The Hindu Business Line : EPCG scheme norms further liberalised

THE Commerce Minister, Mr Arun Jaitley, has made the Export Promotion Capital Goods (EPCG) scheme more attractive by further easing export obligation norms under the scheme, and extending the "duty-saved" formula to EPCG licences issued prior to the current fiscal.

Under the EPCG scheme, exporters are allowed to import capital goods, including computer software systems, at a concessional 5 per cent duty. Prior to the 2003-04 Exim Policy, these concessional imports were allowed subject to their fulfilling an export obligation amounting to five times the c.i.f (cost, insurance and freight) value of imported capital goods over a period of eight years from the date of issuance of licence.

Following the Exim policy, the export obligations were linked to the value of duty saved, which, in turn, was computed against the normal import duty applicable on the imported capital good. The export obligation itself was set at eight times the duty saved amount and to be fulfilled over an eight-year period.

In Wednesday's "mini" Exim Policy, Mr Jaitley has extended the duty-saved formula not only to EPCG licences issued after April 1, 2003, but also on those issued prior to that date. "Export obligations of past EPCG licences have been refixed in line with the present policy, i.e. exports to be eight times the duty saved, instead of the earlier five times the c.i.f value," he said.

The Exim policy had also granted exporters the flexibility to fulfil their export obligations by exporting any other product manufactured or services rendered by them. Thus, if a potato chips manufacturer were to import machinery under the EPCG, he could discharge his export obligation by shipping basmati rice produced by him.

In Wednesday's announcement, the scope for discharge of export obligations has been even more enhanced to include exports of products/services not just by the exporting firm concern, but "group companies" as well. Further, clubbing of EPCG licences has been allowed for discharge of export obligations, provided these are issued during the same licensing year and they pertain to the export of the same product or services.

In addition, import of spares, including refractories, catalysts and consumables, have also been permitted under the EPCG now.

Finally, there is a major procedural simplification with regard to "nexus certification" by the Director-General of Foreign Trade (DGFT), which is done to ensure that capital goods imported under the EPCG scheme are meant for producing the goods that are to be exported.

For EPCG licences involving duty savings of up to Rs 50 crore, the nexus certification can now be done by a Chartered Engineer and the latter's certificate would suffice for the Regional Licensing Authority (RLA) to grant the licence.

For amounts above Rs 50 crore, the application will have to be made to the DGFT headquarters, where it would be scrutinised by a technical committee.

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