In a significant move aimed at addressing long-standing trade tensions and boosting domestic manufacturing, Union Finance Minister Nirmala Sitharaman announced on Sunday that eligible manufacturers in Special Economic Zones (SEZs) will now be permitted to sell their goods in the domestic tariff area at concessional duty rates. This decision, part of the broader Budget 2026 framework, seeks to fulfill a persistent demand from the commerce department and is expected to enhance import substitution efforts across the country.
Key Details of the SEZ Policy Shift
Under the new provisions, SEZ units will be allowed to sell only a prescribed share of their production in the Indian market outside the SEZs. Instead of paying the full specified import duty, these sales will attract lower, concessional rates. This strategic adjustment is designed to leverage the spare capacity available in several SEZ units, thereby making a wider range of goods available at competitive prices within the domestic economy.
Government's Rationale and Industry Impact
Commerce Minister Piyush Goyal emphasized that this initiative will help reduce imports from overseas by utilizing existing domestic manufacturing capabilities. He stated, "We will keep in mind that domestic industry should not suffer from this… we may keep some sectors out of this such as oil refineries." This cautious approach ensures that sensitive sectors are protected while promoting overall economic growth. The specific norms and guidelines for implementation are anticipated to be unveiled over the next one to two months.
Historical Context and Export Performance
In the fiscal year 2024-25, oil constituted nearly 40% of the goods exported from SEZs, with Reliance's Jamnagar facility being a major contributor. Engineering products followed at 19%, and gems and jewellery also featured prominently. During that period, goods exports from SEZs were estimated at $69 billion, highlighting their critical role in India's export landscape.
Expert Insights and Future Outlook
Commerce Secretary Rajesh Agrawal commented on the potential benefits, noting, "The relief to SEZ units for limited access to the domestic market will enable units to achieve economies of scale and help in import substitution." This move is expected to not only bolster domestic production but also enhance the competitiveness of Indian goods in the global market by optimizing resource utilization and reducing dependency on foreign imports.
As the government finalizes the operational details, stakeholders across manufacturing, trade, and policy sectors are closely monitoring developments. The initiative represents a pivotal step in aligning India's economic policies with contemporary trade dynamics, fostering a more self-reliant and resilient industrial ecosystem.
