Government allows SEZs to access overseas funds

The government has decided to continue the existing policy of permitting development of integrated township as a permissible end-use for external commercial borrowings, under the approval route, until December 2009.

While utilisation of ECB proceeds for the real estate is not permitted as per extant policy, the government allowed the use of ECB proceeds for the development of integrated township (as defined in Press Note 3 (2002 Series) dated January 04 2002) as a sector-specific measure in January 2009, a government release said, adding, the policy was due for review in June 2009.

On a review, it has been decided to allow SEZ developers to avail of ECB, under the approval route, for providing infrastructure facilities, as defined in the extant ECB policy, within the SEZ. However, ECB will not be permissible for development of integrated township and commercial real estate within the SEZ.

Currently, the ECB policy is not explicit about accessing of ECB by the corporates, which have violated the extant ECB policy and are under investigation by the Reserve Bank and / or Directorate of Enforcement. It is clarified that corporates, which have violated the extant ECB policy and are under investigation by the Reserve Bank and / or by Directorate of Enforcement, will not be allowed to access the automatic route for ECB. Any request by such corporates for ECB will be examined under the approval route, the release added.

All other aspects of the ECB policy, such as $500 million limit per company per financial year under the automatic route, eligible borrower, recognised lender, end-use, average maturity period, all-in-cost, prepayment, refinancing of existing ECB, reporting arrangements, etc, remain unchanged, it said.

The above amendments in the ECB policy will come into force on the date of notification of regulations/directions issued by the Reserve Bank in this regard under the Foreign Exchange Management Act, 1999.