Commerce Department Pushes for SEZ Flexibility to Boost Exports, Ease US Tariff Impact
The Commerce Department is pushing for greater flexibility for Special Economic Zones (SEZs) to boost domestic manufacturing and exports. Key proposals, backed by the Ministry of Commerce, SEZ Authority, and industry associations, aim to allow SEZ units to engage in reverse job work for Domestic Tariff Area (DTA) retailers and manufacturers, utilising their idle capacities. Meanwhile, the Finance Ministry has expressed concerns about potential unfair advantages for SEZ units in the local market.
In 2025, the government plans to introduce these flexibilities, which include allowing SEZ units to sell in the domestic market on a duty foregone basis, making their goods more competitive locally. The Commerce Department believes this will stimulate manufacturing for both DTA units and SEZ units. However, SEZ units must maintain Net Foreign Exchange (NFE) positivity to continue their exports.
The United States' 50% tariffs on Indian imports have impacted SEZ units, particularly those exporting pharmaceuticals, petroleum products, gems & jewellery, engineering goods, chemicals, electronics, and garments, which together accounted for about $15.2 billion in exports to the US in FY25. The Commerce Department is now trying to expedite a decision on granting these policy flexibilities to help SEZ units sell and purchase more easily in the domestic market.
The Commerce Department's proposals for SEZ flexibilization aim to boost domestic manufacturing and exports, but the Finance Ministry's concerns about unfair advantages for SEZ units in the local market remain. A decision on these flexibilities is pending, with the Commerce Department eager to expedite the process to support SEZ units affected by US tariffs.
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