PRESENTATION on

Dated: 04th NOV 2008

P.P.S.TOMAR DGM(CORP. CONTRACTS)

SCOPE OF PRESENTATION

INTRODUCTION MEGA POWER PROJECT DEEMED EXPORT BENEFITS BENEFITS FOR MEGA POWER PROJECT CONCLUSION

MEGA POWER PROJECT

BACKGROUND Ministry of Power, Govt. of India; D.O. No. C-286/95-IPC dated 10.11.1995 Regarding Setting up of Power Plants of Capacity 1000 MW or more supplying Power to more than one State.

MEGA POWER PROJECT

REQUIREMENTS FOR MEGA POWER PROJECT STATUS: Power Plant with Inter State Distribution Capacity Thermal Power Plant Having capacity of 1000 MW or more except for North Eastern States and Jammu & Kashmir where this limit is 700 MW Hydro Power Plant Respective limits for Hydro Power Plants are and 350 MW

500MW

(As certified by an officer not below the rank of Joint Secretary to GOI in MOP)

MEGA POWER PROJECT

ADDITIONAL REQUIREMENTS FOR CERTIFYING A POWER PROJECT AS MEGA POWER PROJECT: The beneficiary States should have constituted their Regulatory Commissions with full powers to fix Tariffs. The beneficiary States undertakes, in principle, to privatise distribution in the cities having a population of more than one million, within a period to be fixed by MOP. The power purchasing state has agreed to provide recourse to that states share of Central Plan allocation and other devolutions towards discharge of any outstanding payment in respect of purchase of power.

FOREIGN TRADE POLICY

FOREIGN TRADE POLICY (2004-2009)

Ministry of Commerce, Government of India (GOI) has issued a Foreign Trade Policy (FTP) & Handbook Of Procedure : 2004-2009 Annual Supplements are also incorporated by Ministry of Commerce. Latest supplement has updated this policy on 11th April, 2008 w.e.f. 1st April, 2008

DEEMED EXPORT BENEFITS DEEMED EXPORT Those transactions in which the goods supplied do not leave the country and the payment for such supplies is received in Indian rupees or in free foreign exchange. It is essential for the goods to be manufactured in India for being eligible to be considered as Deemed Exports. Though the Deemed Exports are not physical exports, they are eligible for certain export related facilities and benefits.

DEEMED EXPORT BENEFITS DEEMED EXPORT Clause 8.2 There are ten categories [(a) to (j)] of supply of goods by main /subcontractors which are regarded as Deemed Exports, provided goods are manufactured in India. Clause 8.2 (g): Supply of goods to Power Projects and Refineries Benefits of Deemed Export are available to various categories of supply including under 8.2 (g), only if the supply is made under procedure of International Competitive Bidding (ICB).

DEEMED EXPORT BENEFITS

BENEFITS FOR DEEMED EXPORT Clause No. 8.3 of FTP (a) Advance Authorization/Advance Authorization for annual requirement/DFIA Deemed Export Drawback Exemption from Terminal Excise Duty (TED) where supplies are made against ICB. In other cases, refund of TED will be given.

(b) (c)

DEEMED EXPORT BENEFITS

BENEFITS TO SUPPLIER

Clause No. 8.4

Supplier, in case of Power Project shall be eligible for benefits listed in 8.3(a) and (b), whichever is applicable. In case of Mega Power Project, Supplier shall be eligible for benefits listed in 8.3(a), (b) and (c), whichever is applicable. Further supply of Capital Goods and spares upto 10% of FOR value of Capital Goods to Power Projects shall be entitled for Deemed Export Benefits provided the ICB procedure is followed. Benefits of Deemed Exports are also available for Renovation/ Modernization.

DEEMED EXPORT BENEFITS

HOW BENEFITS ARE AVAILABLE : Chapter-4 of Foreign Trade Policy (FTP)

Duty Exemption & Remission Scheme

Duty Exemption Schemes

Duty Remission Scheme

Advance Authorization Duty Free Import Authorization

Duty Entitlement Passbook Scheme Duty Drawback Scheme

DEEMED EXPORT BENEFITS

TERMINAL EXCISE DUTY EXEMPTION:

Benefit is provided for exemption of Central Excise paid on finished goods supplied to project.

The claim is filed on the basis of procedure prescribed by central excise authority.

DOMESTIC SUPPLIES
DOMESTIC INPUTS (Raw Material, Intermediate Supplies, Sub-Assemblies etc) IMPORTED INPUTS (Raw Material, Intermediate Supplies, Sub-Assemblies etc)

EXCISE DUTY

X1

X2

X3

Y1

Y2

Y3

XY
FINAL PRODUCT (DOMESTICALLY MANUFACTURED)
TERMINAL EXCISE DUTY

FROM MAIN CONTRACTOR OR SUB-CONTRACTOR (S) WHOSE NAME APPEARS IN CONTRACT OR SUBSEQUENTLY ADDED

CUSTOM DUTY

DOMESTIC SUPPLIES (DEEMED EXPORT BENEFITS)

DOMESTIC INPUTS (Raw Material, Intermediate Supplies, Sub-Assemblies etc) IMPORTED INPUTS (Raw Material, Intermediate Supplies, Sub-Assemblies etc)

CUSTOM DUTY

EXCISE DUTY

X1

X2

X3

Y1

Y2

Y3

Advance Authorization Deemed Export Drawback

(CENVAT credit is not availed)

XY
FINAL PRODUCT (DOMESTICALLY MANUFACTURED)

Deemed Export Drawback

FROM FROM MAIN CONTRACTOR MAIN CONTRACTOR OR OR SUB-CONTRACTOR (S) SUB-CONTRACTOR (S) WHOSE NAME APPEARS IN WHOSE NAME APPEARS IN CONTRACT OR CONTRACT OR SUBSEQUENTLY ADDED SUBSEQUENTLY ADDED

TERMINAL EXCISE DUTY (Exempted in case of Mega)

BENEFITS FOR MEGA POWER PROJECT

Nil Custom Duty under the Project Import (Chapter 9801) Deemed Export Benefits 8.3(a) Advance Authorization 8.3(b) Deemed Export Drawback if CENVAT Credit is not availed 8.3(c) Terminal Excise Duty Exemption

Price Preference to Domestic Bidder if Project is under Income Tax Benefits

CPSU

Saving in case of Mega Power Project on Foreign Inputs

Duty
Basic CVD Ed.Cess on CVD Ed. Cess on total duty Spl. CVD

Rate (%)
5 16 3 3 4

Before duty Value of After duty duty

100 105 121.8 122.304 122.973 5 16.8 .504 .669 4.919 105 121.8 122.304 122.973

127.892

CONCLUSION

Large Capacity Power Plants (Mega/ Ultra Mega Power Projects) are needed in order to meet increasing demand of Power on the most viable root. Benefits are necessary to promote the Power Producers for setting up of large capacity Power plants. These benefits also promote the Domestic Manufacturers thereby putting hands in countries industrial, infrastructural and economic growth.

DEEMED EXPORT BENEFITS

ADVANCE AUTHORIZATION: Issued to allow duty free imports of inputs, which are incorporated in final product. It allows duty free import of mandatory spares up to 10% of CIF value of authorization which are required to be supplied with resultant product. Advance authorization is issued against import content mentioned in PAC (Project Authority Certificate). Payment against such supplies shall be certified by Project Authority. PAC Payment Certificate BACK

DEEMED EXPORT BENEFITS

DUTY FREE IMPORT AUTHORIZATION(DFIA): This scheme is in force from 1st May, 2006. DFIA is issued to allow duty free import of inputs, fuel oil, energy sources, catalyst, which are required for production export/ Deemed export product.

of

These authorization shall be issued only for products for which Standard Input and Output Norms (SION) have been notified, however Advance Authorization can also be issued on basis of Adhoc norms/Self declared norms. BACK

DEEMED EXPORT BENEFITS

DUTY ENTITLEMENT PASSBOOK SCHEME:

BACK

DEEMED EXPORT BENEFITS

DEEMED EXPORT DRAWBACK:

This benefit is provided for refund of Central Excise Duty paid on inputs/ components, provided CENVAT credit has not been availed by applicant. This benefit is provided for refund of Custom Duty paid on inputs/ components also. Drawback is available subject to procedure laid down in Customs and Central Excise Duty Drawback Rules, 1995. The claim may be filed on the basis of proof of supplies effected or payment received, however grant of deemed export drawback will be limited to the extent of payment received. Payment Certificate BACK

DEEMED EXPORT BENEFITS

BENEFITS TO SUPPLIER

Clause No. 8.4

Supplier shall be eligible for benefits listed in 8.3(a) and (b), whichever is applicable. In case of Mega Power Project, Supplier shall be eligible for benefits listed in 8.3(a), (b) and (c), whichever is applicable.

FOREIGN TRADE POLICY

RELEVENT PROVISIONS OF BENEFIT AVAILABLE TO POWER PROJECT

MEGA POWER PROJECT

NON-MEGA POWER PROJECT

RENNOVATION & MODERNIZATION

ICB

DCB

ICB

DCB

ICB

DCB

FOREIGN TRADE POLICY 1

FOR CIF CONTENT(QUOTED IN SH 1):

1. NIL CUSTOM DUTY UNDER MEGA STATUS

FOR EX-WORKS CONTENT(QUOTED IN SH. 2):

1. ADVANCE AUTHORIZATION 2. DEEMED EXPORT DRAWBACK 3. TERMINAL EXCISE DUTY EXEMPTED BACK

FOREIGN TRADE POLICY 2

FOR CIF CONTENT(QUOTED IN SH 1): NA FOR EX-WORKS CONTENT(QUOTED IN SH. 2):

CUSTOM DUTY EXEMPTED UNDER PROJECT IMPORT

BACK

FOREIGN TRADE POLICY 3

FOR CIF CONTENT(QUOTED IN SH 1):

. CONCESSION CUSTOM DUTY

FOR EX-WORKS CONTENT(QUOTED IN SH. 2):

ADVANCE AUTHORIZATION DEEMED EXPORT DRAWBACK

BACK

FOREIGN TRADE POLICY 4

FOR CIF CONTENT(QUOTED IN SH 1): NA FOR EX-WORKS CONTENT(QUOTED IN SH. 2):

CONCESSIONAL RATE OF CUSTOM DUTY

BACK

FOREIGN TRADE POLICY 5

FOR CIF CONTENT(QUOTED IN SH 1):

1. CONCESSION CUSTOM DUTY

FOR EX-WORKS CONTENT(QUOTED IN SH. 2):

ADVANCE AUTHORIZATION DEEMED EXPORT DRAWBACK

BACK

FOREIGN TRADE POLICY 6

FOR CIF CONTENT(QUOTED IN SH 1): NA FOR EX-WORKS CONTENT(QUOTED IN SH. 2):

CONCESSIONAL RATE OF CUSTOM DUTY

BACK

MEGA POWER PROJECT

MEGA POWER PROJECTSs BENEFIT : Nil Custom Duty

(General Exemption no. 107, SL. No. 400, Chapter no. 98.01, condition no. 86)

condition no. 86

(i) The beneficiary States should have constituted their Regulatory with Commissions full powers to fix tariffs. (ii) To privatise distribution in the cities of power purchasing states having a population of more than one million, within a period to be fixed by MOP.
Continued.

MEGA POWER PROJECT

MEGA POWER PROJECTSs BENEFIT : (iii) The power purchasing state has agreed to provide recourse to that states share of central plant allocation and other devolutions towards discharge of any outstanding payment in respect of purchase of power.

The contract shall be registered by PROMOTOR at some port (since PROMOTOR is importer). A recommendatory letter addressed to the commissioner of custom of the port where contract is being registered shall also be issued by CMD along with the certified list of imported goods.

CONCLUSION

VARIOUS CATEGORIES OF SUPPLY UNDER DEEMED EXPORT Clause 8.2 (a) Supply of goods against Advance License / Advance License for annual requirement/DFRC under the Duty Exemption /Remission Scheme; Supply of goods to Export Oriented Units or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs) or Bio Technology Parks (BTP); Supply of capital goods to holders of licenses under the Export Promotion Capital Goods (EPCG) scheme;

(b)

(c)

CONCLUSION

(d)

Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding in accordance with the procedures of those agencies/ funds, where the legal agreements provide for tender evaluation without Including the customs duty; Supply of capital goods, including in unassembled/ disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR value to fertilizer plants; Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty;

(e)

(f)

CONCLUSION

(g) (h)

Supply of goods to the power projects and refineries not covered in (f) above; Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided the said containers are exported out of India within 6 months or such further period as permitted by the customs; Supply to projects funded by UN agencies; and Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding.

(i) (j)

Benefits of Deemed Export are available to categories of supply under 8.2 (d), (e), (f), (g), only if the supply is made under procedure of International Competitive Bidding (ICB). BACK