Parliament panel for enquiry into abuses in export units scheme

Indian Parliament. (File Photo: IANS)

New Delhi – Parliament’s Public Accounts Committee has voiced serious concern over irregularities and widespread misuse of the 100 percent export oriented units (EOUs) scheme and has called for a detailed inquiry into the “rampant abuses”.

“They (PAC) accordingly recommend that a high-powered independent inquiry should be ordered in the light of the facts contained in this report with a view to find out the unscrupulous elements responsible for the rampant abuse of the scheme and also to fix responsibility of the officers for the various acts of omissions and commissions,” Public Accounts Committee said its report presented in parliament earlier this week.

Keeping in view the “grave nature of the irregularities, the large scale misuse” and also taking into account the “enormous amount of revenue foregone”, the committee said it is convinced that there is a need for undertaking a detailed inquiry into the manner of operation of this scheme.

Noting that the total number of EOUs have come down to 2,608 in 2013-14 from 3,109 in 2009-10, the PAC also suggested that the departments of commerce and revenue should conduct a comparative study of the benefits accrued to special economic zone (SEZ) units vis-a-vis EOUs to find out the reasons for shifting of EOUs to the SEZ sector.

Though duty foregone on the scheme remained static in 2012-13 and 2013-14 at Rs.5,800 crore, exports from these units dropped by 11 percent in 2013-14 from the previous financial year.

“Development commissioner, Santacruz Electronics Export Processing Zone (SEEPZ) Mumbai said the major factors responsible for poor growth of exports from EOUs were withdrawal of income tax benefit under section 10B of the Income Tax Act, 1961 (with effect from April 1, 2011) decreasing profit margins on export products, more attractive schemes like SEZ, where similar export benefits are available to the domestic unit without any domestic sales limitation,” the report said.

It called for a suitable strategy to attract EOUs into the scheme and “all necessary steps should be taken to remove the impediments in their successful operations”.

The committee also that government had foregone significant customs and central excise duties at Rs.32,932 crore during 2009-10 to 2013-14 on EOUs, the Electronics Hardware Technology Park and Software Technology Park schemes.

“No serious attempt has been ever made by the ministry concerned to evaluate the impact of concessions, incentives extended to EOUs from time to time,” it said.

It also noted irregular domestic tariff area sales in 48 cases by EOUs under the development commissioners of Mumbai, Cochin, Noida, Kandla and Falta.

Further, its scrutiny of records revealed that 10 EOUs were allowed to exit from the scheme by allowing “incorrect rate of duty” on finished goods and “incorrect depreciation allowed on capital goods”.