The Hindu Business Line : Norms to calculate forex eased for EoUs facing export curbs

New Delhi, July 25 Export oriented units (EOUs) that were finding it difficult to meet positive net foreign exchange (NFE) earnings within a specified span due to a ban or export duty imposed on their export product have cause for cheer.

The Government has operationalised a policy change that would allow these units to calculate net foreign exchange for any extended period that may be specified by the Board of Approvals.

Prior to this change, the amount was computed for a five-year block period from the commencement of production.

Under the existing policy framework for EOUs, all such units would have to be positive net foreign exchange earners.

Placing bans

With the Centre placing export ban on various products or imposing export duty to discourage exports and enhance domestic supplies to tame inflation, the EOUs and export promotion bodies (such as Federation of Indian Export Organisations) had represented that it would be difficult for units to achieve positive net foreign exchange within a block of five years. So the board was empowered to suitably extend the period on a case-to-case basis, said sources familiar with the development.

As part of its fight against double-digit inflation in the economy, the Government had placed an export ban on rice, pulses, maize and also on cement (ban is not applicable for cement exports made out of Gujarat).The Centre had also slapped export duty on steel.

The latest policy relaxation of the Government comes as a relief for EOUs, which were already impacted by falling import duties over the recent years. However, the annual exports from EOUs had grown exponentially over the last five years from Rs 23,591 crore in 2002-03 to Rs 69,965 crore in 2006-07. In 2007-08, exports from EOUs are estimated at about Rs 1,25,000 crore.

Meanwhile, the Directorate General of Foreign Trade has also sought to improve the monitoring of achievement of positive net foreign exchange by EOUs. For failure to achieve positive net foreign exchange, after completion of one year from the date of commencement of production, a cautionary letter can now be issued by the authorities. At the end of third year or subsequent year, show cause notice will be issued if it is not achieved.

If it is not achieved within the block period specified by the Board of Approval, then the Development Commissioner could initiate action under the Foreign Trade (Development & Regulation) Act, 1992, officials said.

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Norms to calculate forex eased for EoUs facing export curbs