Highlights of Annual Supplement (2013-14) to the Foreign Trade Policy 2009-14 Announced by Shri Anand Sharma
1. Measures to revive investors’ interest in SEZs.
1.1 A package of measures has been formulated to revive investors’ interest in SEZs and to boost exports. The salient features of the package are:-
(i) In view of the acute difficulties in aggregating large tracts of uncultivable land for setting up SEZs, while ensuring vacancy and contiguity, we have decided to reduce the Minimum Land Area Requirement by half. For Multi-product SEZ from 1000 hectares to 500 hectares and for Sector-specific SEZ from existing 100 hectares to 50 hectares.
(ii) To provide greater flexibility in utilizing land tracts falling between 50-450 hectares, it has been decided to introduce a Graded Scale for Minimum Land Criteria which would permit a SEZ an additional sector for each contiguous 50 hectare parcel of land. This will also bring about more efficient use of the infrastructure facilities created in such an SEZ.
(iii) Further flexibility to set up additional units in a sector specific SEZ is being provided by introducing Sectoral broad-banding to encompass similar / related areas under the same sector.
(iv) On the issues relating to Vacancy of Land, while the existing policy allows for parcels of land with pre-existing structures not in commercial use to be considered as vacant land for the purpose of notifying an SEZ, it has now been decided that additions to such pre-existing structures and activities being undertaken after notification would be eligible for duty benefits similar to any other activity in the SEZ.
1.2 IT Exports constitute a very significant part of India’s exports and IT SEZs have a major contribution in it. Exports from IT SEZs during financial year 2012-13 have exceeded Rs. 1.40 lakh crore registering a growth of over 70% over the previous year’s exports. We have specifically addressed issues to boost growth of this very important sector and also to give a fillip to employment and growth in Tier-II and Tier-III cities.
(i) The present requirement of 10 hectares of minimum land area has been done away with. Now there would be no minimum land requirement for setting up an IT/ITES SEZ. Only the minimum built up area criteria would be required to be met by the SEZ developers.
(ii) The minimum built up area requirement has also been considerably relaxed with the requirement of one lakh square meters to be applicable for the 7 major cities viz: Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangalore, Pune and Kolkata. For the other Category B cities 50,000 square meters and for remaining cities only 25,000 square meters built up area norm will be applicable.
1.3 The present SEZ Framework does not include an Exit Policy for the units and feedback was that this was perceived as a great disadvantage. It has now been decided to permit transfer of ownership of SEZ units, including sale.
2. Zero Duty Export Promotion Capital Goods (EPCG) Scheme
2.1 Foreign Trade Policy has two variants under this scheme, namely, Zero Duty EPCG for few sectors and 3% Duty EPCG for all sectors. During the last announcement on 5th June, 2012, a new Post Export EPCG Scheme was also announced which was notified on 18 February, 2013 by the CBEC. Based on the request of all stakeholders, Government has decided to harmonize Zero Duty EPCG and 3% EPCG Scheme into one scheme which will be a Zero Duty EPCG Scheme covering all sectors.
2.2 Following are the salient features of the Zero Duty EPCG Scheme:-
(i) Authorization holders will have export obligation of 6 times the duty saved amount. The export obligation has to be completed in a period of 6 years.
(ii) The period for import under the Scheme would be 18 months.
(iii) Export obligation discharge by export of alternate products as well as accounting of exports of group companies will not be allowed.
(iv) The exporters who have availed benefits under Technology Upgradation Fund Scheme (TUFS) administered by Ministry of Textiles, can also avail the benefit of Zero duty EPCG Scheme.
(v) The import of motor cars, SUVs, all purpose vehicles for hotels, travel agents, or tour transport operators and companies owning/operating golf resorts will not allowed under the new Zero Duty EPCG Scheme.
2.3 Reduced EO for Domestic Sourcing of Capital Goods
The quantum of specific Export Obligation (EO) in the case of domestic sourcing of capital goods under EPCG authorizations has been reduced by 10%. This would promote domestic manufacturing of capital goods.
2.4 Reduced EO for units in the State of Jammu & Kashmir
In order to encourage manufacturing activity in the State of Jammu & Kashmir, it has been decided to reduce the specific export obligation (EO) to 25% of the normal export obligation. Earlier, this benefit was announced on 5th June, 2012 in respect of units located in North Eastern Region and Sikkim. This provision is now being extended to J&K.
3. Widening of Interest Subvention Scheme
3.1 At present, 2% interest subvention scheme is available to certain specific sectors like Handicrafts, Handlooms, Carpets, Readymade Garments, Processed Agricultural Products, Sports Goods and Toys. The scheme had been further widened to include 134 sub-sectors of engineering sector. Government had also announced that the benefit of this scheme of 2% interest subvention could be available upto 31.03.2014.
3.2 Government has now decided to further widen the scheme to include items covered under Chapter 63 of ITC (HS) (other made up textile articles, sets, rags) and additional specified tariff lines of engineering sector items under the scheme. These sectors would be able to avail benefit under this scheme during the period from 01.05.2013 to 31.03.2014.
4. Widening the Scope of Utilization of Duty Credit Scrip
4.1 Duty Credit Scrips issued under Focus Market Schemes, Focus Product Scheme and Vishesh Krishi Gramin Udyog Yojana (VKGUY) can be used for payment of service tax on procurement of services within the legal framework of service tax exemption notifications under the Finance Act, 1994. Holder of the scrip shall be entitled to avail drawback or CENVAT credit of the service tax debited in the scrips as per Department of Revenue rules.
4.2 All duty credit scrips issued under Chapter 3 can be utilized for payment of application fee to DGFT for obtaining any authorization under Foreign Trade Policy. This benefit shall be available only to the original duty credit scrip holders. Duty credit scrip can also be paid for payment of composition fee and for payment of value shortfalls in EO under para 4.28 (b) of Hand Book of Procedure Vol. 1.
5. Market and Product Diversification
5.1 Norway has been added under Focus Market Scheme and Venezuela has been added under Special Focus Market Scheme. The total number of countries under Focus Market Scheme and Special Focus Market Scheme becomes 125 and 50 respectively.
5.2 Approximately, 126 new products have been added under Focus Product Scheme. These products include items from engineering, electronics, chemicals, pharmaceuticals and textiles sector.
5.3 About 47 new products have been added under Market Linked Focus Product Scheme (MLFPS). These products are from engineering, auto components and textiles sector. 2 new countries i.e., Brunei and Yemen have been added as new markets under MLFPS.
5.4 MLFPS is being extended from 01.04.2013 to 31.03.2014 for exports to USA and EU in respect of items falling in Chapter 61 and Chapter 62 of ITC(HS).
5.5 Exports of High Tech products would be incentived and it would be separately notified by 30th June, 2013.
5.6 The towns of Morbi (Gujarat) and Gurgaon (Haryana) have been added to the existing list of towns of export excellence for ceramic tiles and apparel exports respectively. These towns shall be eligible to get benefit under ASIDE Scheme.
6. Incremental Exports Incentivisation Scheme
6.1 Government has announced Incremental Export Incentivisation Scheme on 26.12.12 for the exports made during January 2013 to March 2013. This scheme is available for exports made to USA, EU and Asia. It has been agreed to extend this scheme for the year 2013-14. The calculation of the benefit shall be on annual basis under the extended scheme.
6.2 The Government has also agreed to include additional countries under Incremental Exports Incentivisation Scheme. 53 countries of Latin America and Africa have been added with the objective to increase India’s share in these markets. The present exports to each of these markets is less than US $ 100 million.
7. Facility to close cases of default in Export Obligation
7.1 Requests have been received for grant of relief to close cases where there is default in export obligations pertaining to advance authorizations and EPCG authorizations. It has been decided to allow a facility to close such cases after payment of required duty, along with applicable interest. The duty + interest have to be paid within a limited period of six months from the date of notification of this scheme. The total payment shall not exceed two times the duty saved amount on default in Export Obligation.
8. Served from India Scheme (SFIS)
8.1 Service providers are entitled to duty credit scrips under Served from India Scheme at the rate of 10% of free foreign exchange earned during a financial year. The entitlement shall now be calculated on the basis of net free foreign exchange earned (i.e., after deducting foreign exchange spent from the total foreign exchange earned during the financial year).
8.2 Limited transferability of SFIS scrips shall be allowed by the Regional Authority within group company of the status holder provided the group company is manufacturer.
8.3 Service exporters who are also engaged in manufacturing activity are permitted to use SFIS duty credit scrip for importing/domestically procuring capital goods as defined in para 9.12 of FTP including spares related to manufacturing sector business of the service provider.
8.4 Hotels, travel agents, tour operators or tour transport operators and companies owning/operating golf resorts having SFIS scrip can import or domestically procure motor cars, SUVs and all purpose vehicles using SFIS scrips for payment of duties. Such vehicles need to be registered for “tourist purpose” only.
9. VKGUY Scheme
9.1 There is a limiting provision which restricts benefit of VKGUY to a reduced rate of 3% when a particular item avails drawback at more than 1% rate. It has been decided to delete para 3.13.3 of FTP.
9.2 Limited transferability of the Agri Infrastructure Incentive Scheme (AIIS) scrip from status holder to the supporting manufacturer (of the status holder exporter) who is neither a status holder nor has a unit in a Food Park (and is not a developer) shall be allowed. Such transfer from the status holder would be endorsed by the Regional Authority.
10. Status Holder Incentive Scheme (SHIS)
10.1 Status Holder Incentive Scheme (SHIS) was extended for the year 2012-13. The scheme will not be available for the year 2013-14. Regional Authority shall allow limited transferability of SHIS scrip within group company of the status holder provided the group company is a manufacturer.
11. Recredit of 4% SAD
11.1 Utilization of recredited 4% SAD scrips shall be allowed upto 30.09.13 as a trade facilitation measure. However, no further extension shall be considered by Government and this would be the last such opportunity. The importers are advised to make the initial payment of 4% SAD in cash in future if they want a refund.
12. Duty Free Import Authorization Scheme (DFIA)
12.1 Anti Dumping Duty and Safeguard Duty was exempted under DFIA Scheme. Exemption from payment of Anti Dumping Duty and Safeguard Duty shall henceforth not be available after endorsement of transferability of such authorizations
13. Import of Cars
13.1 Import of cars/vehicles is permitted through designated ports only. Now import of cars/vehicles would also be allowed at ICD Faridabad and Ennore Port (TN).
14. Improvement in quality and timeliness of Foreign Trade Data
14.1 Initiative been taken to improve quality and accuracy of foreign trade data. The release of Press Note relating to Quick estimates has been compressed to 15 days after completion of the month to which it relates. The period of reporting by DGCIS about data on principal commodity-wise has been reduced from 2 ½ months to 1 month. Further transaction level (8 digit level) data is now available within a period of 2 months.
14.2 It has been decided that items falling under chapter 3 schemes for export incentive would be aligned with ITC (HS). This task has been completed by DGFT and it has been uploaded on the website of DGFT to seek feedback from the trade. Tade is requested to give their feedback by 17th May, 2013.
15. Second Task Force on Transaction Cost in International Trade
15.1 The report on Transaction Cost was released in Feb 2011. Implementation of its recommendation resulted into estimated reduction of transaction cost of approximately Rs 2495 Crores. Second Task Force on Transaction Costs has been constituted. The Committee would submit its report in six months
16. Electronic Data Interchange Initiatives
16.1 e-BRC system allows Transmission of realization of export proceeds details from banks to DGFT in electronically secured format. The system has been made mandatory with effect from 17th August, 2012. Up to 16th April, 2013, 31.2 lakh e-BRC have been uploaded on the website of DGFT by 81 banks. e-BRC data is also of use to different ministries/departments of Central Government and State Governments who have expressed interest in obtaining this data from DGFT. Government of Maharashtra and Delhi has started the process, as first movers, to use e-BRC data for processing VAT refund claims of exporters. E-BRC will improve the productivity of DGFT, Banks, Central and State Government department dealing with exporter/importers and will lead to substantial reduction of transaction cost and time
16.2 Reconciliation of export and bank documents at the time of closure of an Advance or EPCG Authorisation involved manual submission of many documents. Transmission of two key documents (Shipping bill from Customs and e-BRC from Banks) relating to Advance Authorization and EPCG Authorizations in secured electronic format to DGFT has established. Accordingly, DGFT has introduced the system of online Export Obligation Discharge certificate (EODC). Exporters can file EODC applications online. DGFT will also transmit all EODCs to DG Systems through a secured message exchange. This will obviate the need to have re- verification at the Custom’s end. Reconciliation of export import/Closure of an authorization was document heavy process. With online EODC exporter can complete the formalities at DGFT online and may get quick clearances at the Customs on account of e-transmission of EODC from DGFT to Customs.
16.3 Message Exchange System for exchanging shipping data relating to Focus Product Scheme (FPS), Focus Market Scheme(FMS), Market linked Focus Product Scheme(MLFPS), Status Holder Incentive Scrip(SHIS), Served From India Scheme (SFIS)and Agri Infrastructure Scheme shall be established with DG Systems. This will allow exporters to quickly link (and not fill all details) Shipping bills received from Customs with their applications for quick processing.
16.4 System for online issuance of Registration Certificate for export of Cotton, Cotton Yarn, Non-Basmati Rice, Wheat and Sugar has been introduced. This will allow quick issuance of Registration Certificates and easy monitoring.
16.5 An online system to resolve EDI issues has been established. The system generates a key number for each complaint for follow up.
16.6 A new online complaint resolution system relating to EDI issues has been devised where users can file online complaint. A key number for each complaint will be generated which can be followed up by the users and DGFT officials for early resolution of issues.
17. Ease of Documentation and procedural simplification
17.1 Submission of physical copies of IEC and Registration-cum-Membership Certificate (RCMC) with individual application has been dispensed with.
17.2 It has been decided to dispense with submission of hard copy of EP copy of shipping bills in case of (a) advance authorization, (b) duty free import authorization for grant of Export Obligation Discharge Certificate (EODC) if exports are made through EDI ports.
17.3 Application fee can be paid either in cash or through demand draft or through EFT. Now exporters/importers would be allowed shortly to utilize their credit card for payment of such application fee.
17.4 Existing procedures contained in para 2.20A of Handbook of Procedures related to execution of bank guarantee / legal undertaking stands deleted.
17.5 In order to facilitate IT exports, we have extended the facility of ‘work from home’ to STPI / EOUs / BTPs / EHTPs.
18. Widening of items eligible for import for Handloom/Made ups and Sports Goods.
18.1 5 additional items (embroidery/sewing threads/poly/quilted bedding materials and printed bags) are included in the list of items which are allowed duty free within the existing limits upto 5% FOB value of exports of handloom made ups in preceding year or within the existing limit of upto 1% of FOB value of exports of cotton/man-made ups in preceding year.
(i) Similarly, 5 additional items have been added pertaining to sports goods exports. These 5 items are (i) PVC Leather Clot (to be used in the manufacture of Inflatable Balls & Sports Gloves), (ii) Latex Foam (to be used in the manufacture of Shin Guard & Goal Keeper Gloves & other Sports Gloves), (iii) Peva / Eva Foil (to be used in the manufacture of Shin Guard & Sports Gloves), (iv) Stitching Thread (to be used in the manufacture of Inflatable balls & Sports Gloves), (v)Printing Ink (to be used in the manufacture of Inflatable balls & Sports Gloves).
(ii) Item descriptions shall be amended, from Synthetic Rubber Bladder to PVC/Synthetic Rubber Bladders for Inflatable Balls and from PU Leather Cloth/PU laminated with cotton for Inflatable Balls to TPU/PU Leather cloth/TPU/PU laminated with cotton for Inflatable Balls, in Notification No.12/2012 – [Cus (Sl.No.521 (f) and (k)] in relation to sports goods exports.
Address by Anand Sharma at the Release of Annual Supplement 2013-14 to the Foreign Trade Policy 2009-14
The Union Minister for Commerce, Industry & Textiles Shri Anand Sharma today released the Annual Supplement 2013-14 to the Foreign Trade Policy 2009-14. Following is the Text of the Speech delivered by Shri Sharma here today:
“Ladies and Gentlemen, I have the privilege of presenting the Annual Supplement 2013-14 to the Foreign Trade Policy.
Four years ago, the Government had announced the 5-year Foreign Trade Policy for the period 2009-14. As we approach the end of this period, it is time for us to take stock of our performance, recognize the challenges we are faced with and take policy measures which will help boost exports. Last year has been an extremely difficult one for the global economy and the challenging economic situation in Euro Zone continues unabated. Recovery in United States is weak and in this environment it has been a difficult task for our exporting community. The World Trade Organization in its latest report has revised the global trade growth projections downwards from 3.7% to 2.5% which is less than half of the previous 20 years average. This is indeed a disturbing trend. We view exports not only as a valuable source of foreign exchange, which helps in stabilizing the Current Account Deficit, but it is also a key contributor to growth and employment.
In the financial year 2012-13, India’s exports have crossed US$ 300 billion reaching at US$ 300.60 billion but compared to previous year, it fell by 1.76%. However, it is a matter of concern that the trade deficit which was US$ 183.4 billion last year has increased to US$ 190.91 billion. If we look at the direction of Indian exports, we are able to discern a shifting trend as Indian exports to Asia, Africa and Latin America during 2012-13 touched US$ 195.27 billion, accounting for 65% of our total export basket. This is indeed a development with significant import as South-South trade is assuming a new dynamics. Apart from this, value added exports have got a centrality in our export basket as engineering exports accounted for US$ 57 billion, textiles accounted for US$ 26 billion and pharmaceuticals at US$ 15 billion.
Agricultural exports by the very nature are sensitive as they have a direct bearing on the domestic price situation as well as demands of the agro-based industry. However, we have always strived to strike a balance in securing interests of the farmers and consumers. On account of bumper harvest last year, export of all agricultural commodities was freely allowed. Export of non-basmati rice, wheat and wheat and wheat products was banned in 2007. Wheat products have been allowed for exports since 2009 and non-basmati rice and wheat exports have been allowed in September 2011. As a result, we have become the largest rice exporter in the world and the second largest wheat exporter. We have exported more than 6 million MTs of wheat since September 2011 and at present except pulses and edible oils, export of all agricultural commodities is free. We have also taken series of measures to promote export of Organic Agricultural produce and in order to provide a predictability for long-term contracting, we have taken a view to exempt export of certain processed and value added products to be freely exportable even in the eventuality of a restriction on exports of basic farm produce. For instance export of cheese, ghee, butter, casein, casein products are exempted from export ban even in the event of a ban on export of milk and milk products.
In the last 4 years, we have aggressively pursued a policy of trade liberalization and engaged with all dynamic parts of the world. We have concluded comprehensive economic partnership agreement with ASEAN after signing of Services and Investment at the Commemorative Summit last year. Similar agreements had already been finalized with Korea, Japan and Malaysia. I have just returned from Brussels and I am happy to share with you that the negotiations for the India-EU BTIA are progressing well and both sides have given a clear mandate to negotiators for concluding a balanced and fair agreement at the earliest. I am confident that over the next couple of months, we should see intensification of this process and hope that we will be able to arrive at a broad understanding soon.
Over the last few months, we have been engaged in an active consultation with the apex chambers, Export Promotion Councils, industry bodies and we convened a meeting of the Board of Trade for comprehensive review to get a sense of the sectors which require special support for exports. We have held detailed dialogue with the Finance Ministry and I myself met Finance Minister on two occasions and I am grateful for the support that has been extended for today’s announcements.
In June last year, I had outlined the 7 pillars which define our approach to foreign trade : (a) Giving a focused thrust to employment intensive industry because we view exports not only in terms of their economic contribution but as a means of generating gainful employment, (b) Encourage domestic manufacturing for inputs to export industry and reduce the dependence on imports, (c) Promote technological upgradation of exports to retain a competitive edge in global markets, (d) Persist with a strong market diversification strategy to hedge the risks against global uncertainty, (e) Encourage exports from the North Eastern Region given its special place in India’s economy, (f)Provide incentives for manufacturing of green goods recognizing the imperatives of building capacities for environmental sustainability and (g) Endeavour to reduce transaction cost through procedural simplification and reduction of human interface. I have persisted with the same approach in this year’s policy announcements.
Now I would like to share with you the measures which we are taking this year for giving a fresh fillip to exports.
The Zero Duty EPCG Scheme has been an important instrument for increasing technology intensity of our exports. This scheme was scheduled to expire in March 2013. In a major decision, we have decided not only to extend the Zero Duty EPCG scheme beyond March 2013, but also merge it with 3% EPCG Scheme. Now the Zero Duty EPCG benefits will be available to all sectors. We have also undertaken a major simplification of the EPCG scheme, details of which will be available through separate notification. Further, for units located in J&K, North East and Sikkim, exporters would be required to achieve 25% of normal export obligation under the scheme. Time period for completion of export obligation for BIFR units has been extended to 9 years instead of 6 years in normal cases.
We would like to encourage our exporters to procure capital goods domestically and thus we have decided that if a EPCG authorization holder procures capital goods from domestic market, the export obligation of such authorization shall be reduced by 10%. Being Textile Minister, I have been conscious of the demands and aspirations of the textile industry. Hitherto, any exporter who had obtained benefits under the Technology Upgradation Fund Scheme was in-eligible for obtaining benefits under Zero Duty EPCG Scheme. We have now decided that even an exporter who has obtained benefits under TUFS Scheme, will be eligible for benefits of Zero Duty EPCG Scheme. This I hope will provide a push to our labour intensive textile industry.
In December last year, we had introduced a new Scheme – Incremental Export Incentive Scheme – for a period of 3 months under which an additional incentive of 2% of FOB value of exports was provided on the incremental exports during that period over the corresponding period last year. This Scheme was made available for exports to USA, Europe and Asia. Recognizing the popularity of the Scheme, I have decided to extend the benefits of this Scheme for this year as well and to cover 53 countries of Latin America and Africa apart from the earlier notified markets.
High interest costs have been a major impediment in increasing our exports. We had extended 2% interest subvention to specified labour intensive sectors coving Handlooms, Handicrafts, Carpets, SMEs, Toys, Sports Goods, Processed Agricultural Products and Ready-Made Garments till 31st March 2013. In December we had extended this facility upto March 2014. Now, we have taken a conscious decision to extend this facility to textile made up articles listed in Chapter 63 of ITC and specified items in Engineering sector.
We have added Norway as a new market under the Focus Market Scheme, taking the total number of markets to 125. We have added Venezuela for the eligibility under the Special Focus Market Scheme with 4% duty credit, taking the total number of countries to 50. 47 new items have been added to the Market Linked Focus Product Scheme (MLFPS) and benefits for exports to USA and EU for chapter 61 & 62 pertaining to the textile sector, has been extended by another year till March 2014. We have added 126 items of engineering, pharmaceuticals, chemicals and textiles sector to the Focus Product Scheme (FPS) and two new items have been added in the Vishesh Krishi and Gram Udyog Yojana (VKGUY) Scheme. We have also decided to incentivize High Tech Products with effect from 30th June, 2013 for which a separate notification would be issued.
We had announced that the scrips under Chapter 3 Schemes will be eligible for utilization for offsetting excise duty in case exporter procures from domestic market to give a focused thrust for manufacturing in domestic industry. This year, I have further allowed utilization of duty credit scrip issued under FMS, FPS and VKGUY for payment of service tax on procurement of services.
All duty credit scrips under Chaper 3 will also be eligible for payment of application fee, composition fee and value-wise shortfall in export obligation. This benefit will be available to the original holder of the duty credit scrip.
Last year, we had allowed transferability of the Status Holder Incentive Scrip (SHIS) subject to the condition that the transferee is a status holder manufacturer. I have expanded the scope of this transferability and allowed such transfers within a group company of a status holder provided the group company is a manufacturer.
Duty credit scrips equivalent to 10% of free foreign exchange earned is issued under Served From India Scheme (SFIS), but currently is allowed for imports relating to any service sector business of applicant. However, recognizing that a group company of service sector provider may also be engaged in manufacturing, we have decided to allow usage of SFIS scrips for import or domestic procurement of capital goods including spares related to manufacturing sector business of such service provider.
In order to encourage export of services, especially in the tourism sector, I am allowing use of SFIS scrips for import or domestic procurement of motor cars, SUVs, all purpose vehicles for hotel, travel agents, tour operators, companies owning/operating golf resorts for tourist purposes. However, users will be required to submit proof of registration for tourism purposes within 6 months and these vehicles will not be allowed to be imported under EPCG scheme.
Status Holder exporting agricultural products are allowed Agri-Infrastructure Incentive Scrip (AIIS) equivalent to 10% of FOB value of agricultural exports. Currently this is subject to ‘actual user’ condition and is non-transferable. This year, I am allowing transferability of these scrips from the Status Holder to Supporting Manufacturer of the Status Holder.
In order to promote exports of agricultural produce, minor forest produce, gram Udyog products, forest based products, VKGUY scheme provides for duty credit scrip equivalent to 5% of FOB value of exports. The Scheme has a stipulation that in case exporter is eligible for duty drawback of more than 1%, VKGUY scheme scrips will be available at a reduced rate of 3%. We are doing away with this condition of reduction of VKGUY rates and all exporters availing benefits under VKGUY will now get 5% duty scrips.
At present duty free import of specified 10 raw materials for manufacture of handlooms made ups, for cotton made ups or manmade made ups is allowed up to 5% of FOB value of preceding year in case of handloom made ups and 1% of FOB value in case of cotton made ups or manmade made ups. Now, in addition to 10 raw materials allowed earlier, embroidery threads, sewing threads, poly-wadding materials, quilted materials and printed bags have also been allowed within these duty free limits.
For enhancing exports of sports goods, import of 16 specified items is allowed duty free to the extent of 3% of FOB value of exports in the preceding year. We have expanded the list to include 5 more items.
There are several Advance Authorization and EPCG authorizations of the past which are pending for closure on account of non-fulfillment of export obligation. In order to clean up such cases, one time relief has been provided to such authorization holders who would be able to close these cases on payment of custom duty and interest and the total amount of duty and interest shall not exceed two times of amount of the duty saved.
In order to make IT exports more flexible, we have extended the facility of ‘Work from Home’ to STPI and EOUs.
We have also allowed import of cars and vehicles at ICD at Faridabad and Ennore Port.
The Special Economic Zones (SEZs) scheme has been a key instrument for promoting exports from India. Today, 389 SEZs have been notified of which 170 are functional and they employ over one million persons. We have received investment of over Rs. 2.36 lakh crores in SEZs and exports from SEZs have seen a dramatic jump from Rs. 22,840 crores in 2005-06 to Rs. 4.76 lakh crores in 2012-13, a growth of over 2000% over the 7 year period. Exports from SEZs during the last financial year have registered a growth of over 31% over the previous year. Undoubtedly, these are significant achievements, but the SEZ scheme has not been able to realize its full potential so far. We have undertaken a comprehensive review of the SEZ Policy after intense stakeholder consultation and after a year- long process, today I am happy to announce a package of reforms for reviving investor interest in SEZs.
We have taken a note of the fact that there are acute difficulties in aggregating large tracts of uncultivable land which is vacant and contiguous and we have decided to reduce the Minimum Land Area Requirement by half for different categories of SEZs. For Multi—product SEZ, this has been brought down from 1000 hectares to 500 hectares and for Sector-Specific SEZs, it has been brought down to 50 hectares from the existing 100 hectares.
Currently, a single-product SEZ is allowed to come up in a land area of 50 hectares while a multi-product SEZ requires minimum 500 hectares of land. In order to provide greater flexibility in operation and efficiency in use of infrastructure, it has now been decided that for every additional 50 hectares of contiguous area, an additional sector would be allowed on a graded scale to be added in the existing SEZ.
Further flexibility to set up additional units in a sector specific SEZ has been provided by introducing Sectoral Broad-Banding to encompass similar or related areas under the same sector.
While existing policy allows for parcels of land with pre-existing structures not in commercial use to be considered as vacant land of SEZ, it has now been decided that additions to such pre-existing structures and activities being undertaken after the notification would be eligible for duty benefits similar to any other activity in SEZ.
IT exports constitute a significant part of India’s exports and IT SEZs have made a significant contribution in this direction. We have decided that there would be no minimum land requirement for setting up IT/ITES SEZs and only minimum built up area criteria would be needed to be met by SEZ Developers. Minimum built up area requirements have also been considerably relaxed with the requirement of one lakh square meters to be applicable for 7 major cities – Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangaluru, Pune and Kolkata. For the other class B-cities minimum built up area would be 50,000 sq. mtrs while for other cities 25,000 sq. mtrs built up area norm will be applicable. I am confident that these measures will give a boost to IT SEZs in Tier-II and III cities, creating employment and growth.
We have received feedback from SEZ units that they are placed at a severe disadvantage in absence of exit policy. We have now decided to allow transfer of ownership of SEZ units including sale.
It may be recalled that we had constituted a Committee for addressing the issue of high transaction costs and the measures which were taken had resulted in reduction of transaction cost of Rs. 2100 crore. Subsequently, some more measures were taken which have further reduced transaction cost by Rs. 395 crore. I am happy to announce constitution of 2nd Task Force on Transaction Costs which will submit its report in a 6-months period.
Last year, we had announced introduction of e-BRC system in DGFT and I am happy to share with you that e-BRC system has been successfully implemented by DGFT and the requirement of physical copy of BRC has been dispensed with and use of e-BRC have been made mandatory since last year. So far, banks have successfully uploaded 31.2 lakh e-BRCs on DGFT server and this will be a significant step in reducing the transaction cost of exporters. Exporters can print BRC from the DGFT website and submit it to any Department which can verify accuracy of the data from the DGFT website which will reduce not only the requirement of interface with public functionaries but will also result in significant savings in costs. DGFT has received requests from many State Governments for sharing of this data for automating VAT refund process. Several other measures have been taken for simplification of procedures and documentation, details of which are available in the Highlights. It has now been decided to dispense with requirement of submission of physical form of Export Promotion copy of shipping bill to the Regional Authority of DGFT in order to obtain Export Obligation Discharge Certificate in case of Advance Authorization, Duty Free Import Authorization and EPCG scheme.
I hope that the measures which we have announced today will go a long way in providing much needed support for exports.