India's SEZ Industry Demands Major Import Relaxations and Trade Policy Reforms to Boost Export Competitiveness

In a significant development reported from New Delhi in October 2025, stakeholders from India's Special Economic Zones (SEZs) have called upon the central government to implement sweeping reforms in import regulations and trade policies. The demands were presented during a crucial high-level consultation with senior officials from the Ministry of Commerce and Industry, highlighting the urgent need for policy flexibility to enhance the sector's operational efficiency.

Critical Import Relief Measures Sought by SEZ Operators

Industry representatives emphasized that SEZ units require immediate relief from multiple import-related restrictions that currently hinder their operations. The stakeholders advocated for comprehensive exemptions from Quality Control Orders, arguing that these requirements create unnecessary delays in procurement processes. They also pressed for the removal of minimum import price restrictions, which they claim distort market dynamics and increase operational costs unnecessarily.

Additionally, the industry highlighted the need to eliminate port-of-entry limitations for goods entering SEZs. According to the representatives, these restrictions significantly hamper the smooth flow of raw materials and essential goods, directly impacting production schedules and export commitments. The proposed changes are viewed as essential for maintaining the competitiveness of SEZ units in the global marketplace.

Free Trade Warehousing Zones Seek Vehicle Import Authorization

Representatives from Free Trade Warehousing Zones (FTWZs), which operate within the SEZ framework, presented specific demands related to vehicle imports. They requested policy amendments that would permit FTWZs to import new vehicles, along with their inclusion in the list of 18 designated ports and Inland Container Depots (ICDs) currently authorized for such imports.

Officials explained that FTWZs are specifically designed to facilitate duty-free import, storage, inspection, and subsequent re-export of goods. However, current restrictions on vehicle imports limit their ability to serve automotive sector clients effectively, reducing the overall utility of these specialized zones.

Domestic Market Integration and Capacity Utilization Concerns

SEZ operators expressed concerns about underutilized capacity and requested greater flexibility to sell in the domestic market. They proposed that sales to domestic buyers should be permitted on a duty foregone basis, where import duties would be calculated based on raw material costs rather than finished goods values. This approach, they argued, would provide a more equitable taxation framework while allowing better capacity utilization.

The industry also sought authorization to perform reverse job work for domestic manufacturers. Such an arrangement would enable SEZ units to process goods for domestic companies, creating additional revenue streams while maintaining their primary export focus. These measures are seen as crucial for helping SEZs integrate with the broader domestic economy without compromising their export obligations.

Financial Constraints in Gold Import Transactions

One of the prominent issues raised concerned the restrictions on advance remittance for gold imports, currently capped at $200,000. Industry representatives argued that this limit has become increasingly inadequate given the substantial rise in gold prices over recent years. They called for higher remittance limits to facilitate smoother transactions in the precious metals sector.

Furthermore, stakeholders highlighted the need for clearer banking guidelines to ensure seamless processing of international transactions. The current ambiguity in regulations, they claimed, often leads to delays and complications in financial settlements, affecting business relationships with overseas suppliers.

Export Zero-Rating Clarity Needed Amid Global Tariff Changes

Concerns were raised regarding the lack of clarity in how tax authorities interpret zero-rating provisions for export of contract manufacturing services. This issue has gained heightened importance following the United States' decision to impose a 50 percent tariff increase on certain imports. SEZ exporters warned that unclear tax treatment could significantly impact their competitiveness in markets affected by these new tariffs.

The industry urged the government to provide definitive guidelines on zero-rating applications to prevent disputes and ensure that SEZ exporters can accurately assess their tax obligations when engaging in contract manufacturing for foreign clients.

Streamlining Compliance with Import Monitoring Systems

SEZ units highlighted significant compliance challenges related to Import Monitoring Systems (IMS) for products such as steel and paper. Representatives argued that the current procedures are excessively complex and time-consuming, creating unnecessary administrative burdens.

The industry advocated for simplified procedures and streamlined reporting requirements that would reduce paperwork while maintaining necessary oversight. They suggested that digital integration and automated reporting systems could significantly improve efficiency without compromising regulatory objectives.

Recognition of Bonded Warehouse Supplies in NFE Calculations

SEZ units that supply goods to bonded warehouses under schemes like Manufacture and Other Operations in Warehouse Regulations (MOOWR) requested that these supplies be recognized as contributions toward their Net Foreign Exchange (NFE) obligations. Currently, such supplies may not receive full credit in NFE calculations, potentially affecting a unit's compliance status.

Industry representatives emphasized that SEZs are mandated to remain NFE-positive to continue operations. They argued that supplies to bonded warehouses should be treated equivalently to direct exports, as these goods ultimately serve export markets and generate foreign exchange earnings for the country.

India's SEZ Performance Snapshot for FY25

According to official data, India currently operates 276 Special Economic Zones across the country. For the fiscal year 2025, exports from these SEZs reached $172 billion, representing a year-on-year growth of 7.3 percent. These figures demonstrate the continued importance of SEZs in driving India's export-oriented industrial growth, despite operational challenges.

Industry Outlook and Policy Reform Expectations

Industry experts emphasized that the requested policy reforms are not merely administrative conveniences but critical requirements for sustaining the momentum of India's SEZ-driven export economy. With global trade dynamics shifting rapidly and domestic infrastructure continuing to evolve, these reforms are seen as essential for maintaining competitiveness.

The SEZ industry is actively pursuing a more enabling policy environment that balances regulatory oversight with operational flexibility. Stakeholders expressed hope that the government would consider these demands favorably, particularly in light of the sector's significant contribution to India's commercial real estate and employment generation.

With India positioning itself as a preferred destination for global manufacturing and services outsourcing, the performance and competitiveness of SEZs remain crucial for achieving broader economic objectives. The outcome of these policy discussions could significantly influence India's export trajectory and its attractiveness as an investment destination in the coming years.

Disclaimer: This news article is based on information from industry sources and official communications. While every effort has been made to ensure accuracy, readers are advised to verify specific details with relevant authorities before making business decisions. The views and opinions expressed by industry representatives do not necessarily reflect the official policy positions of the government or regulatory bodies. Information regarding policy changes, import regulations, and operational guidelines should be confirmed with the Ministry of Commerce and Industry or relevant authorities for the most current and accurate details.