The Export Oriented Units (EOUs)

scheme. introduced in early 1981. is

complementary to the SEZ scheme. lt
adopts the same production regime
but offers a wide option in locations
with reference to factors like source
of raw materials. ports of export.
hinterland facilities. availability of
technological skills, existence of an

industrial base and the need for a

larger area of land for the project. As
on 31st December 2005. 1924 units are
in operation under the ¬0U scheme.

0bjectives of the Export

oriented unit

The main objectives of the ¬OU scheme

is to increase exports. earn foreign
exchange to the country. transfer of
latest technologies stimulate direct
foreign investment and to generate
additional employment.
Major Sectors in EOUs:
GRANITE
TEKTILES/GARMENTS
FOOD PROCeSsING
.CHEMICALS
CoMPUTER SOFTWARE
COFFEE
PHARMACEUTICALS
GEM &JEWELLERY
ENGINEERING GOODS
ELECTRICAL & ELECTRONICS
AQUA & PEARL CULTURE

Export from ¬OU

Exports from £0Us during 2004-2005
were of the order of Rs.36806.11
crores as compared to the export of
Rs.28821.58 crores achieved during
2003-2004. registering a growth of
21.68%.
¬OU Activities
Initially. EOUs were mainly
concentrated in Textiles and Yarn.
Food Processing. Electronics.
Chemicals. Plastics. Granites and
Minerals/0res. But now a day. £OU has
GHtended it area of work which
includes functions like
manufacturing. servicing.
development of software. trading.
repair. remaking. reconditioning. re-
engineering including making of
gold/silver /platinum jewellery and
articles thereof. agriculture
including agro-processing.
aquaculturs. animal husbandry. bio-
technology. floriculture.
horticulture. pisiculture, uiticulture.
poultry. sericulture and granites.
Need for Special License
To set up an £OU for the following
sectors, an EUU owner needs a special
license.
Arms and ammunition.
Explosives and allied items of defense
equipment.
Defense aircraft and warships.
Atomic substances.
Narcotics and psychotropic subst ances
and hazardous chemicals.
.Distillation and brewing of alcoholic
drinks.
.Cigarettes/cigarsand manufactured
tobacco substitutes.

In the above mention cases. EOU owner

are required to submit
the
application form to the Development
Commissioner who will then put them
up to the Board of Approvals (BOA).
Choosing the Location for EOU
EOUs can be set up anywhere in the
country and may be engaged in the
manufacture and production of

software. floriculture. horticulture.

agriculture. aquaculture. animal

husbandry. pisciculture. poultry and

sericulture or ther similar

activit.ies.

However. it should be noted that in

case of large cities where the
population is more than one million.
such as Bangalore and Cochin. the
proposed location should be at least
25 km away from the Standard Urban
Area limits of that city unless. it is to
be located in an area designated as an
"industrial area" before the 25th July.
1991. Non-polluting EOUs such as
electronics. computer sottuware and
printing are eHempt from such
restriction while choosing the area.

Apart from local zonal office and

and
state government. setting up of an
EOU is also strictly guided by the
enuironmental rules and regulations.
Therefore, an even if the ¬OU unit has
fulfilled all locational policy but not
suitable from environmental point of
view then the Ministry of
Environment. Government of India has
right to cancel the proposal. In such
situation industrialist would be
requiredto abide by that decision.
EOU Unit 0bligations
The EOUs are required to achieve the
minimum NFEP (Net Foreign Exchange
Carning as a Percentage of Exports)
the minimum EP (Export
and
Performance) as per the provisions of
EHIM Policy which vary from sector to
sector. As for instance. the units uwith
investment in plant and machinery of
Rs.5 crore and above are required to
achieve positive NFEP and export USS
3.5 million or 3 times the CIF value of
imported capital goods. whichever is
higher. for 5 years. For electronics
hardware sector.minimum NFEP has to
be positive and minimum EP for 5
years is US$ I million or 3 times the CIF
value of imported capital goods.
whichever is higher. NFEP is calculated
cumulatively for a period of 5 years
from the commencement of
commercial production according to a
prescribed formula.
EOU in Eim Policy
Currently EOU scheme is mentioned in
the Chapter 9 of the foreign Trade
Policy (1991-2002) and Chapter 9 off
the Handbook of Procedures. Uolume-1
(HOP). The EOUs can xport all
products except prohibited items of
exports in ITC (HS).

Recent Policy Changes in the ¬OUs

Scheme (w.a.f. 1th April. 2006)
The export of goods up to one and half
percent of the FOB value.
In order to facilitate the smooth
functioning of the £0U unit s. the
Development Commissioners uwill fin
time limits for finalizing the disposal of
matters relating to ¬OUs.
New units engaged in export of
Agriculture/Horticulture/fqua-
Culture products have been now allowed
toremouve capital goods inputs to the
DTA on producing bank guarantee
equivalent to the duty foregone on the
capital goods/input proposed to be
taken out.