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 Special Economic Zone (SEZ) is a specially delineated duty free enclave. SEZs are to be set up in different parts to the country with a view to providing an internationally competitive and hassle free environment for export production. SEZs will be permitted to be set up in the public, private, joint sector or by the State Government with a minimum size of not less than 100 hectares. These units may be for manufacturing, trading or service activity. Package of incentives announced so far include exemption from industrial licensing for manufacture of items reserved for SSIs and removal of Sectorial ceilings on Foreign Direct Investment (FDI) in SEZ units. It is deemed to be foreign territory for the purposes of trade operations and duties and tariffs.

Features of Special Economic Zones are as follows :

1. A duty free enclave has been created which is treated as foreign territory for trade operations.

2. Units can be set up for manufacturing trading and service activities.

3. Units are exempted from routine examination of import and export of cargo by customs.

4. Units should be a positive foreign exchange earner in three years.

5. Sale in domestic market is permitted on payment of duty.

6. Duty free goods are allowed to be utilized within the approval period of 5 years.

7. Subcontracting of production is allowed.