Why have special economic zones rules been relaxed?

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Semiconductors are essential components in all modern electronic devices — smartphones, laptops, TVs, cars, etc.
They power AI, machine learning, digitisation, and automation.
Global supply chain disruption (esp. due to COVID-19) exposed overdependence on countries like China (which produced ~35% of semiconductors in 2021).
Strategic significance: Semiconductor self-reliance is now critical for national security, economic resilience, and technological leadership.

Relevance : GS 3(Economy)

To boost domestic manufacturing of semiconductors and electronic components.
Part of broader efforts under the Semicon India programme (₹76,000 crore outlay).

Reduction in Minimum Land Area (Rule 5):
1. From 50 hectares to 10 hectares for SEZs exclusively for semiconductor/electronics.
2. Enables smaller-scale investments with full SEZ benefits.

Relaxation of “Encumbrance-Free” Land Requirement (Rule 7):
- Earlier requirement: land had to be free of legal disputes or liens.
- Relaxed now due to India’s complex land records and slow legal systems.
- Will accelerate SEZ setup by allowing flexibility in land acquisition.
Permission for Domestic Sales (Rule 18):
- SEZ units can now sell in the domestic market (after paying duties).
- Earlier: SEZs were export-only.
- Shields investors from global trade disruptions, supports domestic tech ecosystem.

Too early to assess long-term impact, but signs of positive momentum:
- Micron Semiconductor Technology India:
  - ₹13,000 crore investment.
  - 37.64-hectare SEZ in Sanand, Gujarat.
Hubballi Durable Goods Cluster (Aequs Group):₹100 crore investment.11.55-hectare SEZ in Dharwad, Karnataka.
- Total new SEZ-linked investment: ₹13,100 crore.

Enhances domestic capacity in a sector central to the digital economy.
Reduces import dependence, especially from geopolitically sensitive nations.
Supports Make in India, Aatmanirbhar Bharat, and India’s ambition to be a global electronics hub.

The relaxation of SEZ rules is a targeted regulatory reform to promote investment in semiconductors.
It aligns with India’s strategic and economic priorities, especially in a post-COVID, tech-driven world.
Initial investments signal positive industry response, but sustained momentum will depend on policy consistency, infrastructure support, and ease of doing business.