By: Shubham Gupta MBA-IB SEM 3

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. ( According to RBI Guidelines for Project Exports and Service Exports) It also involves the export of engineering consultancy or other engineering services / goods as desired by the project owner.

Civil engineering construction projects

Industrial turnkey projects

Consultancy services

Supplies, primarily of capital goods and industrial manufactures

Construction projects involve civil works, steel structural work, erection of utility equipment etc. Examples include projects for building dams, bridges, airports, railway lines, roads and bridges, apartments, office complexes, hospitals, hotels, and desalination plants.

Turnkey projects involve supply of equipment along with related services and cover activities from the conception stage to the commissioning of a project. Typical examples of turnkey projects are: supply, erection and commissioning of boilers, power plants, transmission lines, substations, plants for manufacture of cement, sugar, textiles and chemicals.

Services contracts, involving provision of know-how, skills, personnel and training are categorised as consultancy projects. Typical examples of services contracts are: project implementation services, management contracts for industrial plants, hospitals, hotels, oil exploration, charter hire of rigs and locomotives, supervision of erection of plants, CAD/ CAM solutions in software exports, finance and accounting systems.

Supply contracts involve primarily export of capital goods and industrial manufactures. Typical examples of supply contracts are: supply of stainless steel slabs and ferrochrome manufacturing equipments, diesel generators, pumps and compressors.

Projects require a host of project construction Items/goods. Apart from cement and steel, broadly these products cover : Construction engineering products Construction equipments & accessories

A variety of materials and supplies including

Builders' Hardware (Doors & Windows), Sanitary & allied products, Electrical, Electro-mechanical & building automation systems, Building components construction material (marble, granite, tiles), Glass & Glazing systems & Architectural products, Wood/Timber products, Engineering plastic based systems, Construction Equipment & Accessories etc.

Project Exports from India commenced with a modest beginning in the late 1970s when the construction sector in the oil exporting region of Middle East underwent a spurt of activity. Since then, project exports have evolved over the years, with Indian companies demonstrating capabilities and expertise spanning a wide range of sectors, even in challenging environments. The nature of Project Exports being undertaken reflects the technological maturity and industrial capabilities in the country.

Agriculture & Natural Resources

Fisheries

Energy

Environment
Non conventional sources

Electric

Irrigation & Rural Development

Thermal

Agro Industries

Natural Gas & Oil

Commercial Farming

Industry

Social Infrastructure

Transport & Communication

Consultancy

Education Roads & Road Transport Metals & Minerals Urban Development

Multisector
Ports & Shipping

Housing Chemicals/ Petrochemicals . fuels, fertilisers, pharmaceuticals

Health & Population

Railways

Water Supply & Sanitation

Provisions under RBI guidelines: Indian exporters offering deferred payment terms to overseas buyers and those participating in global tenders for undertaking turnkey/civil construction contracts abroad are required to obtain the approval of the AD (authorised dealer) Category I banks/Exim Bank/Working Group at post-award stage before undertaking execution of such contracts.

TURNKEY, CONSTRUCTION & SUPPLY BIDS / CONTRACTS: Upto Rs. 50 crores : Scheduled Commercial Banks Upto Rs. 200 crores : Exim India Above Rs. 200 crores : Working Group

SERVICES BIDS / CONTRACTS: On Cash Terms : Upto Rs. 5 crores : Scheduled Commercial Banks Upto Rs. 10 crores : Exim India Above Rs. 10 crores : Working Group On Deferred Payment Terms : For any amount : Working Group

Inter-Project Transfer of Machinery: The stipulation regarding recovery of market value (not less than book value) of the machinery, etc., from the transferee project has been withdrawn. Further, exporters may use the machinery / equipment for performing any other contract secured by them in any country subject to the satisfaction of the sponsoring AD Category I bank(s) / Exim Bank / Working Group and also subject to the reporting requirement and would be monitored by the AD Category I bank(s) / Exim Bank / Working Group. Inter-Project Transfer of Funds: AD Category I bank(s) / Exim Bank / Working Group may permit exporters to open, maintain and operate one or more foreign currency account/s in a currency (ies) of their choice with interproject transferability of funds in any currency or country. The Interproject transfer of funds will be monitored by the AD Category I bank(s) / Exim Bank / Working Group.

Deployment of Temporary Cash Surpluses : Project / Service exporters may deploy their temporary cash surpluses, generated outside India, in the following instruments / products, subject to monitoring by the AD Category I bank(s) / Exim Bank / Working Group :

investments in short-term paper abroad including treasury bills and other monetary instruments with a maturity or remaining maturity of one year or less and the rating of which should be at least A-1/AAA by Standard & Poor or P-1/Aaa by Moody's or F1/AAA by Fitch IBCA etc. deposits with branches / subsidiaries outside India of AD Category I banks in India.

Repatriation of Funds in case of On-site Software Contracts The requirement of repatriation of 30 per cent of contract value in respect of on-site contracts by software exporter company / firm has been dispensed with. They should, however, repatriate the profits of on-site contracts after completion of the contracts.

Criteria for consideration Economic, political conditions of the importers country Creditworthiness of importers Experience of the applicant Immediate & long term benefits in terms of forex earnings Period of deferred credit, interest rate, adequacy of advance Nature of security available Facilities required by applicant Economic viability of the proposal

Foreign Currency Accounts abroad Site Office abroad Bridge finance from India Performance guarantees Payment of agency commission Export of equipment from India on re-import

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. The main objective behind the extension of these lines of credit is two fold; firstly, to promote the export of major goods of Indian manufacture to these countries, and secondly, to achieve the political objective i.e. goodwill of beneficiary countries.

Civil construction contracts only MOC approved contractors Company to have good track record adherence to time & cost schedules Satisfactory record of repatriation from previous projects Profitability of 10% to 15% Sourcing of materials from India At least 30% of contract value to be repatriated to India

No approval if services on cash basis & no facilities required Prompt repartition of earnings Software companies to repatriate at least 30% of contract value When facilities required, approval from appropriate authority

Remit all profits/dues to India Close foreign currency accounts Wind up liaison offices Ensure performance guarantees are discharged Liquidate overdrafts abroad Obtain completion certificate

ALL PROVISIONS OF INDIAN COMPANIES ACT-1956 ALL PROVISIONS OF EXIM POLICY ALL PROVISIONS OF CUSTOMS ACT 1962 ALL PROVISIONS OF FOREIGN TRADE ACT-1992 ALL SHIPPING LAWS

THANK YOU!!!