Ahead of the Union Budget 2022-23, India’s Act for Special Economic Zones (SEZs) can get an upgrade. The government is aspiring to make SEZs the engines of growth as well as compliant with the global trade norms. The need of this upgrade is eminent after US won the legal dispute wherein it contested India’s SEZ Act violating global agreement, at WTO. SEZ exports fell to US$ 102.3 billion in FY21 from US$ 112.3 billion in FY20.

The Commerce and Industry Ministry is persistent on having a new act for SEZs to be able to sell goods in the domestic market at low duties, easier exit for loss making firms and acceptance of Indian Rupee currency as a mode of payment. It has also proposed to replace the positive net foreign exchange (NFE), a primary requirement for SEZ units, with a new eligibility criterion.

“We are taking all issues holistically… SEZ Act may be revamped or a new Act might be put in place because SEZs go against WTO rules” said an official. Ministry is looking at ways for partial derecognition of existing SEZs that are no longer in demand. The primary of Net foreign exchange may also be replaced with new criteria, as suggested by the Commerce department.