The Union Government has constituted a 17-member committee to recommend comprehensive reforms for India’s Special Economic Zones (SEZ) framework, with the aim of formulating a new SEZ 2.0 policy aligned with evolving global trade and investment dynamics. According to an official statement, the committee has been tasked with submitting a concept paper, roadmap, or policy recommendations within six months.

The panel will undertake a detailed background study to examine the harmonisation of various export promotion schemes currently in force. These include Special Economic Zones (SEZs), Export-Oriented Units (EOUs), the Manufacturing and Other Operations in Warehouse Regulations (MOOWR), Advance Authorisation, the Export Promotion Capital Goods (EPCG) scheme, and the Duty Free Import Authorisation (DFIA) scheme. The objective is to identify overlaps and policy distortions and recommend a more cohesive export promotion ecosystem.

The committee comprises representatives from key government bodies, including the commerce ministry, customs authorities, NITI Aayog, the Department for Promotion of Industry and Internal Trade (DPIIT), the Central Board of Indirect Taxes and Customs (CBIC), the Directorate General of Export Promotion, the Export Promotion Council for SEZs, two Development Commissioners, and the Department of Economic Affairs.

Among its primary responsibilities is a review of the Special Economic Zones Act, 2005, to assess its effectiveness in the present global trade and macroeconomic environment. The panel will also examine whether the SEZ framework needs alignment with other export incentive schemes to remove policy inconsistencies and improve efficiency.

In addition, the committee will evaluate the impact of recent and proposed policy changes, including provisions relating to Domestic Tariff Area (DTA) sales, fiscal and non-fiscal incentives, compliance norms, and operational flexibility for SEZ units. The review will focus on how these measures influence exports, investment inflows, employment generation, and ease of doing business.

Another key task is to assess the effectiveness of SEZs in attracting both domestic and foreign investment while promoting manufacturing, services growth, technology upgradation, value addition, and employment opportunities, particularly for micro, small and medium enterprises (MSMEs). The panel will also examine operational and regulatory challenges faced by SEZ developers and units, including issues related to customs procedures, taxation, compliance burdens, infrastructure, and coordination among stakeholders.

The committee will further review the fiscal implications of SEZs, including the revenue impact due to duty and tax concessions, and conduct a cost-benefit analysis in terms of exports, investment, and broader economic activity. It will also study international best practices and successful SEZ or free trade zone models worldwide to determine their suitability for adaptation in India.

As part of its consultation process, the panel will engage with a wide range of stakeholders such as central and state governments, SEZ authorities, developers, industry associations, exporters, and SEZ units to gather inputs before finalising its recommendations.

The government expects the committee to propose short-term, medium-term, and long-term reforms, including possible amendments to the SEZ Act and associated rules, along with a clear implementation roadmap and timelines.

In the Union Budget, the government had already announced a one-time measure allowing eligible SEZ manufacturing units to sell goods in the domestic market at concessional import duty rates, subject to certain quantitative restrictions. The move aims to help units utilise surplus production capacity amid global trade disruptions.

This concession addresses a long-standing demand from SEZ units, which have struggled to sell excess output in the domestic market due to high import duties applicable on goods cleared into the Domestic Tariff Area.

Finance Minister Nirmala Sitharaman, while presenting the Budget, stated that the measure was intended to ease capacity utilisation challenges faced by SEZ manufacturing units due to global trade uncertainties.

When the SEZ framework was introduced in 2005, India’s trade policy environment was significantly different. Since then, global supply chains, trade patterns, and domestic economic priorities have evolved, prompting the need for a modernised policy structure.

According to official data, exports from SEZs increased 7.37 per cent to USD 172.27 billion in 2024-25. Currently, India has 276 operational SEZs housing 6,279 units, highlighting the significant role these zones continue to play in the country’s export ecosystem.

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