Govt likely to announce steps to revive export units

Revival of these units will help boost India's exports and reduce CAD

The government is likely to soon announce measures to revive investor interest in Export Oriented Units (EOUs), a move that will help boost shipments overseas and contain current account deficit.

Officials from the Commerce and Revenue department have already held several rounds of meetings on the recommendations of a committee to revamp the 30-year old EOU scheme.

"We are considering several steps including simplification of procedures for EOUs. The steps will help in making EOUs more investor friendly as investments in these units have declined over the period," a senior official in the commerce ministry told PTI.

Besides, revival of these units would help boost India's exports and reduce CAD, the difference between the inflows and outgo of foreign exchange. CAD touched a record high of 4.8% of GDP in 2012-13. During April-August, India's exports grew by 3.89% to USD 124.4 billion.

After expiry of tax benefits for the EOUs, the government in 2011 had set up a committee under the chairmanship of S C Panda, Development Commissioner, Noida SEZ, to revamp the scheme in sync with the changing business environment and gel with the Special Economic Zones.

The committee had recommended 32 measures which included host of tax incentives like exemption from customs duty, central excise and service tax.

"However, the government is unlikely to provide any kind tax incentives to EOUs. The government is mulling to provide investment-linked incentives to these units ," the official said, adding that "things will be finalised in about 10 days".

The committee had suggested several procedural simplifications and steps to reduce transaction cost in order to arrest the declining trend in setting up of EOUs and their exports.

The EoU scheme, introduced in December 1980, had allowed manufacturing units in the Export Processing Zones to enjoy 100% income-tax exemption on profits from overseas sale and also duty free import of raw material.

As the scheme had a sunset clause, the tax benefits were stopped from March 2010. This scheme was immensely used by SMEs sector for setting up their units for export purpose.

The objective was to encourage additional production capacity in manufacturing sector by attracting foreign investment and create employment in the country.

Besides, it had also suggested rationalisation of administrative mechanism for setting up an EOU, setting up warehousing facilities outside the unit premises and sharing of facilities among EOU/STP/EHTP/SEZ unit.

Apart from EOUs, the scheme includes Electronics Hardware Technology Parks (EHTPS) and Software Technology Parks (STPS).

Till 2009-10, 2,586 EOUs, 8,121 STPs and 144 EHTPs were operating in the country. EOUs had made export of goods and services worth Rs 84,135 crore, besides exports from STPs and EHTPs of Rs 2,05,505 crore and Rs 8,028 crore respectively in 2009-10.