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Deemed export units in private and public sectors may get same benefits

Neena Haridas in New Delhi

The Union Budget in all likelihood will put private sector and public sector units identified as 'deemed export units' on par with each other.

According to sources, the existing 15 per cent preference accorded only to public sector equipment suppliers while bidding for projects, is likely to be extended to private sector companies as well.

This move is significant considering that companies such as Larsen &Tubro have for long been involved in projects funded by multi-lateral agencies such as the World Bank and Asian Development Bank.

And they have been seeking that the private sector be treated on par with public sector units. Deemed exports refers to transactions in which the goods supplied do not go out of the country.

According to government officials, the move will increase the number of such projects taken up by domestic companies.

The proposal is based on the recommendations of the panel headed by special secretary (external finance) B K Chaturvedi, set up by Finance Minister Yashwant Sinha to review the entire range of sops presently accorded under deemed exports.

The finance ministry is expected to incur a revenue loss of nearly Rs 10 billion in the current fiscal year on account of deemed export concessions. In 1998-99, the loss was Rs 4.85 billion.

The review was initiated shortly after the Export - Import Policy of 1997-2002 accorded special sops to equipment suppliers to mega power projects.

Suppliers to these projects were allowed to avail of deemed export status as well as zero customs duty.

Apart form this, the Export Promotion Capital Goods Scheme licence-holders can also fulfil their export requirements by supplying to mega power projects.

"EPCG licence-holders who supply to mega power projects (which have been given facility to import at zero duty) earlier could get either deemed export benefits or count their supplies to these projects towards fulfillment of export obligations. Now they can do both," officials explained.

Mega power projects are projects with a capacity of over 1,000 mega-watt, which supply power to more than one state.

Promoters of such projects have been given various sops in the form of customs duty waivers as well as longer tax holiday to enable them to keep tariffs at very low levels.

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