PROJECT EXPORTS

Project Exports from India commenced with a modest beginning in the late 1970s. Since then, project exports have evolved over the years, with Indian companies demonstrating capabilities and expertise spanning a wide range of sectors. The nature of Project Exports being undertaken reflects the technological maturity and industrial capabilities in the country. Project exports are broadly divided into four categories:

• Civil construction
• Turnkey modules
• Consultancy services
• Supplies, primarily of capital goods and industrial manufactures

Each of the above are expalined here:

Civil construction projects

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

Turnkey projects

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, sub-stations, plants for manufacture of cement, sugar, textiles and chemicals.

Consultancy services

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

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

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. Exim Bank plays a pivotal role in promoting and financing Indian companies in the execution of projects. It has been closely associated with the growth of project exports from India by way of providing finance, information and business advisory services. The bank supports Indian companies at all stages of the project cycle from advance tender information, guidance in preparation of competitive bids to providing financial facilities, including loans and guarantees. It extends funded and non-funded facilities for overseas industrial turnkey projects, civil construction contracts, as well as technical and consultancy service contracts. Exim Bank has in place a specialised cell to provide advance information to Indian companies on projects being funded by multilateral funding agencies in various countries. Over the past two decades, increasing number of projects have been executed by Indian companies in North Africa, West Asia, South & South East Asia, CIS and Latin America. Destination of project exports has undergone a change between 1999-00 and 2004-05, with the share of West Asia (mainly Oman, UAE and Iraq) increasing from 28.4 per cent to 63.9 per cent, North Africa (mainly Sudan) increasing from 9.1 per cent to 28.5 per cent, South Asia falling from 41.5 per cent to 5.7 per cent, and South East Asia falling from 15.8 per cent to 0.9 per cent. In 2004-05, turnkey contracts had the major share (57.2 per cent), followed by construction contracts (36.4 per cent), and consultancy contracts (6.4 per cent). Exports of projects and services including construction and industrial turnkey projects and consultancy services increased from US$629 million in 1998-99 to US$911 million in 2004-05, and crossed US$956 million in April- October, 2005 itself.

The Reserve Bank of India has simplified the procedures for project and service exports, such as deployment of temporary cash surpluses and inter-project transfer of machinery and funds. These measures, first announced in the Mid-Term Review of Annual Policy Statement for 2006-07, will provide more flexibility to exporters. The RBI said that the measures were subject to monitoring by banks. Exporters will now be allowed to use the machinery or equipment used for a turnkey or construction abroad, for executing a contract in another country. Currently, exporters are required to dispose of the equipment, machinery, vehicles purchased abroad or arrange their import into India after completion of the contracts. If it has to be used for another overseas project, the market value should be recovered from the second project. Under the modified procedures, the RBI has permitted exporters to deploy their temporary cash surpluses, generated outside India, in instruments such as deposits with overseas branches or subsidiaries of a bank in India, a triple `A' rate short term paper abroad, including treasury bills and other monetary instruments with a maturity or remaining maturity of one year or less. Now, exporters are required to approach the RBI for overseas deployment of their temporary cash surpluses. The apex bank has also permitted exporters to open, maintain and operate one or more foreign currency account in a currency of their choice with inter-project transferability of funds in any currency or country.