The objective of screening by the Screening Committee is to assess the suitability of an Indian engineering contracting company from all points of view- technical, financial and managerial competence- before it is allowed to participate in tenders for overseas construction engineering contracts (civil/ electro-mechanical etc.).
Screening Committee approval is generally accorded selectively for activities for which applicant companies have established capability in one or more of the following construction engineering activities involving:
Dams, canals, irrigation works, tunnels and earthworks.
Roads, bridges, flyovers, airports.
Water and sewage treatment plants, pipelines.
Buildings including commercial and factory complexes, hotels, schools and hospitals.
Special foundations and structural works, docks and sea water works/ports.
Electrification, air-conditioning and utilities.
Any other structure, infrastructure, utility or activity to be determined by the Screening Committee.
General contractors with capabilities in combination of two or more areas in the above range of activities.
The coverage of Screening Committee includes all companies wishing to undertake overseas construction engineering projects involving design, construction, erection and/or commissioning. Indian companies wishing to export project construction items or consultancy services are outside the purview of the Screening Committee.
Types of Clearance
Clearance may be accorded to an applicant company for one or more of the following:
i. Prime Contractor or
ii. Sub Contractor to a Foreign Contracting Company or
iii. Sub Contractor to Indian Company
The clearance may be given either on a specific value basis or for regular overseas operations, depending on the track record within the country, financial position, management expertise and in-house capability.
Contractors are normally expected to fulfill following requirements before they can gain approval of the Screening Committee.
i) company should be a member of Project EPC.
company should be a limited company - either private limited or public limited or a Government undertaking/department
company should have a minimum turnover of Rs. 10 crores (last three years) for getting approval by the screening committee.
company should have minimum tangible net worth and operating experience as under:
Minimum experience *
as Sub-Contractor to a foreign Prime-Contractor
as Sub-Contractor to an Indian Prime-contractor
* An applicant company being considered as Prime-contractor should have a minimum experience of 10 years, in undertaking some comparable type of works in India. Similarly in case of Sub contractor to Foreign Prime-contractor the minimum experience should be 7 years. In the case of a Sub-contractor to an Indian Prime-Contractor, the experience in the line of activity in India should be a minimum of 3 years.
iv) In respect of newly formed firms/companies, joint-ventures or SPV’s created with a view to undertaking and executing overseas projects, the criteria for any one of the Indian or overseas constituents / partners would form the basis for granting approvals
Applications from applicant company should be submitted in 12 copies in the prescribed form, allowing for a 4 weeks time for decision so as to enable receipt of reports from company’s bankers on the standing credit worthiness and dealings and also to enable suitable appraisal. PEPC will scrutinise and supplement data to the extent necessary to make the facts complete and ensure that the applications reach the Committee Members atleast 10 days before the scheduled date of the meeting.
Screening Committee accords clearance after taking into account the following factors:
i) Constitution of Board of Directors of a company including the qualifications, background and experience of directors;
ii) Track record of a company regarding projects executed in India and overseas, as also the nature of works undertaken. Particular emphasis is placed on record of timely completion; and value of single largest contract executed;
iii) Exposure of a company’s management and personnel in dealing with international organisations, and in executing works to international specifications. This is of particular relevance if the company seeks clearance as Sub-contractor to a foreign company (from a third country);
iv) Qualifications and experience of key-personnel currently in full - time employment of company.
v) Financial position of a company, including contingent liability and bank loans as a proportion to the net-worth; and paid up capital;
vi) Approach to international marketing and information systems. Ability of the company to furnish information required by institutions, from time to time.
vii) The plant and machinery owned by the company, the nature and size of which would commensurate with the volume of business proposed to be undertaken. Though these equipments may not be of use overseas, considering their unsuitability to the job proposed, this factor will give the Committee an idea of the applicant company’s status in the business and his familiarity in handling equipment, a factor that is very important for the purpose of deciding his suitability for undertaking contracts overseas.
These are broad criteria for approval of companies. However, the Screening Committee in its discretion may approve a particular company to take up jobs abroad or renew the approval.
Validity of Clearance:
Clearance accorded by the Screening Committee is valid for a period of three years after which company must approach Screening Committee afresh.
Renewal applications shall have to be submitted in the prescribed format for clearance by the Screening Committee of the Council.
Review of Companies already screened
Review occurs in the following situations:
i) Those seeking change in status (e.g. from Sub-contractor to Prime-contractor or from one-shot to regular)
ii) Companies whose guarantees have been invoked, or where recurring disputes have arisen either with clients or with Sub-contractors, leading to litigation etc.
iii) Company whose management/ownership has undergone major change since the date of original approval.
For the above, PEPC works out a procedure for obtaining information from their members on a quarterly basis.
In case of adverse reports about a screened firm reported to the Screening Committee by any of its members, the Screening Committee will be entitled to take such action as it may deem fit including reduction in value limits approved or de-listing from the approved list.
Quorum of the Meeting:
Three members shall be the quorum of Meeting of the Screening Committee provided the three members shall include one member representing Government Department, one representing Financial Institution and one from industry.
Presence of Company’s representative :
The committee may ask the applicant company to depute its representative at the meeting for clarifications or the company may depute its representative with the permission of the Committee.
PROCEDURES FOR PROJECT EXPORTS – CONSULTANCY SERVICES
Under the procedures prescribed in the Project Export Manual, consultancy projects to be undertaken by Indian Consultancy Organizations are required to be approved by a Competent Authority, both at pre-tender and post tender stages. If the consultancy contract is for less than Rs. 5 crore, then these clearances have to be obtained from the respective Authorized Dealer of foreign exchange and if the value of the contract is between Rs. 5 crore and Rs.10 crore, then the approval is required from Exim Bank. If it exceeds Rs. 10 crore, the approval is to be obtained from the Working Group consisting of members form Exim Bank, RBI, ECGC and the Authorized Dealer/Commercial Bank of the Consultant.
The requirement of getting prior clearance from the concerned authorities for such consultancy contracts which are on cash basis and are with the Overseas Government Agencies and are also funded by multilateral funding agencies may be dispensed with by suitable amendments in PEM procedures and FEMA.
PROCEDURE FOR CLEARANCE OF PROPOSALS OF PROJECT EXPORTS -– Construction/turnkey Engineering
(i) All applications to the Working Group are required to be submitted by the exporters through their bankers (who must be authorised dealers in foreign exchange) in the prescribed form in the required number of copies sufficiently in advance to enable the Working Group to hold a meeting of its members for consideration of the proposal. When a proposal is approved by the Working Group, a package clearance is granted by Exim Bank, on behalf of all the members of the Working Group and conveyed to the exporters’ bankers through whom the proposal was received. The Working Group’s clearance will ordinarily be given within a period of seven days from the date of receipt of the application, provided it is complete in all respects.
(ii) 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 the authorised dealer /Exim Bank/ Working Group. However, exporters in such cases are required to ensure that the conditions as laid down in the Memo PEM are complied with.
(iii) On the basis of experience gained over the years and in order to enable the exporters
to expeditiously obtain clearance for contracts for supply of engineering goods on deferred payment terms, turnkey contracts and civil construction contracts, powers have been delegated to authorised dealers and Exim Bank to grant post-award clearances in cases where the contract value does not exceed U.S. Dollar 100 Million. Proposals for undertaking such export contracts up to the value of U.S. Dollar 100 Million will, therefore, be cleared by authorised dealers / Exim Bank . Proposals for undertaking such contracts exceeding U.S. Dollar 100 Million in value will need to be cleared by the Working Group.
“As regards civil construction contracts, the Working Group will consider proposals only from contractors who are on the approved list of Ministry of Commerce and Industry, Government of India in order to ensure that only contractors having the necessary competence and capability undertake overseas construction contracts”.
(iv) In the case of contracts for export of services on cash payment terms requiring fund-based and/or non-fund based facilities, as also those involving deferred payment terms, authorised dealers and Exim Bank have been empowered to grant clearance upto the value of U.S. Dollar 100 Million. Proposals for undertaking such export contracts will, therefore, be cleared by authorised dealers/Exim Bank upto the value of U.S. Dollar 100 Million. Proposals for undertaking such contracts exceeding U.S. Dollar 100 Million in value will need to be cleared by the Working Group.
(v) Proposals for deferred payment export or turnkey projects against Buyers’ Credits as well as for export of managerial / technical consultancy services on deferred payment terms as also those on cash payment terms involving grant of any fund-based and/or non-fund based facilities in excess of the monetary limits mentioned in sub-paragraph (iv) above will need the prior approval of the Working Group.
EXPORT PROMOTION SCHEMES - SERVED FROM INDIA SCHEME
Government of India has introduced "Served from India Scheme" to facilitate exporter of various type of services. The objective of this scheme is to accelerate growth in export of services so as to create a powerful and unique 'Served From India' brand, instantly recognized and respected world over.
Under this scheme, Service Providers of more than 100 services like Professional Services, Computer Related services, Hotels, Restaurants, Educational Services, Research and Development services, Communication Services, Construction and Related Engineering Services, Distribution Service, Environmental related Services, Tourism and Transport related Services, Health Related Social Service, Recreational, Cultural and Sporting Services etc. (List is at Appendix 10 of Hand Book of Procedure on DGFT Website- http://www.dgft.gov.in under "Downloads") are entitled for Duty Credit Scrip. Service providers, who have a total foreign exchange earning of at least Rs.10 Lakhs in preceding or current financial year shall qualify for Duty Credit Scrip. For Individual Service Providers, the criterion is reduced to Rs.5 Lakhs of foreign exchange earnings.
However under Para 3.18.1 of Handbook of Procedure~ Vol. I, many types of services and / or remittances are not eligible for benefits under the scheme. These are:
1. Sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible.
2. Foreign Exchange remittances:
I. related to Financial Services Sector
1. Raising of all types of foreign currency Loans;
2. Export proceeds realization of clients;
3. Issuance of Foreign Equity through ADRs / GDRs or other similar
4. Issuance of foreign currency Bonds;
5. Sale of securities and other financial instruments;
6. Other receivables not connected with services rendered by financial
II. earned through contract / regular employment abroad (e.g. labour
3. Payments for services received from EEFC Account;
4. Foreign exchange turnover by Healthcare Institutions like equity participation, donations etc. (However, remittances received on account of medical treatment, surgery, testing, consultancy and health care provided by the institution shall be eligible);
5. Foreign exchange turnover by Educational Institutions like equity participation, donations etc. (However remittances received on account of the course fees and consultancy provided by the institution shall be eligible);
6. Export turnover relating to services of units operating under SEZ / EOU / EHTP /
STPI / BTP Schemes or supplies of services made to such units;
7. Clubbing of turnover of services rendered by SEZ / EOU / EHTP / STPI / BTP units
with turnover of DT A Service Providers; and
8. Export of Goods.
Service Providers (except Hotels, Restaurants and other Service Providers in Tourism Sector) are entitled to Duty Credit Scrip of 10% of foreign exchange earned during preceding financial year. Hotels of one-star and above (including managed hotels) and heritage hotels approved by Department of Tourism and other Service providers in tourism sector registered with Department of Tourism shall be entitled to 5% while Stand-alone restaurants are entitled for 10% of foreign exchange earned by them in preceding financial year.
"Duty Credit Scrip" may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business. In the case of hotels and stand-alone restaurants, the duty credit entitlement may also be used for the import of food items and alcoholic beverages. The utilization is with AU Condition and Non-transferable except within a Group Company or Managed Hotel.
This benefit of Duty Credit Scrip is granted from Regional Offices of DGFT, spread all over the country. Duty Credit Scrip of nearly Rs.1000 Cr is granted annually, based on previous years Foreign Exchange earned by Service Providers.
Further, details of this Scheme may be seen in Chapter III of Foreign Trade Policy 2004-2007 and Chapter III of Hand Book of Procedure Vol. -I. These Documents are available at DGFT Website- http://www.dgft.gov.in
Directorate General of Foreign Trade (DGFT),
Ministry of Commerce & Industry
New Delhi, October 31, 2007
15.0 sources of information
You would be pleased to know that the information that reaches your desk from PROJECT EPC including “Global Project Opportunities” is complied using various inputs both printed and electronic and are listed below:-
Tender Notices & Commercial Reports from Indian High Commissions & Embassies abroad
a) ENR (b) MEED
c) UN Development Business Print Edition (d) BCI Asia Construction Monitor
e) ADB Business Opportunities Print Edition (f) Business Today
g) Economic & Political Weekly (h) TIME Magazine
i) Gulf News (j) The Economist
k) Eximius: Export Advantage (l) Circulars from various Ministries
m) Civil Engineering & Construction Review, and many others….
iii) We also subscribe to websites like UN Development Business Web edition and take inputs from various other web-sites which include:
a) Asian Development Bank Website (b) World Bank
c) ENR Web-edition (http://enr.com/) (d) The Economist Web-edition
e) www.construction.com (f) http://www.tradeport.org
h) http://trade.swissinfo.net/ (i) http://www.buyersguide.com
j) http://thaipost.com (k) http://www.itenders.com
m) International Monetary Fund Website
n) OPEC Fund Web site (o) MEED Web-site
p) Abu Dhabi Chamber of Commerce & Industry (q) www.ConstructionFutures.co.uk
r) Reserve Bank of India (http://www.rbi.org.in), (s) Ministry of Finance and many others….
While every effort has been made to ensure the accuracy of the information, PROJECT EPC is in no way responsible for any errors : typographic or otherwise. The information produced in this newsletter has been put up after considerable amount of reading & screening from various sources including the internet and as listed in the Sources of Information*