Government of Maharashtra reimburses the duty on electricity consumed by SEEPZ units involved in production activity.

The zone has an assured supply of 4.55 million litres of water a day (mld), which is charged at the rate of Rs.41 per 1,000 litres.

The most important advantage that attracts software enterprises to the zone is the hi-tech secured lease line that enables these companies to communicate and hold videoconferences with any offshore site or branch around the world. The zone is serviced by an exclusive optical fibre telephone exchange. Foreign equity up to 100 per cent is permissible and the remittance of profits and dividends earned by foreign investors in the zone is allowed after the payment of taxes. Goods manufactured in the zone are permitted to be sold on payment of applicable duties.

The success of SEEPZ is evident in its future plans. Speaking to Frontline, Baldev Singh said, "Vertical expansion with additional FSI (floor space index) will offer opportunities to existing units to modernise, expand and diversify their operations. However, we have no plans to go to any other product line of business other than what is existing."

Further approval for the SEEPZ pattern comes from the plans that the State government has. Elaborating on this, Baldev Singh said, "There is already the sanction to set up an SEZ in Navi Mumbai, which will be developed by CIDCO [City Industrial Development Corporation]. This will be a multi-product zone."

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