Project exports: Why it is the next big thing for Budget 2023 to bet on

Project exports refer to the setting up of engineering, construction or infrastructure projects overseas within the framework of the Foreign Trade Policy (FTP) of the Government of India and conforming to the guidelines prescribed by the Reserve Bank of India (RBI) for undertaking such projects. Simply put, project exports connote the export of goods or services on deferred payment terms till the complete execution of a particular project abroad.

However, in recent times securing and executing project exports from any country is determined by the economic and political climate across the globe, government & investment policies and technological & industrial advancement in respective countries. Project exports could include civil engineering & construction projects, turnkey projects, project construction items & goods, process & engineering consultancy services, etc.
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Project exports have secured an important place in India’s export profile, especially on account of the satisfactory performance of the Indian industry in promptly delivering cost-effective and quality products. Project exports provide several benefits including the following:

  • Generates employment opportunities across the supply chain
  • Enables Indian exporters to establish a secured presence in foreign jurisdictions
  • Provides an additional avenue of earnings through the export of goods and services bundled within the project
  • Enables technological and engineering advancement in Indian exports
  • Maintaining trade balance through earning more foreign exchange
  • Recognition of Indian expertise and technology across the globe

While project exports open innumerable opportunities, the scheme in India has been unable to realise its full potential in comparison to its global counterparts, owing to various challenges they have been encountering, including:

  • Rigid and complex compliance procedures
  • Practical difficulties with respect to the classification of export products under the Harmonized System of Nomenclature (HSN)
  • Challenges in segregation and valuation of goods and services, respectively, which are bundled in the Project exports
  • Absence of single window clearance for undertaking Project exports
  • Absence of interest equalisation to undertake capital-intensive Project exports
  • Administrative difficulties relating to the realisation of export proceeds as well as export incentives like Duty Drawback, RODTEP, etc.
  • Procedural difficulties relating to claiming of Duty Drawback and RODTEP benefit in case of export of bought items
  • Absence of efficient diplomatic support from the Government in the form of investment promotion activities and financial benefits to promote Project exports

In India, the Project Exports Promotion Council of India (PEPC) has been established by the Government, to promote project exports and also provide necessary support and guidance to various industries to facilitate an increase in such exports. The role of PEPC has been important in:

  • Collecting information pertaining to new project possibilities in the overseas market
  • Facilitating economic and technical relationships between Indian exporters and foreign companies
  • Serving as a focal point between the Government and the industry members to execute Project exports
  • Offering technical collaborations and strategic alliances to Indian exporters to undertake Project exports
  • Updating relevant stakeholders on trends and policy implications relating to Project exports

The last few years have witnessed active participation by Indian companies in Project exports, with many companies creating a name internationally in the Project exports market. Project exports not only act as a great source of foreign exchange but also provide greater employment opportunities to skilled manpower within the country. In the present world of industrialisation and globalisation, Project exports play an important role not only in projecting India’s technical and engineering expertise, but also earn a fair amount of goodwill for Indian exporters across the globe.

The Government must formulate clear policies for Project exports to close the loopholes and address the issues so that an increasing number of exporters explore this option and earn a larger pie of international business, thus fostering growth. Project exports can also be a valuable tool in the hands of the Government as well as the industry in realising the vision of ‘
Atmanirbhar Bharat’.

Krishna Barad, Partner and Abhishek Singhania, Director – Indirect Tax, BDO India

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