CHAPTER - VI FOREIGN EXCHANGE EARNING – REQUIREMENTS AND MONITORING

53. Net Foreign Exchange Earnings.

The Unit shall achieve Positive Net ForeignExchange to be calculated cumulatively for a period of five years from thecommencement of production according to the following formula, namely:-Positive Net Foreign Exchange = A – B >0where:

A: is Free on Board value of exports, including exports to Nepal andBhutan against freely convertible currency, by the Unit and the value of followingsupplies of their products, namely: -

(a) supply of goods against Advance Licence or Duty Free ReplenishmentCertificate under the Duty Exemption or Remission Scheme or DiamondImprest Licence under the Foreign Trade Policy;

(b) supply of capital goods to holders of licence under the Export PromotionCapital Goods scheme under the Foreign Trade Policy;

(c) supply of goods to projects financed by multilateral or bilateral agenciesor funds as notified by the Department of Economic Affairs, Ministry ofFinance under International Competitive Bidding in accordance with theprocedures of those agencies or funds, where the legal agreementsprovide for tender evaluation without including the customs duty;

(d) supply of capital goods, including those in unassembled or disassembledcondition as well as plants, machinery, accessories, tools, dies and suchgoods which are used for installation purposes till the stage of productionand spares to the extent of ten per cent. of the free on rail value tofertilizer plants;

(e) supply of goods to any project or purpose in respect of which the Ministryof Finance, by a notification, permits the import of such goods at zerocustoms duty;

(f) supply of goods to the power projects and refineries not covered in (e)above;

(g) supply to projects funded by United Nations Agencies;

(h) supply of goods to nuclear power projects through competitive bidding asopposed to International Competitive Bidding;

(i) supply made to bonded warehouses set up under the Foreign Trade Policyor under section 65 of the Customs Act and free trade and warehousing zones, where payment is received in foreign exchange;

(j) supply against special entitlements of duty free import of goods under theForeign Trade Policy;

(k) export of services by services units including services rendered withinSpecial Economic Zone or services rendered in the Domestic Tariff Area and paid for in free foreign exchange or such services rendered in IndianRupees which are otherwise considered as having been paid for in freeforeign exchange by the Reserve Bank of India;

(l) supply of Information Technology Agreement items and notified zero dutytelecom or electronic items, namely, Color Display Tubes for monitorsand Deflection components for colour monitors or any other items as maybe notified by the Central Government;

(m) supply to other units and Developers in the same or other SpecialEconomic Zone or Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park Units or Bio-technology Park Unit provided that such goods and services are permissible for import or procurement by such units and Developers;

(n) supply of goods to Domestic Tariff Area against payment in foreign exchange from the Exchange Earners Foreign Currency account of the Domestic Tariff Area buyer or Free Foreign Exchange received from overseas;

(o) supply of goods against free foreign exchange by a Free Trade and Warehousing Zone Unit;

Explanation: For the proposes of this sub-rule, the supplies under clause (m) shall be against procurement certificate, as applicable and the supplies under clauses (d) to (h) and (j) shall be as per the terms and conditions of the respective duty exemption notified by the Central Government, in the Ministry of Finance; and B: consist of sum of the following:-

(a) sum total of the Cost Insurance and Freight value of all imported inputs used for authorized operations during the relevant period and the Cost Insurance and Freight value of all imported capital goods including goods purchased on high seas basis even though paid for in Indian Rupees and the value of all payments made in foreign exchange by way of export commission, royalty, fees, dividends, interest on external commercial borrowings during the first five year period or any other charges;

(b) value of goods obtained from other Unit or Export Oriented Unit or Electronic Hardware Technology Park or Software Technology Park Unit or Bio-technology Park Unit or from bonded warehouses or procured from international exhibitions held in India or precious metals procured from nominated agencies;

(c) the Cost Insurance Freight value of the goods and services, including prorata Cost Insurance Freight of capital goods, imported duty free or leased from a leasing company or received free of cost and or on loan basis or on transfer for the period they remain with Unit;

Explanation: - for the purposes of this sub-rule "Inputs" mean raw materials, intermediates, components, consumables, parts and packing materials.

(d) for annual calculation of Net Foreign Exchange, value of imported capital goods and lump sum payment of foreign technical know-how fee shall be amortized at the rate of ten per cent. every year from the first year to tenth year.

54. Monitoring of performance

(1) Performance of the Unit shall be monitored by the Approval Committee as per the guidelines given in Annexure appended to these rules.

(2) In case the Approval Committee come to the conclusion that a Unit has not achieved positive Net Foreign Exchange Earning or failed to abide by any of the terms and conditions of the Letter of Approval or Bond-cum-Legal Undertaking, without prejudice to the action that may be taken under any other law for the time being in force, the said Unit shall be liable for penal action under the provisions of the Foreign Trade (Development and Regulation) Act, 1992