India Plans Major SEZ Policy Overhaul to Boost Export Competitiveness

The Ministry of Commerce is gearing up for a significant legislative shift with a high-level stakeholder meeting scheduled for June 30. This meeting marks a critical step in the government's mission to redesign Special Economic Zones (SEZs) for a modern global trade landscape.

Driving the Transition Toward SEZ 2.0

The Commerce Ministry is moving beyond incremental changes to pursue a comprehensive "SEZ 2.0" policy. Recognizing that the current SEZ law, enacted in 2005, was designed for a vastly different era of global trade, the government has constituted a 17-member committee to spearhead these reforms.

The committee is tasked with developing a roadmap and a concept paper that will serve as the blueprint for a more robust, modern framework. This overhaul is essential as India seeks to realign its trade mechanisms with current economic realities and global supply chain dynamics.

Harmonizing Export Promotion Schemes

One of the primary objectives of the upcoming deliberations is the harmonization of various export-oriented schemes. Currently, exporters must navigate a complex web of different regulations, including SEZs, Export-Oriented Units (EOUs), Manufacturing and Other Operations in Warehouse (MOOWR), Advance Authorisation (AA), Export Promotion Capital Goods (EPCG), and Duty Free Import Authorisation (DFIA).

The Ministry is conducting a background study to ensure these schemes do not overlap or create administrative friction. By integrating these mechanisms, the government aims to simplify the compliance landscape and provide a more predictable environment for manufacturers and exporters.

Addressing Operational Bottlenecks and Ease of Doing Business

The June 30 meeting will specifically tackle several long-standing operational hurdles that impact the profitability and efficiency of SEZ units. Key discussion points include:

  • DTA Transactions: Allowing INR payments for services provided by SEZs to the Domestic Tariff Area (DTA).
  • Job Work Flexibility: Enabling SEZ units to perform job work for the DTA without the strict requirement of direct linkages to exports.
  • Import Substitution: Creating better frameworks to encourage local manufacturing through import substitution.
  • Warehousing Reforms: Enhancing the operational efficiency of Free Trade Warehousing Zones (FTWZ).

These measures are designed to reduce the "red tape" that often hampers the ease of doing business within these enclaves.

The Economic Imperative for Reform

The urgency for these reforms is highlighted by recent export trends. Data shows that exports from SEZs declined to $133.45 billion in 2025-26, down from $172.07 billion in 2024-25. With 276 operational SEZs housing 6,695 units across the country, the performance of these zones is vital to India's broader goal of becoming a global manufacturing hub. A revitalized SEZ framework is expected to reverse this decline and recapture lost momentum in the export sector.

Key Takeaways

  • Policy Shift: The government is working toward an "SEZ 2.0" policy to replace the outdated 2005 framework.
  • Scheme Integration: A major focus is being placed on harmonizing SEZs with other schemes like MOOWR, EPCG, and Advance Authorisation to reduce complexity.
  • Operational Ease: Reforms will target specific pain points, such as INR payments for DTA services and more flexible job work regulations, to boost ease of doing business.