At the very outset, what the Notification No. 50/2015-20 dtd. 03.03.2020 does is that it stops the process of exports of the 26 selected bulk drugs (APIs) & formulations thereof, which cannot be offloaded in the domestic market. To any sane mind, this is simply ridiculous.
There are two points of utmost significance:
1. The Advance Authorizations (AA)s are issued with Actual User Condition & therefore the exports related imports need to be used for the purpose of exports under an AA.
2. Under the AAs, non-registered imports of the Active Ingredients (APIs) is allowed & this non-registered import material cannot be used for the manufacture & release of material for the Domestic Market. There is a separate Licence issued by the FDA authorities to manufacture & export the material because the specifications are different. The DGFT is required to observe all the laws applicable to the imports & exports & cannot be an exception. The DGFT has vide POLICY CIRCULAR NO. 9 (RE-2003)/2002-2007 dated 30.6.2003 (as amended) has recognized & imposed restrictions on list of unapproved drugs. The DGFT cannot override the registration requirement & relax the same because i.e. in the domain of the DCGI alone. It is difficult to comprehend that how such errors/omissions can be crept in the present notification & nobody brought this to the attention of the DGFT including the exporters/Associations or the Export Promotion Councils in the meetings supposed to have taken place prior to the issuance of the notification. This only shows that a midnight order has been issued without the proper application of mind.
There should be minimal intervention in International trade as we are a signatory to the WTO. International contracts should not be jeopardized by way of Notifications. The buyers indulge into years of Hard work & pay a lot of registration charges before they become approved suppliers. All this cannot be wasted by way of the Notification. The foreign buyers are looking for the same kind of support from the reliable Indian supplier like in the past & therefore any amount of disruption will not only invite penalty but jeopardize future business relations.
What is the solution then?
1. The non-registered imports used for the manufacture of exports should be allowed in an uninterrupted manner & exports permitted freely under AAs as hitherto & consented by the relevant ministry.
2. The DGFT should take upon himself to clear permission for export simply based on the declaration of the manufacturer that they have ample material to take care of the supplies for the domestic market in relation to what they have been selling in the domestic market.
The DGFT was compelled to reconsider the proposed ban & Office Memorandum No. 01/91/180/24/AM20/EC dtd. 06.03.2020 was issued. Once again, there is no application of mind visible. The OM speaks of the exports from SEZ/EOU but then only gives permission of free exports to the SEZ units only. There is complete silence about the EOUs. Not only this, whether the OM can override the Notification issued by the DGFT is another moot question? The Customs field formation are not willing to oblige therefore everyone is out to get their pound of flesh.
The DGFT should comprehend that there is a separate ministry & Department of Pharmaceuticals directly responsible therefore the DGFT cannot act as an oversight authority & undermine their authority. The department of Pharmaceuticals has examined the OM issued by the DGFT & issued an OM No. 35022/4/2020-Policy (Pt.) dtd. 09.03.2020 after due consideration of the prevailing position & you will see that the Office Memorandums issued by them is sensible & very specifically states that the export of the APIs under AAs need to be allowed. Therefore, the DGFT should have complied with the advice of the relevant ministry & freed the exports in case of SEZ, EOU & advance Authorization by way of the notification. The Notification is deemed essential because the Customs formations are not willing to honour the OM. Why the DGFT should continue with the restrictions if there are no ulterior motives. Why an application for Restricted Item of exports is needed when the relevant ministry has already cleared the issue. The DGFT should remember that it is a matter of common sense that two authorizations cannot be required for conducting exports i.e. 1. Advance Authorization & 2. Restricted Export Item licence. The Customs, which is the implementing agency can always check whether the exports are getting conducted under the Advance Authorization & permit exports & they have been doing so for ages. The task of the policy-maker i.e. DGFT is to facilitate the exporter & not to be the stumbling block as per the mandate of the Parliament.
The DGFT may please note that the industry is reeling under tremendous pressure because of demand destruction due to slowdown therefore whatever business is possible cannot be hampered or stopped just by way of ridiculous restrictions. The DGFT needs to apply mind & ensure that Customers are not lost just because the restrictions are imposed by the DGFT & for this reason immediate action is essential. Further, why the DGFT does not have confidence in the competence of the Customs department to strictly verify the Advance Authorization & permit exports? How only the DGFT Headquarters only seem to possess that capability? If the applications come from all over India what kind of delays will be there & if orders are cancelled, who bears the consequences? The Policy makers need to be more honest in their intention & implementation of the Export Promotion Policy. If any exporter is found to be indulging in any wrongs on this count, then they can be always prosecuted in terms of the law.
The misery of the exporters does not end here. There are several inconsistencies/errors in the application for Restricted Item of exports. These include:
The exporters are required to get export Licence to continue exports but then they are required to upload the past 3 Financial years details in the online application. However, the online application presumes that in the past also, the exports were conducted under a restricted export licence only. This is not true because exports of Erythromycin salts were free prior to 3.3.20. However, the Sr. No. 4 of the online application does not allow you to fill the true position i.e. Not Applicable in the File Number column (because earlier exports were not made under restricted Exports licence) therefore the exporter is practically debarred from uploading the application. This is an error & needs to be rectified immediately in the online application system.
There is another error to be rectified which is in relation to the Sr. No. 5 iii & iv of the online application i.e. Country to which item is to be exported & ultimate destination country. The application allows multiple shipments to be included in one application for obvious reasons (avoid wastage of time, energy & efforts of all concerned by way of multiple applications), however, the multiple countries cannot be specified in the columns Country to which item is to be exported & ultimate destination country. Therefore, the exporters are constrained to file multiple online applications. The same problem exists with the selection of the port of shipment. The Customs field formations will not allow anything other than what is mentioned in the export licence.
The exporters are also encountering glitches in the online application once they have uploaded the data & want to modify the same. There is an error reported on the screen to delete something, which does not appear in the application.
The basis of permitting exports is being a SEZ/EOU or holding an Advance Licence. However, the online application does not have any column to give specific information in relation to the export product. The exporter may have several units therefore specific information is essential.
Therefore, even the implementation of the process is a complete mess even before you initiate it.
The whole of Udyog Bhawan is full of high ranking DGFT officials but then too we are not able to manage a basic online application system even after three decades of the adoption of systems-based approach. This is a telling comment on the efficiency & competence on the task of export Promotion being handled in this country. The authorities are more bothered about protecting their jobs by introducing unnecessary restrictions & exhibiting that work is being carried even when there is no scope for it. This is how the Indian bureaucracy keeps the systemic corruption intact & serves the interest of the nation. I hope to see better days in my life & some real ease of doing business & not a propaganda alone!
(Above are personal view of Author and he can be reached at email@example.com. Taxguru.in not necessarily subscribe to the views of Author)