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The Special Economic Zones (SEZ) framework in India has evolved significantly since its inception, originally focusing on export-oriented manufacturing. Recently, it has strategically shifted to also accommodate domestic industrial needs, aiming to boost self-reliance and economic growth through targeted policy reforms and incentives.
Provisions of Special Economic Zones (SEZ) Act 2005
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| Aspect | Export-Oriented SEZ Framework (Before) | SEZ Framework Supporting Domestic Needs (Now) |
| Focus | Primarily designed to boost exports by offering tax breaks and duty-free imports for goods destined mainly for foreign markets. | Supports both exports and domestic manufacturing, especially in high-tech sectors like semiconductors and electronics. |
| Domestic Sales | SEZ units were not allowed to sell in the Domestic Tariff Area (DTA), restricting domestic market access. | Amendment to Rule 18 permits domestic sales by SEZ units after duty payment
Eg. Micron’s SEZ in Gujarat plans to supply chips to domestic industries. |
| Minimum Land Requirement | Under Rule 5 , minimum land area was 50 hectares, limiting participation by smaller manufacturers. | Reduced minimum land requirement to 10 hectares, enabling more flexible setups for domestic-focused firms.
Eg. Aequs Group’s SEZ in Hubballi, Karnataka approved on 11.55 hectares for electronics manufacturing. |
| Land Ownership Rules | Required “encumbrance-free” land, barring mortgaged or leased land, slowing approvals and limiting flexibility. | Relaxed land encumbrance rules allow use of mortgaged or leased land, accelerating SEZ development. |
| Investment Focus | SEZs acted as “mini-economies” to attract FDI focused on export earnings, with infrastructure geared towards large export clusters. | Emphasis on supporting self-reliance (Atmanirbhar Bharat), import substitution, and domestic industrial growth in critical sectors. |
| Infrastructure Incentives | Tailored towards large export manufacturing clusters, often overlooking domestic industrial needs. | Infrastructure incentives now accommodate high-tech domestic manufacturing, especially semiconductors and electronics. |
| Policy Alignment | Aligned mainly with export promotion policies, with limited scope for domestic industry support. | Aligned with Semicon India Programme (₹76,000 crore) and national initiatives supporting the local semiconductor ecosystem. |
India’s strategic shift in the SEZ framework signals a new era of balanced growth, fostering both export competitiveness and domestic industrial strength. With continued reforms and investments, India is poised to become a global hub for advanced manufacturing, driving innovation, job creation, and economic resilience in the coming decade.
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June 17, 2025
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