SEZ policy reforms: India appoints 17-member committee to draft SEZ 2.0 roadmap

The Centre has formed a 17-member committee to propose wide policy changes for special economic zones, or SEZs, an official said. The panel is expected to deliver a concept paper, roadmap, or draft amendments within six months. The work aims to shape an "SEZ 2.0\" policy. The group will also consider how SEZ rules fit India’s current trade setting.

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The review follows recent Budget steps meant to ease domestic sales by SEZ manufacturers. The Budget announced a one-time option for eligible units to sell into the Domestic Tariff Area at concessional import duty rates. The measure comes with quantitative limits. It addresses concerns over unused capacity linked to global trade disruptions and weaker external demand.

SEZ policy reforms and Budget duty relief

In her Budget speech, Finance Minister Nirmala Sitharaman said that to address concerns arising about utilisation of capacities by manufacturing units in the SEZs due to global trade disruptions, I propose, as a special one-time measure, to facilitate sales by eligible manufacturing units in SEZs to the DTA at concessional rates of duty.

SEZ units had sought easier domestic sales for a long time. Many units reported surplus output during global uncertainty. High Indian import duties also affected labour-intensive sectors. Under the current system, goods moving from SEZ units into the domestic market face high import duties. Officials said trade conditions have shifted since the SEZ law began in 2005.

SEZ policy reforms committee scope and export schemes

The committee will run a background study on aligning export support programmes. It will look at SEZs, export-oriented units, and MOOWR. It will also study Advance Authorisation, EPCG, and Duty Free Import Authorisation. The aim is to reduce overlaps and limit policy distortions across schemes that support exports and manufacturing.

The panel will review the Special Economic Zones Act, 2005, and judge how well it works now. It will consider global trade, investment trends, and India’s macro-economic conditions. The terms also cover how SEZ rules align with other export schemes. The committee will check whether mismatches create distortions, and how those can be corrected.

SEZ policy reforms on incentives, compliance and investment

The group will study recent and planned SEZ changes and their effects. This includes rules on Domestic Tariff Area sales, fiscal and non-fiscal incentives, and compliance. It will also examine operational flexibility offered to units. The assessment will cover exports, investment, employment, and ease of doing business across different SEZ activities.

It will also measure how SEZs attract domestic and foreign investment. The review will cover manufacturing, services, and technology up-gradation. It will consider value addition and job creation, including for MSMEs. The committee will also identify hurdles faced by developers and units, including customs, taxation, infrastructure gaps, and coordination issues.

The committee will review the revenue impact of SEZs and related reforms. It will examine foregone duties and taxes and compare costs with benefits. Outcomes will be assessed in exports, investment, and overall economic activity. It will also study global SEZ and free trade zone models. The panel will seek inputs from Centre, states, developers, exporters, and industry bodies.

The committee includes members from commerce, customs, Niti Aayog, and DPIIT. It also has representatives from CBIC and the Directorate General of Export Promotion. The export promotion council for SEZs is included. Two development commissioners and the Department of Economic Affairs are also part of the group. The panel must propose short, medium, and long-term changes with timelines.

SEZ exports rose 7.37 per cent to USD 172.27 billion in 2024-25. India has 276 operational SEZs with 6,279 units. The government expects the committee’s report within six months. Its recommendations are intended to guide a broader SEZ 2.0 framework. The work will cover legal, procedural, and policy steps, including possible changes to the Act and Rules.

With inputs from PTI