Centre Eases SEZ Norms To Boost Chips, Electronics Production

Centre Eases SEZ Norms To Boost Chips, Electronics Manufacturing

SUMMARY

Manufacturers of semiconductors and electronics components can set up operating units on an area of 10 hectares or more, reduced from 50 hectares earlier

In multi-product SEZs, the minimum land requirement has been lowered to four hectares from 20 hectares

It was reported earlier this year that the Centre is also planning to roll out a new design-linked incentive scheme worth up to $4 Bn to bolster India’s electronics design ecosystem

In a renewed push to semiconductors and electronics components manufacturing in India, the government has amended the special economic zones (SEZ) rules to allow relaxations.

According to a gazette notification issued by the ministry of commerce and industry on Tuesday (June 3), the minimum land requirement for setting up SEZ units has been reduced to 10 hectares from 50 hectares.

The relaxations will apply to a range of electronics and semiconductor-related products, including smart watches, earbuds, display module sub-assembly, li-ion cells for batteries, camera module sub-assembly, battery sub-assembly, various types of other module sub-assemblies, printed circuit board (PCBs) and mobile and information technology hardware components.

Earlier, the SEZs were required to be “encumbrance-free,” meaning the land had to be completely free of any legal disputes or debt. But now if the land is already mortgaged or leased to the Centre or state government or their authorised agencies, it can be used to set up an SEZ.

SEZs are areas meant to attract foreign and domestic investment for economic development of the country.

The new norms have also allowed the manufacturers to even manage their inventories flexibly. Now, companies can directly export their goods from India or sell them in the domestic market or domestic tariff area by paying the required taxes.

Contract manufacturers have also got some relief in the current overhaul in the rules. SEZs can now buy raw materials, capital goods, components and consumables from the domestic market, other than imports.

This is important since SEZs have to earn foreign currency more than they spend.

India’s Push For Semiconductor And Electronics Manufacturing

Last year, the Centre expanded the scope of incentives under the India Semiconductor Mission (ISM) to include display fabrication companies, raw material suppliers, gas suppliers and chip packaging companies and other vendors in the semiconductor ecosystem.

The scheme was launched in 2021 with a total outlay of INR 76,000 Cr.

The government is also planning to bring in the second phase of ISM to support chip design projects in the country and semiconductor packaging designs.

In March, the government also approved the production-linked incentive (PLI) scheme for non-semiconductor electronics components which has an outlay of INR 22,919 Cr. The scheme aims to attract investments to the tune of INR 59,350 Cr and a production of INR 4,56,500 Cr.

According to the Inc42 report, India’s semiconductor market is poised to become a $150 Bn economy by 2030 and India produced electronics goods worth INR 9.52 Lakh Cr in FY24, against INR 1.90 Lakh Cr in FY15, as per the Economic Survey 2024-25.