The Indian government is currently exploring how they could amend existing regulations that may result in considerable financial advantages for renewable energy projects. These particular projects are primarily aimed at the production of green hydrogen within Special Economic Zones (SEZs).
Key Amendments: Allowing SEZs to Span Over Different Areas
The Ministry of Commerce is considering changing the rules to permit SEZs to cover different non-contiguous regions, particularly for green hydrogen-focused projects. Currently, these zones require a continuous area of 50 hectares or more. However, the ministry is considering loosening this requirement when it comes to green hydrogen initiatives. This change could lead to multi-location SEZs and offer developers a chance to harness wind energy using turbines erected considerable distances apart (between 250 and 400 meters).
Fiscal Benefits for Renewable Energy Plants
Another potential amendment on the table involves offering fiscal benefits to renewable energy plants that cater to captive consumption within SEZs. As per the present rules, only those renewable energy plants that serve as SEZ units and are intended to sell power outside the SEZs are eligible for fiscal benefits. Conversely, plants used for captivity are deemed ineligible. If given the green light, these modifications could ensure businesses focused on exporting green hydrogen have access to tax benefits for setting up and operating renewable energy facilities dedicated to green hydrogen production.
What Constitutes Captive Consumption?
Captive consumption refers to the usage of goods or services within a specific area, or within the entity that produces these goods or services, without selling or transferring them to outside markets.
Understanding Special Economic Zones
Special Economic Zones (SEZs) are geographical regions where economic laws tend to be more relaxed compared to a country’s domestic regulations. The SEZ category encompasses a wide range of more specific zones, like Free Trade Zones (FTZs), Export Processing Zones (EPZs), Free Zones (FZs), and Industrial Estates (IEs).
India was one of the first Asian nations to recognize the effectiveness of the EPZ model in boosting exports. The country established its first EPZ in Kandla, Gujarat in 1965.
SEZs in India: A Policy Overview
India’s Special Economic Zones Policy was announced in April 2000 with the aim to improve foreign investments, job opportunities, and to provide an internationally competitive environment for exports. This policy also sought to develop necessary infrastructure facilities. The SEZ Act/Rules specifically exempt certain laws applicable in SEZs. Each Zone is governed by a Development Commissioner in accordance with the SEZ Act, 2005 and SEZ Rules, 2006. Units can be set up in the SEZ to carry out manufacturing, trading, or service activities.
Past UPSC Civil Services Examination Question Relating to Green Hydrogen
A past question from the 2023 UPSC Civil Services Examination asked candidates about green hydrogen. The question asked whether it could be used as a straight fuel for internal combustion, blended with natural gas for heat or power generation, and if it could be utilized in hydrogen fuel cells to run vehicles. The answer, identified as (c), indicated that all three statements were correct.
