Overseas shipments from the Export Oriented Units (EOUs) contracted — for the first time in 15 years — by 2.78 per cent to Rs 1.64 lakh crore in the last fiscal due to a slump in demand in the global markets.
India's exports from the EOUs, which operate within customs bonding, were Rs 1.68 lakh crore in 2007-08, according to the Export Promotion Council for EOUs and SEZs (EPCES).
"Exports in 2008-09 suffered due to global slowdown," EPCES Director-General L B Singhal said adding that income tax benefits currently given to EOUs should be extended for further five years to attract investments in the segment.
"There is an uncertainty on investments in the EOUs due to uncertainty regarding the continuation of income tax benefits in the EOUs beyond March 2010," he said.
EPCES has apprised Finance Minister Pranab Mukherjee and Commerce and Industry Minister Anand Sharma on the problems they are facing.
The council has said no fresh investments would come in the EOUs and the scheme would die its natural death if the entrepreneurs do not get income tax exemption.
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"Unless or until income tax exemption is provided, entrepreneurs would not like to operate under customs bond provisions...," he said. EOUs getting income tax exemption do not get other benefits like focus product scheme.
EOUs operate within the same parameters as SEZs, but no trading is allowed.
EOUs, which came into being in early 1980's, have attracted investment worth over Rs 1.55 lakh crore. There are 2,546 EOUs across the country.
Meanwhile, exports from the special economic zones (SEZs) grew by 36 per cent to Rs 90,416 crore in 2008-09 from Rs 66,638 crore in the previous fiscal.
Besides, India's total exports plunged by 30 per cent in May, according to quick estimates given by Commerce Secretary G K Pillai. The final figures will be released on July 1.
The government yesterday reviewed the grave situation with top exporters promising them sops.
"We will be giving incentives so that Indian exports become competitive," Commerce and Industry Minister Anand Sharma had said.