Net Foregin Exchange

[raj nadh]

Dear Experts,

What is NFE ? How will calculate the NFE of an EOU?

Anand

[Mahir S]

Net Foreign Exchange Earnings as a Percentage of exports (NFEP). The formula for calculation of NFEP is
A – B / A * 100
A = FOB value of Exports
B = Value of Imported Capital goods, raw materials and outgo of foreign exchange by way of Dividends, royalty, selling commission, foreign travel etc.

NFE is calculated on a simple formulae i.e. Exports (FOB value of all exports) - Imports (CIF value of all imports) > 0. In simple words, if a unit is bringing in ‘X’ amount foreign exchange i.e. exports and is buying ‘Y’ amount of foreign exchange from the Government and if X is > Y even by 1$, it has achieved a positive NFE.

[Mahir S]

The manner of computation of NFE is defined under Para 6.10.1 of HBP, all imported inputs and capital goods and value of all payments made in foreign exchange by way of commission, royalty, fees, dividends, interest on external borrowing/high seas sales are considered towards NFE obligation and are to be calculated as per formula prescribed therein. The manner of calculation is explained in Annexure-I to Appendix 14-I-G of HBP.

The unit has to achieve positive NFE in the block of five years starting from the date of commencement of production. The term NFE has been defined for the purpose of notifications No. 52/2003-Customs and No. 22/2003-Central Excise, both dated 31.03.2003 (EOU notifications) on the same lines as defined in FTP. The changes to this effect have been made in the EOU notifications vide notifications No. 76/2007-Customs and 26/2007-C.E. both dated 06.06.2007.

 

AI Summary

Net foreign exchange: exports net of imports and foreign exchange outgo determine NFE compliance for export units. Net Foreign Exchange measures foreign exchange earned by an export unit as Exports (FOB) minus Imports (CIF) and other foreign exchange outgo such as capital goods, imported inputs, dividends, royalties, commissions and foreign travel; the calculation is expressed as a percentage of exports and must include all imported inputs, capital goods and payments in foreign exchange as prescribed in the handbook annexure, with export oriented units required to achieve positive NFE within the prescribed block period.