Rajiv Gupta

The law is not a rational code. These are all well known but then even a beneficial Export Promotion Policy will be afflicted by it is very difficult to digest but then always trust the miraculous Indian bureaucracy for cracking a poor joke. The moot question is that can policy makers  be ever trusted for making a good export promotion policy in the best interest of the nation. Finally, are the policy makers able to understand the implications of the provisions of the law & if not why they are not held accountable for the same.  This is a case, which tells you that even the very basics of the law are flouted with impunity. The exporters are made to suffer instead of being facilitated. Is this not outright cheating?  Where is the responsibility & accountability in the system & if there is none then can there be anything but corruption ruling the roost?

The exporters are allowed the facility of Advance Authorization for duty exemption. The exporters can apply for one or more AAs to conduct exports. If two or more authorizations are redeemed together then this is termed as clubbing & on clubbing the clubbed AAs are deemed to be one. This is beneficial provision with no extra benefit accruing to the exporter as such. Even a layman will understand that the two or more AAs could have been redeemed separately if the exports & imports were as per the AA but if there was mismatch in exports or imports for any reason but this error is taken care of when the AAs are clubbed then there should not be any problem created by the DGFT authorities because this is simply driven by common sense & this was really the genesis of clubbing policy being framed when I made the first ever request for clubbing & redemption when there was no such policy.

Also Read-Why export promotion policy favour defaulters & punish efficient exporters- Part 2

The particulars of the case study are as under:

Sl. No
Authorisation details
Customs Notification no. & date
Export product
Qnty. Of Export (Kgs.)
FOB value of Exports (US$)
Import Item
Qnty. Of import
Issuance date
Import (Kgs.)
Value of import  (US$)
Expiry date of EO period

Now, the fact of the case is that in the 1st AA, the quantum of exports is 120 Kgs. & US$ 120 is realized. Whereas in the 2nd AA, the quantum of exports is 180 Kgs. & US$ 180 is realized. In both the AAs, the imports & exports are conducted within the respective initial period of validity of the AA as well as the Export Obligation (EO) period respectively.

Even a layman will very easily understand that since there is excess exports in the 1st AA, the exporter is utilizing the said excess exports in an AA issued subsequently & there cannot be any reason to accept that because it facilitates the exporter in conducting exports in a manner where he enjoys absolute control to maximize efficiency to get the best out of the imports & exports. The fact & the law point is that the exporter finished the exports first & did not take any advantage of the FTP/HBP provisions to get the undue benefit as such therefore why should any liberal Export Promotion authority should deride this & punish the exporter by not allowing the same. Why the authorities should indulge into such idiocy & advance the same even when the exporter is not getting any undue advantage! Any person with little application of mind will understand that in case of the 1st authorization, the EO is fulfilled to the extent of 120% within the initial validity period therefore there cannot be any penalty levied on the exporter under any circumstances. The readers will also comprehend that this is very basic or elementary & does not require rocket science to understand & implement. However, neither the DGFT nor the Policy Relaxation Committee (PRC) is able to uphold & implement the same till date despite the fact that this principle has been followed in the past & there is no undue benefit ever possible to the exporter. To put things in perspective, in business, the control is very important, therefore in the first place, the exporter refrains from obtaining a single AA (with the total quantum of exports & imports of both the AAs) because the exporter is not very confident of the International business scenario.  Under these circumstances, to enjoy better control on the exports & imports & not end up paying penal rate of interest or composition fee, the exporter has devised a better strategy to split the AAs & subsequently club the same for the purpose of redemption. Please note that the clubbing provision was introduced to take care of such eventualities only more than 15 years ago therefore just stopping this facility without any valid reason being specified is outright idiocy & cannot be allowed to continue in the name of export Promotion Policy. This article is sent to all the members of the PRC as well as the DGFT to specify that what harm or illegality is taking place by permitting clubbing & redemption in this case. The Export Promotion Policy cannot be simply arbitrary & whimsical in any case. The readers should note that in case of clubbing, there is redemption only permitted which effectively means that no imports & exports can be permitted after the clubbing & redemption is completed.

To put the issue  in explicit perspective, please consider in our case study that the complete exports & imports under both the AAs is conducted under the initial validity of the 1st AA i.e. before 14.11.16. The readers will understand that if the exporter had taken out a combined AA instead of two AAs then too, the exporter would have not faced any problem in the EODC or redemption but then this is being denied just because of the clubbing request being made. However, the policymaker sees no issues to be addressed & to give directions to the RLA, Mumbai.

Take another variation where the exports don’t stand completed before 14.11.16 in our case study under both AAs but they stand completed before 14.5.17 i.e. the extended 6 months period of EO of the 1st AA. Now the RLA, Mumbai does not want to even permit this by saying that the EO extension cannot be allowed for the 1st AA for the purpose of clubbing & redemption because excess exports have taken place in the 1st AA. Again, the readers will note that the clubbed AAs are treated as one on clubbing therefore going by that definition, there is a shortfall & EO extension of the 1st AA for the purpose of clubbing & redemption cannot be denied. Again, this is very basic & elementary & governed by common sense but then if they do this, how the abuse will continue to harass & extract a pound of flesh. Is it very difficult to decipher the ulterior motives?

The FTP paragraph 2.57 reserves the right of interpretation to the DGFT/PIC. The fact is that the RLA, Mumbai is an implementing authority & even the Addl. DGFT has no right to interpret the policy but then while exercising the authority an FTDO is far bigger than the DGFT because the interpretation given by that official will be forwarded blindly & protected despite the fact this is out rightly illegal.  In no other country such trampling of authority & insubordination will ever be tolerated.

The biggest problem with the formulation of Export Promotion Policy is that officials come in place for a small duration & hardly have time to understand the intricacies of it. The policymaker in new found role is eager to make an impact & falls prey to idiocies & advancing them & nothing beyond that & for that reason the policy changes faster than you change your clothes in this country. A study of the loopholes ridden export promotion schemes formulated & closed tells you the true achievement of the policymakers.

I will continue with the remaining story about how the DGFT favours the unscrupulous exporters & defaulters & the Clubbing & redemption provisions in the next article. They make a very interesting read about why India as a nation is not in a position to grow exports.

(Above are personal view of Author and he can be reached at rajiv.pec@gmail.com)

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  1. Rajiv Gupta says:

    Dear Mr. Jay Karan Singh,
    I believe that that there is absolutely no room for frivolous objections based on thinking which is devoid of any rationale & logic. Mr. Singh, please understand, formulating an export promotion policy requires a lot of thought because it is not about the policymakers versus the exporters but it concerns the progress of the nation. India needs exports to increase the pace of GDP growth & 10% cannot be achieved without exports playing a major role. The exporters are doing a service to this nation & they need to be treated with dignity. The policy cannot be a con game where the terms & conditions can be changed arbitrarily & whimsically & exporters made to suffer loses silently. Nothing can be more derogatory than this & when this is pointed out, the rectification of the policy is not being carried out. The Mumbai HC has categorically stated that “Let the courts decide” attitude should be given up. The problem is that the policymakers have never even exported a gram of merchandize in their life & they therefore don’t seem to understand what the export is all about therefore anything done in abstract cannot meet the practical needs of the exporters. Please note that if the central principle is that if the exports & imports are within the initial or extended validity of the AA issued first then there is no case of any undue advantage accruing to the exporter even when here are excess exports in the first AA & the revalidation is carried out on the payment of fees & EO extension does not require any fee to be paid. A policymaker should first decide the central policy & then formulate a clear, easy to understand & transparent policy to implement otherwise you are harming the interest of the nation & indulging into a grave error & this is unacceptable. Please research a little more & think a little more & all doubts will vanish. If you say that you don’t have time to read even then it is really very dangerous because policy making requires a lot of reading & research & if you don’t do that then it is better to allow that policy making is left to those who are willing to understand the intricacies. If you don’t read, how can you understand the mistakes? If you don’t understand the mistakes then how do you rectify them? I definitely understand as a trained competency assessor what I am talking about. The Export Promotion policy should be negotiated to the benefit of the exporter to lead the nation to success & it cannot be a con game played by the bureaucracy to put the exporters to lose their entitlements & close down their businesses. The policymakers need to respect this.
    Mr. Singh, if anybody is trying to impose wrong restrictions & distort the basics then it would show up as an anomaly. Any efficient exporter should not be punished & any defaulter should not be favoured. The paragraph (viii) of the PN 32/2015-20 20 dtd. 15.10.17 is absolutely wrong because it vitiates the very basis of clubbing & redemption. Any person with little common sense will understand that if both the exports & imports are within the initial/extended validity/EO period of the AA issued first then there is no scope for undue benefit but why as a policymaker you are pretending not to understand this. Mr. Singh, the paragraph (viii) of the PN block excess exports use of the 1st AA but about if the excess arises in 2nd, or 3rd or 4th AA when 5 AAs are getting clubbed? Mr. Singh, do you now realize that the PN does not take care of this. Why because you cannot advance an idiocy? May you therefore apply your mind or write back about the mental block you are facing in accepting the truth, I will attempt to clear the same. To tell you I had discussion with other DGFT officials & they very well understand it.
    Mr. Singh, any clubbing & redemption policy can be very simply implemented without passing on any undue advantage & the same could be simply worded as:
    For availing the facility of clubbing for redemption/regularization in respect of AAs with common inputs operating under similar customs notification in terms of duty exemption, the exports & imports have to be within the initial/extended validity/EOP period respectively of the AA issued first. Revalidation of the AA & EOP extension will be carried out as per the specific provision for clubbing on fee, if applicable as after clubbing the AAs clubbed are treated as one. Minimum value addition has to be maintained on clubbing. AAs for Annual requirements can be clubbed. Accounting of inputs will be on the basis of SION/Norms fixed by the NC.
    There is one more thing, you can consider:
    Clubbing for shortfall in Value Addition is acceptable. The principle being average VA is applicable in case of a particular licence. If prices drop in International market all of a sudden then export should not be made to bear the brunt of it. As on today, a smart exporter will create a shortfall in quantity & achieve this but DGFT should explicitly permit this in the best interest of the exporters.
    If you have any issue, please let me know, I will address the same.
    Thank you.
    Best Regards,
    Rajiv Gupta

  2. Rajiv Gupta says:

    On Mon, Mar 5, 2018 at 6:37 PM, Jay Karan Singh wrote:
    Clubbing of Authorisations is facility and not a matter of right. Exports made prior to issue of EDI File No/Authorisation cannot be accounted towards discharge of EO. Therefore, exports(excess) made first authorisation cannot be clubbed with authorisation issued subsequently in which no import made. This amount indirect revalidation, as no revalidation is allowed after 18 months. Getting revalidation beyond 18 months has no vested right. Even revalidation beyond 12 months is allowed on merit.

    Dear Mr. Jay Karan Singh,
    Please remember the mandate of the Parliament to the DGFT is to facilitate the exporters & it is not an unbridled authority for abuse & harassing the exporters to no end. There has to be rationale & logic in an Export Promotion Policy & it cannot be a poor joke or an insult to the common sense. Mr. Singh, it is very difficult to comprehend that why even the very basics cannot be respected. Mr. Singh, if the exports are effected under an Advance Authorization then exports are after getting a file number or an authorization. This is elementary therefore why there is a problem being created when exports & realization stand completed. This condition did not exist in the last more than one & a half decades of Clubbing policy in force. Therefore, do you mean to say all the earlier incumbents in the position of the DGFT carried out something wrong! The CBEC i.e. the Revenue authority did not point any wrong or object to it. The CAG or any other auditors of the GoI did not point any wrong or object to it. Do you really mean to say that none of the officials from the revenue department or the audit departments was capable to understand the illegality & they were all colluding in passing on undue advantage but you are only one who is able to understand the illegality? Further, Mr. Singh, please apply your mind. The exports & imports have to be within the initial/extended validity of the AA issued first. Therefore, exports or imports not being valid is out of question. Further, Mr. Singh, please note that Revalidation/EOP extension is as per the specific policy for this purpose & for the purpose of clubbing & regularization therefore how it can be wrong. You pointed out the paragraph 4.42 of the HBP, Mr. Singh therefore where is the case for exercise of discretion? When the legal provision exists, the benefit of it cannot be denied, once again, this is very elementary. Mr. Singh, please see PN 34, this condition does not exist therein & according to you this is an illegality therefore why should you extend the illegality vide PN No. 34, 6 days later. I am unable to understand that how can this kind of arbitrariness & whimsical approach be advanced as export promotion policy? Last but not the least important is that amendment is prospective & not retro-respective. The PM/FM has been telling the whole world that retro-respective adverse amendments will not be carried out. Why then you should spoil the name of the government? Not only this, please note that all this is permitted the world over under the aegis of the WTO therefore why should India deprive the exporters of the legitimate benefits. Mr. Singh, policy making is a serious task & it is essential to understand the implication of each & every word which goes into the print under the signature of the DGFT. No idiocy can ever be advanced in the name of the export promotion policy. Here I see a blatant attempt to defend an idiocy resulting in out-right cheating of the exporters. Mr. Singh, you will understand that discretion will always create scope for corruption therefore the same is avoidable. Further frequent changes in the policy are avoidable because then you do not know what the policy is all about but it becomes a poor joke. Do you mean to say that the incumbent DGFT’s were so incapable that they could not understand the intricacies of the clubbing & redemption even after that process being carried out for more than 15 years! Are the policymakers seriously so bad! If they are that bad then why don’t you file an FIR for taking appropriate action in the matter because there has to be accountability in the system? Please read both parts of the article carefully, the rationale & logic is crystal clear & that is what an export promotion policy should rely on. I have established within the policy provisions, the rationale & logic & if you still have something more to say, please let me know, I will respond.
    Thank you.
    Best Regards,
    Rajiv Gupta

  3. Rajiv Gupta says:

    On Mon, Mar 5, 2018 at 1:17 PM, Jay Karan Singh wrote:
    Mr. Gupta,
    It seems that your knowledge and under standing to the policy is very poor. Just using abusive language and forwarding mail to thousand persons would not make you wiser.

    You should read both the PN carefully and understand the purpose and meaning of it. PN 32 amends the provisions of HBP whereas PN 34 gives one time opportunity till 31.03.2018 for closing all pending cases.

    Sub-Para VI and VII are required to be read harmoniously. Para VI allows facility of extension if exports are made outside the prescribed EOP. Whereas, para VII states about condition for clubbing. Exports made within initial/extended obligation period shall only be accounted. Under para vi, exporter can seek extension if not taken earlier under the provisions of Para 4.42 for regularisation of exports made outside of EOP. As far as accounting of exports made under subsequent Authorisation, where imports are made in first Authorisation without any export or partial export, the philosophy behind the scheme is that duty free imported inputs should be accounted for. If some one imported under a Authorisation but could not export for one and other reasons but by using the same raw materials he discharges export obligation under subsequent Authorisation in which no imports are made, such Authorisation can be clubbed provided exports in the subsequent Authorisation are made within export obligation period of first Authorisation. Nothing wrong in that. No favour to any defaulter.

    Dear Mr. Jay Karan Singh,
    Mr. Singh, calling spade a spade is not a crime. Please note that several loophole ridden Export Promotion measures have been closed down because the articles exposed the wrongs in a threadbare manner. If you want, I will provide you the complete list. Mr. Singh, are you trying to say that PN Nos. 32 & 34 do not pertain to the subject of Clubbing & redemption. Further, Mr. Singh, are you trying to say that the clubbing policy applicable as on date should be very restrictive & render the operations of the exporters invalid by way of retro-respective amendment though one basic tenet of law is that FTP/HBP applicable as on the date of the issue of AA is applicable & another very significant tenet is that amendments are prospective & axiom following out of this is that no change in FTP/HBP can affect the exporter adversely. Therefore, Mr. Singh, now see the case study appearing in part 1 of the article. There is excess export in the AA issued first. Why the DGFT stop this clubbing & redemption? Is EO extension not vested right of the exporter for the purpose of clubbing & redemption Mr. Singh though there is excess exports in the AA issued first & there is no fee applicable because there is no shortfall. Is revalidation not vested right of the exporter for the purpose of clubbing & redemption Mr. Singh though there is imports completed in the AA issued first on payment of applicable fee for the purpose of clubbing & redemption. Mr. Singh, please understand that all the clubbed AAs are treated as one on clubbing & the need for EO extension & revalidation is essential because all the exports & imports have to be within the initial/extended validity of the AA issued first to complete clubbing & redemption. Mr. Singh, please also understand that prorate enhancement of exports & imports in AA is also legally valid. Mr. Singh, are you not aware that imports under replenishment clause under AA are legally valid. Therefore, why clubbing is restricted to only those cases where there is shortfall in the AA issued first & how this condition can be made valid retro-respectively. Therefore it is important to get the context correct first & see things in proper perspective? Picking up something in the article out of context serves no purpose. This issue was brought to the personal attention of the DGFT for rectification long back. Therefore, Mr. Singh, I maintain that no idiocy can be advanced in the name of the export promotion policy. Now, Mr. Singh, please see the PN No. 34. The PN does away with the payment of composition fees if the exports are within 36 months & it omits the condition that this period begins from the date of the first AA. Mr. Singh, does this not ring a bell that why this condition is not properly worded & made strictly applicable. Please note that the condition is not applicable in relation to the AA issued first. These errors, which have a serious financial impact cannot be passed on as a slip. However, Mr. Singh, under PN No. 32, this is not the case. Further, as pointed out, under the present FTP/HBP, even the EOP extension/Revalidation is not being allowed as explained hereinabove. Mr. Singh, these restrictions in respect of EOP extension/Revalidation are not applicable in PN No. 34. Can the DGFT arbitrarily change the FTP/HBP on the basis of the whims & fancy?
    Mr. Singh, if the mind is applied then as explained in the 2nd part of the Article, the exports have to be within the initial/extended period of the first AA then the use of word any authorisation is not appropriate. Only the AA issued first will need revalidation/EOP extension. Please think a little more.
    Mr. Singh, PN No. 32, prohibited clubbing of AA issued on or before 31.3.09 & 6 days later PN 34 relaxed it to 1.4.2002.
    Mr. Singh, both the parts of the article are to be seen together to arrive at a logical conclusion & that is why the mail pertaining to the 2nd part was sent in conjunction with that of the 1st part.
    Mr. Singh, I am pained to see that you only picked to comment on the paragraph (vi) & (vii) related issue of the PN No. 32 whereas you left out the substantive issue of idiocies in reference to the paragraph (viii) of the said PN & this approach on the part of the Export Promotion authority does not augur well for the exporters from India.
    Please note that any good policy for export promotion should be transparent & devoid of any restrictions, which simply constrain the operations of the exporter unnecessarily. There should not be frequent changes in clubbing & redemption policy because this provision is in force for more than 1 ½ decades now & no arbitrary & whimsical restriction advancing idiocy (which fail to pass the test of rationale & logic) can therefore be passed off as export promotion policy.
    If you still need any clarifications/information, please let me know, I am at your service to provide the same.
    Thank you.
    Best Regards,
    Rajiv Gupta

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