Net Foreign Exchange earning by

EOU/SEZ/STP/EHTP
• Requirements of positive NFE - The units should have positive Net Foreign Exchange Earning. (NFE).
• While calculating foreign exchange outgo all the following has to be considered - Capital goods, Raw
materials, Consumables and spares, Dividend payable in foreign exchange, Royalty to collaborators,
Design and know-how fee, Payment to foreign technicians, Training to Indian technicians abroad,
Foreign travel, Interest paid on ECB / deferred payment credit, any other payment in foreign exchange.
• Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively in blocks of five years, starting
from the commencement of production.
• EOU/EHTP/STP units are permitted to sell to DTA up to 50% of the FOB value of exports subject to
fulfillment of positive NFE.
MONITORING
• The annual review of performance of each operational unit and its compliance with the conditions of approval
shall be undertaken by the Development Commissioner before the end of the first quarter of the following
financial year.
• A summary of annual performance review will be sent by each Development Commissioner to the Ministry of
Commerce
• The criteria for keeping the unit under watch or initiating penal action in respect of EOU/SEZ units is:
o Units which have not completed one year will not be monitored.
o In case a unit has completed less than five years from the date of commencement of commercial
production it will be monitored for the number of completed years.
o Watch – If there is shortfall in achieving the NFE as per norms in EOU/SEZ Scheme at the end of
1st and 2nd year
o Issue of show cause notice -At the end of 3rd or subsequent year if positive NFE is not achieved
as per EOU/SEZ Scheme, Show Cause Notice will be issued.
o After the completion of first five years, if it is noted that the unit has not achieved positive NFE,
development commissioner can initiate penal action.
o Annual monitoring in the cases of old units which have completed more than five years will be
undertaken for only such number of years which fall in the second block of five years
CALCULATION OF NFE
• NFE = A – B, where A= FOB value of exports and B is the sum total of CIF Value of all imported inputs
and capital goods and all payments made in foreign exchange.
o If any capital goods imported duty free or leased from a leasing company, received free of cost
and/or on loan basis or transfer, the CIF value of the capital goods shall be included under ‘B’ for
the period it remains with the units.
o If any goods are obtained from another EOU / EHTP / STP / SEZ / BTP unit, or procured from an
international exhibition held in India, or bonded warehouses or precious metals procured from
nominated agencies the value of such goods shall be included under ‘B’.
• Items of manufacture for export specified in the Letter of Permission (LOP)/ Letter of Intent (LOI) alone
shall be taken into account for calculation of NFE.
• While calculating NFE achieved, following basic components are to be taken into consideration:
o Amortized value of capital goods and technical know how fee
o Value of import of R. M. (which is consumed during the year and consumables, spares, etc.).
o Other outflow of foreign exchange towards royalty, interest on external commercial borrowings
etc.
o Value of physical exports effected excluding DTA sales but including supplies of Information
Technology items and zero duty telecom/electronic items
o Depreciation up to 100% is permissible to computers and computer peripherals over a period
of 5 years.
• For annual calculation of NFE the value of imported capital goods and lump sum payment of foreign technical
know-how fee shall be amortized for first 10 years at 10%

Dushyant Singla Suryabir Singh

• Supplies to other EOU/SEZ/ EHTP/ STP/BTP units shall be counted towards NFE provided that such goods are
permissible for procurement by these units.
• Fulfillment of NFE by EOU/ EHTP/STP/BTP units in regard to such exports shall be reckoned on the basis of
the price at which the goods are supplied by EOUs to other Exporter or other EOU/ EHTP/ STP/BTP/SEZ unit.

Dushyant Singla Suryabir Singh