The Special Economic Zones Act, 2005

Summary of the Special Economic Zones Act, 2005
Key Provisions
1. Governance & Oversight
• Authority Accountability: - Annual audit by the Comptroller and Auditor-General of India or appointed person, with reports submitted to the Central Government and laid before each House of Parliament.
• Central Government Oversight: - Directions: Authorities must comply with Central Government directions for efficient Act administration (Section 38).
• Reporting: Regular returns, statements, and annual performance reports to the Central Government, with the latter to be laid before Parliament (Section 39).
• Supersession: Central Government may supersede an Authority for non-performance, abuse of power, or non-compliance with directions, with provisions for representation and temporary vesting of powers (Section 40).
2. Establishment & Operational Framework
• SEZ Establishment: - By Central Government, State Government, or any person, jointly or severally (Section 3).
• SEZ Authority: - Constituted by the Central Government for each SEZ (Section 31).
3. Legal & Administrative Provisions
• Public Servant Status: - Members, officers, and employees of Authorities are deemed public servants under the Indian Penal Code (Section 41).
4. Administration & Compliance
• Development Commissioner: - Chief executive of the SEZ Authority, responsible for SEZ administration (Section 32).

Legislative History:

The Special Economic Zones Act, 2005

● Act Title - The Special Economic Zones Act, 2005

● Act Number / Year - 28 of 2005

● Act ID (India Code) - 200528

● Assent Date - June 23, 2005

● Enforcement Date - February 10, 2006

● Nodal Ministry - Ministry of Commerce and Industry

Precedent & Historical Rationale

● Limitations of the Export Processing Zones (EPZ) Model and Exim Policy Regime - India established Asia's first Export Processing Zone (EPZ) at Kandla in 1965, later converting existing EPZs into Special Economic Zones under the Foreign Trade Policy in April 2000. However, these zones operated primarily under administrative circulars and fragmented regulatory orders without an overarching statutory backing. This absence of a dedicated central statute generated legal uncertainties regarding long-term fiscal stability, created multi-agency bureaucratic friction, and discouraged large-scale domestic and foreign private investments in zone infrastructure.

● Dedicated Statutory Architecture for Export Promotion and Single-Window Governance - Formulated to provide a comprehensive, stable statutory framework for the establishment, development, and management of Special Economic Zones for export promotion. The Act designated SEZs as deemed duty-free enclaves outside the customs territory of India, instituted an apex Board of Approval (BoA) and zone-level Approval Committees for single-window clearances, provided statutory tax holidays and duty drawbacks, permitted the establishment of Offshore Banking Units (OBUs) and International Financial Services Centres (IFSCs), and decentralized zone administration through Development Commissioners.

Parliamentary Trajectory & Enactment

● Formulation & Introduction - Drafted by the Ministry of Commerce and Industry to replace executive guidelines with an overarching legislative enactment; introduced as The Special Economic Zones Bill, 2005 by Commerce and Industry Minister Kamal Nath in the Lok Sabha during the Budget Session.

● Parliamentary Passage - Debated and passed by the Lok Sabha on May 10, 2005 (after key official amendments addressing labour provisions were incorporated), and considered and passed by the Rajya Sabha on May 12, 2005.

● President's Assent - Received the assent of the President of India (Dr. A.P.J. Abdul Kalam) on June 23, 2005, and was published in the Gazette of India on the same day.

● Enforcement - Enforced on February 10, 2006.

Sources - Parliamentary Debates (Lok Sabha & Rajya Sabha), Press Information Bureau (PIB Delhi), The Gazette of India, India Code, and the Ministry of Commerce and Industry.