EXPORT PROMOTION MEASURES
Export Import (EXIM) Policy 2002-07
The annual amendment to the Export & Import
(EXIM) Policy 2002-07 was carried out on March 31,
2003. The thrust of the amendment was to carry out procedural simplification of the various
export promotion schemes, focus on critical sectors
of export growth potential for India such as the
services, agriculture, information technology etc. Further
trade facilitation measures and incentives were
granted for units in the Special Economic Zones (SEZ)/
Export Oriented Units (EOU)/ Electronic Hardware Technology Parks (EHTP)/Software
Technology Parks of India (STPI) scheme in a bid to boost
exports from these zones.The gist of the salient changes
in the Exim Policy 2002-07 carried out w.e.f.
01.04.2003 and some subsequent changes introduced
in January 2004 are given below:
l A Duty free import facility for service
sector having a minimum foreign exchange earning of Rs.30 lakhs in the preceding one / two
/ three licensing years has been introduced. The duty free entitlement would be 10%
of the average foreign exchange earned in the preceding three licensing years for all
service sector units barring hotels. However, for hotels, stand-alone restaurant and
heritage hotels, the duty free entitlement would be
5% of the average foreign exchange earned in the preceding three licensing years.
This entitlement can be used for import of any capital goods including office
equipment, professional equipment, spares and consumables. However, imports
of agriculture and dairy products would not be allowed for imports against this
entitlement. The entitlement and the goods
imported against such entitlement shall be non-transferable.
The supply of services where the
payment is in Indian Rupees but which is otherwise considered by the Reserve Bank of
India (RBI) as having been paid in free foreign
exchange is to be considered as supply under the export promotion schemes.
The Corporate sector with proven
credentials are encouraged to sponsor Agri Export
Zone for boosting agro exports. They may provide for pre/post harvest treatment and
operations, plant protection, processing,
packaging, storage and related Research & Development.
Duty Entitlement PassBook
for selected agro products would factor in the cost of pre-production inputs such
as fertiliser, pesticides and seeds.
Duty-free import entitlement is allowed
for status holders having incremental growth of more than 25% in FOB value of exports
(in free foreign exchange). This facility is available to status holders having a
minimum export turnover of Rs.25 crore (in free
foreign exchange). The duty free entitlement shall
be 10% of the incremental growth in exports and can be used for import of capital goods,
office equipment and inputs for their own factory
or the factory of the associate/supporting manufacturer/job worker. The
entitlement/ goods will not be transferable. This facility
is available on the exports made from 1.4.2003.
The duty free import entitlement for
status holders was revamped and the following exports are not taken into account
for tabulating the entitlement:
Re-export of imported goods or
exports made through transshipment;
Export turnover of units operating
under SEZ/EOU/EHTP/STPI Schemes or products manufactured by them
and exported through Domestic Tariff Area (DTA) units;
Deemed exports (even when payments are received in Free Foreign Exchange) and payment from Export Earner
Foreign Currency (EEFC) account
Supplies made by one status holder
to another status holder;
Export performance made by one
status holder on behalf of other status holder.
Supplies made or export
performance effected by a non-status holder
(Merchant exporter/Manufacturer with any export performance in 2003-04) to a status
holder if the applicant as well as the non
status holder have less than 25 per cent incremental growth over their
respective previous years direct export turnover.
The exports made by an applicant within
a group and the group to which it belongs has individually less than 25 per
cent incremental growth of export.
Advance Licence for
Annual Requirements facility for status holders is introduced to enable them to plan
for their imports of raw material and components on an annual basis and
take advantage of bulk purchases.
The Input-Output norms for
status holders are to be fixed on priority basis within a period of 60 days.
Status holders in STPI are permitted
free movement of professional equipment like laptop / computer.
To give a boost to electronic
hardware industry, supplies of all 217 ITA-1 items
from EHTP units to DTA would now qualify for fulfillment of Net Foreign Exchange Positive
( NFEP) criteria.
To promote growth of exports in
embedded software, hardware is admissible for duty
free import for testing and development purposes. Hardware up to a value of US$ 10,000
is allowed to be disposed off subject to STPI certification.
100% depreciation is available over a
period of 3 years to computer and computer peripherals for units in EOU/EHTP/STP/SEZ.
Gems & Jewellery Sector
Diamond & Jewellery Dollar Account
for exporters have been allowed for dealing in purchase/sale of diamonds and
diamond studded jewellery.
Nominated agencies can accept payment
in dollars for cost of import of precious metals from EEFC account of exporter.
Gems & Jewellery units in SEZ and
EOUs can now receive precious metal i.e. Gold/silver/platinum prior to exports or post
exports equivalent to value of jewellery exported.
This means that they can bring export proceeds in kind against the present provision
of bringing in cash only.
The import of gold and silver in various
forms such as powder, unwrought, sheets, plates, strips, tubes, pipes has been made free.
Up-gradation of infrastructure in
existing clusters/industrial locations under the Department of Industrial Policy &
Promotion (DIPP) scheme has been allowed to
increase overall competitiveness of the export clusters.
Supplemental efforts are to be made
under the Assistance to States for Development of Export Infrastructure and other activities
(ASIDE scheme) and similar schemes of other Ministries to bridge technology
and productivity gaps in identified clusters.
10 such clusters with high growth
potential are to be reinvigorated based on a participatory approach.
Removal of Quantitative Restrictions and
The import of Electrical Energy; silver/
gold in various forms such as powder, unwrought, sheets, plates, strips, tubes, pipes;
Global Positioning System has been freed .
The homologation criteria has been
exempt for the import of vehicles above a CIF
value of $40000 by individuals under the Export Promotion of Capital Goods (EPCG)
Scheme issued to Companies and firms.
Import of livestock and livestock
products from countries affected by the Avian
Influenza Virus (Fowl Plague) has been prohibited.
The threshold limit for xport of gifts have
been extended to Rs 5,00,000 from the earlier Rs 100000.
Export Promotion Schemes
The salient changes carried out in the various
export promotion schemes w.e.f. 01.04.2003 are as under:
Special Economic Zones
Sales from Domestic Tariff Area
to SEZs are to be treated as export. This
entitles domestic suppliers to Drawback/ DEPB benefits, CST exemption and Service
Agriculture/Horticulture processing SEZ
units are now allowed to provide inputs and equipment to contract farmers in DTA
to promote production of goods as per the requirement of importing countries. This
is expected to integrate the production and processing and help in promoting
SEZs specializing in agro exports.
Foreign bound passengers are now
allowed to take goods from SEZs to promote trade, tourism and exports.
Domestic sales by SEZ units are now
exempt from Special Ad-valorem Duty (SAD).
Restriction of one year period for
remittance of export proceeds has been removed for SEZ units.
Netting of export has been permitted for
SEZ unit provided it is between same exporter and importer over a period of 12 months.
SEZ units are permitted to take job
abroad and exports goods from there
SEZ units can now capitalise
l Wastage for subcontracting/exchange by gem and jewellery units in
transactions between SEZ and DTA is allowed.
Export/import of all products through
post parcel/courier by SEZ units is also allowed.
The value of capital goods imported by
SEZ units can be amortised uniformly over 10 years.
SEZ units would now be allowed to sell
all products including gems and jewellery through exhibitions and duty free shops
or shops set up abroad
Goods required for operation
and maintenance of SEZ units can be imported duty free.
Trading units in the SEZ are permitted
the facility of inter unit transfer of goods.
Export Oriented Units
Agriculture/Horticulture processing EOUs
are allowed to provide inputs and equipment to contract farmers in DTA to
promote production of goods as per the requirement of importing countries. This is expected
to integrate production and processing and help in promoting agri-exports.
EOUs are now required to be only net
positive foreign exchange earners; there will now
be no export performance requirement.
Foreign bound passengers are allowed
to take goods from EOUs to promote trade, tourism and exports.
The value of capital goods imported by
EOUs can now be amortized uniformly over 10 years.
Period of utilisation of raw
materials prescribed for EOUs has been increased from 1 year to 3 years.
Gems and jewellery EOUs are now
being permitted sub-contracting in DTA. Wastage for subcontracting/exchange by gem
and jewellery units in transactions between EOUs and DTA will now be allowed as per norms.
Export/import of all products through
post parcel/courier by EOUs is now allowed.
l EOUs are allowed to sell all products including gems and jewellery
through exhibitions and duty free shops or shops
set up abroad.
Gems and jewellery EOUs are entitled
to advance domestic sales.
A provision for the extension of the validity
of the Letter of Permission (LOP) as also the format has been devised under the scheme.
The Units Approval Committee has the
power to approve applications for setting up of
EOU units undertaking R&D
Export Promotion of Capital Goods (
The scheme now allows import of
capital goods for pre-production and
post-production facilities also.
Export Obligation under the scheme is
now linked to the duty saved and is to be 8 times the duty saved.
To facilitate up-gradation of existing plant
and machinery, import of spares upto 100% value of the license, spare
and consumables, are also allowed under the scheme.
To promote higher value addition in
exports, the existing condition of imposing an additional Export Obligation (EO) of 50%
for products in the higher product chain has been done away with.
Greater flexibility is given for fulfillment
of export obligation under the scheme by allowing export of any other
product manufactured by the exporter on case by case basis on merits. The concept of
EO fulfillment has been extended to companies under the same Group.
Import of capital goods upto 10 years old
is also allowed under the scheme.
To facilitate diversification into the
software sector, existing manufacturer exporters
are allowed to fulfill export obligation arising
out of import of capital goods under the scheme for setting up of software units through export of manufactured goods of the
Royalty payments received from abroad
and testing charges received in free foreign exchange are to be counted for discharge
of export obligation.
Duty Entitlement Passbook (
Facility for provisional DEPB rate has
been introduced to encourage diversification and promote export of new products. These
rates are valid for a period of 6 months.
DEPB rates have been rationalised in line
with general reduction in Customs duty.
Anti-dumping and safeguard duty
exemption to advance license are allowed for
deemed exports for supplies to EOU/SEZ/EHTP/STP.
The composition fee for export
obligation extension has been linked to the duty
saved on unutilised imports and no extension beyond 36 months from the date of issue
of the license has been permitted.
Concept of "Advance License for free of
cost material" reintroduced.
Advance License for Annual Requirements
A provision of export obligation extension
and revalidation of the license has been introduced.
New provision of Advance Licence for
Annual Requirement for Intermediate Supplies has been introduced.
Duty Free Replenishment Certificate (
Duty Free Replenishment Certificate
scheme has been extended to deemed exports to provide a boost to domestic manufacturer.
Value addition under DFRC scheme
has been reduced from 33% to 25%.
Fuel under actual user condition has
also been allowed under the scheme.
Measures for reducing transaction costs
& improving procedural simplification
The work related to the electronic
interface with the various agencies involved with international trade is at an advanced stage.
Electronic filing of applications has been made mandatory for applications under
the self certification advance licence applications.
Applications filed electronically have a
50% lower processing fee as compared to manual applications.
The actual user condition for import of
second hand capital goods upto 10 years old has been dispensed with.
The penal interest rate has been
reduced from 24% to 15% for all old cases of
default under Exim Policy.
The restriction on export warranty spares
has been removed.
The IEC holder is to furnish online return
of imports/exports made on yearly basis in order to weed out the casual importers
Export of free of cost goods for
export promotion @ 2% of average annual exports in preceding three years has been
permitted subject to ceiling of Rs.5 lakh.
For revival of sick units, extension of
export obligation period is to be allowed to such
units based on Bureau of Industrial Finance & Recontruction (BIFR) rehabilitation
schemes or the State government rehabilitation schemes.
Implementation of Medium Term Export
A number of measures have been taken through
the Budget and the EXIM Policy to translate the
Medium Term Export Strategy 2002-07 (MTES) into
ground level policies for the export sector. The progress
in implementation of the MTES is as follows:
Product Market Strategy
Export Promotion Councils
have been requested to implement the policy of
Product Market Strategy and to focus on 220 products. India Trade Promotion
Organisation (ITPO) has also been requested to take
note of the potential sectors and markets given in MTES for its trade promotion activities.
The 8-digit commodity classification has
been adopted by the DGFT w.e.f. 1.4.2002 and by Dept. of Revenue for import tariff by
Gazette Notification in January 2003 for adoption w.e.f. 1.2.2003. This can also be the
basis for tariff negotiations in the World Trade Organisation ( WTO).
The peak rate of customs has been reduced to
25%. Tariffs for many capital goods items needed
for textiles and IT sector have been reduced
drastically in the Budget 2003-04.
FDI in Export Sector and SEZ Policy
SEZ policy has been strengthened. Besides the
tax incentive and permission for setting up
Overseas Banking Units (OBUs) in SEZs, many other
facilities have been extended to SEZs in the Exim Policy.
Reduction in transaction cost and
introduction of digital signatures suggested in MTES
For reduction in transaction costs, same
day licensing has been introduced in all regional
offices of DGFT. Digital signature system has also
Improving Export Infrastructure
Many policy measures have been announced in
the budget to improve infrastructure. For example, corporatisation of ports in a phased manner and
a package of concessions to private sector entry
in green field airport projects announced in the
Budget are expected to help the export sector.
In order to save bank charges, direct negotiations
of export documents have been permitted. For facilitating export credit, offshore banking units
are permitted in SEZs. The ceiling rate on export
credit in foreign currency has been reduced to LIBOR
plus 0.75 percentage point from LIBOR plus 1.00 percentage point.
Assistance to States
Under the Assistance to States for
Infrastructure Development for Exports (ASIDE), the
export performance and incremental export
performance of states are being taken into account for
enhancing the responsibility of State Governments for
Market Development Programmes and
Internal Dissemination of information
For this purpose, allocation of funds under
Market Access Initiative (MAI) Scheme has been enhanced.
Assistance to States for Development of
Export Infrastructure and other activities (ASIDE Scheme)
Assistance to States for Development of
Export Infrastructure and other activities (ASIDE)
scheme, started in March 2002, continued to be
implemented during the year with full vigour. The outlay of
this scheme has two components. Eighty percent of
the funds (state component) is earmarked for
allocation to the States on the basis of an approved criteria.
The balance 20 percent (central component), and amounts equivalent to un-utillised portion of the
funds allocated to the States in the past year(s), if any, is
retained at the central level for meeting the requirements of inter-state projects, capital
outlays of EPZs, activities relating to promotion of
exports from the North Eastern Region. A minimum of
10% of the scheme outlay is reserved for expenditure
in the North Eastern Region and Sikkim. In order
to encourage private sector participation in
development of infrastructure for export promotion,
State Governments/UTs are being encouraged to
identify projects with private sector participation by
giving them additional incentives.
An outlay of
Rs. 1725 crore has been made for
the ASIDE scheme during the 10th Five Year Plan
(2002-2007) of which provision for the year 2003-04 is Rs. 350 crore. Funds under the scheme are
disbursed directly to a Nodal Agency nominated by the
State Government where it is kept under a separate head
in the accounts of the Nodal Agency.
In order to evaluate progress in the
implementation of projects, its impact on exports etc., the
projects sanctioned under the ASIDE scheme are
being visited by field formations of Department of
Commerce who submit consolidated report in the prescribed format to the Department of
Commerce, the concerned State Government and the
nodal agency of the State for appropriate action. A
web-enabled monitoring system of the projects has
been developed on the website of the Department
for online assessment of the progress of the projects.
To facilitate various measures undertaken
to stimulate and diversify the country's export trade,
the Market Development Assistance (MDA) scheme
is being implemented by the Department of Commerce with the following objectives :-
(a) To assist individual exporters for
export promotion activities abroad
(b) To assist Export Promotion Councils
(EPCs) to undertake export promotion activities
for their product(s) and commodities
(c) To assist consortium marketing
(d) To assist approved
organisations/trade bodies in undertaking limited exclusive
non-recurring innovative activities connected with export promotion efforts of their members
(e) To assist Export Promotion Councils
to contest Countervailing duty/Anti dumping cases initiated abroad
(f) To assist Focus Area export
promotion programmes in specific regions abroad
like Focus LAC, Focus Africa and Focus CIS programmes.
(g) To promote residual essential activities
connected with marketing promotion efforts abroad.
Recognised Export Promotion Councils
are eligible for MDA assistance for development
and promotional activities of their products
including participation in trade
fairs/exhibitions/council sponsored Trade delegations, publicity
through printed material, etc.
Focus Area programmes namely Focus
Latin American Countries(LAC), Focus Africa and
Focus Commonwealth of Independent States (CIS) support market promotion activities in these regions
through EPCs, ITPO etc. by way of organising
specialised `Made in India' exhibitions, translation facilities
in regional languages, market survey, setting up
of warehousing facilities, opening of foreign
offices, preparation of product catalogue in CD ROM
form, inviting prominent foreign delegates and buyers
to India, etc. Opening and maintaining foreign
offices and warehouses in these regions by
recognised Export/Trading Houses and recognised
consortium of Small Scale Industries (SSI) units is
also supported by the Scheme.
MARKET ACCESS INITIATIVE (MAI)
Government have approved the Market
Access Initiative (MAI) scheme under Plan Scheme to
act as a catalyst to promote India's exports on a sustained basis. The scheme is devised on
focus product- focus country approach to evolve
specific strategy for specific market and specific
product through market studies/survey.
Assistance is extended under the Scheme to
State Governments/ Export Promotion Councils/Registered Trade Promotion
Organisations/ Exporters, etc. for the following components:
Marketing projects which may
include showrooms, warehousing facility, display
in international departmental stores, publicity campaign and brand promotion,
participation in trade fairs, research and
product development etc.
Export potential survey of the States
Registration charges for product
registration abroad for pharmaceuticals,
biotechnology and agro chemicals
Testing charges for engineering products
Study of WTO related matters
INFRASTRUCTURE SUPPORT AND
The Department of Commerce endeavors to
resolve problems experienced by the trading community
in the carriage of goods through coordination with
the concerned Ministries and Departments. Efforts
to improve transport/logistic support to exporters and
importers includes greater containerisation, extension of Air Cargo Complexes (ACCs), computerisation of cargo clearance, introduction
of Electronic Data Interchange (EDI), improved communication, warehousing, etc.
The major initiatives taken in this regard
recently during the year included the following :
a) Setting up of exclusive Courier Terminals
at Delhi and Mumbai airports for handling of international express consignments.
b) Providing 3-day free period for courier
import consignments at Delhi airport by the
Central Warehousing Corporation.
c) Starting of new train services by
Container Corporation of India (CONCOR).
d) Obtaining approval for setting up of 4
Inland Container Depots/Container Freight Stations (ICDs/CFSs) for facilitating movement
of export/ import consignments.
e) Constituting of two high level committees
viz. Standing Committee on Promotion of Exports by Sea (SCOPE-SHIPPING) and
Standing Committee on Promotion of Exports by Air (SCOPE-AIR) is to address constraints in
the smooth movement of international cargo.
f) Hosting web based systems on
country's trade on the website to provide query
based access to the country wise, commodity wise, country x commodity wise exports/
imports details. The monitoring systems for
release of funds under Assistance to States for Developing Infrastructure and other
allied activities (ASIDE) Scheme and Critical Infrastructure Balancing (CIB) scheme
have also been developed and implemented for data collection from states and
central agencies and its further monitoring in the department.
Interface for Local Access through Intranet
To facilitate the users within the department, a
local web page has been created and maintained at
the local area network/ Intranet to provide direct
access to the various web based
applications/systems developed and implemented in the department. It
also has press releases, work allocation, electronic notice board, various downloadable forms, training programme details, linkages to the web sites of
the various trade related bodies and organisations of
the country and abroad , their E-mail directory
information and other utility packages.
Export Credit Interest Rate Structure
The reduction in ceiling interest rates on rupee
export credit by 1 percentage point across the
board effective from September 26, 2001 has further
been extended upto April 30, 2004. Now the ceiling
rates of interest are indicated by the RBI for the first
slab of pre-shipment credit, i.e., upto 180 days and
for post-shipment credit upto 90 days. For
subsequent period and other categories, interest rates are
left free to be decided by the banks themselves.
Export Credit in Foreign Currency
In order to make the interest rates on export
credit competitive, the ceiling interest rates export on
export credit in foreign currency which was revised
with effect from 29.4.2002 continues to remain unchanged.
Resources for foreign currency funds for PCFC
With a view to providing further flexibility to banks
to service foreign currency funds for granting PCFC/EBR to exporters, the RBI has permitted banks
to use foreign currency funds borrowed in terms of
para 4(2) (i) of Notification No. FEMA 3/2000 RB
dated May 3, 2000 as also foreign currency funds generated through buy-sell swaps in domestic
forex market for granting such loans subject to
adherence to Aggregate Gap Limit approved by the RBI.
All India Export Advisory Committee
During the period under review the meetings of
the All India Export Advisory Committee which
deliberates on issues relating to export credit and
exchange control was held at Guwahati on September 12, 2003.
Seminar on export credit
The Reserve Bank organised seminars on
export credit for the benefit of the exporters as well
as bankers at Guwahati in September 11, 2003 and
at Tirupur in September 30, 2003 jointly with the
State Bank of India and the Indian Overseas Bank respectively.
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