Par panel for detailed inquiry into operation of EOU scheme

Expressing serious concerns over irregularities and large scale misuse of the Export Oriented Unit scheme, a Parliamentary panel has asked for a detailed inquiry into "rampant abuse" of the scheme.
Keeping in view the "grave nature of the irregularities, the large scale misuse" and also taking into account the "enormous amount of revenue foregone", the committee is convinced that there is a need for undertaking a detailed inquiry into the manner of operation of this scheme.
"They accordingly recommend that a high powered independent inquiry should be ordered in the light of the facts contained in this report with a view to find out the unscrupulous elements responsible for the rampant abuse of the scheme and also to fix responsibility of the officers for the various acts of omissions and commissions," Public Accounts Committee said its report.

The report was on the performance of 100 per cent Export Oriented Unit (EOU) Scheme, introduced by the Department of Commerce in 1980. The purpose of the scheme was to boost exports by creating additional production capacity.
It allows the establishment of business units anywhere in the country with the duty to achieve a specified export obligation.
The committee also suggested that department of Commerce and revenue should conduct a comparative study of the benefits accrued to SEZ units and EOUs to find out the reasons for shifting of EOUs to SEZ sector.

It highlighted that the total number of EOUs have come down to 2,608 in 2013-14 from 3,109 in 2009-10. Though the duty foregone on the scheme remained static in 2012-13 and 2013-14 at Rs 5,800 crore, the export from these units dropped by 11 per cent in 2013-14 from the preceding fiscal.

It called for a suitable strategy to attract EOUs into this scheme and "all necessary steps should be taken to remove the impediments in their successful operations".
The committee observed that government had foregone significant customs and central excise duties to Rs 32,932 crore during 2009-10 to 2013-14 on EOUs/ Electronics Hardware Technology Park scheme/ Software Technology Park scheme.
"No serious attempt has been ever made by the ministry (Commerce) concerned to evaluate the impact of concessions, incentives, extended to EOUs from time to time," it added.
Further, it said irregular domestic tariff area sales were noticed in 48 cases by EOUs under the development commissioners of Mumbai, Cochin, Noida, Kandla and Falta.

The committee also found several shortcomings in the operation of the scheme. Scrutiny of some records revealed that 10 EOUs were allowed to exit from the scheme by allowing "incorrect rate of duty" on finished goods and "incorrect depreciation allowed on capital goods.