The Hindu Business Line : Export units want sops on par with SEZs

THE Confederation of Export Units (CEU) has demanded that the rules applicable to units situated in the special economic zones (SEZs) should be extended to the 100 per cent export-oriented units (EOUs) also in order to keep them globally competitive.

The CEU is a body of the 100 per cent EOUs. According to the CEU President, Mr S.K. Saraf, the tax laws applicable to the EOUs as compared to the units located in the SEZs make domestic procurements costlier for the former . ``This is extremely important to bring in fresh investments for setting up EOUs which account for more than double the exports from all the SEZs taken together.''

Additionally, it is also necessary to remove the sunset clause on tax holiday that says that income tax holiday will be available to the EOUs only till 2000. ``It takes two to three years to establish an unit and earn profit practically leaving hardly any period left for them to avail income tax benefits,'' he said.

The CEU has demanded that the Government should reconsider the SEZ Bill and rework it as EOU & SEZ Bill thereby treating the EOUs as an extension of the SEZs.

According to data provided by CEU, during fiscal 2002-03, 1,701 EOUs have exported goods worth Rs 22,729 crore of which 70 per cent was net forex earnings. Total investment in these units stand at Rs 18,168 crore and employs around six lakh people.

On the other hand, during the same period, 732 SEZ units exported goods worth Rs 10,000 crore of which 56 per cent was net forex earnings. Total investments in these units are Rs 2,200 crore and together they employ around one lakh employees.

It has also been demanded that the Government should provide external commercial borrowings facilities to the EOUs at par with the SEZ units.

The RBI has issued guidelines to all the banks for extending pre-shipment credit and post-shipment credit in foreign currency at a rate that should be LIBOR plus 0.75 per cent.

This comes to around two per cent, Mr Saraf said and added that in reality, most of the banks have expressed their inability to extend such funds on the pretext that they do not have foreign currency funds and the borrowers have to utilise these credits in rupee loans at eight per cent interest rate which is four times the cost it should have been and urged the Government to remove the anomalies.