However, other manufacturer-exporters as well as service providers have been given only a 50 per cent bank guarantee exemption, says a notification issued by the revenue department to give effect to the EPCG scheme.

The new EPCG scheme is an off-shoot of the revised export and import policy notified by commerce and industry minister Murasoli Maran on March 31.

It allows imports of new capital goods at 5 per cent customs against an export obligation equal to five times the c.i.f. value of imported goods to be fulfilled in eight years. No additional customs duty will be charged on such imports.

Earlier, there were two windows - at 10 per cent and at zero duty - for import of capital goods under the export promotin capital goods scheme and the revised policy has merged these into one allowing imports at a uniform rate of 5 per cent.

In the case of service providers, the director-general of foreign trade (DGFT) will issue 5 per cent duty EPCG licences only for those who had been covered by the earlier 10 per cent duty scheme.

Further, service providers will be allowed to import only those equipment required by them for rendering services. Imports of consumer items like carpets, crockery, marble, chandeliers will not be allowed.

In addition, relocation of imported machinery under 10 per cent/5 per cent/zero duty schemes into factory/premises of (a) vendors/supporting manufacturers attached to manufacturer-exporters and merchant exporters, (b) contract farmers for export of agricultural products and (c) service providers is permitted.

Introduced from April 1, 1995, the zero duty EPCG scheme with a threshold limit of Rs 20 crore (c.i.f. vlue) for import of new as well as second-hand capital goods with a stiff export obligation was scrapped on March 31, 2000.The obligation was to be achieved on an f.o.b. basis or a net foreign exchange (NFE) basis. In the case of the former, the obligation was equal to six times the c.i.f. value of capital goods to be completed in eight years. NFE norms had prescribed four times the c.i.f. value of capital goods as the export obligation to be achieved in eight years.

Following changes in the exim policy announced on April 13, 1998, the zero duty scheme was liberalised by lowering the threshold limit of Rs 20 crore crore to Rs 1 crore for seven key sectors - garments, electronics, gems and jewellery, sports goods, leather, toys and agro and food processing.Subsequently in the new policy notified on March 31, 1999, the reduced threshold limit of Rs 1 crore was also extended to three more sectors, textiles, chemicals and plastics.