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The Centre has cleared two aerospace export-oriented unit (EOU) ventures of the Tatas near Hyderabad involving an investment of Rs 335 crore.
The two projects approved by the inter-ministerial Board of Approval for EOUs include a Rs 165-crore joint venture between the Tatas and Lockheed Martin for manufacture of ‘aircraft structural assemblies' such as centre-wing box and empennage or tail assembly of aircraft.
The other venture involves an investment of Rs 170 crore by Tata Aerostructure Systems Ltd for making helicopter-cabin kits and parts and accessories for aircraft. These investments come at a time when companies are exiting the EOU scheme due to discontinuation of income-tax benefits from April 1.
Single window
Official sources told Business Line that the Tatas have chosen the EOU route despite the lack of fiscal incentives mainly due to the single-window clearance mechanism under the scheme, which enables faster approvals and ease of operations.
These two projects were cleared by the Unit Approval Committee for EOUs in Hyderabad on July 8 and later by the board on July 22. These EOUs come under the jurisdiction of the Development Commissioner of Visakhapatnam Special Economic Zone.
The sources said the Foreign Investment Promotion Board (FIPB) had approved the ventures. The FIPB had last December approved a proposal by Tata Advanced Systems Ltd involving foreign investment of Rs 42.82 crore. The equity was to help Tatas undertake defence production. The proposal, the sources said, was regarding the joint venture with Lockheed, where Tata will hold 74 per cent stake, whereas Lockheed Martin will take the remaining 26 per cent stake, as required by norms for foreign direct investment in the defence sector.
The salient feature of the EOU Scheme is that companies are free to set up a unit anywhere in the country. By 2009-10, there were 2,586 EOUs, 8,121 software-technology parks and 144 electronic-hardware-technology parks operating in the country. Exports in 2009-10 under the scheme were worth Rs 2,97,668 crore.
But the share of EOUs in India's exports fell to 46.5 per cent in 2008-09 from 53.9 per cent in 2007-08, and further to 35.2 per cent in 2009-10 and 25.17 per cent in 2010-11 (up to December 2010). This was mainly because 354 units had exited the scheme in 2010-11 (up to December 2010), while 393 units exited in 2009-10 as income-tax benefits for such units were rolled back.
Last month, a Government panel had suggested extension of investment-linked income-tax benefits and a host of other fiscal sops to EOUs. It had recommended fiscal measures, new policies, simpler procedures and lower transaction costs for EOUs to “reverse the declining trend in setting up of EOUs and their exports”.
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