The government is preparing a set of policy changes to help special economic zone (SEZ) manufacturers find more buyers at home, after a steep 50% tariff by the United States led to cancelled export orders.
The idea is to allow SEZ units to sell more easily in the domestic market by charging duties only on imported raw materials instead of finished goods. Currently, if an SEZ unit sells in India, it must pay full customs duty on the final product, making local sales expensive and unattractive.
By tweaking the rules, the government hopes to lower costs, encourage more value addition inside SEZs, and keep production lines running despite weaker exports. This is especially critical for labour-heavy industries such as gems & jewellery and electricals, which have been hit hard by the tariff shock.
The commerce and finance ministries are jointly working on these reforms, which have been discussed in recent high-level trade meetings.
Industry bodies have also asked the government to consider short-term relief measures, such as sharing part of the US tariff burden with exporters. According to Alok Chaturvedi, Director General of EPCES, exports to the US from SEZs stood at $21.6 billion in FY25. He suggested that the government could temporarily absorb up to 30% of the additional tariff through drawback schemes or similar tools, giving exporters a cushion for at least a quarter until they adjust to new conditions.
In the long run, policymakers believe such measures will not only help SEZs manage the immediate tariff hit but also strengthen India’s competitiveness by spreading costs over larger production volumes and improving economies of scale.