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Special Economic Zones SEZ Establishment Procedure.


A SEZ unit can be set up any where in India after fulfilling the following requirements.

Step by Step Procedure

  1. According to SEZ Act 2005, a Special Economic Zone can be established either jointly or severally by the Central Government, State Government, or any other person involve in the manufacturing of goods. Even a foreign company can also set up SEZ in India.

  2. After identifying the proper area a person wishing to establish a SEZ unit may make a proposal to the State Government

  3. Notwithstanding anything contained in sub-section (2), any person, who intends to set up a Special Economic Zone, may, after identifying the area, at his option, make a proposal directly to the Board for the purpose of setting up the Special Economic Zone:

  4. In case, a State Government intends to set up a Special Economic Zone, it may after choosing the area, forward the proposal directly to the Board of Approval for the purpose of setting up the Special Economic Zone:

  5. Every proposal under sub-sections (2) to (4) shall be made in such form and manner containing such particulars as may be prescribed.

  6. The State Government may, on receipt of the proposal made under sub-section (2), forward the same together with its recommendations to the Board within a fix period as may be prescribed.

  7. Without prejudice to the provisions contained in subsection (8), the Board may, after receipt of the proposal under sub-section (2) to (4), approve the proposal subject to such terms and conditions as it may deem fit to impose, or modify or reject the proposal.

  8. The Central Government may prescribe the following requirement for establishment of a Special Economic Zone, namely:-

    • The minimum area of land and other terms and conditions subject to which the Board shall approve, modify or reject any proposal received by it under sub-section (2) to (4) ; and

    • The terms and conditions, subject to which the Developer shall undertake the authorised operations and his obligations and entitlements.

Provided that different minimum are of land and other terms and conditions referred to in clause (a) may be prescribed by the Central Government for a class or classes of Special Economic Zones.

9. If the Board,-

  • Approves without any modification, the proposal received under sub-section (2) to (4), it shall communicate the same to the Central Government;

  • Approves with modifications the proposal received under sub-section (2) to (4), it shall, communicate such modifications to the person or the State Government concerned and if such modifications have been accepted by such person or the State Government, the Board shall communicate the approval to the Central Government;

  • Rejects the proposal, received under sub-section (2) to (4), it shall record the reasons therefore and communicate the rejection to the Central Government which shall intimate to the State Government or the person concerned.

  1. The Central Government shall, on receipt of communication under clause (a) or clause (b) of sub-section (9), grant, within such time as may be prescribed, a letter of approval on such terms and conditions and obligations and entitlements as may be approved by the Board, to the Developer, being the person or the State Government concerned:

    Provided that the Central Government may, on the basis of approval of the Board, approve more than one Developer in a Special Economic Zone in cases where one Developer does not have in his possession the minimum area of contiguous land, as may be prescribed, for setting up a Special Economic Zone and in such cases, each Developer shall be considered as a Developer in respect of the land in his possession.

  2. Any person who, or a State Government which, intends to provide any infrastructure facilities in the identified area referred to in sub-section (2) to (4), or undertake any authorised operation may, after entering into an agreement with the Developer referred to in sub-section (10), make a proposal for the same to the Board for its approval and the provisions of sub-section (5) and sub-sections (7) to (10) shall, as far as may be, apply to the said proposal made by such person or State Government.
  3. Every person or a State Government referred to in subsection (11), whose proposal has been approved by the Board and who, or which, has been granted letter of approval by the Central Government, shall be considered as a Co-Developer of the Special Economic Zone.
  4. Subject to the provisions of this section and the letter of approval granted to a Developer, the Developer may allocate space or built up area or provide infrastructure services to the approved units in accordance with the agreement entered into by him with the entrepreneurs of such Units.

Documents Submission

Following necessary document are required before making the final proposal for the SEZ units-

  1. 15 copies of the application shall be submitted to the Chief Secretary of the State, which shall indicate:
  2. Name and address of the applicant
  3. Status of the promoter (whether private/public or joint sector/ NRIs or state government)
  4. Project report

The documents for establishment of SEZ shall be submitted with the following details: -

  1. Location of the proposed Zone with details of existing infrastructure and that proposed to be established,
  2. Area of the proposed SEZ and its distance from the nearest Sea Port/Airport/Rail/Road head etc.
  3. Financial details and mode of financing the project and viability of the project.
  4. Details of foreign equity, if any
  5. Whether the zone will allow only certain specific industries or will be a multi-product zone.

State Government Approval

The State Government shall, forward it along with their commitment to the following to the Department of Commerce, Government of India:

  • That the area proposed under Special Economic Zone shall be free from any environmental restrictions;
  • Water, electricity and other services would be provided as required;
  • Full exemption shall be given in electricity duty and tax on sale of electricity for self generated and purchased power;
  • Exemption from State Sales Tax, octroi, mandi tax, turnover tax and taxes, duty, Cess, levies on supply of goods from Domestic Tariff Area to SEZ units;
  • That single point clearances system and minimum inspections requirement under State Laws/Rules would be provided.
  • Generation, transmission and distribution of power shall be allowed within the SEZ;
  • The Zone will be declared as a Public Utility Service under the Industrial Disputes Act;
  • All powers under Industrial Dispute Act, 1947 shall be delegated to Development Commissioner.
    • Section 11(1) of Special Economic Zones Act, 2005 provides that "the Central Government may appoint any of its officers not below the rank of Deputy Secretary to the Government of India as the Development Commissioner of one or more Special Economic Zones"
Government of India after considering the above proposals may grant in-principle approval for setting up of SEZs. The in-principle approval shall be valid for a period of one year. However, this validity period may be extended by the Department of Commerce, as it may thinks fit.

According to Section 3(7) of Special economic Zones Act, 2005, the Board of Approval may accept, modify or reject the proposal depending upon various circumstances. In case of acceptance, approval is valid for a period of 3 years within which time effective steps shall be taken by the developer to implement the project. Although, this time period can be extended the Department of Commerce depending upon various circumstances.

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