RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
MUMBAI 400 001
May 5, 2000
A.D.( M.A. Series) Circular No.9
All Authorised Dealers in Foreign Exchange.
Amendments to the Memorandum PEM
It has been decided to amend/modify exchange control regulations as stated in the following paragraphs:
1. Pre-bid Clearance
In terms of paragraph B.6(i) (A) and (B) of Memorandum PEM, exporters intending to submit bids for deferred payment supply contracts, turnkey projects and civil construction contracts abroad have to seek prior clearance of the proposal from authorised dealer/Exim Bank/Working Group before submission of such bids. Further, in terms of paragraph C.2 of Memorandum PEM, service contracts as specified therein, need prior clearance of authorised dealer/Exim Bank/Working Group as the case may be, at pre-bid stage.
It has now been decided to dispense with the requirement of clearance of project export proposals (including service contract proposals) at pre-bid stage. Hence, exporters desiring to submit bids for execution of projects abroad including service contracts will not be required to obtain clearance for submission of bids from authorised dealer/Exim Bank/Working Group. Exporters, in such cases, should, however, in their own interest, ensure that conditions as laid down in Memorandum PEM for submission of bids are complied with.
2. Bridge Finance
In terms of paragraph B.5(g) of Memorandum PEM, bridge finance for meeting temporary short-falls in working capital in respect of turnkey projects and civil construction contracts, may be approved by authorised dealer/Exim Bank provided the finance required does not exceed 15% of the contract value. In the case of service contracts such limit has been fixed at 10% of the contract value. It has now been decided that authorised dealers/Exim Bank may clear project export proposals (including service contract proposals) involving bridge finance upto 25% of the contract value.
3. Deferred Credit
In terms of paragraph B.6(B)(iii) of Memorandum PEM, in cases where the exporter desires to offer commercial credit not exceeding one year in respect of goods, specified in Annexure I of Memorandum PEM, the authorised dealers are required to forward the proposals to Exim Bank, which has been authorised to dispose of such applications. It has now been decided to permit authorised dealers also to consider such proposals themselves without forwarding them to Exim Bank.
4. Approval for payment terms
It has been decided to dispense with the requirement stipulated at paragraph B.7(vi) of Memorandum PEM that the exporters should obtain Reserve Banks approval for payment terms after the proposal at post award stage has been cleared by the authorised dealer/Exim Bank/Working Group, in all cases where the authority approving the proposal has conveyed such approval on behalf of the Reserve Bank.
5. Single Foreign Currency Account
for more than one project
In terms of paragraph D.1(i) of Memorandum PEM, general permission has been granted to project/service exporters for opening foreign currency accounts subject to conditions stipulated by the authorised dealer/Exim Bank/Working Group as the case may be. The exporter in such cases is required to maintain separate foreign currency account for each contract abroad. It has now been decided to allow the exporter, if he so desires, to maintain a single foreign currency account for more than one contract being executed abroad in the same country subject to the conditions as may be stipulated by the authorised dealer/Exim Bank. It will however, be necessary for the exporter to submit project-wise statement of accounts duly certified by a Chartered Accountant to the concerned office of the Reserve Bank as also to the authorised dealer monitoring the projects.
6. Third Country Purchases
In terms of paragraph D2 of Memorandum PEM, authorised dealers may open letters of credit in favour of third country suppliers on back to back basis provided the amounts for which credit is to be opened from India in favour of third country supplier does not exceed the amount for which a credit has been opened by the project authority in favour of Indian exporter and the credit has been advised through the same authorised dealer.
It has now been decided that such Letters of Credit may be established by any authorised dealer on a back-to-back basis, subject to the same terms and conditions.
In terms of paragraph D.7 of Memorandum PEM the authorised dealers/Exim Bank have been authorised to furnish, without prior permission of Reserve Bank, bid bonds/tender guarantees and advance payment/performance guarantees, in cases where they have been authorised to approve proposals of exporters to submit bids for undertaking contracts abroad. It has now been decided that authorised dealers/Exim Bank/Working Group may consider and approve project export proposals/service contracts abroad involving all types of guarantees required to be furnished in connection with execution of projects/contracts abroad.
8. Liaison Offices
At present, permission of Reserve Bank is required to be obtained for opening of liaison offices overseas in connection with the execution of the project/service export contracts abroad. It has now been decided that project exporters may be permitted to open temporary liaison offices overseas in connection with the execution of the contracts abroad by the competent authority approving the relative export proposal. However, the liaison office will be restricted to one in a country where more than one project export is executed.
9. Submission of Progress Report
In terms of paragraph B.9 of the Memorandum PEM, exporters are required to furnish progress reports in form DPX-5 on a quarterly basis to all the members of the Working Group and to the concerned Office of the Reserve Bank through their bankers within one month from the date of expiry of each quarter.
It has now been decided that the progress report in form DPX-5 may henceforth be submitted to the aforesaid authorities on a half yearly basis within one month from the date of the expiry of the relative half year.
10. Amendments to the Memorandum PEM will be advised separately. Meanwhile, authorised dealers may bring the contents of this circular to the notice of their concerned constituents.
11. The directions contained in this circular have been issued under Section 73(3) of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.
Chief General Manager