Monday, May 07, 2007

Nath not in tune with FM on SEZ forex earning rule



NEW DELHI: Determination of export obligation for units in SEZs is
proving to be a tricky issue for the government. While the eGoM on SEZs
had asked the finance and commerce ministries to examine the feasibility
of introducing an additional export obligation, the two ministries are
finding no meeting point on the issue.

The eGoM had said that in addition to the existing criteria requiring
SEZ units to be net foreign exchange earners, it should be examined
whether another obligation requiring units to export goods equal to the
value of inputs bought by them from the domestic tariff area (DTA)could
be imposed.

When an export obligation is imposed on a unit, it is committed to carry
out exports — depending on the level of obligation imposed — in return
for the various concessions. The finance ministry feels the current
export obligation requiring SEZ units to be net foreign exchange earners
is not enough to ensure adequate exports. The commerce ministry,
however, believes the net foreign exchange criteria should be enough
provided checks are introduced to rule out foul play.

Speaking to ET, commerce ministry officials said they realised the need
to prevent misuse of rules. One possible misuse could be that an SEZ
unit could set up a subsidiary in the DTA and source goods from it with
the DTA unit claiming concessions in lieu of the deemed exports made to
the SEZ unit.

To prevent such cases, the commerce ministry has suggested that in case
a DTA unit is fulfilling its export obligation by supplying goods to an
SEZ unit, the value of sales should be added to the SEZ unit's export
obligation. The finance ministry argues there could be units that are
not importing at all, and which would not have to export anything if the
export obligation is restricted to units being net foreign exchange


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