New Delhi, Mar 12: The confederation of 100 per cent export oriented units (CEU) has proposed an alternative scheme whereby the units are allowed to operate in a new regime free of customs bonding, sub-contracting or restrictions on sale of end-products or waste and scrap in the domestic tariff area (DTA).If the first alternative to the existing EOU scheme does not find favour with the government, the confederation suggests that its second option be considered. Both the alternatives follow suggestions thrown up at a recent meeting two senior government officials had with representatives of the CEU in Delhi recently. The officials are additional secretary in ministry of commerce Nripendra Misra and director (customs), Central Board of Excise and Customs SC Choudhary.
In addition to the alternatives, CEU has also urged the government to permit EOUs to sell more than the normal permitted quantity in the DTA to take care of the crisis-generated surplus stock flowing from the currency turmoil in south-east Asia. EOUs which have not utilised the permitted DTA sale entitlements in the past may be given a "credit balance" of such entitlements which they can use any time to meet contingencies during their stay in the EOU scheme. Other measures suggested by CEU are: a moratorium on term-loans installments, interest payments, export and value addition obligations, additional special import licence facility, allocation of special reserved quotas for cotton yarn for EOUS and permission to export soft waste in the textile industry.
In addition, the government should consider granting EOUs a "national priority status" at both the central and state levels as they commit to export 70 per cent of their production value. Pointing out that EOUs are effective as thse country's long-term economic ambassadors abroad, CEU recommends that they be given a "green passport" linked to their green card. The green passport should contain about 150 pages to avoid repeated addition of pages and be valid for 20 years to facilitate long-term visas and recognition of their national economic contribution.
The first alternative scheme envisages that the EOUs will remain in operation for a period of five to 10 years as they choose. They will earn a minimum net foreign exchange or 10 per cent in the case of products with indigenous inputs of 95 to 100 per cent as also for software and other such products to be notified and 20 per cent in all other cases.
Capital goods import will be duty deferred as of now with depreciation of up to 90 per cent. There will be nil duty on such capital goods after EOUs have completed their obligations. There will be no bank guarantee. Instead, arrangements will be made for insurance of duty element deferred or foregone by the government. Under the second alternative scheme, CEU says the EOUs will undertake an export obligation equal to 75 per cent of value of production and at least 20 per cent value addition. Import of capital goods shall be as per the export promotion capital goods scheme. This is subject to the condition that the 75 per cent obligation is well above the EPCG stipulation along with the obligation on raw materials, if any.
If this is not acceptable to the government, the units may be allowed import of capital goods but with 90 per cent depreciation and nil duty on fulfillment of obligations. Further, no restrictions may be applied on DTA sale unless the item is in the negative list and the export obligation and value addition norms are fulfilled.
Moreover, DTA supplies to EOUs must be treated as deemed exports with all the facilities available to physical exports, while EOU supplies to DTA be permitted against any type of licence which implies foreign exchange outflow to be treated as exports and given all related benefits. For all practical; purposes, a single bond will suffice.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
