"In fact, we have pressed the Government for the continuation of the zero-duty facility that allows imports involving a c.i.f value of Rs 20 crore and above under the scheme," director-general of foreign trade (DGFT) LN Lakhanpal said.

Lakhanpal said that according to indications available, the zero-duty scheme will continue and the axe was likely to fall on "mega" projects in the fertiliser, power and petroleum sectors.

He also indicated that there was no need to change the EPCG scheme that also allowed import of new and second-hand capital goods at 10 per cent customs duty.

Following changes in the exim policy announced on April 13, 1998, the EPCG scheme was liberalised by lowering thethreshold limit of Rs 20 crore to Rs 1 crore for seven key sectors--garments, electronics, gems and jewellery, sports goods, leather, toys and agro and food processing.

To encourage further the export growth of the software sector, the limit under the scheme was slashed to Rs 10 lakh.

Imports of capital good under zero-duty scheme as well as the 10 per cent duty plan has shrunk from Rs 8,600 crore in 1996-97 to Rs 3,600 crore in 1997-98 and to Rs 1,800 crore in 1998-99 so far owing to demand recession at home.

The scheme started a few years ago became very popular with the exporting community. And in the whole of 1995-96, imports contracted by exporters under the scheme were as much as Rs 11,000 crore and much higher in the previous years.

The export obligation against imports at 10 per cent is four times the cif value of capital goods which has to be fulfilled in five years.

Under zero-duty imports, the obligation can be achieved on an f.o.b or a net foreign exchange (NFE) basis. In the case ofthe former, the obligation will be equal to six times the c.i.f value of capital goods to be completed in eight years.

NFE norms prescribe four times the c.i.f value of capital goods as the export obligation to be achieved in eight years.

DGFT has issued a policy circular by which various categories of rupee payments will be regarded as foreign exchange earned for purposes of fulfilment of export obligation under the EPCG scheme.