Commerce ministry seeks views of departments on measures to revive SEZs, promote economies of scale

New Delhi: The commerce ministry has sought views of different departments on proposed measures to revive special economic zones and facilitate business transactions between SEZ and the domestic market, a senior official said on Monday.

The official said that the ministry has suggested allowing the sale of products manufactured in Special Economic Zones (SEZs) in the domestic market on payment of duty foregone on inputs as that would help promote value addition.

"The main issue in SEZs is that we are not able to get economies of scale. The connect between SEZs and the domestic tariff area (DTA) or domestic market has to be improved. There are also issues if DTA is selling to SEZs," the official said.

"So we have suggested duty foregone basis sales. There are also issues with regards to job work. For example if an IT firm has to get some work from the domestic market, they need permission. We have sent a draft cabinet note," the official added.

At present, units in SEZs are allowed to sell their products in the DTA on payment of duties on an output basis (finished goods).

For these changes, the commerce ministry has proposed amendments in the SEZ law.

The government is considering several measures such as a flexible framework for the sale of products manufactured in SEZs in the domestic market, and streamlining approval processes for units.

The aim is to help revive SEZs and facilitate business transactions between SEZs and the DTA.

SEZs are enclosures that are treated as foreign territories for trade and customs duties, with restrictions on duty-free sales outside these zones in the domestic market.

Last year, Commerce and Industry Minister Piyush Goyal said that the government is looking at easing certain restrictions for units in SEZs to promote the sector's growth.

Think tank Global Trade Research Initiative (GTRI) in a report has suggested the government allow sale of products manufactured in SEZs in the domestic market on payment of duty foregone on inputs as that would help promote value addition.

GTRI Co-Founder Ajay Srivastava had said that the government already allows DTA sales on payment of duty foregone on an input basis to firms operating under the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme.

Exports from special economic zones grew over 4 per cent to $163.7 billion (Rs 13.65 lakh crore) in fiscal 2024, despite a 3 per cent decline in the country's overall exports.

According to the data of the commerce ministry, exports from these zones stood at $157.24 billion (Rs 13.12 lakh crore) in 2022-23 and $133 billion (Rs 11.09 lakh crore) in 2021-22.

SEZs are key export hubs which contributed over one-third of the country's total outbound shipments in the last fiscal.

As many as 423 such zones have been approved by the government, out of which 280 are operational as of March 31 this year. As many as 5,711 units are approved in these zones till December 31, 2023.

The major export destinations include the UAE, the US, the UK, Australia and Singapore.