In a bid to make Special Economic Zones (SEZs) more attractive to investors, the government is considering easing rules to encourage investments in high potential sectors such as green hydrogen, air cargo, MROs (maintenance, repair & overhaul) and space exploration by making changes aligning with their specific needs, a source said.
This follows recent reforms announced in the SEZ rules to address the specialised needs of semiconductor and electronics component manufacturing sectors.
“The government is focussed on making SEZs more attractive. We have a lot of idle capacity and also land. We need to encourage new sectors with high potential for growth. This can happen only when we relax SEZ rules based on particular needs of identified sectors,” a source said.
Easing norms
In case of green hydrogen, the government may consider allowing SEZ units to sell power outside the SEZ, which would be an important relaxation.
Moreover, the SEZ rules on maintaining contiguity (continuity of land holdings) may need to be changed for green hydrogen producers as they have many wind turbines and ensuring contiguity may be difficult, the source said.
Similarly for air cargo, it may be important to facilitate air craft leasing, and have rules supporting it, the source added.
In case of semiconductors and electronic component manufacturing, SEZ rules were relaxed for Net Foreign Exchange calculation; for supplying to domestic market after payment of duties; and on conditions requiring SEZ land to be encumbrance free.
“The relaxations in SEZ rules for semiconductors and electronic component manufacturing, paved the way for approval to be extended to important investment proposals in the sector,” the official pointed out.
In fact, soon after the Department of Commerce notified the amendments in SEZ rules on June 3, the Board of Approval for SEZs approved Micron Semiconductor Technology India Pvt Ltd’s proposal to establish a semiconductor manufacturing SEZ in Sanand, Gujarat and Hubbali Durable Goods Cluster in Hubbali, Karnataka for manufacturing electronics and durables.
“While for semiconductors and electronic components the rules were changed based on the needs of the sector, the template would be different for different sectors,” the source said.
The Commerce Department has been trying to amend the SEZ Act to make the policy more attractive for units following the lapse of direct tax benefits enjoyed by SEZs and imposition of minimum alternate tax (MAT).
“As amending the SEZ Act to bring about changes to make the policy more investor friendly is taking a lot of time, the government is trying to bring about changes based on need through notifications,” the source said.
