The central government has officially notified two new Special Economic Zones in the Union Territory of Puducherry, proposing a combined investment of ₹1,975 crore. Approved by the Board of Approval for Special Economic Zones, the notification includes a Multi-Sector zone in Karasur and an Information Technology and Information Technology Enabled Services (IT/ITES) zone in Thattanchavady. This development is expected to generate approximately 8,500 jobs and marks the first time in India that a municipal body is acting as an economic zone developer.
Details of the Newly Notified Special Economic Zones
The two zones target different industrial domains and are located in distinct parts of the Union Territory. They will serve as key hubs for regional business expansion.
| Special Economic Zone | Developer | Location | Area (Hectares) | Proposed Investment | Expected Employment |
|---|---|---|---|---|---|
| IT/ITES SEZ | Oulgaret Municipality | Thattanchavady Village, Oulgaret Taluk | 8.62 | ₹725 crore | 3,500 jobs |
| Multi-Sector SEZ | PIPDIC | Karasur Village, Villianur Taluk | 86.24 | ₹1,250 crore | 5,000 jobs |
The Thattanchavady IT/ITES SEZ
The IT/ITES Special Economic Zone is being developed at Thattanchavady village within the Oulgaret Taluk of Puducherry. Spanning 8.62 hectares, this project has a planned investment of ₹725 crore and is projected to create 3,500 direct and indirect jobs. What sets this project apart is its developer. Rather than a state agency or private company, the Oulgaret Municipality is the implementing body, making this the first-ever municipal-led SEZ in India.
The Karasur Multi-Sector SEZ
The second notified zone is a Multi-Sector Special Economic Zone located at Karasur village in the Villianur Taluk of Puducherry. Spread across a much larger area of 86.24 hectares, the development will be managed by the Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC). PIPDIC has proposed an investment of ₹1,250 crore for this zone, aiming to generate 5,000 direct and indirect jobs by hosting a variety of manufacturing and service industries.
Institutional Significance: Municipalities as Economic Developers
The selection of the Oulgaret Municipality (also known as Uzhavarkarai) to develop the Thattanchavady IT/ITES SEZ represents a major shift in how local urban bodies function in India. Traditionally, SEZ developers are state-level industrial promotion bodies or private business corporations. By empowering a municipality to develop and operate an export-oriented economic zone, the project establishes a new precedent for municipal administration.
Historically, the Oulgaret Municipality began as the Oulgaret Commune Panchayat under French colonial rule in 1880. Following the integration of Puducherry into the Indian Union, the commune was upgraded to a full municipality on January 14, 1994. In India, local governance is guided by the 74th Constitutional Amendment Act, 1992, which mandates the devolution of power to urban local bodies. Under this framework, municipalities are responsible not just for basic civic amenities but also for planning local economic development. The Thattanchavady project translates this constitutional mandate into practice, directly involving local governments in high-tech industrial growth.
Legal and Administrative Framework of SEZs in India
The establishment and operation of Special Economic Zones in India are governed by the Special Economic Zones Act, 2005, and the Special Economic Zones Rules, 2006. Under this legal framework, these zones are designated as duty-free enclaves. For all trade operations, duties, and tariffs, they are treated as foreign territory, which reduces compliance costs and tax burdens to attract investment.
The highest decision-making body for these zones is the Board of Approval (BoA), which functions as a single-window clearance mechanism. Chaired by the Secretary of the Department of Commerce within the Ministry of Commerce and Industry, the board evaluates all SEZ proposals. The two zones in Puducherry were approved during the 137th meeting of the Board of Approval on February 27, 2026.
While the municipal model is new, the involvement of industrial promotion corporations is a standard practice under the Act. The developer of the Karasur zone, the Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC), has a long history. Established by the local government on April 17, 1974, PIPDIC has dual functions as an industrial infrastructure builder and a financial assistance provider for regional businesses. It has developed several industrial estates in areas like Mettupalayam, Kirumambakkam, and Sedarapet over the past decades.
Expected Impact on Puducherry’s Economy
The introduction of these zones is set to provide a major boost to the economy of Puducherry. As a Union Territory governed under Article 239A of the Constitution of India, Puducherry operates with a local legislature and Council of Ministers established under the Government of Union Territories Act, 1963. While the territory has historically relied on agriculture, tourism, and light manufacturing, the new zones will help diversify its industrial base.
The combined investment of ₹1,975 crore will strengthen infrastructure in both the technology and manufacturing sectors. The Thattanchavady IT/ITES SEZ will enhance Puducherry’s digital service capabilities, while the Karasur Multi-Sector SEZ will cater to broader industrial requirements. Together, they are expected to create 8,500 jobs, reducing unemployment and attracting skilled talent.
At the national level, India’s SEZs have shown robust growth, with exports rising from ₹7.59 lakh crore in FY21 to ₹14.56 lakh crore in the 2024-2025 financial year. By establishing these new zones, Puducherry is positioning itself to capture a larger share of India’s growing export trade, integrating its local industries with global supply chains.
Key Takeaways
- The central government has notified two new Special Economic Zones in the Union Territory of Puducherry with a proposed investment of ₹1,975 crore.
- The IT/ITES SEZ in Thattanchavady village is being developed by the Oulgaret Municipality, making it the first municipal-led SEZ in India.
- The Multi-Sector SEZ in Karasur village is being developed by the Pondicherry Industrial Promotion Development and Investment Corporation (PIPDIC).
- PIPDIC was established on April 17, 1974 by the Government of Puducherry to promote industrial growth and provide financial assistance.
- Special Economic Zones in India are regulated under the Special Economic Zones Act, 2005, and the Special Economic Zones Rules, 2006.
- The apex approving body for SEZs is the Board of Approval (BoA), which is chaired by the Secretary of the Department of Commerce.
- Puducherry’s legislature is established under Article 239A of the Constitution of India and the Government of Union Territories Act, 1963.
