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Home  >  Publications  >  Annual Report 2007-2008       


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Annual Report 2007-2008
Foreign Trade Policy

A comprehensive Foreign Trade Policy (FTP) for 2004-09 was announced on 31st August, 2004 and its Annual Supplement for the year 2007-08 was released on 19th April, 2007. The basic objective of this policy is to double the merchandise exports by 2009 and to make exports an effective instrument of economic growth by giving thrust to employment generation particularly in semi urban and rural areas through a number of policy initiatives. These include simplification of procedures, reduction in transaction cost, neutralisation of incidence of levies and duties on inputs used for exports and development of global hubs for manufacturing, trading and services. Keeping in view the interests of the domestic entrepreneur, farmers, traders as well as India's international commitments and bilateral treaties, amendments/changes in policy are made from time to time as and when these become necessary in public interest.

Stability of policy regime has yielded positive results and India's merchandise exports is expected to surpass the objective of doubling by 2009. Some of the major initiatives taken recently, including measures announced in the Annual Supplement to FTP in April, 2007 are given below:

The Union Minister for Commerce & Industry addressing at the release of Annual Supplement to the Foreign Trade Policy 2004-09, in New Delhi on April 19, 2007.

Focus Market Scheme and Focus Product Scheme

The Focus Market Scheme was introduced with effect from 1.4.2006 with a view to offsetting the high freight cost and other disabilities faced in accessing select international markets. The scheme allowed duty credit facility @ 2.5 per cent of the FOB value of exports of all products to the notified countries. In order to give further thrust to the Focus Market Scheme, 16 additional markets have been notified/ clarified during the year which shall be entitled for duty credit scrip on export with effect from 1.4.2007. In total, 57 markets are covered under the scheme. The scheme had enhanced India's export competitiveness in these regions.

The Focus Product Scheme was introduced with effect from 1.4.2006. It provides incentives for export of products which have high employment potential in rural and semi urban areas with a view to offset the inherent infrastructure bottlenecks and other associated costs involved in marketing of such products. The scheme allowed duty credit facility @ 1.5 per cent of the FOB value of exports of notified products, such as value added fish and leather products, stationery items, fireworks, sports goods, handloom products bearing handloom mark and handicraft items. In order to give further thrust to the Focus Product Scheme, 19 additional products have been notified/ clarified during the year which shall be entitled for duty credit scrip on export with effect from 1.4.2007. In total, 103 products are covered under the scheme. In addition to this, 2 more products have also been added/ notified during the year under the High Tech Products Scheme which is a part of Focus Product Scheme.

The scrip and the items imported against the Focus Market Scheme and Focus Product Scheme are eely transferable. The duty credit, thus obtained may be used for import of inputs or goods including capital goods provided the same is freely importable under ITC (HS), except a small list of items contained in Appendix 37B.

Vishesh Krishi and Gram Udyog Yojna

With a view to promote employment generation in rural and semi urban areas, the export of Gram Udyog products i.e. village and cottage industry products has been incentivised by awarding a duty credit scrip @ 5 per cent of FOB value of exports under the expanded Vishesh Krishi and Gram Udyog Yojna. However, the duty credit scrip is being granted only at a reduced rate of 3.5 per cent of the FOB value of exports, in cases where the exporter has availed the benefits under Chapter 4 of this Policy, for import of agriculture inputs (other than catalysts, consumable and packing materials) relating to the export item under this scheme. The certificate/scrip can be used for import of all freely importable items, except such items as notified by the government in Appendix 37B. The scrip and the items imported against it are freely transferable. In order to give further thrust to the scheme, 153 new products have been notified to be eligible for benefit under the Scheme w.e.f. 1.4.2007. In terms of value of duty credit scrip issued, there has been an increase to the extent of Rs.299.64 crore during 2006-07 over the previous year, thus registering an annual growth rate of 113.564 per cent.

Exporters have the option to avail of the benefits in respect of the same exported product(s) under only one of the above three schemes i.e. the Focus Market Scheme, the Focus Product Scheme or the Vishesh Krishi and Gram Udyog Yojna.

Gems & Jewellery Sector

With a view to give competitive edge and also to sharpen the core strength of the promising gems and jewellery sectors and the handicraft sector, duty free access to tools, machinery and equipment has been provided. Export of rhodium polished silver jewellery has been encouraged further by way of enhanced entitlement of duty free consumables to 3% which would compensate the price rise of rhodium, an essential ingredient for polishing. To reduce the transaction cost for the diamond sector, testing facility at Dubai has been incorporated in the list of certifying agencies.

Duty Neutralisation Scheme

Developers and Co-Developer of Special Economic Zones have been notified for benefits under all duty neutralisation schemes like Duty Entitlement Pass Book (DEPB), Duty Free Import Authorisation Scheme (DFIA) and Advance Authorisation Schemes.

Duty Free Import Authorisation Scheme (DFIA)

A new Scheme called DFIA was made effective from 1.5.2006. It offers duty free imports for exports and transferability of scrip or the imported inputs, once the export obligation is completed. This scheme has undergone changes, making it more user friendly both in terms of procedural simplification and reduce interface with the government authorities.

Duty Entitlement Pass Book (DEPB) Scheme

The scheme shall continue till 31.3.2008. Facility of Brand Rate for customs duty on fuel, which remained un-rebated under the scheme and the 4 per cent Special Additional Duty was introduced under the scheme. DEPB rates of 9 product sectors were enhanced by 3 per cent and for the rest by 2 per cent w.e.f 1.4.07 so as to adjust for reduced value addition, rupee appreciation etc. The enhanced rates for 47 entries were slightly reduced w.e.f. 9.10.2007, though still higher than the rates which were prevalent before 1.4.2007. Formulation of a new scheme for rebating the State Indirect Taxes on exports is under consideration.

Service Tax on Exports

Government has announced in principle, that exporters should only export goods and not the taxes and duties thereon. In line with this, services rendered abroad and charged on exports from India, would be exempted from Service Tax. The Department of Revenue has been requested to expedite the issuance of corresponding Notification.

Service tax on services rendered in India and utilized by exporters would be exempted/ remitted. While the Department of Revenue have issued Notification allowing refund of service tax on 10 services, remission mechanism for the balance services is being institutionalized, by way of working out of modalities.

Trade Facilitation Measures

  • Duty free import of samples upto Rs. 75,000/- (presently Rs. 60,000/-) has been allowed for all exporters.
  • With a view to reduce transaction time and cost, the Requirement of double verification process at customs under EPCG and Advance Authorization scheme has been done away. Now onwards, if required, random verification will be resorted to.
  • Application forms have been down-sized thereby reducing transaction time.
  • With a view to ensure greater predictability and stability in determining direct tax liability of domestic manufacturers, the word 'manufacturing' is being clearly defined in the new Income Tax Code.

Export Promotion Capital Goods (EPCG) Scheme

  • To encourage the exports from the tiny and cottage sector, export obligation period is raised to 12 years.
  • Service sector is required to maintain the average level of exports to avail new EPCG.
  • Provision is made for waiver of export obligation, if because of Force Majeure reasons, the exporter is unable to fulfil export obligation.
  • Issue of EPCG for import of spares, tools, spare refractory is also allowed for existing imported plant and machinery (though not imported under EPCG cover).

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

  • Limit prescribed for procurement and export of spares/components under the Foreign Trade Policy has been enhanced from 1.5 per cent of FOB value of exports to 5 per cent, subject to the condition that it shall not count for NFE and direct tax benefits. The earlier condition of export of spares/components within the warranty period of the export article has been done away with.
  • The requirement of permission from the Development Commissioner/Custom Authorities when part of the production process is sub-contracted abroad and goods are exported from the premises of the sub-contractor abroad, has been removed.
  • Units having Premier Trading House status have been allowed the option to undertake DTA sales on monthly basis, besides quarterly, half-yearly or annual basis, as allowed to other units
  • Detailed Guidelines for conversion of DTA units into EOU/EHTP/STP/BTP unit have been incorporated in the Appendix 14-I-O in Handbook of Procedures.
  • The general provisions in para 9.3 and 9.4 of Handbook of Procedures, regarding applications received after expiry of prescribed date of receipt and supplementary claims have been made applicable for CST refunds to these units.

Deemed export

The time limit for claiming deemed export benefits has been enhanced from 6 months to 12 months from the date of payment. These claims can be filed Invalidation Letter/ARO wise, against individual licences, within the time limit as specified above. 100% TED refund will be allowed after 100% surplus have been made physically and payment received up to 90%.

Electronic Data Interchange (EDI) Initiatives

The following Electronic Data Interchange (EDI) initiatives are being undertaken with a view to implify procedures relating to international trade and to put in place an exporter friendly regime for obtaining import authorizations under various Export Promotion Schemes:

  • Bring all the community partners dealing with international trade on an EDI enabled platform to reduce transaction costs.
  • Extend the online web enabled application procedure for issue of licence/ authorization to all categories of licences/ authorization;
  • Consolidate the message exchange system with Customs and extend its scope to cover all shipping Bills relating to different export promotion schemes.
  • Doing away with the manual double verification of the authorization system by way of online validation with the Customs Authority, initially for the ports having EDI facility.

Grievance Redressal Committee

A Grievance Redressal Committee (GRC) headed by the Additional Secretary, Department of Commerce has since been set up to handle grievances of exporters against decisions of the DGFT relating to Trade and Policy. The Exporters shall send their grievances to the Committee in Electronic form, besides all other normal modes. Representations to the Committee may be forwarded by post addressed to the Chairman of the Committee. The application of the aggrieved party must contain the name of the applicant, IEC No., address (with contact Nos. and e-mail ID), the details of reference earlier made to DGFT, if any and the grounds in support of grievances, in brief. Any decision relating to Foreign Trade i.e. decisions of ALC, EPCG, PIC, PRC, EPZ/EOU etc. i.e. all non-statutory matters relating to

Foreign Trade Policy which has caused grievances to the exporter/importer will be heard by the Committee. Thereafter, Grievance Committee functioning in DGFT may be approached in the first instance for redressal of the grievances. The petitioner may thereafter refer the matter to GRC if still aggrieved with the decision of the Grievance Committee of DGFT. The Committee would also afford a personal hearing to the petitioner to redress the grievance by considering applications in its meetings. The petitioners would be able to see the minutes of the meeting on the website of the Department of Commerce (http://commerce.gov.in). During the period April-December 2007, the Grievance Redressal Committee met 6 (six) times wherein 85 cases were considered and disposed off.

Important Policy Decisions taken during the year (after 19.4.2007)

  • Import of reconditioned components of computer classified under Exim Code No.847330 has been restricted. [Notification No.8 dated 11.6.2007].
  • Import of power tillers allowed subject to emission norms notified by Department of Road Transport and Highways. [Notification No.11 dated 3.7.2007]
  • Import of rice in India allowed subject to the condition that the exporter is able to furnish a certificate from the concerned Government authorities that the exported rice is GM free. [Notification No.13 dated 10.7.2007]
  • Import of dolomite and limestone of a size higher than one cubic feet has been restricted. [Notification No.17 dated 26.7.2007]
  • MMTC Limited and TANCEM Limited were permitted to import cement without standard mark from such foreign manufacturers who have applied for registration with Bureau of Indian Standards. [Notification No.23 dated 14.8.2007]
  • Import of wheat has been made free till further orders. [Notification No.35 dated 8.10.2007]
  • Import of palm oil through port in Kerala has been restricted. [Notification No.39 dated 16.10.2007]
  • Import prohibition on processed pig bristles has been removed. [Notification No.50 dated 14.11.2007]
  • In addition to import of eligible shooters, import of 0.177 bore air guns and air pistols allowed freely by National Rifle Association of India (NRAI). [Notification No.52 dated 21.11.2007]
  • The list of items where mandatory BIS standards is required for imports has been amended. The present list includes 68 items. [Notification No.53 dated 21.11.2007]
  • Conditions have been imposed on import of certain chemicals as per Chemical Weapon Convention [Notification No.59 dated 30.11.2007].

Trends of Authorizations issued under Export Promotion & Duty Neutralization Schemes during the period April-December, 2007

During the period April-December 2007, a total of 1,12,386 authorisations having CIF/ Duty credit value of Rs. 1,32,489 crore and FOB/ Export Obligation of Rs. 3,35,854 crore have been issued which represents downfall of 18% in number, 14% in CIF/ Duty credit value and 4% in FOB value/ Export Obligation over the corresponding period of last year. However, category wise, pattern of issuance of authorisations during the period remained the same as in the corresponding period of last year. A Statement on total number of authorizations issued and their CIF/ Duty Credit & FOB during April-December, 2007 and the corresponding period of last year is given in the Table-5.1.

A comparative picture of authorizations issued & their import value during the period April-December for the year 2006 and 2007 is depicted through Charts-5.1 & 5.2. The percentage share of import authorizations issued and their value by Category during April-December, 2007 is depicted through Charts 5.3 & 5.4.

Chart 5.1

Chart 5.2

Chart 5.3

Chart 5.4

Table-5.1


 

 

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