labels: industry - general, economy - general
Commerce, finance ministry disagree over SEZ forex earning rulenews
19 June 2007

New Delhi: The finance and commerce ministry seem to be at loggerheads over the issue of of introducing an additional export obligation.

The eGoM on SEZs 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.

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 earners.

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Commerce, finance ministry disagree over SEZ forex earning rule