PROJECT

EXPORTS
BY:
PARESH PATIL
SARTHAK VAIDYA

PROJECT EXPORTS
Project Exports, in essence, represents the setting up of
projects overseas as construction and/or engineering
projects. It does also involve the export of engineering
consultancy or other engineering services or goods
complement as desired by the project owner.
Export of engineering goods on deferred payment terms and
execution of turnkey projects and civil construction contracts
abroad are collectively referred to as Project Exports.
Eg: projects for building dams, bridges, airports, railway lines, roads and

bridges, apartments, office complexes, hospitals, hotels, and desalination

plants. supply of stainless steel slabserection and commissioning of
boilers, Turnkey projects like power plants, transmission lines, substations, plants for manufacture of cement, sugar, textiles and chemicals.

MEMORANDUM OF INSTRUCTIONS ON
PROJECT & SERVICE EXPORTS
Regulations relating to 'Project Exports' and 'Service Exports' were issued in
a booklet form in March 1994. Subsequently, an updated version was
published in May 1997. With the introduction of Foreign Exchange
Management Act,1999 (42 of 1999), suitable changes have been made in the
provision. updated version referred is oct 2003

Project export contracts are generally of high value and exporters undertaking
them are required to offer competitive credit terms to be able to secure orders
from foreign buyers in the face of stiff international competition.
Indian exporters offering deferred payment terms to overseas buyers in
respect of export of goods and those who have been awarded turnkey, civil
construction contracts by overseas parties have to secure prior approval at
post award stage from various institutions such as Authorised Dealer /Exim
Bank /Reserve Bank of India.

Scope of Memorandum
(I)
This memorandum contains directions to be observed by the
exporters engaged in project exports and service exports as also
Export Import Bank of India and authorised dealers while dealing with
cases of project/service exports.
(ii) Directions contained in this Memorandum have been issued
under Section 10(4) and Section 11(1) of Foreign Exchange
Management Act, 1999 (42 of 1999).

Constitution of Working Group

those who have secured turnkey/civil construction contracts abroad
require approval/assistance of different institutions like Reserve Bank,
Exim Bank and ECGC besides their own bankers.
With a view to remove the need for exporters to approach each
institution separately for such approvals and to avoid delays, a
Working Group has been constituted

Criteria for consideration of

Proposals by Working Group
Some of the criteria are:

Period of deferred credit offered , rate of interest, adequacy of

advance and down payment provided Nature of security

obtainable from the foreign buyers against payments due and
nature and extent of various bonds/guarantees required to be
offered by the exporter (including those for procuring third
country supplies
In case of turnkey contracts, economic and technical viability
thereof as well as special features relating to erection,
supervision and commissioning of the contract.

As regards civil construction contracts, the Working

Group will consider proposals only from contractors
who are on the approved list of Ministry of Commerce
and Industry, Government of India in order to ensure
that only contractors having the necessary
competence and capability undertake overseas
construction contracts
Along with the all previously mentioned there are more criteria like:
Availability of infrastructural facilities in the importer country like transport, water,
construction material, skilled/unskilled labour,
Estimated monthly/quarterly cash flows for the entire duration of the contract and
arrangements between prime contractor and associate/sub-contractors for timely
execution of the contract in case of consortium arrangement.
Whether the contract would need any bridge finance facility abroad to meet
temporary cash flow deficits in working capital, if so, the manner of raising the
bridge finance and its full repayment with interest.

PROJECT EXPORT PROMOTION

COUNCIL (PEPC)

Project Exports Promotion Council of India

(PEPC) is an export promotion council set up
by the Government of India in 1984 (as
Overseas Construction Council of India).
PEPC in line with the Foreign Trade Policy of
the Government (of India) not only
undertakes the necessary export promotion
initiatives but also provides necessary
technical information, guidance and support
to Indian Civil and Engineering construction
including process engineering contractors
and consultants in public or private sector.

PROJECT EPC ACTIVITIES AND

SERVICES:

Briefly the councils activities and services can be

summarised as under: acts as the co-ordinating
agency to facilitate quantum increase in project
exports
Regularly collects, collates and disseminates
technical and other information pertaining to
overseas markets and new project possibilities
world-wide to member companies through
monthly magazine :GPO (Global Project
Opportunities)
Promoting, facilitating project exports/export of
project construction items/goods
Joint ventures, technical collaborations & strategic
alliances

PROJECT EPC ACTIVITIES AND

SERVICES:

Co-ordinating the promotion of technical

and/or economic co-operation between
Indian project exporters and foreign
companies
a) by promoting technology transfer
especially in sophisticated technology fields
which would encourage Indian companies to
jointly bid for mega projects
b) by assisting in formation of consortia
and/or joint venture arrangements to
facilitate bidding for or executing large
projects

GOVERNMENT OF INDIA
INTIATIVES TO PROMOTE
PROJECT EXPORTS

MDA (Market Development

Assistance)

Financial assistance for export promotion activities.

The scheme is administered by Department of

Commerce. Assistance includes, amongst others,
participation in
(i) Trade Fairs and Buyer Seller meets abroad or in
India, and
(ii) Export promotion seminars.

Focus Areas : At present 4 Focus Area programs viz.

Focus (LAC), Focus (Africa), Focus (CIS) and Focus
(ASEAN+2) are under operation. Additional incentives
are being given for the export efforts for these regions
which are mentioned in the MDA Scheme.

MDA Contd.

Participation in Trade Fair/Exhibition

Eligibility criteria for MDA grant

Exporting companies with an f.o.b. value of
exports of upto Rs. 15 crore in the preceding
year will be eligible for MDA.

This will be subject to the condition that the

exporter is having complete 12 months
membership with concerned EPC etc. and filing of
returns with concerned EPC/organisation
regularly.

MDA Contd.

Assistance would be permissible on

travel expenses by air, in economy
excursion class fair and/or charges of the
built up furnished stall.
would,
No.This
of
Maximum
visits in a financial
Sl. No.
Area/Sector
(2)
however,
be
subject
to
an upper
ceiling
financial
ceiling
per
(1)
year
(3) tour.
event(4)
mentioned in the table
per
1.
2.
3.
4.
5.

Focus LAC
FOCUS AFRICA ( including
WANA Countries)
FOCUS CIS
FOCUS ASEAN+2
General Areas
TOTAL

1
1

Rs. 1,80,000
Rs. 1,50,000

1
1
1
5

Rs. 1,50,000
Rs. 1,50,000
Rs. 80,000*
General Areas

Documentation for Reimbursement of MDA

Grant to Exporters.
Procedure for Claiming MDA Grant
The concerned EPC/FIEO etc. will issue approval letter
within 5 working days of receipt of application to the
exporter.
Exporter is required to submit the claim along with the
specified documents immediately on completion of the
activity or within 3 months of the completion of the
activity.
After the final approval of the case by MDA Committee
& release of grant by the Ministry to concerned
EPC/FIEO, the grant is released to the exporter.

MAI (Market Access Initiative)

Financial assistance for medium-term export promotion

efforts with sharp focus on a country /Product.
A whole range of activities can be funded under MAI
scheme. These include, amongst others,
(i) Market studies,
(ii) Setting up of showroom / warehouse,
(iii) Sales promotion campaigns,
(iv) International departmental stores,
(v) Publicity campaigns,
(vi) Participation in international trade fairs,
(vii) Brand promotion,
(viii) Registration charges for pharmaceuticals and
term export promotion efforts with sharp focus on a
country / product,
(ix) Testing charges for engineering products.

LINE OF CREDIT

Government of India has been extending

lines of credit to the Governments of
friendly developing foreign countries for a
number of years.
These lines of credit are meant for only
the Governments of foreign countries and
not the private organizations of a
particular country, from the Govt. of India.
Serves two-fold objectives.

LINE OF CREDIT (CONTD.)

Criteria for GOI (Govt. of India)

Credits
Credit worthiness
Soundness of Project
Indian Content
Prospects for Continuing Trade

PROCEDURE FOR
DISBURSEMENT OF CREDIT :
Indian exporter enters into a contract with
the importer of the recipient country for
export of goods and services from India.

Parties Involved :
Exporter, Government of receipent country,
Bank nominated by the government of
reciepent country, Government of India,
State Bank of India Overseas Branch New
Delhi, Negotiating local bank for exporter

EXIM LINES OF CREDIT

Exim Bank extends Lines of Credit (LOCs) to

overseas financial institutions, regional
development banks, sovereign governments and
other entities overseas, to enable buyers in those
countries, to import goods and services from
India on deferred credit terms. The Indian
exporters can obtain payment of eligible value
from Exim Bank, without recourse to them,
against negotiation of shipping documents. LOC
is a financing mechanism that provides a safe
mode of non-recourse financing option to Indian
exporters, especially to SMEs, and serves as an
effective market entry tool.

PROCEDURE

1. Exim Bank signs agreement with Borrower and

announces when effective.
2. Exporter checks procedures and Service fee
with Exim Bank and negotiates contract with
Importer.
3. Importer consults borrower and signs contract
with exporter.
4. Borrower approves contract.
5. Exim Bank approves contract and advises
borrower and also exporter and commercial bank.
6. Exporter ships goods.
7. Commercial bank negotiates shipping
documents and pays exporter.
8. EXIM Bank reimburses Commercial bank on
receipt of claim by debit to borrower.
9. Borrower repays EXIM Bank on due date.

THANK
YOU