NEW LOOK EXIM POLICY GIVES MASSIVE THRUST TO EXPORTS
Date : 31 Mar 2002
Location : New Delhi
Shri Murasoli Maran, Union Minister of Commerce & industry, today unveiled the first Five-Year Export & Import (Exim) Policy of the new millennium for the period 2002-2007 containing a comprehensive package intended to give a massive thrust to India's exports. Announcing the Policy which removes all quantitative restrictions on exports at a news conference here, Shri Maran said that the new Policy was comprehensive in scope as it encompassed the agricultural sector, cottage & handicrafts and the small scale sectors, thus taking care of more than 80% of India’s population living in the rural areas which would also benefit a wide-range of the country’s population and give an additional fillip to the country’s exports. Stating that the Policy attempts to forge a lasting partnership amongst the Union Government, the State Governments, exporters and the people at large, Shri Maran underlined that the new Policy simplifies the process of exporting to such an extent that even small artisans in India would feel motivated to export. Shri Rajiv Pratap Rudy, Dr. Raman Singh, Ministers of State for Commerce & Industry, Shri Dipak Chatterjee, Commerce Secretary and Shri N.L. Lakhanpal, Secretary & Director General of Foreign Trade were present at the news conference, which was also attended by a large number of representatives from trade and industry including the apex chambers. Outlining the broad approach of the new Exim Policy in what he called a Mission Statement, Shri Maran stressed the need for taking radical steps, away from "a business as usual approach" and said that the Policy was geared towards doubling India’s present exports of US $ 46 billion to more than US $ 80 billion over the Tenth Five Year Plan by 2007, envisaging a compound annual growth rate of 11.9% in exports. "Therefore, there should be appreciation of the fact that international trade is a vital part of development strategy, and it can be an effective instrument of economic growth, employment generation and poverty alleviation", the Minister said.
Shri Maran announced the removal of all Quantitative Restrictions (QRs) on exports – except for a few sensitive items. Only a few items have been retained for exports through the state trading enterprises.
The Policy gives a major thrust to agricultural exports from India by removing export restrictions like registration requirement, minimum export price or the requirement of export through the state trading regime on whole and infant milk food, butter, wheat & wheat products, coarse grains, groundnut oil, and on cashew exports to Russia under Rupee Debt Repayment Scheme. Export restrictions on non-basmati rice, pulses, grain and flour of barley, maize, bajra, ragi and jowar have already been removed on 5th March, 2002. Further, transport assistance will be made available for export of fresh and processed fruits, vegetables, floriculture, poultry, dairy products and products of wheat & rice. This will also lead to diversification of agriculture activity. Further, it is also proposed to work out suitable Transport Assistance for export of accumulated stocks of rice and wheat from FCI (Food Corporation of India) to facilitate their liquidation, Shri Maran announced. The Minister said that the government would, in consultation with the state governments, catalyse the development of necessary infrastructure, flow of credit and other facilities for promoting agro-products, adding that 20 Agri-Export Zones had already been sanctioned.
In a significant decision to make India’s Special Economic Zones (SEZs) internationally competitive, Shri Maran announced that for the first time in India, Overseas Banking Units (OBU’s) will be permitted to be set up in SEZs. These units would be virtually foreign branches of Indian banks but located in India. These Overseas Banking Units, inter alia would be exempt from CRR, SLR and would give access to SEZ units and SEZ developers to international finances at international rates. The Minister also announced the following entitlements for the SEZs (in addition to the fiscal packages already announced) – viz., (a) IT concessions to units in SEZ, details of which will be presented in Parliament; (b) Exemption from CST (Central Sales Tax) to supplies from DTA (Domestic Tariff Area) to SEZ; (c) Drawback/DEPB to DTA suppliers; (d) Transactions from DTA to SEZ to be treated as exports under Income Tax Act and Customs Act; and (e) Exemption to SEZ units from External Commercial Borrowings restrictions, freedom to make overseas investment and carry out commodity hedging.
The Minister announced that various duty-neutralisation instruments for exports such as DEPB (Duty Entitlement Pass Book) and all other schemes like Advance Licences, EPCG etc. would continue along with the existing dispensation of not having any value caps. The changes in respect of Advance Licence include abolition of Duty Exemption Entitlement Certificate (DEEC); withdrawal of annual advance licence scheme and exporters being allowed to avail advance licences for any value. Regarding DEPB, the value cap exemption would continue and there will be no mid-term reduction of rates except in exceptional circumstances. EPCG licences of Rs.100 crore or more will have 12 years export obligation period (as against 8 years earlier) with a 5 year moratorium, while supplies under deemed exports will be eligible for export obligation fulfilment along with deemed export benefits. Some of the sector-specific packages in the Policy include reduction of customs duty on import of rough diamonds to zero per cent, abolition of licensing regime for rough diamonds which should help India to emerge as a major international centre for diamonds; reduction in value-addition norms for export of plain jewellery from 10% to 7%; allowing export of all mechanised unstudded jewellery at a value-addition of 3% only as part of the effort to achieve a quantum jump in jewellery exports from India; Extension of duty-free imports of trimmings and embellishments upto 3% of FOB value – hitherto confined to leather garments – to all leather products; and permitting DEPB rates for all kinds of blended fabrics among several other benefits for the textile sector.
In a major initiative to further reduce transaction cost, Shri Maran announced a series of procedural simplifications covering DGFT, Customs and Banks. These include (a) adoption of a new commodity classification for imports and exports which will be adopted by the Central Board of Excise & Customs and the Directorate General of Commercial Intelligence & Statistics with the common classification to be used by DGFT and CBEC to eliminate classification disputes, thereby reducing the exporters’ transaction cost and time; (b) further simplification of all schemes; (c) reduction of the maximum fee limit for application under various schemes: (d) same day licensing introduced in all the regional offices; (e) adoption and harmonisation of the 8-digit ITC (HS) code by Customs; (f) reduction in percentage of physical examination of export cargo; finalisation of the application for fixation of brand rate of draw back within 15 days; (g) direct negotiation of export documents in order to help exporters save bank charges; (h) 100% retention in EEFC (Export Earners’ Foreign Currency) accounts and extension of repatriation period for realisation of export proceeds from 180 days to 360 days. These facilities are being made available to the status holders.
The Policy also marks the launching of a new programme this year called "Special Focus on Cottage sector and Handicrafts" keeping in view that the small scale sector forms 50% of India’s exports. As part of this package, an initial amount of Rs.5 crore has been earmarked for promoting cottage sector exports coming under the KVIC. Units in the handicraft sector can also access funds on the Market Access Initiative Scheme, while under the EPCG (Export Promotion Capital Goods) Scheme, these units will not be required to maintain average level of exports. Units in the handicraft sector will also be entitled to the benefit of Export House status on achieving lower average export performance of Rs.5 crore as against Rs.15 crore for others and to duty-free imports of specified items such as embellishments upto 3% of FOB value of their exports.
Recognising the need for promoting towns of export excellence or industrial clusters some of which have already become globally renowned manufacturing bases such as Tirupur for hosiery, Panipat and Ludhiana for woollens etc., Shri Maran announced that such cluster towns would be eligible for a number of benefits with a view to maximising their export profiles and upgrading them to move in the higher value chain. Thus, common service providers in these areas will be entitled to the facility of EPCG scheme and recognised associations of such units will be able to access funds under the Market Access Initiative for creating focussed technological services. Such areas will also receive priorities for assistance under the scheme for Central Assistance to States.
The Minister further announced an incentive package to give a boost to the electronic hardware industry, while noting that India had emerged as a global player in software but in hardware her presence in the international arena had been insignificant. The Electronic Hardware Technology Park (EHTP) Scheme is being modified to enable the sector to face the zero duty regime under the Information Technology Agreement (ITA-I) of the WTO. Units in the EHTP will now be entitled to the following facilities: (i) NFEP (Net Foreign Exchange as a percentage of exports) positive in 5 years only instead of every year; (ii) no other export obligation for EHTPs; and (iii) supplies of ITA-I items having zero duty in the domestic market to be eligible for counting of export obligation.
Referring to schemes already under implementation, Shri Maran indicated that the scope of the Market Access Initiative (MAI) Scheme would be broadened to include all activities considered necessary for focussed market promotion efforts. Stating that the MAI scheme was in line with market promotion and development schemes being implemented in many other countries, Shri Maran said that a beginning had already been made this year with a small allocation of Rs.14.50 crore, which was being increased to Rs.42 crore in 2002-2003. Regarding the scheme for participation of states in the export endeavour (ASIDE or Assistance to States for Infrastructure Development for Exports), Shri Maran announced that a sum of Rs.330 crore had been approved for this scheme for the year 2002-2003. Shri Maran also said that special focus would be given to the 106 items identified in the medium term export strategy through various export promotion schemes and their progress would be regularly monitored. These 106 items are mainly engineering/ electrical/electronic items, instruments, watches etc., footwear items, marine & poultry items, some textiles & chemical items, jewellery items and items for repairs.
In keeping with the export focus of the Policy especially diversification of markets, Shri Maran announced the launching of a new programme called "FOCUS: AFRICA" to give a boost to India’s trade with the sub-Saharan African region. The first phase of the Focus: Africa programme would include 7 countries namely, Nigeria, South Africa, Mauritius, Kenya, Ethiopia, Tanzania and Ghana. The exporters exporting to these markets would be given Export House Status on export of Rs.5 crore. He also said that in order to strengthen trade ties with the CIS countries, a "FOCUS:CIS" programme would be launched in the coming year. Further, Indian Missions would provide business promotion services to visiting Indian exporters/businessmen at a nominal fee on more or less cost basis by setting up "Business Centres".