Balancing Trade: SEZs Gain Limited Domestic Market Access Amid Safeguards

The government's decision to allow Special Economic Zone (SEZ) units to sell up to 30% of their export turnover domestically has sparked concerns among local manufacturers. They fear that lower-cost SEZ goods could undermine their market position. However, Finance Ministry sources assure that a robust safeguard system is in place.

This safeguard system consists of three main pillars. First, a calibrated customs duty on SEZ-to-domestic market clearances neutralizes cost advantages, ensuring fair pricing. Second, a hard cap limits domestic sales to 30% of export turnover, preventing SEZ units from shifting focus from exports. Finally, a minimum 20% value addition requirement ensures genuine manufacturing activity, not mere trading.

Further protections include sectoral exclusions where domestic producers might be particularly vulnerable. Finance Ministry sources emphasize that these measures are designed for balance and transparency, providing SEZs flexibility amid global challenges without disadvantaging domestic industries.