The Indian government is exploring targeted relaxations in Special Economic Zone (SEZ) rules to attract investments in emerging high-potential sectors such as green hydrogen, air cargo, maintenance-repair-overhaul (MRO) services and space technology. The move follows recent amendments that made SEZs more accommodating for semiconductor and electronics manufacturing.
Officials suggest that the current SEZ framework may be restructured sector-wise to unlock idle land and infrastructure. The commerce department is assessing specific regulatory hurdles that hinder growth in these sectors and is looking to ease rules through administrative notifications rather than waiting for long-pending legislative amendments to the SEZ Act, reported The Hindu Business Line.
For the green hydrogen sector, potential reforms include permitting SEZ units to sell power outside the zone, a significant shift from existing norms. The government is also evaluating the need to amend contiguity requirements, particularly for renewable energy projects such as wind power, which often operate on non-contiguous land parcels.
In air cargo and aviation-related sectors, modifications may support aircraft leasing activities and create a more conducive environment for MRO operations. Similarly, the space sector could benefit from custom-tailored relaxations that align with its unique infrastructure and investment needs.
The government recently relaxed SEZ rules for semiconductor and electronic component manufacturing. These changes included easing net foreign exchange calculations, simplifying procedures for domestic market sales after duty payments and removing restrictions around land encumbrances. These adjustments paved the way for key investment approvals such as Micron’s semiconductor manufacturing facility in Sanand, Gujarat and the Hubbali Durable Goods Cluster in Karnataka.
With the expiry of direct tax incentives and the introduction of the Minimum Alternate Tax (MAT) for SEZs, interest in these zones had declined. In response, the government is adopting a more flexible, sector-specific approach to revive investor confidence and utilisation of SEZ infrastructure.
By using administrative notifications to implement reforms based on individual sector requirements, the government aims to make SEZs more relevant to the evolving industrial landscape.
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SEZ rules may be eased for green hydrogen, air cargo, MROs, space