Special Economic Zones (SEZs) Reform
A government panel, including officials from the Commerce and Industry Ministry, NITI Aayog, and exporters, is working on new Special Economic Zones (SEZs) norms to boost manufacturing and support exporters amid US tariff challenges.
Current Challenges
- US Tariffs Impact: Many SEZ units, especially those focused on the US market, face export competitiveness issues due to steep US tariffs.
- Decrease in SEZ Exports: Exports from SEZs stood at $172 billion in FY25, with domestic sales only comprising 2% of total production.
- Comparison with China: Indian SEZs have not matched the success of Chinese SEZs in transforming manufacturing.
Proposed Solutions
- Reverse Job Work Policy: This policy would allow SEZ units to carry out work for the domestic market, optimizing the use of labor and equipment.
- Concerns exist regarding duty exemptions on inputs, which need to be fair to the domestic industry.
- Alternative Routes to Reform: Instead of a new SEZ bill, faster methods are being considered to support exporters affected by US tariffs, though the Finance Ministry has revenue concerns.
Sector-Specific Concerns
- Gems and Jewellery Industry:
- Constitutes 65% of India's studded jewellery exports from SEZ units.
- The industry seeks permission for reverse job work, extended export obligations, and interest moratoriums on credit.
Broader Economic Concerns
- Negative Trade Balance: Concerns about increasing imports of raw materials and marginal growth in traditional jewellery exports.
- Productivity Issues: SEZs face challenges with low investment in R&D, limited training programs, and declining gem and jewellery units.
- Foreign Direct Investment (FDI): Low FDI due to lack of investment protection agreements and negative perceptions about SEZs.