In the present scenario, concerning manufacturing, there is a dominant challenge to export products to curtail down their production cost. The principles for productivity engineering were treated as an indispensable requirement in ‘Export Oriented Units’ (EOU); the essential purpose of EOU was to boost the level of export, and thereby organising further production capacity, and enhancing the quality of productivity by adopting effective techniques.
The Indian producers who produce goods solely for export can register themselves as ‘EOU’, and by doing so, they are redeemed from duty payments against resources used in the production of such goods. Trading units are not covered under EOU. After applying for the Export Oriented Units (EOU) Scheme, a letter of permission (LOP) is issued by the Development Commissioner and the applicant shall subject to further approval and verification from several Commissioners and State government agencies.
Background Of EOU
This scheme was launched in December 1980 by a resolution of the Ministry of Commerce. The scheme flourished from the 1980s to mid-2000s because of its flexibility and remarkable position, resulting in a boost in exports and an increase in production. The scheme was introduced eighteen years after the first export processing zone (EPZ) was formed in Kandla and twenty years before social economic zones (SEZs) came into being. The prime concern of Export Oriented Units (EOU) to stimulate export and foreign exchange has faced many alterations over the two decades to achieve the scheme’s goal. The scheme was also affected by the introduction of Special Economic Zone (SEZ) in 2006, resulting in a decline in EOU.
Declining Trend of Export Oriented Units
A study conducted by CAG upon the performance of Export Oriented Units (EOU), the audit report revealed inconsistent, incomplete and unreliable macro data on EOUs, non-fulfilment of export obligation (EO)/NFE, excess DTA sales, irregular payment of Central Sales Tax (CST)/ drawback on DTA sales and mismatch of export performance recorded by DoR and DoC. The report showed that EOU has failed to deliver its prime objective. Export Oriented Units (EOU) has marginally slowed its pace as the proposition is unable to function because of the introduction of a similar initiative, i.e. SEZ, and government’s incapability to effectively use the trade policy potentially.
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Grey Areas In Export Oriented Units
In Export Oriented Units (EOU), the prime area of concern is consumer satisfaction, and hence critical decisions are to be taken about productivity and manufacturing unit as well. To reduce the cost of the product, there arises a need for effective and efficient utilisation of technology. Based on the report prepared by CAG, some feedback has been provided with effective measures to lift the level of exports to restore the position as follows:
- To have an internal audit to ensure the effective working of Export Oriented Units (EOU), and submit a report regarding its sales and information upon the volume of exports.
- To frame a new policy which is ancillary to the main scheme, and
- To punish the non-compliance with the procedure and also enhance the provision for maximum output as the core function of the scheme.
Export Oriented Units (EOU) scheme has not been fully capable; the reason being complexities in its size, promotional schemes and its share is limited in manufacturing. According to the CAG report, SEZ is more effective in satisfying the crucial function of the scheme and has better provisions which are much more satisfactory in promoting exports and controlling irregularities in the same.
There are substantial operational malfunctionings and existing ambiguities regarding non-compliance of work and misrepresentation by EOU, which lead to immense loss to the government. To achieve success in Export Oriented Units (EOU), the government could revive and make the scheme following the dynamic global environment and ensure proper functioning without being affected with similar competitive schemes. If these changes are not implemented, then a continuous fall in Export Oriented Units (EOU) will be encountered, and this scheme will be like the one which has less efficient or ineffective trade policy.
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