News: The government has relaxed key rules related to Special Economic Zones (SEZs) to encourage the domestic manufacture of semiconductors and electronics.
About Special Economic Zones (SEZs)
- A special economic zone is a geographical area in which the trade and tax laws are relaxed and different from that in the rest of the country so as to be more conducive to industries.
- Aim: The aim of a SEZ is to increase investment (FDI), exports and employment.
- India had setup the first SEZ in Asia in 1965 at Kandla (based on Export Processing Zone (EPZ) model).
- SEZ policy: The SEZ policy was announced by the government in 2000 which was strengthened through SEZ Act 2005 which was passed by Parliament in May, 2005 which came into effect on 10th February, 2006.
- SEZ Rules: The SEZ Rules provide for different minimum land requirement for different class of SEZs.
- Every SEZ is divided into a processing area where alone the SEZ units would come up and the non-processing area where the supporting infrastructure is to be created.
Recent changes in the SEZ Rules
- The Ministry of Commerce and Industry has notified several modifications to the Special Economic Zones (SEZ) Rules, 2006 to enhance the domestic manufacture of semiconductors.
- Rule 5 – Size of the SEZ: The minimum contiguous land area required for the manufacture of semiconductors or electronic components has been reduced to 10 hectares from 50 hectares earlier.
- Rule 7: It now allows the Board of Approval for SEZs to relax the condition that had required SEZ land to be “encumbrance-free”.
- Land is deemed to be encumbrance-free if it does not have any legal claims, liens, or charges against it, and when clear title of ownership and transfer can be established.
- Rule 18: It now allows SEZ units in semiconductor and electronics component manufacturing to supply domestically, after paying the applicable duties.
- Conventionally, SEZs are exclusively export-oriented.
