Why have special economic zones rules been relaxed? | Explained

Assam Chief Minister Himanta Biswa Sarma inspects the progress of the semiconductor venture, at Jagiroad in Morigaon, Assam on February 1.
| Photo Credit: ANI

The story to this point: The Government of India has been taking varied steps to spice up the manufacturing of semiconductors and electronics in India, in a bid to scale back our dependence on imports. Some earlier measures embody the Semicon India programme launched in 2022 with an outlay of ₹76,000 crore. Now, the federal government has gone a step additional and has relaxed key rules associated to Special Economic Zones (SEZs) to additional encourage the home manufacture of semiconductors and electronics.

Why are semiconductors essential?

Semiconductors lie on the coronary heart of an more and more digital society, with AI and machine studying solely the newest in a protracted development of elevated digitisation and automation. Semiconductors are the tiny chips processing huge quantities of knowledge that make all of those processes attainable, in a single’s telephone, pc, pill, good TV, good speaker, automotive, and each different digital gadget. According to the Semiconductor Industry Association, China accounted for about 35% of all semiconductors manufactured on the planet in 2021. Following the COVID-19 pandemic, a lot of the world, together with India, realised that the focus of provide chains in a single nation posed enormous dangers for any nation depending on these provides. Therefore, they began attempting to spice up the home manufacture of such key parts.

What are the newest steps by the Indian authorities?

On June 9, the Ministry of Commerce and Industry introduced that it had notified a number of modifications to the Special Economic Zones (SEZ) Rules, 2006, per week earlier, to boost the home manufacture of semiconductors.

One of those tweaks was to Rule 5, which handled the scale of the SEZ. Earlier, an SEZ arrange solely for the manufacture of semiconductors or digital parts wanted a minimal contiguous land space of fifty hectares. This has now been considerably diminished to 10 hectares. This diminished measurement will enable firms to make smaller investments however nonetheless avail of SEZ advantages resembling tax exemptions, duty-free imports, and infrastructure assist.

Another modification to Rule 7 of the SEZ Rules now permits the Board of Approval for SEZs to chill out the situation that had required SEZ land to be “encumbrance-free”. Land is deemed to be encumbrance-free if it doesn’t have any authorized claims, liens, or costs towards it, and when clear title of possession and switch might be established. With India’s difficult and often-archaic land file mechanisms, and prolonged authorized processes, such a requirement would have stymied a whole lot of SEZs. Relaxing this rule will enable SEZs to return up sooner.

A 3rd modification was to Rule 18, permitting SEZ items in semiconductor and electronics part manufacturing to provide domestically, after paying the relevant duties. Conventionally, SEZs are solely export-oriented. Allowing home gross sales not solely shields the SEZs from the continued world commerce uncertainty, but in addition ensures a gentle provide to the home market itself.

What has been the influence?

Given the adjustments are so latest, one can’t instantly set up long-term impacts. However, following the tweaks, two new SEZs have already been permitted with a complete funding of ₹13,100 crore. Micron Semiconductor Technology India will set up an SEZ facility in Sanand, Gujarat for the manufacture of semiconductors with an estimated funding of ₹13,000 crore, whereas Hubballi Durable Goods Cluster, part of the Aequs Group, will set up an SEZ facility for the manufacture of digital parts in Dharwad, Karnataka, at a price of ₹100 crore.

Micron’s plant is to be 37.64 hectares in space and the Aequs plant is predicted to be 11.55 hectares.