DOING BUSINESS WITH INDIA
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PARTIALLY CONVERTIBLE RUPEE :
From 3rd March, 1992, the rupee has been made a partially convertible currency, with the
eventual goal of making it freely convertible within two to three years. Under the
recently introduced Liberalised Exchange Rate Management System (LERMS) :
* All export receipts are to be surrendered to Authorised dealers 40% at the official rate, and 60% at market values
* Exporters can retain 15% of total receipts in foreign currency accounts out of the 60% surrendered at market rates to meet requirements such as travel, advertising, etc.
* Hard currency continues to remain available at for official rate
for imports under advance licences, imprest licences and replenishment of raw materials
for gems and jewellery exports, and for specified essential items.
* Foreign exchange will be available at market rates for all other imports.
* Foreign exchange requirements for private travel, debt servicing, dividend or royalty
payments and other remittances may also be obtained from banks or
exchange dealers at the current market rate.
* The system has the advantages of totally by-passing bureaucratic controls and
freeing importers from delays and inefficiencies.
EXPORT PROCESSING ZONES & EXPORT ORIENTED UNITS:
Export Processing Zones are designated areas within which
manufacturing or processing for the purpose of export is carried out. They are designed to
provide internationally competitive infrastructural facilities along with the
advantages of a duty-free, low-cost business environment.
India currently offers 6 such zones: Cochin (Kerala), Falta (West Bengal), Kandla
(Gujarat), Madras (Tamil Nadu), Noida (Uttar Pradesh) and Bombay (Maharashtra).
Export Oriented Units need not be located in an EPZ, but must be concerned with manufacture primarily for export purposes, and should adhere to specified value-addition norms.
The units can sell their product to Domestic Tariff Areas, to the
extend of 25% of the export sales, provided that the unit uses indigenous
raw material to the extent of 30% or more for the production .If the use of indigenous raw material is less than 30% DTA sales are correspondingly limited to 15% of export sales
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INCENTIVES FOR EXPORTING UNITS :
The new Export-Import Policy provides several new incentives for exporting units. Taken
together with existing incentives, there is now an attractive package for exporting units
which includes:
* Duty free imports of raw materials and components.
* Tax holiday for a period of five continuous years in the first 8 years from the year of
commencement of production.
* Exemption from taxes on export earnings even after the
period of tax holiday.
* Exemption from central and state taxes on production and
sale.
*Permission to install machinery on lease.
* Freedom to borrow self- liquidating foreign currency loans at the prime rate of
interest.
* Inter-unit transfers of finished goods among exporting
units.
* Decentralised single-window clearance of proposals concerning units in export
processing zones.
* EOU/EPZ units may export through Export Houses, Trading
Houses and Star Trading Houses.
FOREIGN INVESTMENT
IN EXPORTING ACTIVITIES:
In keeping with the Governments emphasis on encouraging exports, foreign investment upto
51% in international trading companies
receives automatic approval. Such companies should be engaged primarily in export
activities. Higher equity holding is also permissible, but this requires Government
approval.
In addition, upto 100% foreign equity holding is welcomed in
Export Oriented Units and units located in Export Processing
Zones.
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