The Ministry of Commerce and Industry announced the Annual Supplement 2010-11 to the Foreign Trade Policy 2009-14 (‘FTP’) on 23 August 2010. The objective of the Annual Supplement is to reverse the trend of declining exports and assist sectors badly hit by recession. It has adopted a multi-pronged strategy that includes providing additional support to the affected sectors, promoting technological upgradation and taking measures to reduce transaction costs of exports.

Apart from enhancing the quantum of export incentives, steps have also been taken to broaden the reach of export products under the various schemes. These measures, taken together, are expected to bring back export growth to around 25% per annum in the remaining three years of the current FTP.

Further, effort has been made to encourage technological up-gradation, and undertake simplification of procedures under the FTP to reduce transaction costs for exporters.

The FTP 2009-14 incorporating the current Annual Supplement is effective from 23 August 2010. Highlights of the Supplement are summarised below:

Amendments in existing schemes

Duty Entitlement Passbook (‘DEPB’) Scheme

  • DEPB Scheme further extended by six months upto 30 June 2011

Export Promotion Capital Goods (‘EPCG’) Scheme

  • Import of goods under zero duty EPCG Scheme further extended by 1 year i.e., upto 31 March 2012
  • Additional products such as chemical and allied products, rubber, marine products, sports goods and toys and specified engineering products have been extended the benefit of the zero duty Scheme
  • EPCG Authorization can now be issued for annual requirement to specified exporters. The annual entitlement in terms of duty saved amount shall be upto 50 percent of FOB value of physical exports and! or FOR value of deemed export, in preceding licensing year

Status Holder Incentive Scheme (‘SHIS’)

  • SHIS extended by six months upto 31 March 2012
  • Expanded to cover additional product! product groups including chemical and allied products, rubber, electronics products, engineering products for exports made during 2010-11 and 2011-12

Focus Product Scheme (‘FPS’)

  • 256 New products have been added in FPS including Electric generating set, Colour TV sets, Optical Media Products like CD, DVD etc, Unpopulated PCBs, Desktops and Notebooks etc.
  • Additional benefit of 2 percent of duty credit entitlement, over and above the existing benefit of 3 percent or 5 percent, for the products like toys and sports goods, handloom, silk carpets, etc has been extended

Market Linked Focus Product (‘MLFP’) Scheme

  • The benefit under MLFPS for export of readymade garments to 27 European Union (‘EU’) countries has been extended by 6 months, upto 31 March 2011.

Served From India Scheme (‘SFIS’)

  • Service providers availing incentive under SFIS would be allowed to import vehicles in the nature of professional equipment

Vishesh Krishi and Gram Udyog Yojna (‘VKGUY’)

  • Transfer of Incentive Scrips for import of cold chain equipment has been allowed amongst status holders and units (excluding developers) in the Food Parks.
  • Instant Tea and CSNLCardinol have been extended the benefits under VKGUY @ 5% of FOB value of exports.

Advance Authorization

  • Imports under Advance Authorization for Annual Requirement have been exempted from anti­dumping and safeguard duties.
  • Clubbing of Advance Authorization with Advance Authorization for Annual Requirement has been permitted for the purpose of account closure.
  • Single customs notification has been contemplated for Advance Authorization for physical exports and deemed exports to facilitate their clubbing.
  • Ad-hoc norms ratified under Advance Authorization scheme will apply prospectively and retrospectively to all cases for the same export product up to one year.
  • Chartered Engineer Certificate for Advance Authorization on self declared basis has been dispensed with.

Towns of Export Excellence (‘TEE’)

Additional TEE shave been announced for handicrafts, textiles and leather products.

Interest subvention scheme

Interest subvention of 2% for pre-shipment credit for certain export sectors now extended to a number of additional products of the sectors like engineering, textiles and leather etc.

EDI Initiatives

Facility of a data preparation module for Advance Authorization and EPCG provided on an offline mode.

Additional licensed certifying authorities for digital signatures and banks for electronic fund transfer (EFT) operations have been included in the EDI operations.

The online message exchange for Annual Advance Authorization and Duty Free Import Authorization (DFIA) proposed to be made operational with Customs w.e.f. 1 December 2010.

Specific sector based initiatives

Leather Sector

Re-export of unsold imported raw hides and skins and semi-finished leather from public bonded warehouses shall be allowed without payment of any export duty.

Machinery and equipment for effluent treatment plants exempt from Customs Duty.

CVD exempted on lining, interlining material, raw, tanned and dressed fur skins.

Handloom sector

Export of handloom made-ups to be included for duty free import entitlement of specified trimmings, embellishments etc. @ 5% of FOB value of exports during previous financial year.

Handicraft sector

Duty free import entitlement of tools, trimmings and embellishments is 5% of FOB value of exports during previous financial year.

CVD exempted on duty free import of trimmings, embellishments and consumables.

Electronic and IT Hardware sector

Export of electronic goods to be brought under Focus Product Scheme.

Benefits under SHIS scheme extended to this sector.

Miscellaneous

  • Exporters can club Advance authorization with Advance Authorization for Annual Requirement for the purpose of closure
  • Chartered Engineer Certificate for Advance Authorization on self declared basis has been dispensed with to reduce documentation and transaction cost

Conclusion

The Government had set a target for exports at USD 200 billion for 2010-11, which seems achievable given last year’s export of USD 178.7 billion. This perhaps shows that the industry is moving in the right direction. The Supplement has continued with existing schemes thereby ensuring a stable environment for industry to perform.

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