SEZ 2.0: Commerce Ministry readies overhaul to arrest falling exports

As export figures slide, the government is gathering stakeholders this June to draft a new roadmap for India’s Special Economic Zones.

The Commerce Ministry has set the stage for a critical reset of India’s industrial enclaves. With a stakeholders' meeting scheduled for June 30, the government is looking to address the mounting issues plaguing Special Economic Zones (SEZs). The urgency is palpable; after years of being engines for growth, exports from these zones have seen a significant dip, falling to $133.45 billion in 2025-26 from $172.07 billion the previous year.

For the 6,695 units currently operating across 276 SEZs, the current regulatory framework is increasingly seen as a relic of a different economic era. Formulated back in 2005, the SEZ Act was designed for a global trade environment that looks nothing like the one India navigates today. Officials are now focused on a "SEZ 2.0" policy, aiming to harmonise these zones with broader export promotion schemes, including Advance Authorisation and Duty Free Import Authorisation.

Key items on the agenda

The upcoming June 30 meeting will be a deep dive into the operational bottlenecks that developers and units face daily. Discussions are expected to cover contentious issues such as enabling INR payments for services provided to the Domestic Tariff Area (DTA) and simplifying job work arrangements. Currently, units within these enclaves face rigid restrictions on duty-free domestic sales, as they are treated as foreign territories under customs law. Easing these constraints could be the key to boosting domestic integration.

Beyond the immediate fixes, a 17-member committee is already working on a comprehensive concept paper. This roadmap aims to align SEZs with other export-oriented units (EoUs) and the Manufacturing and Other Operations in Warehouse (MOOWR) scheme. By ironing out these overlaps, the Ministry hopes to simplify the ease of doing business and provide a more cohesive environment for manufacturers.

Why it matters: The bigger picture

The push for reform is more than just a bureaucratic exercise; it is an attempt to stay relevant in a volatile global market. When the original policy was drafted, the goal was to carve out islands of efficiency. Today, the objective has shifted toward integrating these zones into the heart of India's manufacturing value chain. If the Ministry can successfully bridge the gap between "foreign territory" status and domestic market needs, it could revitalise the cooling export sector. The shift signals a transition from viewing SEZs as isolated enclaves to seeing them as core components of a modern, export-led economy.