L.B. Singhal
Director General

Sub: i. Meeting held with Shri Arun Jaitley, Honourable Commerce & Industry Minister on Friday, April 16, 2004.

ii. Meeting held with Shri Dipak Chatterjee, Commerce Secretary on Thursday, April 15, 2004.

iii. Meetings held with Shri A.K. Singh, Chairman, CBEC and Shri Sidharth Kak, Member (Customs) on Thursday, April 15, 2004.

iv. EPCES Meeting with Press held on Friday, April 16, 2004.

v. Farewell Dinner for Shri Vinay Bansal, Additional Secretary, Ministry of

Commerce and Welcome Dinner for Shri G.K. Pillai, Additional Secretary, Ministry of Commerce held on Friday, April 16, 2004.

1. A delegation comprising Shri Sharad Jaipuria, Chairman, EPCES, myself, Shri R.K. Sonthalia, Member, Central Governing Council, Shri Vishwa Nath, Regional Chairman, EPCES, Noida Special Economic Zone, Shri Baldev Singh, Jt.Development Commissioner, SEEPZ Special Economic Zone called on Chairman, CBEC & Member (Customs) on Thursday, April 15, 2004. Delegation discussed in detail issues/problems being faced by EOUs/SEZ Units. A list of issues, in respect of which detailed representation was submitted to Department of Revenue, is enclosed for your ready reference.

2. EPCES delegation met Shri Arun Jaitley, Honourable Commerce & Industry Minister on Friday, April 16, 2004 and Shri Dipak Chatterjee, Commerce Secretary on Thursday, April 15, 2004. A list of issues, in respect of which detailed representation was submitted, is enclosed along with for your information.

3. EPCES organized Farewell Dinner for Shri Vinay Bansal, Additional Secretary, Ministry of Commerce and Chairman, Board of Approvals, who after promotion to the Secretary, Government of India has joined as Chairman, National Pharmaceutical Pricing Authority. EPCES also invited Shri G.K. Pillai, who has joined as Additional Secretary, Ministry of Commerce in place of Shri Vinay Bansal and welcomed Shri G.K. Pillai, Additional Secretary, Ministry of Commerce. EPCES had invited Shri S. Kak, Member (Customs) as well but because of pre-occupation he could not come. Shri Jayant Dasgupta, Joint Secretary, Ministry of Commerce, Shri A.K. Prasad, Director (Customs), Shri Ashok Kumar Meena, Deputy Secretary, Ministry of Commerce, Shri Mohan Pyare, Jt.Development Commissioner, Noida Special Economic Zone were also present on the occasion.

4. EPCES organized a Press Meet with leading newspapers on Friday, April 16, 2004 to highlight issues relating to EOUs/SEZ Units. In this Press Meet the representatives of following newspapers were present:

• · Economic Times.
• · Financial Express
• · Hindustan Times.
• · Hindu Business Line.
• · Press Trust of India.
• · United News of India.
• · Navbharat Times (Hindi).
• · Hindustan (Hindi).
• · World Trade Scanner.
• · Samachar Post.

Some of the clippings of the Press are also enclosed for your information.

This is for your information please.

List of issues, in respect of which detailed representation was submitted to Department of Revenue.

1. Removal of Service Tax on supplies to EOUs

2. Issues relating to Central Sales Tax Act

3. Exemption from the requirement of bank guarantee/security with B-17 Bond for import as well as for sub-contracting

4. Fast Track clearance/recognizing golden EOUs/SEZ Units

5. Availability of DEPB for supplies from DTA to SEZ units

6. Repeated registration with different ports and delay in registration with Customs Authorities.

7. Rationalization of duty structure on domestic sales by EOUs/SEZ Units

8. Abolition of cost recovery charges

9. Cenvat Credit facility to SEZs/EOUs.

10. Self Removal Process (SRP)

11. Payment of Excise Duty on monthly basis.

12. AED on High Speed Diesel

13. Duty on heavy furnace oil sludge

14. Permission to supply against CT-2/Annexure I

15. DTA sale of fabrics by EOUs – Rate of duty

16. Depreciation on Capital Goods

17. Procedure for granting permission for procurement of HSD

18. Clearance of samples by EOUs to DTA

19. DTA Sale of products manufactured by EOUs where excise duty is NIL

20. Negligible use of imported consumables.

21. Duty on statutory samples cleared from EOU.

List of issues, in respect of which detailed representation was submitted to Hon’ble Commerce Minister.

I. SUGGESTIONS RELATING TO EOUs

1. Continuation of EOU Scheme beyond 2010
2. Exemption from CST for supplies from DTA to EOUs
3. Exemption from Service Tax for supplies to EOUs
4. DEPB benefits for supplies of goods from DTA to EOUs
5. DTA Sale on the basis of duty foregone on imported Inputs plus Excise Duty on finished goods.

II. SUGGESTIONS RELATING TO SEZ UNITS

6. Availability of DEPB for supplies from DTA to SEZ
7. Supplies by SEZ to DTA against free foreign exchange
To be counted for discharge of export performance.
8. DTA Sale from SEZ on the basis of duty foregone On imported inputs plus Excise Duty on the finished Product

III. SUGGESTIONS RELATING TO CBDT

9. Doing away with the Sunset clause of 2010 under Section 10B of the Income Tax Act for EOUs.
10. Income Tax exemption for DTA units converted into EOUs
11. Income Tax exemption under Section 10A to existingSEZ units for a period of 10 years from the date of Conversion of EPZs into SEZs.
12. Income Tax exemption to Trading Units in SEZs under Section 10A of Income Tax Act.

IV. SUGGESTIONS RELATING TO CBEC

13. Exemption from Bank Guarantee
14. Dispensing with Cost Recovery Charges
15. Fast Track clearance for recognized EOUs/SEZ Units
16. Repeated registration with different ports and delay in Registration with Customs Authorities.

V. SUGGESTIONS RELATING TO BANKING

17. Availability of PCFC on priority
18. Extension of OBU facility to EOUs

PRESS COVERAGE
The Hindu - Business Line Monday, April 19, 2004

EOUs, SEZ units want benefits restored

Our Bureau
New Delhi , April 18

THE trade policy liberalisation and phased reduction in the country's tariff structure over the years together have robbed the 100-per cent export-oriented units (EOUs) and units located in the Special Economic Zones (SEZs) of their very rationale, depriving them of any preliminary advantage they had in this regard.

Addressing a news conference here, the newly-formed Export Promotion Council for EOUs and SEZs (EPCES) Chairman, Mr Sharad Jaipuria, said a delegation led by him has called on the Union Commerce and Industry Minister, Mr Arun Jaitley, Member (Customs) Central Board of Excise and Customs, Mr S. Kak, and the Commerce Secretary, Mr Dipak Chatterjee, and presented a charter of demands so as to restore reasonable benefits already conferred on them.

Mr Jaipuria said exports from EOU/SEZ units are being hit badly due to appreciation of rupee and decline in forward premium on dollar. In the last one year, the rupee has appreciated roughly 10 per cent against the dollar. Similarly, the one-year premium of dollar, which was hovering between 5 and 6 per cent, has come down to zero. Hence the cumulative loss to the EOU/SEZ units is 14-15 per cent. He said against the exports of Rs 40,000 crore, the loss to SEZ/EOU sector is approximately Rs 6,000 crore which the industry is unable to absorb, blunting the competitiveness of this sector.

As exports from EOU/SEZ are all set to go up from Rs 32,785 crore in 2002-03 to over Rs 40,000 crore in 2003-04, Mr Jaipuria deplored the units in this sector have not been obtaining pre-shipment credit in foreign exchange from various banks, despite earning high foreign exchange.

Mr Jaipuria said that when a domestic tariff area unit is converted into EOU, then such units must continue to get the benefit of income tax exemption. He said that though trading activity has been allowed in the SEZ, such units engaged in trading are not entitled to income tax exemption. He said that if India is to become a hub of international trading as well, this facility should be extended to EOU/SEZ units.

Of the 2,300 operational EOUs and SEZ units, EPCES had enrolled over 1,500 EOUs/SEZ units including units with export turnover ranging from Rs100 crore to Rs 1,000 crore a year, Mr Jaipuria said. He said Golden EOUs/SEZ units should be recognised on certain criteria such as investment and performance and given some benefits such as exemption from procurement certificate, exemption from bank guarantee/security, clearance of goods from customs/excise on self-declaration basis. He said a detailed scheme has already been sent from the Ministry of Commerce to Finance for early action, he added.

As this sector has shown an average growth of 30 per cent in the last decade, the Council is looking ahead to achieve exports of $20 billion by 2010 and $80 billion by 2020. He said the Council has plans to organise overseas activities by taking trade delegation from among its members to Latin America, Africa, CIS and South East Asia in 2004-05, keeping in view the multi-product interests of its members. The Council also proposes to host seminars/workshops one each in seven SEZs on export-related subjects this year.

Mr L.B. Singhal, Director-General of the EPCES, said unlike other product-specific Councils for export promotion, it is the first and unique scheme-specific export promotion council for serving the interests of exclusive exporting community. He said there is no justification for asking bank guarantee from EOUs as they operate in customs bonded areas.

While a domestic exporter with a turnover of Rs 1 crore and above is not required to give any bank guarantee, under the EOU scheme, even units such as Moser Baer India Ltd, Dr Reddy's Lab, Hindustan Lever which are doing exports of more than Rs 500 crore individually are required to furnish bank guarantee to the customs along with B-17 Bond, before effecting any shipment.

Mr Singhal said that EOU/SEZ units could take advantage of the market development assistance (MDA) scheme, since as per revised MDA guidelines effective from April 1, 2004, MDA is permissible to exporter with a free-on-board value of exports upto Rs 5 crore in the preceding year.

THE FINANCIAL EXPRESS,
Monday, April 19, 2004

EPCES Seeks Sops To Reach $20 Bn Exports

NEW DELHI, APRIL 18: Aiming to achieve $20 billion exports by 2010 from export oriented units (EoUs) and special economic zones (SEZ) -- the apex Export Promotion Council of EoUs and SEZ (EPCES) -- has asked the government for discontinuation of sunset clause of 2010, availability of pre-shipment credit in forex and controlling appreciation of the rupee against the dollar.

"No new EoUs will come up because of the sunset clause of 2010 as the period of six years is a very short period for setting up units, starting operations and then recovering investments," Sharad Jaipuria, the newly elected chairman of EPC for EoUs and SEZ units said.

Mr Jaipuria has also sought income tax exemption for domestic tarrif area units converting to EoUs and also for trading activity in SEZs.

Expressing concern over the non-availability of pre-shipment credit in forex to EoUs and SEZs, he said though the sector was responsible for earning forex up to $6.8 billion during 2002-03, the units were not able to get pre-shipment credit in forex from banks.

Lamenting over the impact of the rising rupee against the dollar, Mr Jaipuria in his first interaction with media on Friday sought immediate intervention by the Reserve Bank of India. He said the rupee appreciation by nearly 10 per cent in a year’s time had eroded exporters competitiveness in global markets resulting in loss of business for them. Mr Jaipuria said that the sector, which currently had investment of about Rs 20,000 crore had witnessed a growth rate of nearly 46 per cent in 2003-04.