The government is considering easing regulations in Special Economic Zones (SEZs) to attract greater investment in high-potential sectors such as green hydrogen, air cargo, maintenance, repair and overhaul (MRO) services, and space exploration. According to a source, the proposed changes aim to align SEZ policies with the specific requirements of these emerging industries to enhance their appeal to investors, reported The Hindu Business Line.
The move comes in the wake of recent SEZ rule relaxations aimed at supporting semiconductor and electronics component manufacturing. These reforms have already helped pave the way for major investment approvals in the sector, including projects by Micron Semiconductor Technology India Pvt Ltd in Gujarat and the Hubbali Durable Goods Cluster in Karnataka, according to the media report.
“We have a lot of idle capacity and available land in SEZs. To attract new investments, especially in high-potential sectors, the rules need to be flexible and adapted to each sector’s specific needs,” the source told businessline.
For the green hydrogen sector, one key change under consideration is allowing SEZ-based units to sell power outside the SEZ—a significant shift from current restrictions. Additionally, current rules that require SEZ land to be contiguous may be revised, as green hydrogen projects often involve multiple wind turbine installations spread across non-adjacent plots.
Earlier, for semiconductors and electronics, the government had relaxed SEZ norms related to Net Foreign Exchange (NFE) calculations, domestic supply permissions (after paying duties), and land encumbrance conditions. These reforms made it easier for companies to set up facilities within SEZs and serve both export and domestic markets.
The official noted that the new strategy is to tailor SEZ regulations based on the specific operational requirements of each sector. “What worked for electronics may not work for green hydrogen or space exploration. Each sector will have its own policy framework,” the source explained.
While the Commerce Department is still working to amend the SEZ Act to make it more investor-friendly—especially after the expiry of key tax incentives and the imposition of minimum alternate tax (MAT)—progress has been slow. As a stopgap, the government is using notifications to introduce targeted changes in SEZ rules without waiting for formal legislative amendments.
This flexible, sector-specific approach is aimed at breathing new life into India’s SEZ policy by aligning it more closely with the needs of modern industries and unlocking the economic potential of underutilised SEZ infrastructure.
