Why is News :
- On June 9, 2025, the Government of India relaxed SEZ Rules to promote domestic manufacturing of semiconductors and electronic components.
- This aligns with India’s goal to become self-reliant in semiconductor production amid global supply chain vulnerabilities.
Background :
- India launched the Semicon India Programme in 2022 with an outlay of ₹76,000 crore.
- Semiconductors are critical to electronics and are central to technologies like AI, 5G, automotive electronics, and smart devices.
- Heavy reliance on imports (mostly from China) exposed vulnerabilities during the COVID-19 supply chain disruption.
Key Amendments to SEZ Rules :
Reduction in Minimum Land Requirement (Rule 5):
- Earlier: Minimum 50 hectares.
- Now: Reduced to 10 hectares for semiconductor/electronics SEZs.
- Impact: Enables smaller firms to invest and still avail SEZ benefits.
Encumbrance-Free Land Relaxation (Rule 7):
- Earlier: Land had to be free from legal claims (encumbrances).
- Now: Relaxation allowed by the Board of Approval.
- Impact: Eases the establishment of SEZs, considering India’s complex land ownership laws.
Permission for Domestic Sales (Rule 18):
- SEZ units can now sell domestically after paying duties.
- Impact: Reduces export-dependency and supports domestic electronics ecosystem.
Impact of Policy Tweaks
Two SEZs approved immediately after the amendments:
- Micron Semiconductor (Sanand, Gujarat)
- Area: 37.64 hectares
- Investment: ₹13,000 crore
- Aequs Group – Hubballi Durable Goods Cluster (Dharwad, Karnataka)
- Area: 11.55 hectares
- Investment: ₹100 crore
- Indicates early traction and interest from global players.
Significance of Semiconductors
- Core of all modern electronics.
- Used in:
- Smartphones, Laptops, EVs
- Defence equipment
- AI, IoT, and smart manufacturing
- Strategic Asset: Key to digital sovereignty and economic security.
Challenges
- High capital costs, technical know-how, and long gestation periods.
- Global competition from countries like Taiwan, South Korea, and China.
Way Forward
- Strengthen the domestic value chain—from design to fabrication.
- Invest in R&D, skilled workforce, and robust infrastructure.
- Continue to de-risk supply chains through public-private partnerships and FDI-friendly reforms.
SPECIAL ECONOMIC ZONES :
Definition: SEZs are duty-free enclaves treated as foreign territory for trade, tariff, and operations.
Who Can Set Up: Private, public, joint sector entities or State Governments/agencies.
Evolution & Governance
- Introduced: In 2000 (Foreign Trade Policy), replacing Export Processing Zones (EPZs).
- Governed By:
- SEZ Act, 2005
- SEZ Rules, 2006
Types of SEZs
- Includes EPZs, Free Zones, Industrial Estates, Free Ports, Urban Enterprise Zones, etc.
Current Status
- Operational SEZs: 276
- Exports (2023–24): USD 163.69 billion
- Example: GIFT City, Gujarat
Objectives
- Boost economic activity
- Promote exports
- Attract FDI & domestic investment
- Create jobs
- Develop infrastructure
Incentives & Benefits
- Tax Exemptions: CST, Service Tax, State Sales Tax (now under GST)
- Duty-Free Procurement for development/operation
- Zero-rated Supplies under IGST Act, 2017
- Single-Window Clearance at Centre & State level
- ECB Limit: Up to USD 500 million annually, no maturity cap
UPSC Relevance :
GS3: Indian Economy; Investment Models; Infrastructure; Science & Technology
Mains Practice Question
Q. Discuss the recent reforms in SEZ rules aimed at promoting semiconductor manufacturing in India. How do these changes align with India’s broader goal of technological self-reliance?