Budget 2026 Delivers Major Boost to Nagpur's Mihan-SEZ with Key Concessions
Finance Minister Nirmala Sitharaman's Union Budget 2026-27 has introduced a series of measures specifically designed to revitalize manufacturing units operating within Special Economic Zones (SEZs), with Nagpur's Mihan-SEZ standing to gain significantly. The most notable proposal allows eligible manufacturing units in SEZs to sell goods in the Domestic Tariff Area (DTA) at concessional rates, a long-pending demand from industry stakeholders.
Aviation Sector Receives Crucial Duty Exemptions
The budget also proposes critical exemptions from basic customs duty on components and parts required for manufacturing civilian, training, and other aircraft. Furthermore, raw materials imported for producing aircraft parts used in maintaining defence aircraft are set to be exempted. This move comes at an opportune time as Dassault Reliance Aviation Limited (DRAL) has announced plans to manufacture Falcon business jets at Nagpur's Mihan-SEZ, while Max Aerospace intends to establish a maintenance, repair, and overhaul (MRO) facility for military aircraft in the region.
Bharat Malkhani, CEO of Max Aerospace, highlighted that taxation on raw materials had been a major challenge for the sector, and these exemptions are expected to provide substantial relief, potentially accelerating project timelines and reducing operational costs.
Addressing Long-Standing Industry Demands
The Association of Industrial Development (AID), a Nagpur-based NGO, had previously advocated for easing SEZ sales to DTAs. Ashish Kale, President of AID, confirmed that the proposal was forwarded to Union Commerce Minister Piyush Goyal through Union Minister Nitin Gadkari. "The long-pending demand has finally been accepted in the Union Budget. It was much needed for the Mihan-SEZ," Kale stated, expressing relief at the government's responsiveness.
Ashish Jhagrawat, a director at consultancy firm M/s Moon SEZ, noted that exports from several SEZs had declined due to multiple factors, including geopolitical tensions such as the Russia-Ukraine war, which led to sanctions affecting trade with certain countries. He emphasized that the relaxation for DTA sales had been a critical demand to help SEZ units diversify their markets and stabilize operations.
Understanding DTA Sales and Their Impact
Areas outside an SEZ are classified as Domestic Tariff Areas (DTAs). Since SEZs are treated as foreign territories for trade purposes, sales outside their boundaries—even within India—are considered imports and typically attract customs duties. The proposed concessional duty is expected to lower costs significantly for SEZ units selling domestically, making their products more competitive in the Indian market. Mihan-SEZ houses numerous manufacturing units across sectors like pharmaceuticals and aviation, and Sitharaman announced this measure as a one-time concession aimed at providing immediate relief.
Sunrise Sectors: Lithium-Ion and Textiles Get a Push
In a move to promote emerging industries, the Budget extends basic customs duty exemptions to capital goods used in manufacturing lithium-ion cells for batteries and battery energy storage systems. This is particularly relevant for Vidarbha, where Surjagad Ispat Pvt Ltd has announced plans to establish what it claims will be the country's first lithium refinery in Nagpur, with battery manufacturing planned at a later stage. Company officials believe the exemption will reduce production costs, enhancing viability. Additionally, JSW has announced intentions to set up a lithium-ion battery manufacturing facility at Butibori, further cementing the region's role in this sunrise sector.
The finance minister also announced the development of mega textile parks in "challenge mode," raising hopes for the PM-MITRA textile park at Amravati. Approximately 1,000 acres have already been allotted for this project under the central government's PM-MITRA scheme, though it has seen limited response so far. Prashant Mohta, President of the Vidarbha Industries Association (VIA) and Managing Director of Gima Tex, remarked, "The announcement gives fresh momentum to the Amravati textile park," anticipating increased investment and activity.
Relief for Local Produce and Unorganised Traders
In another significant relief measure, Sitharaman proposed a reduction in Tax Collected at Source (TCS) on tendu leaves, a major forest produce in Gadchiroli. This move is expected to benefit unorganised traders, who previously paid a 5% TCS. Under the new proposal, contractors selling tendu leaves directly to beedi manufacturers will be exempt from TCS, while sales to unorganised traders without an undertaking for beedi production will continue to attract the levy. Notably, nearly 20% of tendu leaf sales occur in the unorganised sector. The Budget also reduces TCS on the sale of liquor and minerals, a measure expected to boost local business activity and streamline trade processes.
Overall, Budget 2026 appears tailored to address specific regional challenges while fostering growth in key sectors, positioning Nagpur and Vidarbha as pivotal hubs for manufacturing and innovation in the coming years.
