Forex in Metro projects may shrink to boost local firms

Written by Rajat Arora | New Delhi | Updated: Dec 10 2013, 10:42am hrs
The urban development ministry wants the foreign exchange component in metro projects to be limited to 25% of the total project cost.

The move is aimed at bringing down the cost of projects and promoting indigenous production.

In line with this, the ministry also wants the finance ministry to withdraw a custom duty waiver for import of tunnel boring machines (TBMs), parts and components.

If the duty waiver goes, then many foreign manufacturers of these products could look at setting up production facilities in India, spurring foreign direct investment (FDI) inflows, the ministry feels.

The ministry of finance has waived off basic custom duty and other additional duty of customs on import of tunnel boring machines (TBMs), parts and components whereas indigenously manufactured TBMs attract CST and VAT of 16.2%. As a a result locally manufactured TBMs are 30% more expensive than the imported ones, said a ministry official.The ministry has also prepared a note proposing to limit the foreign exchange component to 25% with the plan to progressively reduce the same in the years to come as domestic capacities get created.

At present, metro railway projects are under implementation in eight cities. Other than extension plans in Kolkata and Delhi, Metro rail projects are at various stages of execution in Jaipur, Bangalore, Chennai, Kochi and Hyderabad. Such projects are planned in about a dozen more cities, including Ahmedabad, Bhopal, Chandigarh, Indore, Kanpur, Lucknow, Ludhiana, Nagpur, Nashik, Patna and Pune.