Announcing the foreign trade policy 2009-14 here on Thursday, Mr Anand Sharma, Union Commerce Minister said, the Government wanted to provide a stable policy environment conducive for foreign trade and accordingly, it has been decided to continue with the DEPB (Duty Entitlement Pass Book Scheme) up to December 2010 and income-tax benefits under Sec 10 (A) for IT industry and under Sec 10 (B) for 100 per cent export oriented units for one additional year till March 31, 2011.
Enhanced insurance coverage and exposure for exports through ECGC (Export Credit Guarantee Corporation) schemes has been ensured till March 31, 2010. It has also been decided to continue with the interest subvention scheme for this purpose. The plan is to encourage value addition in manufactured exports and towards this end, the government has stipulated a minimum 15 per cent value addition on imported inputs under Advanced Authorisation Scheme.
The new policy has decided to give special focus to new emerging markets to make Indian exports more competitive. Additional resources have been made available under the Market Development Assistance Scheme and Market Access Initiative Scheme. Additionally, incentive schemes are being rationalised to identify leading products which would catalyse the next phase of export growth. The new policy also seeks to promote Brand India through six or more `Made in India’ shows across the world every year.
The Policy Thrust: The Key Goals
- The short-term objective is to arrest and reverse the declining trend of exports and to provide additional support to sectors hit badly by recession in the developed world
- The policy aims to achieve an annual export growth of 15%, with an annual export target of US$ 200 billion by March 2011; silent on export target for this year
- The commerce ministry hopes the country would return to a high export growth path of around 25% per annum, and double exports of goods and services, both 2014
- The long term policy objective for the government is to double India’s share in global trade by 2020, which stood at 1.64% in 2008
Support for market & product diversification
- Incentive schemes under Chapter 3 have been expanded by way of addition of new products and markets. Twenty six new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 10 in Asia-Oceania
- 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%. Large number of products included for benefits under FPS
- Market Linked Focus Product Scheme (MLFPS) has been expanded to products in pharmaceuticals, synthetic fabrics, value added rubber and plastic, textile made-up, knitted and crocheted fabrics, glass products, iron and steel products, aluminium
Technological upgradation, EPCG relaxation, DEPB
- EPCG Scheme at Zero Duty for engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, and leather. Not available for current beneficiaries of other schemes like TUFS, or Status Holder scheme.
- To increase the life of existing plant and machinery, export obligation on import of spares, moulds under the EPCG Scheme has been reduced to 50% of the normal specific export obligation.
- Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country has been extended for the 5-year policy period 2009-14.
- To accelerate exports, additional Duty Credit scrips shall be given to status holders @ 1% of the FOB value of past exports. The Duty Credit scrips can be used for procurement of capital goods. This facility will be available till March 31, 2011.
The policy permits transfer of the Duty Credit scrips being issued to status holders under paragraph 3.8.6 of FTP under VKGUY Scheme. The transfer can be made only to status holders and scrips can be used only to procure cold chain equipment.
Stability/continuity of the Foreign Trade Policy
- To impart stability to the policy regime, the Duty Entitlement Passbook (DEPB) Scheme is being extended by a year till December 31, 2010. The interest subvention of 2% for pre-shipment credit for 7 sectors extended till March 31, 2010 in Budget 2009.
- DEPB rate shall also include factoring of custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norms.
- Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of IT Act has been extended for the financial year 2010-11 in Budget 2009-10.
- 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.
Sops for the marine sector
- Fisheries have been included in the sectors which are exempted from maintenance of average export obligations under the EPCG Scheme. Fishing trawlers, boats, ships and other similar items shall not be allowed to be imported under this provision.
- Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for status holders has been given to marine sector.
Sops for Gems & Jewellery sector
- To neutralise duty incidence on gold jewellery exports, the policy allows duty drawback on these. To make India a diamond international trading hub, it is planned to establish “Diamond Bourses,’’ The first one has come up in Mumbai.
- A new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification purposes has been introduced.
- To participate in overseas exhibitions, exporters may carry merchandise worth $5 million with them, against $2 million allowed now. The limit of personal carriage, as samples, for export promotion tours, has also been increased to $1 million.
Sops for the Leather sector
- Leather sector will be allowed re-export of unsold imported raw hides and skins and semi-finished leather from public bonded warehouses, subject to payment of 50% of export duty. Enhancement of FPS rate to 2% would also benefit the sector.
Sops for Tea & Agriculture
- Minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%. The DTA sale limit has been increased from the existing 30% to 50%, and tea exports eligible for VKGUY Scheme benefits.
- To reduce transaction and handling costs in agriculture, a single-window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multi-functional nodal agencies, to be accredited by APEDA.
Sops for Pharmaceuticals
- Export obligation period for advance authorisations issued with 6-APA as input has been increased from 6 months to 36 months. Sector has extensively been covered under MLFPS for countries in Africa and Latin America, Oceania and the Far East.
Sops for Export-Oriented Units
- 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.
- To provide clarity to the customs field formations, the revenue department will issue a clarification to enable procurement of spares beyond 5% by granite EOUs. EOUs will be allowed to procure finished goods for consolidation, subject to certain safeguards.
- Board of Approvals (BOA) will consider extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs. EOUs will be allowed credit facility for the component of SAD and Education Cess on DTA sale.
Thrust for Value-Added Manufacturing
- To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorisation Scheme has been prescribed. Project Exports and a large number of manufactured goods brought under FPS and MLFPS.
Flexibility provided to exporters
- Payment of customs duty for export obligation shortfall under Advance Authorisation / DFIA / EPCG Authorisation has been allowed by way of debit of Duty Credit scrips. Earlier, the payment was allowed in cash only.
- Import of restricted items, as replenishment, will be allowed against transferred DFIAs. Time limit of 60 days for re-import of exported gems and jewellery items for participation in exhibitions has been extended to 90 days in case of USA.
Simplification of procedures, reduction in transaction costs
- To facilitate duty-free import of samples by exporters, number of samples/pieces has been increased from the existing 15 to 50. Customs clearance of such samples shall be based on declarations given by the importers for value and quantity of samples.
- To allow exemption for up to two stages from payment of excise duty in lieu of refund, in case of supply to an advance authorisation holder (against invalidation letter) by the domestic intermediate manufacturer.
- No fee shall now be charged for grant of incentives under Chapter 3. For all other 18 Authorisations, maximum fee is being reduced to Rs 100,000 from Rs 1,50,000 and Rs 50,000 from the existing Rs 75,000 (for EDI applications).