16th June 2025 (10 Topics)
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SEZ Rule Relaxation
Context
The Government of India has recently relaxed Special Economic Zones (SEZ) rules to attract investment in domestic semiconductor and electronics manufacturing, a sector crucial for reducing import dependence and securing supply chains. This move complements the existing Semicon India Programme launched in 2022 with a financial outlay of ?76,000 crore.
Semiconductors: Strategic Importance
- Definition: Semiconductors are materials with conductivity between conductors and insulators; they are the core components of integrated circuits (ICs) or microchips.
- Applications: Found in smartphones, computers, automobiles, defence systems, AI infrastructure, IoT devices, etc.
- Strategic Resource: Post-COVID-19, countries realized the vulnerability of global supply chains, especially with China producing ~35% of the world’s chips (2021).
- National Security Link: Disruption in chip supplies can impact defence, critical infrastructure, and strategic autonomy.
Relaxation in SEZ Rules
- Previous Restriction: SEZ units had to export at least 51% of their output, and domestic tariff area (DTA) sales were taxed heavily.
- Recent Change: Government has eased DTA access for SEZ-manufactured goods, allowing more flexible domestic sales without significant penalties or procedural bottlenecks.
- Implication: This is expected to facilitate semiconductor fabs and electronics units to sell in India's growing domestic market — a key concern of potential investors.
Semicon India Programme (2022)
- Launched by: Ministry of Electronics and Information Technology (MeitY)
- Outlay: ?76,000 crore
- Components:
- Design Linked Incentive (DLI) Scheme
- Modified Programme for Semiconductors and Display Fab Ecosystem
- Incentives for compound semiconductors and ATMP/OSAT units
- Objective: To develop a self-reliant semiconductor ecosystem including design, manufacturing, packaging, and research.
Global Context
- Countries like the S. (CHIPS and Science Act) and EU (European Chips Act) have also adopted similar subsidy-based approaches to build domestic semiconductor capabilities and reduce dependence on China and Taiwan.
Special Economic Zones (SEZs):Definition & Purpose
Evolution of SEZs in India
SEZ Governance Structure
Status
Key Objectives of SEZ Act
Major Incentives and Facilities
Reform Initiatives
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