I.  Foreign Trade Policy (FTP): 2004-09

The Government has set a long-term vision of making India a major player in world trade. Foreign Trade Policy (FTP) provides the basic policy framework of translating this vision into specific strategies, goals and targets. The twin objectives of the FTP 2004-09 was doubling of India’s share in global trade in the next five years, and making trade an effective instrument of economic growth by giving thrust to employment generation. The Policy, with clearly enunciated objectives and strategies and necessary initiatives taken by the Govt. during the last five years has been very effective in putting India’s exports on a higher growth trajectory.

The Indian exports witnessed an unprecedented and consistently high growth during the five year period from 2004-05 to 2008-09. During this period, the exports grew at an average annual growth rate of 23.9%; increasing from US$ 83.5 billion in 2004-05 to US$ 185.3 billion in 2008-09. As per WTO estimates, India’s share of global merchandise trade rose from 0.94% in 2004 to 1.45% in 2008. The share of global commercial services export similarly increased from 1.3% in 2004 to 2.7% in 2008. India’s total share in goods and services trade also went up from 1.08% in 2004 to 1.65% in 2008.

Keeping in view the second objective of making trade an effective instrument of economic growth and employment generation, sectors with significant export prospects coupled with employment generation in semi-urban and rural areas were identified as thrust sectors and specific initiatives were undertaken for Agriculture, Handicrafts, Handlooms, Gems & Jewellery and Leather & Footwear sectors. On the employment front, studies have suggested that a large number of jobs were created directly or indirectly as a result of augmented exports in the last five years. Contribution of Special Economic Zones (SEZ) in terms of investment, employment generation, and exports has been significant.

I.  Foreign Trade Policy (FTP): 2009-14

Basic Approach, Objectives and Strategy

For India to become a major player in world trade, an all encompassing and comprehensive vision is required for the overall development of the country’s foreign trade. Trade is not an end in itself, but a means to economic growth and national development. Coherence and consistency among trade and other economic policies is important for maximizing the contribution of such policies to development. Thus, while incorporating the existing practice of enunciating a stable Five Year Policy, it is necessary to go much beyond and take an integrated approach to the developmental requirements of India’s foreign trade.

In 2008-09, the world faced an unprecedented economic slow-down and witnessed one of the most severe global recessions in the post-war period that affected countries across the globe in varying degrees. All major economic activities like industrial production, trade capital flows, unemployment, investment and consumption took a hit.

Union Minister of Commerce & Industry, Sh. Anand Sharma, Minister of State of Commerce & Industry, Sh. Jyotiraditya Scindia and Commerce Secretary, Dr. Rahul Khullar at the release of Foreign Trade Policy (2009-14) on 27th August, 2009

India has not been affected to the same extent as other economies of the world during this phase. Yet our exports have suffered a decline since October 2008 significantly due to shrinkage of demand in the traditional markets of our exports due to global economic slowdown and the reduced international prices of commodities. India’s exports in dollar terms showed a growth of about 48.1% from April to September, 2008 whereas from October, 2008, it started declining, bringing down the annual growth to 13.6% in 2008-09. After showing a negative growth for seven consecutive months in 2009-10, India’s exports have entered the positive territory (growing at 18.2% during the month of November, 2009-10). Agriculture and industry has shown remarkable resilience and dynamism in contributing to a healthy growth in exports. It is in this context and background that the current Foreign Trade Policy (FTP, 2009-14) was announced on 27th August, 2009.

The short term objective of FTP (2009-14) is to arrest and reverse the decliningtrend of exports and to provide additional support especially to those sectorswhich have been hit badly by recession in the developed world. The long termpolicy objective for the Government is to double India’s share in global trade by 2020.

Union Minister of Commerce and Industry, Shri Anand Sharma and Minister of State of Commerce and Industry, Shri Jyotiraditya Scindia addressing a Press Conference to
announce the Foreign Trade Policy, in New Delhi on 27th August, 2009.

In order to meet the objectives stated above, the major thrust areas of strategy spelt out in FTP (2009-14) comprise a mix of policy measures including fiscal incentives, institutional changes, procedural rationalization, enhanced market access across the world and diversification of export markets. The FTP envisages three basic pillars for supporting India’s exports. These are (i) infrastructure related to exports, (ii) bringing down transaction costs, and (iii) providing full refund of all indirect taxes and levies. The prime importance here is on a stable policy environment conducive to foreign trade by way of continuation of exporter friendly and transparent schemes/ facilities. In addition, after the operationalisation of the Goods and Services Tax (GST) regime, the Government will make concerted attempts to see that the GST rebates are given on all indirect taxes and levies on exports. A special thrust would be provided to employment intensive sectors which have witnessed job losses in the wake of this recession, especially in the fields of textile, leather, handicrafts, etc.

Given the current economic climate, policy measures initiated in the FTP 2009-14 would basically be in force for a two year period after which mid-course corrections could be undertaken, if required. In the meantime, sectoral reviews to assess the impact of these measures on Indian exports would be carried out and accordingly appropriate initiatives would be taken.

Major Initiatives Taken in the FTP (2009-14)

• Higher Support for Market and Product Diversification

• 27 new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 11 in Asia-Oceania.

• A large number of products from various sectors including Engineering products, value added Plastic products, Jute and Sisal products, Technical Textiles, Green Technology products, Project goods, vegetable textiles, Electronic items etc. have been included for benefits under Focus Product Scheme (FPS).

• The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%.

• The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%.

• Market Linked Focus Product Scheme (MLFPS) has been greatly expanded by inclusion of products classified under more than 3600 ITC(HS) Codes at 8 digit level. Benefits to these products will be provided, if exports are made to 15 identified markets (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia, New Zealand, Japan and China). A common simplified application form has been introduced for taking benefits under Focus Product Scheme (FPS), Focus Market Scheme (FMS), Market Linked Focus Products Scheme (MLFPS) and Vishesh Krishi and Gram Udyog Yojna (VKGUY).

• EPCG Scheme at Zero Duty has been introduced for certain sectors like engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and leather & leather products (subject to exclusions as provided in HBP Vol. 1). The scheme shall be in operation till 31.3.2011.

• Jaipur, Srinagar and Anantnag recognized as ‘Towns of Export Excellence’ for handicrafts; Kanpur, Dewas and Ambur recognized for leather products; and Malihabad for horticultural products.

• Support for Green products and products from North East

• Focus Product Scheme benefit extended for export of ‘green products’; and for exports of some products originating from the North East.

• Status Holders

• To accelerate exports and encourage technological upgradation, additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports for certain specified sectors. This facility shall be available for export up to 31.3.2011.

• Transferability for the Duty Credit scrips being issued to Status Holders under paragraph 3.8.6 of FTP under VKGUY Scheme permitted among status holders.

• Duty Entitlement Passbook (DEPB) Scheme extended beyond 31-12-2009 till 31.12.2010. DEPB rate shall also include factoring of custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norms.

• Interest subvention of 2% for pre-shipment credit for 7 specified sectors has been extended till 31.3.2010.

• Income Tax exemption to 100% EOUs and to STPI units has been extended for the financial year 2010-11.

• Other measures

• The adjustment assistance scheme initiated in December 2008 to provide enhanced ECGC cover at 95% to the adversely affected sectors is continued till March, 2010.

• Export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced to 50% of the normal specific export obligation.

• Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country, extended for the 5 year Policy Period, 2009-14.

• Sector specific measures

• Fisheries included in the sectors which are exempted from maintenance of average EO under EPCG Scheme.

• Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders given to Marine sector.

• To neutralize duty incidence on Jewellery exports and hence to allow Duty Drawback on such exports, duty drawback rates notified by Department of Revenue.

• In an endeavour to make India a diamond international trading hub, it is planned to establish “Diamond Bourse (s)”.

• Import on consignment basis of cut & polished diamonds for the purpose of grading/ certification purposes introduced.

• Value limits of personal carriage of Gems & Jewellery items have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, increased from US$ 0.1 million to US$ 1 million.

• To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce introduced. The system will involve creation of multi-functional nodal agencies to be accredited by APEDA.

• Leather sector allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses, subject to payment of 50% of the applicable export duty.

• Minimum value addition under advance authorization scheme for export of tea reduced from the existing 100% to 50%.

• DTA sale limit of instant tea by EOU units increased from the existing 30% to 50%.

• Export of tea covered under VKGUY Scheme benefits.

• Export Obligation Period for advance authorizations issued with 6-APA as input has been increased from the existing 6 months to 36 months.

• Requirement of ‘Handloom Mark’ for availing benefits under FPS removed.

• EOUs allowed to sell products manufactured by them in DTA upto a limit of 90% instead of existing 75%, without changing the criteria of ‘similar goods’, within the overall entitlement of 50% for DTA sale.

• A clarification issued to enable procurement of spares beyond 5% by granite sector EOUs.

• EOUs allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.

• Board of Approvals (BOA) to consider, extension of block period by one year for calculation of Net Foreign Exchange earnings of EOUs.

• EOUs allowed CENVAT Credit facility for the component of Education Cess on DTA sale.

• To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme prescribed.

• Coverage of Project Exports and a large number of manufactured goods under FPS and MLFPS.

• In cases, where RBI specifically writes off the export proceeds realization, the incentives under the FTP, not to be recovered from the exporters subject to certain conditions.

• A number of measures undertaken for reduction of transaction cost allowing flexibility to exporters and simplification of procedures, which are listed separately (para 1.11).

• To enable support to Indian industry and exporters, especially the MSMEs, in availing their rights through trade remedy instruments, a Directorate of Trade Remedy Measures has been set up.

Gems & Jewellery exports constitute a major proportion of our total merchandiseexports. It is an employment oriented sector. Exports fromthis sector suffered significantly on account of the global economic slowdown. Some of the measures undertaken for gems and jewellery sector were in terms of announcement of Duty Drawback rates for the gems & jewellery items by Department of Revenue; To establish “Diamond Bourses” in an endeavour to make India a diamond international trading hub, introduction of a new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading / certification; value limits of personal carriage of Gems & Jewellery items have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions; enhancement in the limit in case of personal carriage, as samples, for export promotion tours from US$ 0.1 million to US$ 1 million etc.

B. Service Tax Refund

The Government has already announced refund of service tax for almost all prime services, which are directly related to export production and supply. A few pending issues relating to Service Tax refund on exports have been resolved recently. These include:

• Exemption from Service tax on services linked to exports:

• On service related to transport of export goods by road form any Container Freight Stations (CFS) or Inland Container Depot (ICD) to the port or Airport and on service related to transport of export goods by road directly from their place of removal, to an ICD, a CFS, a port or airport;

• Services provided by Foreign Agent Commission service.

• Procedure for refund of service tax simplified by allowing refund on self certification in case refund claim does not exceed 0.25% of FOB value of exports; and certification by Chartered Accountant in case of others;

• Time period for filing refund claim increased to 1 year from the date of export (as against half-yearly).

C. Vishesh Krishi and Gram Udyog Yojna (Special Agriculture and Village Industry Scheme)

Keeping in view the objective of Foreign Trade Policy 2009-14 to promote employment generation in rural and semi urban areas, Vishesh Krishi And Gram Udyog Yojana has been expanded to include export of Agricultural Produce and their value added products; Minor Forest Produce and their value added variants; Gram Udyog Products; and Other products, as notified from time to time.

Duty Credit Scrip benefits are granted with an aim to compensate high transport costs, and to offset other disadvantages. Exporters, of products notified in Appendix 37A of HBP vol.1, shall be entitled for Duty Credit Scrip equivalent to 5% of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards. However, reduced rate of 3% is applicable in such cases where exporter has also availed benefits of Drawback, at rates higher than 1%; or Specific DEPB rate (i.e. other than Miscellaneous Category – Sr. Nos. 22D & 22C of Product Group 90); or Advance Authorization or Duty Free Import Authorization for import of inputs (other than catalysts, consumables and packing materials) for the exported product for which Duty Credit Scrip under VKGUY is being claimed. Additional 2% rate, over and above the 5% or 3% rate, is admissible for products specified in Table 2, Appendix 37A of HBP vol.1 (like Flowers, Fruits, Vegetables and other products etc.).

Higher Incentive for Status holders is available in the form of duty credit scrip equal to 10% of FOB value of agricultural exports, limited to Rs. 100 crore per annum, for products covered under ITC HS Chapters 1 to 24, to permit import of Capital Goods/equipments like Cold Storage Units; Pre-cooling Units and Reefer Van/Containers etc.

D. Focus Market Scheme (FMS)

For offsetting high freight cost and other externalities to select international markets with a view to enhance India’s export competitiveness in these countries, “Focus Market Scheme” has been launched w.e.f. 1.4.2006. Exporters of all products to notified countries (as in Appendix 37C of HBP vol.1) shall be entitled for Duty Credit Scrip equivalent to 3% of FOB value of exports. So far, the Scheme covers a total of 110 markets (52 markets in Africa; 31 in Latin America; 10 in CIS-CAR Block; 5 in East Europe; 1 in Asia; and 11 in Asia-Oceania Block).

During the period April – November 2009-10, a total of 3854 authorizations having CIF value of Rs. 295 crore and FOB value of Rs.12504 crore have been issued under the scheme.

E. Focus Product Scheme (FPS)

To incentivize export of such products which have high export intensity / employment potential, so as to offset infrastructure inefficiencies and other associated costs involved in marketing of these products, a Scheme called Focus Product Scheme, has been introduced w.e.f. 1.4.2006.

Under the Scheme, exports of notified products (as in Appendix 37D of HBP vol.1) to all countries (including SEZ units) would be entitled for Duty Credit scrip equivalent to 2% of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards. However, Special Focus Product (s) / sector (s), covered under Table 2 and Table 5 of Appendix 37D [toys and sports goods, carpets and handicrafts, at present], shall be granted Duty Credit Scrip equivalent to 5% of FOB value of exports. Over 1150 products have so far been covered at 8 digit level under the Scheme, which include leather products and footwear, handloom products, handmade carpets and other textile floor coverings, handicrafts, coir and jute products, technical textiles, engineering products, Green technology products, electronic products, value added plastic and Glass products etc.

During the period April – November 2009-10, a total of 5770 authorizations having CIF value of Rs.252 crore and FOB value of Rs.15093 crore have been issued under the scheme.

F. Market Linked Focus Products Scheme (MLFPS)

To give significant boost to market penetration of specific product in specified markets, a variant under Focus Product Scheme called Market Linked Focus Products was introduced from 1.4.2008. Under the Scheme, export of products /sectors of high export intensity /employment potential (which are not covered under the FPS List) would be incentivized at 2% of FOB value of exports (in free foreign exchange) under FPS when exported to the Linked Markets (countries), which are not covered in the present FMS List, as notified in Appendix 37D of HBPv1, for exports made from 27.8.2009 onwards.

Presently, the products covered under the scheme include Motor vehicles, auto-components, apparels, knitted and crocheted fabrics, pharma products, value added plastic and rubber goods, Glass products, dyes and chemicals, household articles of Aluminium, Machine Tools, Earth moving equipments, Transmission Towers, Electrical & Power equipments, steel tubes/pipes/galvanized sheets, compressors, Iron & Steel structures, three wheelers etc. The countries covered under the Scheme include Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Australia, New Zealand, Cambodia, Vietnam, Japan and China. There are over 3600 products so far covered at 8 digit levels.

G. Served from India Scheme

The objective of the Scheme is to accelerate growth in export of services so as to create a powerful and unique ‘Served from India’ brand, instantly recognized and respected the world over. All Indian Service Providers, of services listed in Appendix 10 of HBP vol.1, who have free foreign exchange earning of at least Rs.10 lakhs in preceding financial year / current financial year shall qualify for Duty CreditScrip. For Individual Indian Service Providers, minimum free foreign exchange earnings would be Rs.5 lakhs. All service providers of 161 tradable services are entitled to Duty Credit Scrip @ 10% of the free foreign exchange earned, except a few ineligible sectors / services. Import allowed with actual user condition for import of capital goods, office equipments, consumables, etc. During the period April-November 2009-10, a total of Rs 750 crore worth duty credit scrips have been issued under the scheme.

H. Status Holders Incentive Scheme (SHIS)

With an objective to promote investment in upgradation of technology of some specified sectors such as Leather, Textiles, Jute, Handicrafts, Engineering, Plastics, Basic Chemicals, Status Holders shall be entitled to incentive scrip @ 1% of FOB value of exports made during 2009-10 and during 2010-2011, of these specified sectors, in the form of duty credit [subject to prescribed exclusions as specified] for procurement of capital goods for technology upgradation, with actual user condition. This shall be over and above any duty credit scrip claimed/availed under Chapter-3 of FTP. This facility is available for exports made upto 31.3.2011. 

I. Export Promotion Capital Goods (EPCG) Scheme

In order to facilitate augmentation of imports under the Scheme, at present, there are two EPCG Schemes, that is, 3% concessional duty scheme and Zero duty concessional EPCG Scheme.

(a) 3% Concessional Duty Scheme

The salient features of 3% concessional duty scheme are as under:

1. The Scheme was initially introduced in the Import and Export Policy
   1990-93 for import of Capital Goods at a concessional rate of Customs
   Duty @ 25%. The concessional rate of duty has been reduced gradually to 3% since 1.4.2008.

2. The scheme allows import of capital goods for pre-production, production and post production as well as for computer software systems subject to an export obligation equivalent to 8 times of duty saved amount (50% of Export Obligation in case of import of spares),to be fulfilled in 8 years reckoned from Authorization issue-date.

3. The scheme also requires maintenance of average level of exports achieved by the exporter in the preceding three licensing years for the same and similar products within the overall export obligation period including extended period, except for categories mentioned in para 5.7.6 of Hand Book of Procedure.

4. To encourage exports from the tiny and cottage sector, an export obligation period of 12 years is granted for fulfillment of export obligation.

5. EPCG authorization can also be issued for import of spares, tools and refractory for initial lining and catalyst for initial charge for existing plant and machinery. (imported earlier under the EPCG Scheme or otherwise).

6. In case of agro units, the export obligation is equivalent to 6 times duty saved on imported capital goods to be completed within a period of 12 years.

7. In case of SSI Units, the EO is equivalent to 6 times duty saved to be fulfilled over a period of 8 years provided the cif value of such imported capital goods does not exceed Rs.50 lakh and total investment in plant and machinery after such imports does not exceed the SSI limits.

8. For EPCG authorizations with a duty saved amount of Rs.100 crore or more, the export obligation period is 12 years.

9. Import of second hand capital goods is allowed without any age restriction.

10. Import of motor car, sports utility vehicles/all purpose vehicles is allowed only to hotels, travel agents, tour operators or tour transport operators and companies owning / operating golf resorts whose total foreign exchange earnings from their respective sectors in the current and preceding three licensing years is Rs.1.5 crore or more.

11. Vehicles imported under EPCG Scheme are to be so registered that the vehicles are used for tourist purpose only. Parts of cars, such as chassis, cannot be imported under EPCG Scheme. 

12. EPCG Authorization can also be issued for import of capital goods underScheme for Project Imports notified by the Central Board of Excise andCustoms under S. No.441 of Customs Exemption Notification No.21/2002 dated 01.03.2002. Export obligation for such EPCG authorizationswould be eight times of duty saved. Duty saved would be the difference between the effective duty under aforesaid Customs

 

Box 4.2 Export Obligation (EO) Conditions under EPCG Scheme

EO to be fulfilled by export of goods manufactured/service rendered by applicant. Up to 50% of EO may be fulfilled by exports of other goods manufactured or services provided by the same firm/ company/ group companies. Exports shall be physical exports. Certain deemed exports will also be counted towards fulfillment of EO. The export obligation under the Scheme shall be over and above, the average level of exports achieved by the EPCG authorization holder in the preceding three licensing years for the same and similar products within the overall export obligation period including extended period, other than the categories exempted for this purpose. No average EO condition for certain sectors like handicraft, handlooms, cottage, tiny sector, agriculture, aqua-culture, animal husbandry, floriculture, horticulture, pisciculture, poultry and sericulture. Extension in EO period may be granted for a period of 2 years + 2 years subject to certain conditions specified in Para 5.1 of HBP. For BIFR units, EO period may be extended as per BIFR package or 12 years, if not specified by BIFR. Import of Capital Goods shall be subject to Actual User Condition till EO is completed. Capital Goods imported (excepting tools) for manufacturing of export products relating to handicraft, handlooms, cottage, tiny sector, agriculture, aqua-culture, animal husbandry, floriculture, horticulture, pisciculture, poultry and sericulture are not transferable for a period of five years from date of import even if EO is fulfilled. However, transfer of capital goods is allowed within group companies within five years from the date of import after fulfillment of EO under intimation to RA and jurisdictional Central Excise Authority.

Notification and concessional duty under the EPCG Scheme.

13. The scope of the EPCG scheme has been extended to Common Service Providers (CSP) who are designated / certified as a Common service Providers by the DGFT, Department of Commerce or State Infrastructural Corporation in a Town of Export Excellence.

14. A person holding an EPCG license may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying CG to EPCG authorization holder shall be eligible for deemed export benefits under Para 8.3 of the Policy.

15. EPCG license may be issued for retail sector for import of capital goods required by the retailer to create modern infrastructure in the retail sector.

16. EPCG Authorizations holders can opt for Technological up-gradation of existing Capital goods imported under EPCG authorizations’ subject to conditions stipulated in para 5.8 (i) to (v) of FTP

(b) Zero Duty EPCG Scheme

The scheme has been introduced in the new Foreign Trade Policy 2009-14 for specified sectors, viz for exporters of engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and leather & leather products; subject to exclusions as provided in HBP vol. I. The salient features of the scheme are as under:

• Under zero duty EPCG Scheme, EO equivalent to 6 times of duty saved amount on capital goods is required to be fulfilled in 6 years from authorization issue date.

• The validity period for import of capital goods under zero duty EPCG Scheme is nine months;

• EO period of 6 years can be extended for a maximum period of 2 years only.

All other provisions pertaining to 3% duty EPCG scheme, to the extent they are not inconsistent with the above provisions of zero duty EPCG Scheme, are applicable to the zero duty EPCG Scheme also. The zero duty EPCG Scheme will be in operation till 31.3.2011.

J. Export Oriented Units (EOUs)/Electronic Hardware Technology Park(EHTP)/Software Technology Park (STP)/Biotechnology Park (BTP)

The following incentives have been announced by Hon’ble Commerce & Industry Minister while announcing Foreign Trade Policy (2009-2014) on 27th August 2009 with regard to EOU/EHTP/STP/BTP:-

• EOUs have been allowed to sell products manufactured by them in DTA up to a limit of 90% instead of existing 75%, without changing the criteria of ‘similar goods’, within the overall entitlement of 50% for DTA sale.

• EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.

• During this period of downturn, Board of Approvals (BOA) to consider, extension of block period by one year for calculation of Net Foreign Exchange earnings of EOUs.

• EOUs will now be allowed CENVAT Credit facility for the component of Education Cess on DTA sale.

• DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%.

• Income Tax benefits under Section 10A for IT Industry and under Section 10B for 100% Export Oriented Units have been continued for one additional year till 31st March, 2011.

Further, following additions/changes have been made in FTP/HBP Vol-I:-

• The Board of Approvals (BoA) to allow, on a case to case basis, requests of EOU/ EHTP/ STP/BTP units in sectors other than Gems & Jewellery, for consolidation of goods related to manufactured articles and export thereof along with manufactured article. Such goods may be allowed to be imported/procured from DTA by EOU without payment of duty, to the extent of 5 %FOB value of such manufactured articles exported by the unit in preceding financial year. This is subject to certain conditions;

• Whenever a unit is unable to export due to prohibition / restriction imposed on export of any product mentioned in Letter of Permission (LoP), the five year block period for calculation of NFE earnings may be suitably extended by BoA. BoA may also consider extension of block period by another one year, for calculation of NFE, on case to case basis, for those units which complete 5 years block period in between 30.09.2008 and 30.09.2009, keeping in view of the decline in exports in that particular unit, due to economic slowdown only.

• Applications for conversion into an EOU / EHTP/ STP / BTP unit from existing DTA units, having an investment of Rs. 50 crore and above in plant and machinery or exporting Rs. 50 crore and above annually, shall be placed before BoA for a decision.

• Interest is payable on delay in refund of CST, if the case is not settled within 30 days of receipt of complete application.

• An authorized person of Gems & Jewellery EOU may also import gold in primary form, up to 10 Kgs in a financial year through personal carriage, as per guidelines prescribed by RBI and Department of Revenue (DoR).

• Relaxation has been allowed in period of EO against import of items covered by Chapter 9 of ITC (HS) certain spices and coconut oil.

• Sub-contracting of production process abroad has been elaborated.

• In case of goods exported for holding/participating in exhibitions in USA, the time period has been increased to 90 days from earlier 60 days.

• In case of personal carriage of goods for holding/participating in overseas exhibitions, value of gems & jewellery.

Comparative picture of authorizations issued & their CIF values during the period April-November of the years 2008-09 & 2009-10 is depicted through Charts-4.1 & 4.2. Percentage share of authorizations issued & their CIF values by Category during April-November, 2009 is depicted through Charts 4.3 & 4.4.

Table 4.1

Trends of Authorizations Issued Under Export Promotion & Duty Neutralization Scheme

Annexure 4.2

(ii) Rice

• Export of wheat and wheat products was prohibited vide Notification No. 33 dated 8th October, 2007.

• Export of Wheat Flour (Maida), Samolina (Rava / Sirgi), Whole meal atta and resultant atta has been permitted freely subject to a limit of 6, 50,000 MTs up to 31st March, 2010; export is allowed only from Customs EDI Ports.

• It has however, been decided that in 2009-10, export of wheat by private trade may not be allowed other than the export of 6.5 lakh tonnes of wheat products, which has already been permitted by the Government.

• The situation is regularly monitored at the highest level of Government, so that immediate further corrective measures, can be taken as may be required. In this regard, the Government constituted the following two High Level Committees for deliberating the issues on regular basis:

• An Apex Group chaired by Prime Minister with Finance Minister, Commerce Minister, Deputy Chairman (Planning Commission), RBI Governor;

• Committee of officers chaired by Cabinet Secretary, including Finance Secretary, Commerce Secretary, Secretary(DIPP), Secretary (Planning Commission)- to meet regularly to look into the suggestions made by Trade and Industry and the respective Administrative Ministries in respect of the current global economic and financial crisis and to recommend action to the Apex Group.

• Department of MSME and Department of Financial Services to jointly monitor on the progress of the meetings of Monthly meeting of State level Bankers’ Committee for resolution of credit issues of MSME.

(ii) Measures taken by RBI:

• Increase in Liquidity to the banks for improving credit flow, by :

• Reducing CRR, SLR, Repo rate and Reverse Repo rate (from Oct ’08, CRR reduced from 9% to 5% (now modified to 5.5% on 13.02.10 and to be enhanced to 5.75% w.e.f. 27.2.2010), SLR reduced from 25% to 24% (restored to 25% in Oct.’09), Repo Rate reduced from 7.5% to 4.75%, and Reverse Repo Rate reduced from 6% to 3.25%).

• Refinance facility to the EXIM Bank for an amount of Rs. 5000 crore for providing pre-shipment and post-shipment credit in Rs. or dollars;

• A special re-finance facility put in place for banks for the purpose of extending finance to exports, micro and small enterprises, mutual funds and NBFCs. Provisioning requirements had been lowered. Export Credit Refinance facility for commercial banks increased to 50% (now restored to 15% on 27.10.2009) of the outstanding Rupee Export Credit.

• Increase in FOREX Liquidity:

• RBI’s assurance for continued selling of foreign exchange (US $) through banks, to augment supply in the domestic foreign exchange market;

• Interest rates on export credit in foreign currency have been reduced to LIBOR + 200 basis points in February 2010 from the earlier LIBOR+350 basis points.

• Easing of Credit Terms:

• The period of pre-shipment and post-shipment Rupee Export Credit enhanced by 90 days each;

• Time period of export realization for non-status holder exporters increased to 12 months, at par with the Status holders. This facility which was available up to 03.06.09 has been extended for one more year.

• PSU Banks, consequent to measures announced by RBI, reduced the margin money on Guarantees for export units.