EXIM Policy Project

Study of EXIM policy

INDEX SR

PAG

N

E

O. 1

TOPIC PRE – 1991 SCENARIO OF FOREIGN TRADE

Brief Review of India’s Trade Policy India’s Share In World Trade General Provisions Regarding Imports And Exports 2

JOURNEY OF EXIM POLICY

Exim Policy, 1992-97 Exim Policy, 1997-2002 Modified Exim Policy, April 1998 Exim Policy 1999-2000 Exim Policy 2000-2001 Exim Policy 2001-2002 Exim Policy 2002-2007 Exim Policy, 2003-2004 Mini EXIM Policy, Jan 2004 Foreign Trade Policy, 2004-2009 3

HIGHLIGHTS OF EXIM POLICY & ITS IMPACT

Special Economic Zone (SEZ) Duty Free Replenishment Certificate (DFRC) Scheme Duty Entitlement Pass Book (DEPB) Scheme Quantitative Restrictions (QR) Agricultural Export Zones (AEZ) Status Holders Export Promotion Capital Goods Scheme (EPCG) Deemed Exports Advance License Scheme 4

EXIM BANK

5

EXPORTS, IMPORTS & TRADE BALANCE

6

INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE

7

FUTURE OF EXIM

8

BIBLIOGRAPHY

NO.


PRE – 1991 SCENARIO OF FOREIGN TRADE

Exim Exim is the the prin princi cipa pall fina financ ncia iall inst instit itut utio ion n in the the coun countr try y for for cococoordinating working of institutions engaged in financing exports and imports. The import policy in the post independence period was guided by consideration of a growth oriented policy which should ultimately lead us to the objective of self reliance: a)

Import Imports s should should be be limite limited d as far far as possi possible ble so so as to conse conserve rve foreign exchange.

b) Imports of those items were to be encouraged which would help the industrialization of the economy and imports of such items which could be produced at home were discouraged or completely banned. This distinction between essential and non-essential items of imports were necessary necessary in view of the fact that even the demand demand for imports imports of capital goods and other equipment in a developing economy could be of such a magnitude that it might become difficult to find foreign exchange for developmental imports. c) The nature of imports should be so modified that it helped export promotion, and thus mitigate the deficit in the balance of payments position ultimately. The gov government appointed the Import and Expor port Policy Committee headed by Mr. Mudaliar in 1962 to review Government’s trade policy. The recommendations of the committee were accepted by the government. Mr.V.P.Singh, the then Commerce Minister, announced the Export Import policy on the 12 th of April, 1985.It was here that for the first time the Government announced the policy on a three year basis. The basic aim of the policy was to facilitate production through easier


and quicker access to imported inputs, impart continuity and stability of Exim xim

Poli olicy, cy,

stren treng gthen then

the

expo export rt

produ roduct ctiion

base, ase,

facil aciliitate tate

technological up gradation and affect all possible savings in imports.



Brief Review of India’s Trade Policy

India’s foreign trade policy during the last five decades may be broadly split into import substitution policy, export drive policy and export acceleratio acceleration n policy. policy. The import substitution substitution was followed followed in the first two decades. With fears of external dominance, the Indian planners adopted a somewhat introvert external trade str strategy which reli elied on encouraging domestic production for the domestic market with the help of high tariffs and high degree of protection. Far from viewing foreign trade as an engine of growth, Indian planners sought to minimise import demand by adopting an import substitution policy and gave secondary place to exports primarily primarily as a source to generate generate the foreign foreign exchange earnings to meet that part of the import bill not covered by external assi assist stan ance ce.. Ther There e were were cont contro rols ls over over both both impo import rts s and and expo export rts. s. However, this policy of import substituting industrialisation and system of controls failed to produce rapid growth and self-reliance. With the realisation of the drawbacks of the excessively inwardlook lookin ing g stra strate tegy gy on one one hand hand and and the the need need for for mode modern rnis isat atio ion n and and techno technolog logy y upgrad upgradati ation on on the other, other, certai certain n policy policy measur measures es were were initiated in the late seventies. Export incentives in the form of cash comp compen ensa sato tory ry supp suppor ortt (CCS (CCS), ), impo import rt repl replen enis ishm hmen entt (REP (REP), ), duty duty drawback (DDS), market development assistance (MDA) etc and export services in the form of export promotion councils, commodity boards and


specialised services institution were introduced. The strategy towards a greater integration of the Indian economy with the rest of the world has been pursued since then. In 1975-76 import policy was liberalised to make available imported inputs for registered exporters. In mid-1980s the government adopted a three-year import-export policy (1985-88) with the aim to provide easy access to imports, essential for maximizing prod produc ucti tion on and and expo export rts. s. The The main main polic policy y chang changes es were were abol abolit itio ion n of automatic licensing, inclusion of 201 items of industrial machinery under capital goods import under OGL, decentralisation of 53 import items and granting facility for import of capital goods against REP license from Rs 1 lakhs to Rs 2 lakhs. The The seco second nd thre threee-ye year ar polic policy y (1988 (1988-9 -91) 1) carr carrie ied d forw forwar ard d the the process of trade liberalisation to make exports more competitive. The policy was designed to stimulate industrial growth by providing easy acce access ss to essen ssenttial ial impo mported rted capi capita tall good goods, s, raw mater ateriials als and and component ents to industry so as to sustain movements towa owards modernizat modernization, ion, technologic technological al upgradatio upgradation n and making making Indian Indian industry industry compet competiti itive ve inter internat nation ionall ally. y. The libera liberall impor imports ts of capita capitall goods goods and technology were viewed as a means to enable exporters to undertake technological upgradation in order to compete more effectively in the international market. In the 1990s many short run adjustments were made in the trade policy in order to overcome the external sector crisis, which hit the country in 1991. Two major measures taken in trade policies were (a) liberalisation of imports entailing successive expansion in the OGL list and (b) linking expansion in exports to import liberalisation. CCS scheme was suspended; REP license was substituted by EXIM scrips. The rupee


was devalued in July 1991 and the country saw transition towards the market-based exchange rate regime. From From Inde Indepe pend nden ence ce in 1947 1947 till till mid mid 1990 1990s, s, India ndia with with some some exceptions, always faced deficit in its balance of payments i.e. imports alwa always ys exce exceed eded ed expo export rts. s. This This was was char charac acte teri rist stic ic of a deve develo lopi ping ng country struggling for reconstruction and modernization of its economy. Imports galloped because of increasing requirements of capital goods, defence equipments, petroleum products, and raw materials. Exports rema remain ined ed rela relati tive vely ly slug sluggi gish sh owin owing g to lack lack of expo export rtab able le surp surplu lus, s, competition in the international market, inflation at home, and increasing protectionist policies, of the developed countries. India embarked on the path of globalization in the early 1990s with the objective of improving overall productivity, competitiveness and efficiency of the economy in order to attain a higher growth profile. Concom Concomita itantl ntly, y, indust industria rial, l, financ financial ial and extern external al sector sector reform reforms s were were init initia iate ted d with with a view view to crea creati ting ng an envi enviro ronm nmen entt cond conduc ucti tive ve for for the the expansion of trade. As a result, growth in trade accelerated in the early part of the 1990s. This momentum however could not be sustained in the face of various domestic bottlenecks and exogenous constraints like East Asia crisis and slowdown in the US economy. These external factor factors s along along with with stagna stagnatio tion n in invest investmen mentt rate, rate, sluggi sluggish sh indust industria riall growth and slow down in manufacturing productivity, predicted India’s trade during during the closing closing years of the 1990s. 1990s. Thus while while the opening of the economy presented a range of opportunities and advantages to the trade sector in India, the greater integration with the global economy has posed several challenges as well.


Since the initiation of economic reforms, India’s outward orientation has increased considerably. The destination pattern of Indian exports has remarkably changed in the sense that the importance of developing countries as an export market has increased considerably. There are, however, concerns that the country the dramatic changes in exports of East Asia. India’s experience has seemingly fallen short of expectation expectation.. India’s India’s share in global global trade trade did not rise as impressi impressively vely and and the the comm commod odit ity y stru struct ctur ure e of Indi India’ a’s s expo export rt rema remain ined ed almo almost st unchanged until the mid 1990s. Moreover, Moreover, unlike the East Asian countries countries where industry industry has been the major driver of exports growth, the contribution of industrial export exports s in India India has been been compar comparati ativel vely y low. low. This This could perhaps perhaps be attributed to small scale industry reservations and inflexible labour laws besides infrastructural bottlenecks. The labour cost in India however is one of the lowest among the competitor countries. Given the export struct structure ure on India, India, the potent potential ial for higher higher export exports s of manufa manufactu ctures res,, especially to the developed countries is high. On the imports side, despite some initial apprehensions, liberalization has not adversely affected India’s balance of payments. On the contrary, increased trade liberalization along with the prudent mana manage gem ment ent of capi capita tall acco accoun untt libe libera raliliza zati tion on has has impa impart rted ed with with significant strength to the balance of payments since the mid 1990a. With the increased competitiveness of Indian Industries imports of low and medium technology intensive products have declined. At the same time, imports of high technology intensive products and imports used for export export produc productio tion n have increase increased. d.

There There is growing growing evidenc evidence e that

accessibility to imports has a positive impact on the growth performance of the country.


In the 1990s, a liberalised trade regime was put in place, which marked a significant significant turnaround from the earlier controlled controlled regime. The chal challe leng nge e of rest restor orin ing g the the macr macroo-ec econ onom omic ic bala balanc nce e init initia ialllly y was was combined with a long term new trade policy which formed a major ingredient of the economic reforms programme. It was recognized that trade policies should form a part of an integrated policy framework if the aim aim was was to impr improv ove e the the over overal alll prod produc ucti tivi vity ty and and effi effici cien ency cy of the the economic system. Apart from devaluation of the exchange rate and a switch over to a unified marked determined exchange system in 1993, the new trade policy was characterized by a short negative list of imports and export exports, s, loweri lowering ng of the level level and disper dispersio sion n of nomina nominall tariff tariffs, s, withdrawal of quantitative restrictions on imports and phasing out of the syst system em of impo mport licens censiing. ng. The The new new trade ade pol policy icy refor eforms ms also also encompassed significant changes in the system of export incentives, movi moving ng away away from from dire direct ct subsi subsidi dies es to indi indire rect ct expo export rt prom promot otio iona nall measures. The multi-pronged strategy undertaken in the beginning of the 1990s gradually had its desired effects on the economy and ushered in a phase of a stable stable and high growth. growth. The rising rising exports exports combined combined with sign signif ific icant ant surg surge e in capi capita tall flow flows s prov provid ided ed oppo opport rtun unit itie ies s for for furt furthe her r liberaliza liberalization tion of essential essential import imports s from quantitat quantitative ive restricti restrictions. ons. stability

in

the

exchange

rate

of

the

rupee

maintained

The the

competitiveness of Indian exports and at the same time prevented the upsurge of cheap imports. The loss of the East European markets since the early 1990s was successfully countered by diversifying into newer markets of developing countries of Asia and the Organization of the petroleum Exporting Countries(OPEC).


The economic reform process introduced in the beginning of the 1990s wit focus on liberalization had enabled increased integration of the Indian Indian Economy Economy with with the rest of the world. world. The growth growth rate rate of India’s trade is increasingly dependent on exogenous factors such as world trade growth, international price changes and developments in the competitor countries. Cross currency exchange rates as well as solarrupee exchange rate movements also get reflected in the performance of India’s trade. Although the level and dispersion of India’s tariff have considerably come down since the early 1990s it remains among the highest as compared to emerging market economies. It is increasingly being realized that the desirable structure of tari tariff ff rate rates s shou should ld comp comply ly with with the the basi basic c prin princi cipl ples es of simp simplilici city ty,, transparency, stability stability and international international practices. As noted in the tenth plan plan docu docume ment nt,, the the most most effe effect ctiv ive e mean means s of enco encour uragi aging ng outwa outward rd orientation is to lower tariffs on imports so that the anti-export bias corrected. corrected. Further, Further, it may be noted noted that as the duty rates fall, fall, the need for for refu refund nds s will will comm commens ensur urat atel ely y decli decline ne ther thereb eby y brin bringi ging ng down down the the transaction cost. It has been observed that in contrast to the structural and compositional shifts in world trade towards higher technology intensive products, the commodity structure of India’s exports remained largely unchanged until the mid 1990s. Although, of late India’s exports have show shown n a stea steady dy tren trend d towa toward rds s high higher er techn echnol olog ogy y cont conten ent, t, Indi India’ a’s s specialization of in exports lies in manufacturing goods, especially to the developed developed markets markets remains remains high. However, However, given the general general trend trend of move moveme ment nt of term terms s of trad trade e towa toward rds s high higher er techn echnol olog ogy y inte intens nsiv ive e products, it may be imperative for India to move up the technology ladder.


At the same time, the policy of reservation for SSIs had declined successful small scale units to expand and achieve economies of scale scale and and upgr upgrad ade e tech techno nolo logy gy..

This This in turn has affect affected ed export export

growth, manufacturing production and employment generation. A noteworthy fact is that despite significant liberalization of imports during the 1990s the overall balance of payments has been in surplus for most of the years with the country foreign exchange reserves crossing US$ 100 billion mark. Thus, in contrast to fears expressed at the time if the opening up of the economy, import, and liberalization policies have in fact strengthened the country’s external sector since 1990-91. The implication is that continued reduction in import import tariffs will will help in inducing greater efficiency and competitiveness in the economy, while reducing reducing avoidable avoidable transacti transaction on costs in trade. For the future, future, the prospects of sustained growth in exports of goods and services are bright provided the Indian economy can face the challenge of enhancing produc productiv tivity ity and compet competiti itiven veness ess in an increa increasin singly gly integr integrate ated d global global environment.



Import Substitution: Cornerstone of Trade Policy

Indi India a adop adoptted an inw inward ard looki ooking ng deve develo lopm pmen entt str strateg ategy y afte after r independence wherein import substitution constituted a major element of both both trade and indust industri rial al policie policies. s. The focus focus in the initia initiall stages stages

of

planned development was on stimulating home grown industrialization, essentially based on the infant industry argument ,wherein production for dome domest stic ic mark market et was was

shiel shielde ded d

behi behind nd high high tari tariff ff wall walls s

effect effective ive prot protect ection ion .thi .this s policy policy not not only only

undere underesti stimat mated ed

and and hig high h the expor exportt


possib possibili ilitie ties s

but also also the impo import rt inten intensit sity y

of the the import import subs substit tituti ution on

process itself. Import Import substituti substitution on was the prime objective objective of India’s India’s trade policy till the mid 1970’s. This policy was largely based on the imports and exports act act of 1947 1947.. Libe Libera rall ince incent ntiv ives es were were gran grante ted d to firm firms s if they they were were undertaking production of an imported item that was not domestically produced. Prot Protec ecti tive ve quot quotas as howe howeve verr rema remain ined ed more more or less less inta intact ct and and domest domestic ic indust industry ry continu continued ed to be shield shielded ed from from import import compet competiti ition. on. Production for exports cannot be isolated from production for the home market and trade policy would have to be integrated with the policy for domestic industrialization. A three year export import policy was introduced in 1985 to provide a definite focus to the trade sector. A major ingredient of this policy was the provision of easy access to essential capital goods, raw materials and and comp compon onen entt from from abro abroad ad sinc since e thes these e were were view viewed ed as a majo major r incent incentive ive for for export exporters ers in undert undertaki aking ng techno technolog logica icall up gradat gradation ion for reducing cost and improving quality. In short prior to mid 1991, foreign trade of India suffered from strict bureaucratic and discretionary control. Foreign exchange transactions were controlled by the government and the Reserve Bank of India. Begi Beginn nnin ing g mid1 mid199 991 1 the the gove govern rnme ment nt of Indi India a intr introd oduc uced ed a seri series es of reforms to liberalize and globalize the Indian economy. The process of globalizati globalization on is a reality which cannot be denied denied and also should not be avoided .It needs to be managed so that we can derive the maximum advantage from world markets.




Balance of payment crisis, 1991

The balance of payment situation became very difficult in 19911992 despite of softening of oil price in the world market. Even with a subs substa tant ntia iall impo import rt comp compre ress ssio ion, n, the the pres pressu sure re on the the bal balance ance of payments persisted throughout the current financial year. The The gove govern rnme ment nt atte attemp mpte ted d to mobi mobililize ze supp suppor ortt for for bala balanc nce e of payments for multilateral financial institutions– the international monetary fund, the World Bank and the Asian development d evelopment bank. Another important initiative taken by the government to meet the urgent need for the balance of payments financing was the announ announcem cement ent of two schemes schemes designed designed to encourag encourage e the inflow inflow of capital funds from abroad .The India development bond scheme and the immunity scheme for repatriation of funds held abroad were introduced in October1991. Foreign currency assets, which had declined to $1.1 billion at their lowest point in june1991, had risen to $4.4 billion by February1992. The The buil build d up of the the res reserve erves s in the cour ourse of 1991 1991--92 was was necessary to restore confidence in the system, but it also meant the additional resources mobilized from the multilateral financial institutions and the IDB and immunity schemes were primarily used for building up reserves and not to liberalize imports, which remain severely constrained in 1991-92. Foll Follow owin ing g adj adjustm ustmen ents ts were were call called ed for for a broa broad d base based, d, rapi rapid d and and sustained growth of exports.


•

Reduction in the excess domestic demand-Domestic demand had to be restrained and supply increased.

•

Enhanced Competiveness-This required two changes, a change in the exchange rate of rupee and a reduction in a relative prices of thos those e prod produc ucts ts whic which h were were cost costly ly visvis-àà-vi vis s compe competi ting ng good goods s abr abroad. oad. The firs firstt step step was was taken aken by means eans of a down downwa ward rd adju adjust stme ment nt of abou aboutt 18 perc percen entt in the the exte extern rnal al valu value e of the the rupe rupee e .The .The second second step step requi require red d a phasi phasing ng

down down of import import

restrictions and a reductions in in the high levels of protection ,which characterize Indian industries. •

Deregulation-One of the obstacles to exports lied in the cumber cumbersom some e admini administr strati ative ve proced procedure ures s involv involved, ed, arisin arising g from from control controls s over over import imports s and export exports, s, exchan exchange ge contr control ol and also also procedures. Measures which were taken for lowering the inflation rate in the economy are:-

•

Reducing subsidies and external support to production enterprises so as to make more responsive to price and demand changes.

•

Ensur nsurin ing g that hat buf buffer stoc stock k oper perati ations ons for for food food grai rains and interventions in agricultural markets were counter cyclical. c yclical.

•

Encouraging savings to be high not only as a proportion of GDP but in relation to demand for investment funds in the economy.

•

Keeping entry barriers low in the industrial sector and improving industry’s access to imported inputs at low tariffs.




Ind In dia’s ia ’s Shar Sh are e In World Trade World Trade

In 1950, India accounted for 1.8 percent (1.85 percent of exports and 1.71 percent of imports) of world trade, gradually declining to 0.53 percent by 1991; it marginally improved to 0.61 percent in 1994. The decline in India’s share in world trade has not only been arrested but reversed. reversed. Below table table shows trends trends in India’s India’s share in the world world trade during the post-Independence period. It is discernible that of late India’s share in world exports exports in on the increase. increase. It s noteworthy noteworthy that India commands an important place in world trade in tea, precious, and semiprecious stone, spices, iron iron ore, leather leather and coffee. The Foreign Trade Policy, 2004 – 2009 has set an ambitious task of achieving 1.5 percent share in the world trade by the year 2009.

Selected

Years

(percent) Year 1950 1960 1970 1980 1990 1991 1992 1993 1994 1998 2000 2001 2003

Exports 1.85 1.03 0.64 0.42 0.52 0.50 0.53 0.58 0.60 0.60 0.70 0.70 0.86

Imports 1.71 1.69 0.65 0.72 0.66 0.56 0.61 0.60 0.63 -

Trade 1.78 1.36 0.65 0.57 0.59 0.53 0.57 0.59 0.61 -


Sources: Government of India, Economic Survey, 1996-1997, p.88, and Economic Survey, 2005-2006 p. S-95



General Provisions Regarding Imports And Exports

Exports and Imports free unless regulated 2.1 Exports an and Im Imports sh shall be be fr free, ex except in in ca cases wh where they are regulated by the provisions of this Policy or any other law for the time being in force. The item wise export and and impo mport poli policy cy shal shalll be, be, as spec speciified fied in ITC ITC(HS) HS) publ publis ishe hed d and and noti notifi fied ed by Dire Direct ctor or Gene Genera rall of Fore Foreig ign n Trade, as amended from time to time. Compliance with Laws 2.2 Every ery ex exporter or importer sh shall co comply wi with th the pr provisions ons of the Foreign Trade (Development and Regulation) Act, 1992 1992,, the Rul Rules and and Orde Orderrs mad made there here unde under, r, the the provisions of this Policy and the terms and conditions of any license/certificate/permission granted to him, as well as provisions of any other law for the time being in force. All imported goods shall also be subject to domestic Laws, Rule Rules, s,

Orde Orders rs,,

environment ental

Regul egulat atio ions ns,, and

safety

domestically produced goods.

tech techni nica call

norms

as

spec specif ific icat atio ions ns,, appli plicab cable

to


Interpretation of Policy If any question or doubt arises in respect of the interpretation of any provision contained in this Policy, or regarding the classification of any item in the ITC(HS) or Handbook (Vol.1) or Handbook (Vol.2), the said question or doubt shall be referred to the Director General of Foreign Trade whose decision thereon shall be final and binding. If any question or doubt arises whether a licen cence/ certificate/permission has been issued in accordance with this Policy or if any question or doubt arises touching upon the scope and content of such documents, the same shall be referred to the Director General of Foreign Trade whose decision thereon shall be final and binding. Procedure The Director General of Foreign Trade may, in any case or class of cases, specify the procedure to be followed by an expo export rter er or impo import rter er or by any any lice licens nsin ing g or any any othe other r competent authority for the purpose of implementing the provisions of the Act, the Rules and the Orders made there under and this Policy. Such procedures shall be included in the Handbook (Vol.1), Handbook (Vol.2) and in ITC(HS) and published by means of a Public Notice. Such procedures may, in like manner, be amended from time to time. The Handbook (Vol.1) is a supplement to the EXIM Policy and contains relevant procedures and other details. The benefits available under various schemes of the Policy are given in the Handbook (Vol.1).


Exemption from Policy / Procedure Any request for relaxation of the provisions of this Policy or of any any proc proced edur ure, e, on the the groun ground d that that ther there e is genu genuin ine e hardship to the applicant or that a strict application of the Policy Policy or the procedure is likely likely to have an adverse adverse impact on trade, may be made to the Director General of Foreign Trade for such relief as may be necessary. The Director General of Foreign Trade may pass such orders or grant such relaxation or relief, as he may deem fit and proper. The The Dire Direct ctor or Gene Genera rall of Fore Foreig ign n Trad Trade e may, may, in publ public ic interest, exempt any person or class or category of persons from any provision of this Policy or any procedure and may, while granting such exemption, impose such conditions as he may deem fit. Such request may be considered only afte afterr cons consul ulti ting ng ALC ALC if the the requ reques estt is in resp respec ectt of a provision of Chapter-4 (excluding any provision relating to Gem Gem & Jew Jewell ellery ery secto ectorr) of the the Pol Policy/ icy/ Proc rocedur edure. e. However, any such request in respect of a provision other than Chapter-4 as given above may be considered only after consulting Policy Relaxation Committee. Principles of Restriction DGFT may, through a notification, adopt and enforce any measure necessary for:•

•

Protection of public morals. Prot Protec ecti tion on of huma human, n, ani animal mal or plan plantt life life or

health. •

Protection of patents, trademarks and copyrights

and the prevention of deceptive practices. •

Prevention of prison labour.


•

Protection of national treasures of artistic, historic

or archeological value. •

•

Conservation of exhaustible natural resources. Prot Protec ecti tion on of trad trade e of fiss fissio iona nabl ble e mate materi rial al or

material from which they are derived; and •

Prev Preven enti tion on of traf traffi fic c in arms arms,, ammu ammuni niti tion on and and

implements of war. Restricted Goods Any goods, the export or import of which is restricted under ITC(HS) may be exported or imported only in accordance with with a licens license/ e/ certif certifica icate/ te/ permis permissio sion n or a public public notice notice issued in this behalf. Terms and Conditions of a License / Certificate / Permission Every license/certificate/permission shall be valid for the period

of

validity

specified

in

the

license/

certif certifica icate/ te/per permis missio sion n and shall shall contai contain n such such terms terms and conditions as may be specified by the licensing authority which may include: a.

The The quan quanti tity ty,, desc descri ript ptio ion n and and valu value e of the the good goods; s;

b.

Actual Us User co condition;

c.

Export obligation;

d.

The The val value ue addi additi tion on to be achi achiev eved ed;; and and

e. The The mini minim mum expo exporrt price rice.. Licence/ Certificate/ Permission not a Right No person person may claim a license/ce license/certifi rtificate/ cate/ permission permission as a righ rightt and and the the Dire Direct ctor or Gene Genera rall of Fore Foreig ign n Trad Trade e or the the licensing authority shall have the power to refuse to grant or renew a license/certificate/permission license/certificate/permission in accordance with the provisions of the Act and the Rules made there under.


Penalty If a lice licens nse/ e/cer certi tifi ficat cate/ e/pe perm rmis issi sion on hold holder er viol violat ates es any any condit condition ion of the licens license/c e/cert ertifi ificat cate/ e/ permis permissio sion n or fails fails to fulfill the export obligation, he shall be liable for action in accordance with the Act, the Rules and Orders made there under, the Policy and any other law for the time being in force. State Trading Any Any good goods, s, the impo import rt or expo export rt of whic which h is gove govern rned ed throug through h exclus exclusive ive or specia speciall privil privilege eges s grante granted d to State State Trading Trading Enterprise(s), Enterprise(s), may be imported imported or exported exported by the State State Tradin Trading g Enterp Enterpris rise(s e(s)) as specif specified ied in the ITC(HS ITC(HS)) Book Book subj subjec ectt to the the cond condit itio ions ns spec specif ifie ied d ther therei ein. n. The The Director General of Foreign Trade may, however, grant a license/certificate/permission to any other person to import or

export

any

of

these

goods.

In respe espec ct of good goods s the impor mportt or exp export ort of whi which is governed through exclusive or special privileges granted to State Trading Enterprise(s), the State Trading Enterprise(s) shall make any such purchases or sales involving imports or

exports

solely

cons consid ider erat atio ions ns,,

in

accordance

incl includ udin ing g

pric price, e,

mark market etab abililit ity, y, tran transp spor orta tati tion on and and

with

commercial

qual qualit ity, y,

avai availa labi bilility ty,,

othe otherr

cond condit itio ions ns of

purchase or sale. These enterprises shall act in a non discriminatory manner and shall afford the enterprises of other countries adequate opportunity, in accordance with customary business practices, to compete for participation in such purchases or sales. Importer-Exporter Importer-Exporter Code Number


No export or import shall be made by any person without an Importer-Exporter Code (IEC) number unless specifically exempted. An Importer-Exporter Code (IEC) number shall be granted on application by the competent authority in accordance with the procedure specified in the Handbook (Vol.1). Trade with Neighbouring Countries The Director General of Foreign Trade may issue, from time to time, such instructions or frame such schemes as may be required to promote trade and strengthen economic ties with neighbouring countries. Transit Facility Transit of goods through India from or to countries adjacent to India shall be regulated in accordance with the bilateral treaties between India and those countries. Trade with Russia under Debt- Repayment Agreement In the case of trade with Russia under the Debt Repayment Agreem Agreement ent,, the Direct Director or Genera Generall of Foreig Foreign n Trade Trade may issue, from time to time, such instructions or frame such schemes as may be required, and anything contained in this Policy, in so far as it is inconsistent with such instructions or schemes, shall not apply. Actual User Condition Capital goods, raw materials, intermediates, components, consumables, spares, parts, accessories, instruments and other goods, which are importable without any restriction, may be imported by any person. However, if such imports requir require e a licens license/c e/cert ertifi ificat cate/ e/ permis permissio sion, n, the actual actual user user alon alone e may may impo import rt such such good goods s unle unless ss the the actu actual al user user condit condition ion is specif specifica ically lly dispen dispensed sed with with by the licens licensing ing authority.


Second Hand Goods All second hand goods shall be restricted for imports and may be imported only in accordance with the provisions of this Policy, ITC(HS), Handbook (Vol.1), Public Notice or a licence/certificate/permission issued in this behalf. licence/certificate/permission Import of samples Impo Import rt of samp sample les s shal shalll be gover governe ned d by the the provi provisi sion ons s given in Handbook (Vol.1). Import of Gifts Import of gifts shall be permitted where such goods are othe otherw rwis ise e free freely ly impo import rtab able le unde underr this this Poli Policy cy.. In othe other r case cases, s, a Custo ustom ms Clea Clearrance ance Permi ermitt (CCP CCP) shal hall be required from the DGFT. Passenger Baggage Bonafide household goods and personal effects may be imported as part of passenger baggage. Samples of such items that are otherwise freely importable under this Policy may may also also be impo import rted ed as part part of pass passen enge gerr bagg baggag age e without a licence/certificate/ permission. Exporters coming from abroad are also allowed to import drawings, patterns, labels,

price

tags,

buttons,

belts,

trimming

and

emb embell ellishm ishmen entts requi equire red d for expo export rt,, as part art of their heir passenger

baggage

permission. Import on Export basis New or second

without

hand

capital

a

licen cence/certificate/

goods,

equipments,

components, parts and accessories, containers meant for packing of goods for exports may be imported for export without without a licence licence/ce /certi rtific ficate ate/pe /permi rmissi ssion on on executi execution on of Lega Legall Unde Undert rtak akin ing/ g/ Bank Bank Guar Guaran ante tee e with with the the Cust Custom oms s Authorities. Re-import of goods repaired abroad


Capi apital tal

good goods, s, equi equipm pmen ents ts,,

comp compon onen entts,

parts arts and and

accessories accessories,, whether whether imported imported or indigenous, indigenous, may be sent abr abroad oad

for for repa repaiirs, rs, test testiing, ng,

qual qualiity impro mprove veme ment nt or

upgr upgrad adat atio ion n or stan standa dard rdiz izat atio ion n of tech techno nolo logy gy and and reimported without a licence/certificate/permission. licence/certificate/permission. Import of goods used in projects abroad After completion of the projects abroad, project contractors may import, without a licence/certificate/permission, used goods goods includ including ing capital capital goods goods provid provided ed they they have have been been used for at least one year. Sale on High Seas Sale of goods on high seas for import into India may be made subject to this Policy or any other law for the time being in force. Import under Lease Financing Permission of licensing authority is not required for import of new capital goods under lease financing. Clearance of Goods from Customs The goods already imported/shipped/arrived, in advance, but not cleared cleared from Customs Customs may also be cleared cleared against the licence/ certificate/ permission issued subsequently. Execution of BG/LUT Where herev ver any any dut duty free ree impor mportt is allo allow wed or where ere otherwise specifically stated, the importer shall execute a Legal Legal Undert Undertaki aking ng (LUT)/ (LUT)/Ban Bank k Guaran Guarantee tee (BG) (BG) with with the Customs Authority before clearance of goods through the Customs, in the manner as may be prescribed. In case of indige indigenou nous s sourci sourcing, ng, the licenc licence/c e/cert ertifi ificat cate/ e/ permis permissio sion n hold holder er shal shalll furn furnis ish h BG/L BG/LUT UT to the the lice licens nsin ing g auth author orit ity y before

sourc urcing

the

materi erial

from

supplier/nominated agency. Private/ Public Bonded Warehouses for Imports

the

indig digenous


Private/Public bonded warehouses may be set up in the Domestic Tariff Area as per the terms and conditions of notificati notification on issued by Department Department of Revenue. Revenue. Any person may may impo import rt good goods s exce except pt proh prohib ibit ited ed item items, s, arms arms and and ammunition, on,

hazardou dous

waste

warehouse

them

such

in

and

chemicals

private/public

and

bonded

wareh arehou ouse ses. s. Such uch goods oods may be clea cleare red d for for home home cons consum umpt ptio ion n in acco accord rdan ance ce with with the the prov provis isio ions ns of this this Poli olicy

and and

agai agains nstt

Lice Licenc nce/ e/ce cerrtific ificat ate/ e/

per permiss missio ion, n,

wherever required. Customs duty as applicable shall be paid at the time of clearance of such goods. If such goods are not cleared for home consumption within a period of one year or such extended period as the custom authorities may permit, the importer of such goods shall re-export the goods. Free Exports All goods may be exported without any restriction except to the extent such exports are regulated by ITC(HS) or any other provision of this Policy or any other law for the time being in force. The Director General of Foreign Trade may, however, specify through a public notice such terms and conditions according to which any goods, not included in the ITC(HS), may be exported without a licence/ certificate/ permission. Export of samples Expor Exportt of samp sample les s shal shalll be gove govern rned ed by the the provi provisi sions ons given in Handbook (Vol.1) Export of Passenger Baggage Bonafide personal baggage may be exported either along with the passenger or, if unaccompanied, within one year befo before re or afte afterr the the pass passen enge ger' r's s depa depart rtur ure e from from Indi India. a.


However, items mentioned as Restricted in ITC(HS) shall require a licence/certificate/permission, except in the case of edible items. Export of Gifts Good Goods, s, incl includ udin ing g edib edible le item items, s, of value value not not exce exceed edin ing g Rs.1,00,000/- in a licensing year, may be exported as a s a gift. Howe Howeve ver, r, item items s ment mentio ione ned d as rest restri rict cted ed for for expo export rts s in ITC(HS) shall not be exported as a gift, without a licence/ certificate/ permission, except in the case of edible items. Export of Spares Warranty spares, whether indigenous or imported, of plant, equipm equipment ent,, machin machinery ery,, automo automobil biles es or any other other goods goods may be exported upto 7.5% of the FOB value of the exports of such goods along with the main equipment or subsequently but within the contracted warranty period of such goods. Third Party Exports Third party exports, as defined in paragraph 9.56 shall be allowed under the Policy. Export of Imported Goods Goods imported, in accordance with this Policy, may be exported in the same or substantially the same form without a licence/certificate/ permission provided that the item to be impo import rted ed or expo export rted ed is not not ment mentio ione ned d as rest restri rict cted ed for for import or export in the ITC(HS). Exports of such goods import imported ed agains againstt paymen paymentt in freely freely conver convertib tible le curren currency cy would be permitted against payment in freely convertible currency. Goods, Goods, includ including ing those those mentio mentioned ned as restr restrict icted ed item item for import or export (except prohibited items) in ITC(HS), may be impo import rted ed unde underr Cust Custom oms s Bond Bond for for expo export rt in free freely ly


convertible

currency

without

a

licence/certificate/

permission. Export of Replacement Goods Good Goods s or part parts s ther thereo eoff on bein being g expo export rted ed and and foun found d defe defect ctiv ive/ e/da dama mage ged d or othe otherw rwis ise e unfi unfitt for use use may may be replaced free of charge by the exporter and such goods shal shalll be allo allowe wed d clea cleara ranc nce e by the the cust custom oms s auth author orit itie ies s provided that the replacement goods are not mentioned as restricted items for exports in ITC(HS). Export of Repaired Goods Good Goods s or part parts s ther thereo eoff on bein being g expo export rted ed and and foun found d defe defect ctiv ive, e, dama damage ged d or othe otherw rwis ise e unfi unfitt for for use use may may be imported for repair and subsequent re-export. Such goods shall shall be allowe allowed d cleara clearance nce withou withoutt a licenc licence/c e/cert ertifi ificat cate/ e/ permis permissio sion n and in accord accordance ance with with custom customs s notifi notificat cation ion issued in this behalf. Private Bonded Warehouses for Exports Private bonded warehouse exclusively for exports may be set up in DTA as per the terms and conditions of the noti notifi fica cati tion ons s issue issued d by Depa Depart rtme ment nt of Reven Revenue ue.. Such Such ware wareho hous use e shal shalll be enti entitl tled ed to proc procur ure e the the goods goods from from dome domest stic ic manu manufa fact ctur urer ers s with withou outt paym payment ent of duty duty.. The The supp supplilies es made made by the the dome domest stic ic supp supplilier er to the the noti notifi fied ed warehouses shall be treated as physical exports provided the the paym paymen ents ts for the same same are made ade in free free fore foreiign exchange. Denomination of Export Contracts All export contracts and invoices shall be denominated in freely convertible currency and export proceeds shall be realised in freely convertible currency. Contracts for which payments are received through the Asian Clearing Union


(ACU) shall be denominated in ACU Dollar. The Central Government may relax the provisions of this paragraph in appropriate cases. Export contracts and Invoices can be denominated

in

Indian

rupees

against

EXIM

Bank/Government of India line of credit. Realisation of Export Proceeds If an exporter fails to realise the export proceeds within the time time speci specifi fied ed by the the Rese Reserv rve e Bank Bank of Indi India, a, he shal shall, l, without prejudice to any liability or penalty under any law for the time being in force, be liable to action in accordance with the provisions of the Act, the Rules and Orders made there under and the provisions of this Policy. Free movement of export goods No seizure of Stock 2.42 2.42.1 .1 No seiz seizur ure e of stoc stock k shal shalll be made made by by any any age agenc ncy y so so as to disrupt the manufacturing activity and delivery schedule of export export goods. In exceptional exceptional cases, the concerned concerned agency may seize the stock on the basis of prima facie evidence.

2.43

However, such seizure should be lifted within 7 days. Export Promotion Council The basic objective of export promotion councils is to prom promot ote e and and deve develo lop p the the expo export rts s of the the coun countr try. y. Each Each Coun Counci cill is resp respon onsi sibl ble e for for the the prom promot otio ion n of a part partic icul ular ar group of products, projects and services. The list of the councils and their main functions are given in Handbook

(Vol.1). Registration -cum-Membership Certificate 2.44 2.44 Any Any per perso son, n, appl applyi ying ng for for (i) (i) a lic licen ence ce// cer certi tifi fica cate te// perm permis issi sion on to import/ export, [except items listed as restricted items in ITC(HS)] or (ii) any other benefit or concession under this poli policy cy shal shalll be requ requir ired ed to furn furnis ish h Regi Regist stra rati tion on-c -cum um-Membership Certificate (RCMC) granted by the competent


authority authority in accordance accordance with the procedure specified specified in the Handbook (Vol.1) unless specifically exempted under the Policy.

JOURNEY OF EXIM POLICY

India`s

foreign

trade

is

regulated

by

the

foreign

trade

(Development and Regulation) Act, 1992 which replaced the import and expo export rt (con (contr trol ol)) Act, Act, 1947 1947.. The The act act of 1992 1992 empo empowe wers rs the the cent centra rall government to formulate and announce from time to time the export and import policy and to amend it in like manner. Prio Priorr to mid mid -199 -1991, 1, fore foreig ign n trad trade e of Indi India a suff suffer ered ed from from stri strict ct bureaucratic and discretionary controls. However, the new government which took over at the centre in June 1991 soon realised that India’s foreign trade policy must respond to the changes (liberalization and openne openness) ss) sweepi sweeping ng across across the world. world. To reduce reduce contro controls, ls, simpli simplify fy proc proced edur ures es and and to crea creatte a cong congen enia iall envi enviro ronm nmen entt for for trad trade, e, the the government made a statement on trade policy in parliament on august 13, 1991, ushering a new era in the foreign trade policy of India. Instead of cont contro rolls and and reg regulat ulatio ions ns,, the the focu focus s shif shiftted to promo romottion ion and and development of foreign trade. Before 1985-86, the annual export-import policy was announced at the beginning of the financial year. In 1985-86 , a three year exportimport policy was announced for the period April 1985 through march 1988, providing a reasonable degree of stability to the policy framework.


On its expiry, expiry, the new policy for three years 1988-91 was announced announced in March 1988 which laid even greater emphasis on promotion of exports.



EXIM POLICY, 1992-97

On Marc March h 31, 31, 1992, 1992, the the gove govern rnme ment nt anno announ unce ced d the the expo export rt and and import policy for a period of five years (April 1, 1992 to march 31, 1997), coinciding with the period of eighth five year plan. The chief controller of imports and exports was re-designated as director general of foreign trad trade. e. EXIM EXIM Poli Policy cy,, 1992 1992-9 -97 7 made made a consc conscio ious us effo effort rt to dism dismant antle le variou various s protec protectio tionis nistt and regula regulator tory y polici policies es and accele accelerat rate e India` India`s s transition towards a globally oriented economy. The export-import policy was was furt urther her liber iberal aliz ized ed by the gove goverrnmen nmentt on March arch 31, 31, 199 1993. Substantial concessions were announced to boost agricultural exports. The government also announced a centrally sponsored scheme to set up industrial parks in different states.



EXIM POLICY, 1997-2002

The export and import policy, 1997- 2002 (coinciding with the period of ninth five year plan) sought to consolidate the gains of the previous poli policy cy and and furt furthe herr car carry forw forwar ard d the the proc proces ess s of libe libera raliliza zati tion on by deregu deregulat lating ing and simpli simplifyi fying ng proced procedure ures s and removi removing ng quanti quantitat tative ive restrictions in a phased manner. It set an ambitious target of attaining an export export level of US$ 90-100 billion billion by the year 2002 and achieving achieving 1 per cent share in world trade. Objectives:


The principal objectives of the policy were the following: 1. To accelerate the the country`s transition transition to a globally – oriented oriented vibrant econom economy y to derive derive maximu maximum m benefi benefits ts from from expand expanding ing global global market market opportunities. 2.

To stimul stimulate ate sustai sustained ned econom economic ic growth growth by providin providing g access to

essential raw materials, intermediates, Components, consumables and capital goods required for augmenting production. 3.

To enha enhanc nce e the the tech techno nolo logi gica call stre streng ngth th and effic efficie ienc ncy y of Indi Indian an

agriculture, industry and services, thereby improving their competitive str strengt ength h

whi while

gener enerat atin ing g

new

empl employ oym ment ent

oppo opport rtun uniities ties,,

and and

enco encour urage age the the atta attain inme ment nt of inte intern rnat atio iona nalllly y acce accept pted ed stan standa dard rds s of quality. 4.

To provide provide consum consumers ers with with good quality quality product products s at reason reasonabl able e

prices. Salient Features: Following were the salient features of the policy: 1. Exports and imports shall be free, except to the extent they are regulated by the provisions of this policy. 2. The Central Central Government Government may in public, public, interest, interest, regulate regulate the import import or exports of goods by means of a negative negative list of imports or a negative negative list of exports, as the case may be. 3. The negative list may consist of goods, goods, the import or export of which is prohibited, restricted through licensing, or canalised.


4. Prohibited Prohibited items items in the Negative list of Imports Imports shall not be imported imported and prohibited items in the Negative list of exports shall not be exported. 5.

Any Any goods goods,, the the expor exportt or impor importt of which which is rest restri rict cted ed throu through gh

licensing , may be exported or imported only in accordance with a license issued in this behalf. 6.

Any Any goods goods,, the impor importt or expo export rt of which which is canal canalis ised, ed, may may be

imported or exported by canalising agency specified in the negative list. 7. No export or import shall be made by any person without an importer importer – exporter code (IEC) number unless specifically exempted.



MODIFIED EXIM POLICY, APRIL 1998

The new government at the centre, which assumed office in March 1998, announced its exports and import policy for the year 1998-99 on April 13, 1998. As part of the annual export-import policy modification, the the gove govern rnme ment nt free freed d from from impor mportt rest restri rict ctio ions ns a larg large e numb number er of consumer goods and liberalized all major export promotion schemes. This This new dose dose of libe liberrali alizati zation on of the trad trade e regi egime by the new new government was necessitated by the commitments made by India at the Worl World d Trad Trade e Orga Organi niza zati tion on (WTO (WTO). ). The The timi timing ng of the the impo import rt poli policy cy liberalization coincided with the scheduled review of India`s trade policy by WT WTO O on Apri Aprill 16 and and 17, 17, 1998 1998.. Apar Apartt from from the the gene genera rall glob global al pressure on India to remove restrictions on imports, the US had filed a


complaint with the WTO against India`s import regime. The following were the main provisions of the modified Export-import policy unveiled by the Commerce Minister on April 13, 1998. 1. 340 340 more more item items s were were shif shifte ted d from from rest restri rict cted ed list list to open open gene genera rall licence (OGL). (OGL). Thus Thus out of the total total number of 10, 202 items covered under the export-import policy, only 2200 remained on the restricted list. 2. The revised revised policy policy set an export export growth growth target target of 20 percen percentt for the year 1998-99 which in other words required total exports of the order of US$ 41.4 billion during 1998-99. 3. Zero Zero –dut –duty y expo export rt prom promot otio ion n capit capital al good goods s (EPC (EPCG) G) sche scheme me was was extended to all the software exporters by lowering the threshold limit of importable capital goods from Rs 20 crore to Rs 10 lakhs. The lowering of the threshold limit was expected to help the software companies to proliferate throughout the length and breadth of the country. In other words they could import any capital goods without paying any import duty and in return sign an export obligation of 5 times the value of capital goods on net foreign exchange earning basis for a period of six years. In the case of garments, agriculture, food processing, gems and jewellery, electronics leather, leather, sport goods and toys the minimum limit was lowered to Rs 1 crore. 4. In a bid bid to prev preven entt chea cheap p impo import rts s bein being g dump dumped ed at unre unreas asona onabl ble e prices, the government set up an anti-dumping cell called Directorate General (DG) of Anti-Dumping and Allied Duties. The DG would be responsible for investigation into alleged cases of dumping as well as subsidised cases. DG would be recommended Anti –Dumping duties wher where e it is foun found d that that dump dumped ed impor mports ts are are caus causin ing g har harm to the the


domestic industry. Where harm is caused to the domestic industry by subsidising exports of the exporting countries then the DG would have the jurisdiction to investigate all such cases and recommend possible imposition of countervailing duties. The DG would also advice the indu indust stry ry grou groups ps and and cons consum umer er for for on how how to go abou aboutt coll collec ecti ting ng information and procedures involved in making out a case for antidumping duties. 5. Other Other provisions provisions include: Delegation Delegation of powers powers to regional licensing licensing offices, offices, Doing away with the minimum value addition of 33 percent under advance licensing sche scheme me,, Simp Simplilifi fied ed proc proced edur ures es for for clubb clubbin ing g of advan advance ce lice licens nse e scheme and Private bonded warehouses to be set up to import, stock and sell even negative list items.



EXIM POLICY 1999-2000

In its effort to further dismantle the import control regime and hasten the the inte integr grat atio ion n of the the Indi Indian an econo economy my with with the the worl world d econ econom omy, y, the the govern governmen mentt announ announced ced a revise revised d export export-im -impor portt policy policy on March March 31, 1999 which came into force on April1, 1999.


The new export –import policy freed import of 894 items of consumer goods, agricultural products and textile from licensing requirements. In other words a number of Consumer Consumer items could now be imported imported license-free license-free subject only to the payment of import duty. Physical controls on imports were removed and the only control over imports was fiscal in nature, i.e. adjusting import duty to regulate imports. These adjustments were to be made within the upper limit prescribed by WTO.

Moreover, another 414items were removed from the restricted list, allowing these to be imported against special import licenses. India`s inte intern rnat atio iona nall comm commit itme ment nts s requ requir ire e it to remo remove ve licen licensi sing ng curb curbs s on imports by the year 2003.



EXIM POLICY 2000-2001

The union commerce and industry minister announced on march 31, 2000 the new export-import policy of the government of India for the year year 2000-2 2000-2001 001.. The export export –impor –importt policy policy envisa envisagin ging g a 20 percent percent expo export rt grow growth th in doll dollar ar term terms s in 2000 2000-2 -200 001, 1, brou brough ghtt abou aboutt a majo major r rationalisation in export promotion schemes and launched a series of sector specific initiatives.


ajor init initia iati tive ve to boost oost Export Export Promot Promotion ion:: In a major

exp exports orts,, the the

Government announced the following measures:

Special Economic Zones (SEZ): in the pattern of Chinese models the

government announced the setting up of two SEZs at Positra in Gujarat and Nangunery in Tamil Nadu ]. Industrial units located in SEZs will be exempted from rules and regulations governing exports and imports. The entire production will have to be exported from these zones. Sales from Domestic Tariff Area (DTA) can be done only on full payment of custom duty. Several Export Processing Zones (EPZs)will shortly be converted into into SEZs SEZs.. The The EPZs EPZs loca locate ted d in Kand Kandla la,, Viza Vizag g and and Koch Kochii will will be converted into SEZs immediately. It was further announced that 100 percent foreign direct investment (FDI) would be allowed in all products in SEZs.

SEZs would be treated as if they are outside the customs territory of the country. The units would be able to import capital goods and raw material duty free. The movement of goods to and from SEZs would be unrestricted.

It is noteworthy that SEZs have played a crucial role in boosting China`s exports and presently the country derives 40 percent of its exports from such zones. However, Chinese SEZs are based on contract labour system (hire and fire policy). The commerce minister while announcing the EXIM policy categorically ruled out any changes in


labour laws. Moreover, there is no systems of reservation of items for small scale industries in China. It is unclear if the Government of India would allow the production of reserved item for small industries in the SEZs. Still further there are various infrastructural bottlenecks like power shorta shortage, ge, lack lack of transp transport ort facili facility ty and of course course proced procedura urall delays. delays. Hence the success of SEZs in India is a moot question

Sector Sector-Sp -Speci ecific fic

Packag Packages: es:

the the

Expo Export rt-i -imp mpor ortt

poli policy cy 2000 2000-2 -200 001 1

anno announ unce ced d sect sector or-s -spec pecif ific ic pack packag ages es for for seve severr core core area areas s to boos boostt expo export rt,, viz. viz. Gems Gems and and jewe jewellller ery, y, phar pharma mace ceut utic ical als, s, agro agroch chem emic ical als, s, biotechnology, silk, leather and garments.

For the gems and jewellery exporters, the government announced a diam diamon ondd-do dollllar ar accou account nt (DDA (DDA)) schem scheme e expo export rt proc procee eeds ds can be retained in a dollar account and the exporters can use funds in this account for import of rough diamonds.

For agrochemicals, biotechnology and pharma units (considered as knowledge-intensive), the government has allowed duty free imports of laboratory equipment, chemicals and reagents upto 1% of the FOB value of exports. Similarly the government increased duty free import of trimmings, embellishments and other items from 2 to 3% of the total export value


Since the Involv Involveme ement nt of State State Governm Government ents s in Export Export Promot Promotion ions s: Since stag stages es forg forgo o taxe taxes s (mai (mainl nly y sale sales s tax) tax) on expo export rts, s, they they have have litt little le incentive to promote exports. [1] the 2000-2001 export -import policy anno announ unce ced d

fina financ ncia iall ince incent ntiv ives es to to stat states es bas based ed on on thei theirr expo export rt

performance. An incentives scheme with an initial outlay of Rs. 250 crores to secure states involvement in the national export drive was unveiled. The states can use the funds for export promotions activities such such as infr infras astr truc uctu ture re deve develo lopm pmen ent. t. The The comm commer erce ce and and indu indust stry ry minister said that he would request the state to treat all units exporting more more than than 50 percen percentt of their their turnov turnover er as public public utilit utility y servic services. es. This This would enable them to keep their international commitment on delivery schedule. Furthermore, the minister observed that the recent spectacular growth of software exports was, apart from India’s knowledge in high-tech, due to hands off policy policy of government government towards this sector .A similar approach approach to hardware electronics is called for. Import Import liberalisat liberalisation: ion: The The expo export rt impo import rt poli policy cy 2000 2000 to 2001 2001 lift lifted ed

quan quanti tita tati tive ve rest restri rict ctio ions ns on 714 714 comm common only ly used used item items s (agr (agric icul ultu tura rall products and consumer durables ) which can now be freely imported. Thus, commodities like meat, milk powder, coffee, tea, fish, pickles, cigars , cigarettes, television , radio , tape recorders , foot wares & umbrellas can be imported freely from April 1, 2000. However most of these items will attracts peak rates of basic import duty. The lifting of licensing and quota restrictions on 714 import items was in line with India’s WTO obligations. The government promised to abolish licensing and quota curbs on the remaining 715 items (such liquor, cars etc) in April 2001.


Many critics of new policy fear that that removal of licensing and quota rest restri rict ctio ion n will will lead lead to surg surge e in impo import rts s of thes these e item items, s, hurt hurtin ing g the the domestic industry. However, it is noteworthy that import restrictionare being phased out since 1966 but no extraordinary growth has occurred in the import of freed items. The commerce minister maintain that antidumping and anti-subsidy tariffs and other safeguards would be used if ther there e is sudd sudden en sear search ch in impo import rts, s, caus causin ing g seri seriou ous s inju injuri ries es to the the domestic industry.



EXIM Policy, 2001-2002

The union commerce And industry minister unveiled on march 31, 2001, the export –import policy for the year 2001-2002. Removal of Quantitative restrictions: The process of removal of import

restrictions , which began in 1991, was completed in a phased manner bye the Export-Import Policy 2001-2002 with the removal of restriction on the remaining of 715 items. This was in tune with the commitments made to the WTO. Out of these 715 items 342 were textile products, 147 were agricultural products and 226 were other manufactured products. However, import of agricultural products like wheat, rice, maze, copra and coconut oil was placed in the category safe trading . the nominated state trading enterprise enterprise will conduct conduct the import of this commodity commodity solely solely as per commercial consideration . similarly, import of petroleum products including petrol , diesel & ATF was placed in the category of state trading in all 27 out of 715 items taken of the quantitative restrictions restrictions list were put under the state trading category. category. The minister was confident that the Indian market will not swamped by impo import rted ed bran brands ds of comm commonl only y used used arti articl cles es.. To prev preven entt dump dumpin ing, g,


government will take recourse to anti-dumping duties and other non-tariff barriers. Arrangements have been made to track, collate and analyse data on 300 sensitive items which mainly comprise farm goods and items produced by small scale sectors. Agricultural Export Zones: With a view to boost agricultural exports and

provid provide e remune remunerat rative ive return returns s to the farmin farming g commun community ity,, the Export Export-Import policy proposed the the setting up of agricultural export zones. Three Three such zones are proposed to be set up in himanchal Pradesh , jammu Kashmir (to promote export of apples) and Maharashtra. Government will make efforts to provide improved access to the produce/products of the the agri agricu cult ltur ure e and and alli allied ed sect sector ors s in the the inte intern rnat atio ional nal mark market et.. Stat State e governments have been asking to identify product specific agricultural export zones for development for export of specific products from a geographically contiguous area.



EXIM Policy , 2002-2007

The EXIM Policy 2002-07 was unveiled on march 31, 2002. The policy entailed several institutional, infrastructural and fiscal measures intended to promote exports which are conductive to the economic development of the country. The following were the salient features of the policy. Special Economic zones (SEZs): Offshore banking units (OBUs) were

permitted in SEZs . Units in SEZ were permitted to undertake hedging of commodity price risks, provided such transactions are undertaken by the units on stand-alone basis. This will impart security to the returns of the unit. It has has also also been been deci decide ded d to perm permit it exter externa nall comm commer erci cial al borr borrow owin ings gs (ECB (ECBs) s) for for tenu tenure re of less less than than thre three e year years s in SEZs SEZs.. The The deta detaililed ed


guidelines will be worked out by RBI. This will provide opportunities for accessing working capital loan for these units internationally competitive rates. Employ Employmen mentt

Genera Generatio tion: n:

In

an

effort

to

generate

additional

employment , the following announcements were made pertaining to agricultural and small industry sectors. Exports restrictions like registration and packaging requirement were removed forthwith on butter, wheat & wheat products, coarse grains grou ground ndnut nuts s oil oil and and cash cashew ew to Russ Russia ia . Quan Quanti tita tati tive ve and and pack packag agin ing g restrictions on wheat and its products, butter, pulses, grains and flour of barley, maize, bajra, ragi and jowar had already been removed on march 5, 2002. •

Restrictions on export of all cultivated varieties of seed, except jute and onion, were removed.

•

To promote export of agriculture and agriculture-based products, 20 agriculture export zones were notified.

•

In order to promote diversification of agriculture, transport subsidy shall be available for export of fruits, vegetables, floriculture, poultry and dairy products.

•

3 perc percen entt spec specia iall DEPB DEPB rate ate was anno announ unce ced d for for pri primary mary and processed foods exported in retail packaging of 1 kg or less

•

An amount of Rs 5 crore under Market Access Initiative (MAI)

•

Was earmarked for promoting cottage sector exports coming under te KVIC.

•

The units in the handicrafts sector can also access funds from MAI sche scheme me for for devel develop opme ment nt of webs websit ite e for for visu visual al exhi exhibi biti tion on of thei their r product.


•

Under the export of Promotion Capitals Goods (EPCG) scheme, these units will not be required to maintain average level of exports, while calculating the export obligation.

•

These units shall be entitled to the benefit of Export House Status on achieving lower average export performance of Rs 5 crore as against Rs 15 crore for others.

•

The units in handicraft sector will be entitled to duty free imports of an enlarged list of items as embellishments up to 3 percent of FOB value of their exports.

•

With With a view view to enco encour urag agin ing g furt furthe herr deve develo lopm pmen entt of cent center ers s of economics and export excellence such as Tirupur for hosiery, wollen blanket in Panipat, wollen knitwear in Ludhiana, following benefits shall be available to small scale sector: 1. Common Common service providers providers in these areas shall be entitled for facility facility of EPCG scheme. 2. The recogniz recognized ed associ associati ations ons of units units in these areas will be able able to access the funds under the Market Access initiative scheme for creating focused technological services and marketing abroad. 3. Such Such areas areas will will receiv receive e priori priority ty for assist assistance ance for identi identifie fied d critic critical al infrastructure gaps from the scheme on Central Assistance to States. 4. Entitlement for Export Export House Status at Rs 15 crore crore for others.

Tech Techno nolo logy gy

Upgr Upgrad adati ation on::

Park(EHTP) Park(EHTP) scheme

Elect lectrronic onic

Hardw ardwar are e

Tec Technol hnolog ogy y

was modified modified to enable enable the sector to face the

zero duty regime under ITA(Information Technology Agreement)-1.The units shall be entitled to following facility.


Net Foreign Exchange as a Percentage of Exports (NFEP) positive in

•

5 years. •

No other export obligation for units in EHTP.

•

Supplies of ITA-1 items having zero duty in the domestic market to be eligible for counting of export obligation.

Growth-oriented: The status holders shall be eligible for the following

new/special facilities. Lice License nse/C /Cer erti tifi fica cate te/P /Per ermi miss ssio ions ns and and custo customs ms clea cleara ranc nce e for for both both

•

exports imports on self-declaration basis. •

Fixation of input-output norms on priority.

•

Priority finance for medium and long-term capital requirement as per conditions notified by rbi. Exemption from compulsory negotiation of documents through banks.

•

The remitt remittanc ances, es, howeve however, r, would would continu continue e to be receiv received ed throug through h banking channels. 100 100 perc percent ent rete retent ntio ion n of fore foreig ign n exch exchan ange ge in Exch Exchang ange e Earn Earner ers s

•

Foreign Currency (EEFC) account. Enha Enhance nceme ment nt in norm normal al repa repatr tria iati tion on peri period od from from 180 180 days days to 360 360

•

days.



EXIM Policy, 2003-2004

It had the following provisions: •

The The poli policy cy prov proviided ded a massi assive ve thru thrust st to expor xportt of ser servic vices by introducing duty free export facility for the service sector units having a minimum foreign exchange earning of Rs 10 lakh.


•

Encouragement of corporate sector with proven credential to sponsor Agri-Export Zones for boosting farm exports.

•

EPCG scheme made more flexible and attractive so that even the small scale sector could set up and expand its manufacturing base for exports.

•

Fixing of input-output norms for status holders on priority basis within a period of 60 days and permission to status holders in Software Technol Technology ogy Parks Parks India India(ST (STPI) PI) for free free moveme movement nt of profes professio sional nal equipments.

•

Simplification and codification of rules, regulations and procedures application on SEZ and EOU units by putting all these rules and regu regula lati tions ons in one one plac place, e, thus thus great greatly ly faci facililita tati ting ng both both pote potent ntia iall investors and existing units.

•

To increase the overall competitiveness of export clusters, a scheme for upgradation of infrastructure in existing clusters/industrial locations would be implemented.

•

Extension of Duty Free Replenishment Certificate(DFRC)scheme to deemed exports and reduction in its value addition norms from 33 percent to 25 percent.



Mini EXIM policy, Jan 2004

Preceding Preceding the dissolution dissolution of the 13th Lok Sabha on Feb. 6, 2004 the government of India announced mini EXIM policy on Jan 28, 2004. It included facilitation and simplification measure to sustain the momentum of export growth. Specifically it was aimed at providing boost to exports of gems gems and and jewe jewellller ery, y, enco encour urag agin ing g tour touris ism m and and maki making ng ener energy gy generation cheaper. Highlights of new policy were.


•

Free import of gold and silver for export purpose permitted. In other word words, s, gold gold and and silv silver er can can now be impo import rted ed with without out payi paying ng any any comm commis issi sion on to chan channe nellllin ing g agen agents ts.. (in (in 1099 10997, 7, the the gove govern rnme ment nt authorized three canalizing agencies viz MMTC, STC and HHEC, and eigh eightt bank banks s to impo import rt gold gold and and silv silver er for for sale sales s in the the dome domest stic ic marke arkett ). Like Likewi wise se,, impor mportt of rough ough,, uncu uncutt and and semi semi poli olished shed diam diamon onds ds will will not not be valu valued ed for for expo export rt obli obliga gati tions ons.. Quan Quanti tita tati tive ve restriction on gold and silver imports has also been lifted. Government also also anno announ unce ced d the the intr introd oduc ucti tion on of a gold gold card card for for cred credit itwo wort rthy hy exporters to make available cheaper foreign currency debt on easier terms.

•

Duty free import facility available to star hotels extended the heritage, one and two star hotels and stand alone restaurants. All these hotels have been allowed duty free import equivalent to 5% of their export earnings in three preceding years.

•

Restriction on import of electrical energy lifted

•

Online license electronic fund transfer facility for exporters. These measures are expected to reduce transaction cost for exporters and make export administration transparent



FOREIGN TRADE POLICY, 2004-2009

In radical move the government of India announced on August 31 2004 a new forign trade policy for the period 2004-09, replacing the hitherto nomenclature of EXIM policy by foreign Trade policy. A vigorous export led growth str strategy of doubling India’s a’s share in glo global merchandise trade in the next 5 years , with a focus on the sector having


pros prospe pect ctus us for expo exporrt expa expans nsiion and and pot potent ential ial for empl employ oyme ment nt generation, generation, constitute constitute the mail plank of the policy. These measures measures are expect expected ed to enhanc enhance e intern internati ationa onall compet competive iveness ness and aid in furthe further r increasing the acceptability on Indian exports. Objective and strategy The new FTP takes an integrated view of the overall development of Indi India’ a’s s fore foreig ign n trad trade e and and esse essent ntia ialllly y prov provid ides es a road roadma map p for for the the development of this sector. It is built around two major objectives of doubling India’s share of global merchandise trade by 2009 and using trade policy as an effective effective instrument instrument of economic economic growth with a thrust thrust on employment generation. Key strategies to achieve these objectives, inter alia, include: unshackling of controls and creating an atmosphere of trust and transparency; incidence of all levies on input used in export products; facilitating development of Indi ndia as a global hub of manufacturing, trading and services; identifying and nurturing special focus area to generate additional employment opportunities, particularly in

semi

urban

and

rura ural

areas;

facilitating technological

and

infrastructural up gradation of the Indian economy, epically and ensuring that that dome domest stic ic sect sector or are are not not disa disadv dvan anta tage ge

in trad tradin ing g agre agreem emen ents ts

upgrading the infrastructural network related to the entire foreign trade chai chain n to inte intern rnat atio iona nall stand standar ards ds revi revita talilizi zing ng the the boar board d of trad trade e by rede redefi fini ning ng its its role role and and indu induct ctin ing g into into it expe expert rts s on trade trade poli policy cy and and activating Indian embassies as key players in export e xport strategies.

Special focus initiatives


The The FTP 2004 2004 has has inden ndenttifie ified d cert certai ain n thrus hrustt sect secto or havi having ng prospects for export expansion and potential for employment generation. These thrust sector include agriculture, handlooms and handicraft, gems and and jewe jewellller ery y and and leat leathe herr foot footwe wear ar sect sector or.. Sect Sector or spec specif ific ic poli policy cy initiatives for the thrust sector include for agriculture sector introduction of new scheme called vishesh krishi upaj yojana to boost export exports of fruit, vegetables, flowers minor forest produce and their value added products. Under the scheme exports of these products qualify for duty free credit entitlement for importing inputs and other goods under EPCG sche scheme me perm permit itti ting ng the the inst instal alla lati tion on of capi capita tall good goods s impo import rted ed unde under r EPCG EPCG for for agri agricu cult ltur ure e anyw anywhe here re ASID ASIDE E sche scheme me for for devel develop opme ment nt of AEZ’ AEZ’s, s, libe libera ralilizat zatio ion n of impo import rt of seed seeds s bulb bulbs s tube tubert rts s and and plant plantin ing g material and liberalization of the exports of plant portion, derivatives and extract to promote export of medicinal plants and herbal produce The special focus initiatives for handlooms and handicraft sector incl includ ude e exte extens nsio ion n of faci facililita tati ting ng like like enha enhanc ncin ing g duty duty free free impo import rts s of trimming and embellishment for handlooms and handicrafts exemption of samples from CVD authorizing handicraft export promotion council to import trimmings embellishment and samples for small manufacturing and establishment of a new handicraft special economic zone. New Export Promotion scheme A new scheme to accelerate growth of export called the target plus has been introduced. Under the scheme exporters achieving a quantum growth in exports are entitled to duty free credit based on incremental exports substantially higher than the general actual export target fixed. Rewards are granted based on a tired approach. For incremental growth of over 20%, 25% and 100%, the duty free credit are 5%, 10%, and 15%


of f.o. f.o.b b valu value e of incr increm emen enta tall expo export rts. s. Anot Anothe herr new new sche scheme me call called ed vishesh kishi upaj yojana has been introduced to boost exports of fruits, vegetables and flower. Exports of these products qualify for duty free cred credit it enti entitl tlem emen entt equi equiva vale lent nt to 5% of f.o.b .o.b valu value e of expo export rts. s. The The entitlement is freely freely transferable and can be used for import import of a variety variety of input and goods. To accelerate growth in export of service so as to crea create te a powe powerf rful ul and and uniq unique ue serv served ed from from Indi India a bran brand d inst instan antl tly y recognized and respected the world over the earlier duty free export credit scheme for service has been revamped and re –cast into the served from India scheme. Individual service providers who earn foreign exchange of at least 5 lakh, and other service providers who earn foreign exchange of at least Rs. 10 lakh are eligible for a duty-credit entitlement of 10% of total foreign exchange earned by them. In the case of hotels it is 5%. Hotels and restaurants can use their duty credit entitlement for import of good items and alcoholic beverages. To make India into global trading hub a new scheme to establish Free trading and warehousing warehousing zones has been introduced introduced to create create trade related related infra infra to facilitate the import and export of goods and service with freedom to carry out trade transaction in convertible currency. Besides permitting FDI up to 100% in the development outlay of Rs 100 cr and five lakh sq. mts built up area. Units in the FTWZ qualify for all other benefits as applicable for SEZ units.



Simp Simpli lifi fica cati tion on,, rati ration onal aliz izati ation on and and modi modifi fica cati tion on of ongo ongoin ing g schemes:


EPCG EPCG sche scheme me has has been been furt furthe herr impr improv oved ed upon upon by prov provid idin ing g additi additiona onall flexib flexibili ility ty for fulfil fulfilmen mentt of export export obliga obligatio tion, n, facili facilitat tating ing and providing incentives for technological up gradation, permitting transfer of capital goods to group companies and managed hotels, doing away with the requir requireme ement nt of certif certifica icate te from from central central excise excise and impro improvin ving g the viability of specified projects by calculating their exports obligating based on concessional duty permitted to them. Import of second hand capital good goods s with withou outt any any rest restri rict ctio ion n on age age has has been been perm permit itte ted d and and the the minimum depreciated value for plant and machinery to be re located into India has been reduced from Rs 50 cr to Rs 25 cr. The new policy has been been allo allowe wed d tran transf sfer er of the the impo import rt enti entitl tlem emen entt unde underr duty duty free free replen replenish ishmen mentt certif certifica icate te scheme scheme in respec respectt of fuel fuel to the market marketing ing agencies authorized by the ministry of petroleum and natural gas to facilitate sourcing of such import by individual exporters. The Duty Entitlement passbook scheme will continue until replaced by a new scheme to be drawn up in consultation with exports. Additional benefits have been provided to EOU , including exemption from service tax in proportion to their goods and service, permission to retain 100% of exports earnings in export earners foreign currency accounts, extension of income tax benefits on plant and machinery to DTA unit which convert to EOU, EHTP, STP, BTP units allowing imports of capital goods on self certification basis and permission to dispose of leftover material and fabrics up to 2% of c.i.f value or quantity of import on imports on payment of duty on transaction value only. Minimum investment criterion has has been been waiv waived ed for for hand handic icra raft ft,, agri agricu cult ltur ure, e, flor floric icul ultu ture re.. The The FTP propose setting up to BTP’s by granting all facilitates of 100% EOUs. The The FT FTP P 2004 004 has has intro ntrod duced uced a new ratio ationa naliliza zati tion on sche scheme me of categorization

of

status

holders

as

star

export

houses

with


benc benchm hmar arki king ng for for expo export rts s perf perfor orma manc nce e vary varyin ing g from from Rs15 Rs15 cr to Rs 5000cr.



Sim Simplif plifiicati catio on

of

rule ru les s

and and

proc pr oced edur ure e

and and

inst instit itut utiional onal

measures:

Policy measures announced to further rationalize/simplify the rule and procedure include exemption for exporters with minimum turnover of Rs 5cr and good track record from furnishing bank guarantee in any of the scheme service tax exemption for exporters of all goods and service uniformly to 24 months reduction in number of return of returns and forms to be filled delegation of more power to zonal and regional offices and time time bound bound introd introduct uction ion of electr electroni onic c data data interf interface ace.. Instit Instituti utiona onall measures proposed in the FTP 2004 include revamping and revitalizing the board of trade setting up of council to map opportunities for key service in key markets and setting up of common facility centres for use of professional home based service providers in state and district level towns. 

Annual supplement 2005-06 to the foreign trade policy 2004-05

The union commerce and industry minister announcement on april 8 2005, the 2005-06 supplement to the five year foreign trade policy, giving a big boost to exports from agriculture and manufacturing sector. Auto Auto compon component ents s pharm pharmace aceuti utical cal’s ’s gems gems and jewell jewellery ery and seafood seafood expo exporrts firm firms s stoo stood d to gai gain the most most.. Highl ghlight ights s of the the annu annual al supplement were as follows


•

Push Push to expo export rts s of farm farm,, mari marine ne,, manu manufa fact ctur ure e and and phar pharma ma

products •

Exports cess on farm commodities abolished

•

Infra imitative to reduce port congestion

•

Imports by hotels, other service industry made duty free

•

Setting up of interstate trade council mooted

•

Procedure simplified cut transaction costs aayat aay at niryat introduced

HIGHLIGHTS OF EXIM POLICY & ITS IMPACT

SPECIAL ECONOMIC ZONE (SEZ)

Special economic zone is a particular area inside a state which acts as fore foreig ign n terr territ itor ory y for for tari tariff ff and and trad trade e oper operat atio ions ns.. Govt Govt.. provi provide des s tax tax exem exempt ptio ion n (IT, (IT, Exci Excise se,, cust custom oms, s, sales sales etc. etc.), ), subs subsid idis ised ed wate waterr and electricity etc. SEZ SEZ can can be sect sector or spec specif ific ic or mult multii prod produc uctt SEZ. SEZ. It help helps s in the the develo developme pment nt of infras infrastru tructu cture re of the the area area around around the SEZ, SEZ, provid provides es employment to people, makes the exports more viable. All this will helps the country's products to become more competitive vis-a-vis providing all round development of region. It should be noted that if 100 acres are allotted for SEZ, then only 3035% of area is used for setting up plants. rest of the area is used to


provide

housing

facilities,

malls,

multiplexes

etc.

Also Tax exemption is for specific period say for 10 yrs or so Units in SEZ would be permitted to It has also been decided to permit Special Economic Zones (SEZs)

Offshore Banking Units (OBUs) shall be permitted in SEZs. Detailed guidelines are being worked out by RBI. This should help some of our cities emerge as financial nerve centres of Asia & undertake hedging of commodity price risks, provided such transactions are undertaken by the units External Commercial Borrowings (ECBs) for a tenure of less than three years in SEZs. The detailed guidelines guidelines will be worked worked out by RBI. This will provide opportunities for accessing working capital loan for these

units

at

internationally

competitive

rates.

The SEZ scheme has undergone few changes: •

FDI permitted under automatic route for all manufacturing sectors, except a small negative list.

•

No licence required to set up units for items reserved under SSI.

•

Units in SEZs can bring back their proceeds in 365 days and retain 100 per cent of proceeds in EEFC account.

•

No CR waiver is required for sending sample goods for participation in exhibitions.

•

SEZ developers will be given infrastructure status under the IncomeTax Act, as provided provided in the Finance Bill, Bill, 2001, and will be entitled to concessional duty for procuring goods for setting up SEZs.


All the necessary steps were initiated to give permission to set up SEZs to the States, the private sector and the joint sector. Special Economic Zones Scheme •

Sales from Domestic Tariff Area (DTA) to SEZs to be treated as export. This would now entitle domestic suppliers to Drawback/ DEPB benefits, CST exemption and Service Tax exemption.

•

Agriculture/Horticulture processing SEZ units will now be allowed to provide inputs and equipments to contract farmers in DTA to promote production of goods as per the requirement of importing coun countr trie ies. s. This This is expe expect cted ed to integ ntegra rate te the prod produc ucti tion on and and proc proces essi sing ng and and help help in prom promot otin ing g SEZs SEZs spec specia ialilisi sing ng in agro agro exports.

•

Foreign bound passengers will now be allowed to take goods from SEZs to promote trade, tourism and exports.

•

Domestic sales by SEZ units will now be exempt from SAD.

•

Restriction of one year period for remittance of export proceeds removed for SEZ units.

•

Netting of export permitted for SEZ unit provided it is between same exporter and importer over a period of 12 months.

•

SEZ units permitted to take job work abroad and exports goods from there only.

•

SEZ units can capitalise import payables.

•

Wastage for subcontracting/exchange by gem and jewellery units in transactions between SEZ and DTA will now be allowed.

•

Export/import of all products through post parcel/courier by SEZ units will now be allowed.


•

The value of capital goods imported by SEZ units will now be amortised uniformly over 10 years.

•

SEZ units will now be allowed to sell all products including gems and jewellery through exhibitions and duty free shops or shops set up abroad

•

Goods required for operation and maintenance of SEZ units will now be allowed duty free.

According to the Exim Policy (1997-2002), SEZs may be set up for manufacture of goods and rendering of services, production, processing, assembling, assembling, trading, trading, repair, repair, remaking, remaking, reconditio reconditioning, ning, re-enginee re-engineering ring,, including of making of gold/silver/platinum jewellery and articles. An SEZ SEZ is a spec specia ialllly y deli deline neat ated ed `dut `duty y free free'' encl enclav ave e and and shal shalll be deemed to be foreign territory for trade operations, duties and tariffs. Thus Thus,, ther there e shoul should d be nece necess ssar ary y `chec `check k post posts' s' and and Cust Custom oms s duty duty vigilance as in the case of airport and ports. However, there are many advantages, and of course, one or two disadvantages. In a major step towards achieving sustained, quantum growth in exports, Special Economic Zones (SEZs) will soon be established in different parts of the country, as in China. Announcing the annual Export & Import (Exim) Policy for 2000-2001 at a press conference here today, Shri Murasoli Maran, Union Minister of Commerce and Industry, said that India's first two Special Economic Zones would come up in the States of Gujarat and Tamil Nadu. The SEZs would come into operation very soon, with the basic idea being to establish the Zones as areas where export production could take place free from all rules and regulations gove govern rnin ing g impo import rts s and and expo export rts s and and to give give them them full full oper operat atio iona nall


flexibility. The movement of goods to and from the SEZs would be unrestricted and without any hindrance and any State government or corporate entity or individual may furnish proposals for setting up such Zones in the country. Land for the first two SEZs in Gujarat and Tamil Nadu has already been earmarked, the Minister said. Observing that India, by not following vigorous policies, was ceding billions of dollars in FDI FDI to its its East East Asia Asian n neig neighb hbou ours rs each each year year (inv (invest estme ment nt flow flows s that that otherwise would have come to India), Shri Maran expressed the hope that that with with the establ establish ishmen mentt of the SEZs, SEZs, proced procedura urall constr constrain aints ts and delays would be taken care of and foreign direct investment in the export sector sector would become become attractiv attractive. e. The units in the SEZs would be able to import capital goods and raw materials duty-free and would also be able to acce access ss the the same same from from the Dome Domest stic ic Tari Tariff ff Area Area (DTA (DTA)) with withou outt payment of terminal excise duty. The entire production of the units in these SEZs would be exported and DTA sales would be permitted on payment of full applicable customs duty. The minimum size of the SEZs would be 400 to 500 hectares or more. Shri Maran also announced that immediatel immediately, y, the existing Export Process Zones at Santa Cruz, Kandla, Vizag and Cochin would be converted into SEZs, although the area of these existing Zones were limited due to historical reasons

Major advantages •

SEZs may export goods and services, including agro-products, partly processed jewellery, sub-assemblies and components. It may also export by-products, rejects, waste from the production process.

•

SEZs may import all types of goods without payment of duty. This includes capital goods, but not prohibited items for imports.


•

Even SEZ units can lease capital goods from a domestic/foreign leasing company.

•

But, both the SEZ unit and domestic foreign lease company shall jointly file the documents to enable import/procurement of the capital goods.

•

SEZs may procure goods required by it without payment of Duty from bonded warehouses in the DTA set up under the policy.

•

SEZ units may import goods for creating a central facility for use by software development units, without payment of duty.

•

SEZs may also import gold/silver/platinum and specified goods from DTA through the nominated agencies for setting up units without duty, but subject to government conditions.

•

SEZ gem and jewellery units, with the Development Commissioner's permission,

shall

be

entitled

to

personal

carriage

of

gold/silve gold/silver/pla r/platinum tinum jewellery jewellery,, precious, precious, semi-prec semi-precious ious stones and articles. •

They can export jewellery, including branded jewellery, which is also permitted for display/sale in the permitted shops set up abroad.

•

SEZs may bring back sold goods for repair and replacement.

•

Goods may be transferred to DTA for replacement/repair/testing or calibration, quality testing and R&D purposes under intimation to the Customs authorities.

•

SEZ SEZ unit units, s, with with the the main mainta tain ined ed reco record rds s and and prio priorr inti intima mati tion on to Cust Custom oms s auth author orit ity, y, may may supp supply ly or sell sell samp sample les s in the the DTA DTA for for display/market promotion on payment of applicable duties.

•

Remove samples on furnishing a suitable undertaking to customs autho authori riti ties es for for brin bringi ging ng the the good goods s back back with within in a stip stipul ulat ated ed time time without payment of duty.


•

No duty duty shal shalll be paya payabl ble e if the the good goods s are are dest destro roye yed d wit with the the permission of Customs authorities.

•

SEZs SEZs may may subc subcon ontr trac actt a part part of thei theirr prod produc ucti tion on or prod produc ucti tion on process through units in the DTA.

Major disadvantages •

The SEZ shall execute a legal undertaking with the Development Commissioner that if it fails to achieve positive foreign exchange earnings, it will be liable to penalty in terms of the legal undertaking, or under any other law for the time being in force.

•

SEZ units may be debonded with the approval of the Development Commission. Debonding shall be subjected to payment of applicable Customs Customs and excise duties and the imported imported and indigenous indigenous capital capital goods, raw materials, finished goods in stock, and so on.

DUTY FREE REPLENISHMENT CERTIFICATE (DFRC) SCHEME

DFRC Scheme announced in 2002-07 EXIM Policy has been continued in 2003-0 2003-04 4 Policy Policy.. Hencef Hencefort orth h suppli supplies es made made under under Deemed Deemed Export Export Scheme in terms of Para 8.2 of the EXIM Policy would also be entitled for benefit of DFRC Scheme. Import of inputs against DFRC License (issued against supplies made under Deemed Export Scheme) shall also be permitted from sea-ports, airports, ICDs and CFSs specified in the DFRC Notification as usual. For this purpose, DFRC licence issued under Deemed Export Scheme shall inter-alia contain details of excise


certified invoice number and date with value of supplies in Indian rupees. All other conditions of the DFRC Scheme remain unchanged. In order to monitor revenue outflow under u nder DFRC scheme, the concerned Custom Houses shall send a monthly report containing details of CIF value of goods imported and amount of duty foregone under the Scheme on the 10th of the succeeding month to JS(DBK). The first such report shall be sent by 10th May, 2003. Duty Free Replenishment Certificate is issued to a merchant-exporter or manufacturer-exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty, and special additional duty. However, such inputs shall be subject to the payment of additional customs duty equal ual to the excise duty at the time of import. Duty Free Replenishment Certificate shall be issued only in respect of expo export rt prod produc ucts ts cove covere red d unde underr the the SION SIONs s as noti notifi fied ed by DGFT DGFT.. However, DFRC shall not be issued in respect of SIONs which are subject to "actual user" condition or where the input is allowed with prior import condition or where the norms allow import of acetic anhydride, ephedrine and pseudo ephedrine in the Handbook (Vol-II). Duty Free Replenishment Certificate shall be issued for import of inputs, as per per SION SION,, havi having ng same same qual qualit ity, y, tech techni nica call char charac acte teri rist stic ics s and and specifications as those used in the end product and as indicated in the shipping bills. The validity of such licences shall be 18 months. DFRC and or the material(s) imported against it shall be freely transferable •

Validity of DFRC to be extended from 12 months to 18 months.


•

Dispensing with the need of technical characteristics for inputs except for items in the sensitive list.

•

Automatic calculation of CIF value under DFRC scheme without reference to international price of individual inputs.

•

Prov Provis isio ion n inco incorp rpor orat ated ed for for clai claim m of DFRC DFRC agai agains nstt adva advanc nce e payment.

•

Coverage of additional ports under DFRC

•

Split up facility extended to DFRC scheme to give operational flexibility to the holder of DFRC.

The Duty Free Replenishment Certificate shall be subject to a minimum value

addition

of

33%.

The The expo export rt prod produc ucts ts,, whic which h are are elig eligib ible le for for modi modifi fied ed VAT, VAT, shal shalll be eligible for CENVAT credit. However, non excisable, non dutiable or non centrally vatable products, shall be eligible for drawback at the time of exports in lieu of additional customs duty to be paid at the time of imports under the scheme. The exporter shall be entitled for drawback benefits in respect of any of the duty paid materials, whether imported or indigenous, used in the expo export rt prod produc uctt as per per the the draw drawba back ck rate rate fixe fixed d by Dire Direct ctor orat ate e of Draw Drawba back ck (Min (Minis istr try y of Fina Financ nce) e).. The The draw drawba back ck shal shalll howe howeve verr be restricted to the duty paid materials not covered under SION.

DUTY ENTITLEMENT PASS BOOK (DEPB) SCHEME


DEPB Scheme announced in 2002-07 EXIM Policy has been continued. In this this rega regard rd earl earlie ierr Cust Custom oms s Noti Notifi fica cati tion on No.4 No.45/ 5/20 2002 02-C -Cus us.. dated dated 22.4.2002 and DOR Circular No.24/2002-Cus. dated 6.5.2002 refers. Henceforth, supplies made by DTA units to units in SEZ would be entitled for DEPB benefits. The area of the Special Economic Zone shall be a Customs Station and all the functions relating to the enforcement of the Customs Act shall be controlled by the Commissioner of Customs with the assistance of proper officers of Customs. The goods entered into the SEZ from the DTA shall be under the cover of a Bill of Export. This Bill shall be registered in the SEZ Customs formation and assigned a running serial number. Thereafter the goods shall be examined by the Customs Officers posted in the SEZ like a normal export consignment. These goods shall be eligible eligible for DEPB benefit benefit & the DEPB scrips shall be issued by the licensing authority to the SEZ Unit receiving supplies from DTA Unit on the basis of a disclaimer certificate given by the DTA Unit in favour of SEZ Unit. This is because it has now been decided to treat supplies made by DTA Unit to a unit in SEZ as exports for the purpose of granting DEPB benefit. For the purpose of allowing DEPB benefit against DEPB licenses issued for supplies to SEZ units, verification of the DEPB license shall be done in the same manner as specified in earlier DOR Circular No.14/99-Cus. dated 15.3.99 excepting that in case of supplies made to SEZ units, the Bill of Export and other related documents shall be verified. Since the port of registration in respect of such DEPB license would be the place where the receiver SEZ unit is located, import against such DEPB scrips shall be permitted either from the same Custom House or from any other place notified in DEPB Custom Notification No.45/2002 against TRA in terms of para 6 of DOR Circular No.85/99-Cus. dated 23.12.99 and also


in terms of DOR Circular No.66/2001-Cus. dated 19.11.2001 when the Custom House of receiver SEZ unit is a non-notified place. For this purpose, both Commissioner Incharge of Customs House (who issues TRA) TRA) and and the the Cust Custom om Hous House e rece receiv ivin ing g the the TRA TRA shal shalll foll follow ow the the procedure as specified in DOR Circular No.66/2001. Objectives

The objective of DEPB is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product. Under the DEPB, an exporter may apply for credit, as a specified perc percen enta tage ge of FO FOB B valu value e of expo export rts, s, made made in free freely ly conv conver erti tibl ble e currency. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade by way of public notice issued in this behalf, for import of raw materials, intermediates, components, parts, packaging material etc. The holder of DEPB shall have the option to pay additional customs duty, if any, in cash as well. Validity

The DEPB shall be valid for a period of 12 months from the date of issue. Transferability

The DEPB and/or the items imported against it are freely transferable. The transfer transfer of DEPB shall however be for import at the port specified specified


in the DEPB, which shall be the port from where exports have been made. Imports from a port other than the port of export shall be allowed under TRA facility as per the terms and conditions of the notification issued by Department of Revenue. Applicability of Drawback

Normally, the exports made under the DEPB Scheme shall not be entitled for drawback. However, the additional customs duty/excise duty paid in cash on inputs under DEPB shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue. In cases, where the additional customs duty is adjusted from DEPB, no benefit of CENVAT/ Drawback shall be admissible. In another major initiative to boost agri and allied products exports, Shri Jaitley said that fixation of DEPB rates for selected agro products would factor in the cost of inputs such as fertilisers, pesticides and seeds. This would help the farmers to use the required inputs in a scientific manner to boost productivity and quality

QUANTITATIVE RESTRICTIONS (QR)

Quanti Quantitat tative ive Restri Restricti ctions ons are explic explicit it limits limits usuall usually y by volume volume on the amount of a specified commodity that may be imported into a country sometimes also indicating the amounts that may be imported from each supplying country. Compared to tariffs the protection afforded by QR’s tend tend to be more ore predi redict cta able ble bei being less ess affe affect cte ed by chan change ges s in


competitive factors. Quotas have been used at times to favour preferred sources of supply. Quanti Quantitat tative ive Restr Restrict iction ions s were were being being mainta maintaine ined d ever ever since since 1947 1947 on balance of payments grounds under the GATT to which we were a sign signat ator ory. y. We part partic icip ipat ated ed in the the Urug Uruguay uay Roun Round d nego negoti tiat atio ions ns and and became a founder-member of WTO and and subsc bscribed to all the Agreements but we continued to maintain QRs on the same balance of payments grounds. However, with the improvement in the balance of payments position, certain members of the WTO had disputed our need or justification to cont contin inue ue Quan Quanti tita tati tive ve Rest Restri rict ctio ions ns for for BOP BOP reas reason ons. s. Indi India a coul could d negotiate with most of the trading partners, with the exception of USA, to arrive at a mutually agreeable solution for phasing out these Quantitative Restrictions. The USA filed a dispute and the Dispute Settlement Panel constituted in November 1997 ruled against India. India filed an appeal before the Appe Appellllat ate e Body Body of WT WTO O agai agains nstt the the find findin ings gs of the the Pane Panell but but the Appellate Body also upheld the findings of the Panel challenged by Indi India. a. Cons Conseq eque uent ntly ly,, we are are now obli oblige ged d to with withdr draw aw Quan Quanti tita tati tive ve Restrictions. An agreement was signed between India and USA for determining the reasonable period of time, under which the Quantitative Restrictions on the remaining 1429 tariff lines were to be removed by April 1, 2001, of which 714 before April 1, 2000. The tariff line-wise import policy was first announced on March 31,1996 and at that time itself 6161 tariff lines were made free. Since then 1905


tariff lines have been made free till now. In this connection, I would like to point out that the QRs in respect of these 1429 tariff lines were withdrawn preferentially for imports from SAARC countries with effect from August 1, 1998 itself. It is to be noted that tariff protection will continue to be available. Further in the event of unfair trade practices like dumping or subsidisation of exports by other countries causing injury to the Indian industry, adequate protection under anti-dumping or anti-subsidy mechanisms or if there is a sudd sudden en surg surge e in impo import rts s caus causin ing g seri seriou ous s inju injury ry to the the indu indust stry ry,, protec protectio tion n under under safegu safeguard ard provis provision ions s will will always always be availa available ble.. The industry can always approach either the Anti-dumping Directorate or the Safeguard Directorate for appropriate relief.

Removal of QR

The process of removal of import restrictions, which began in 1991, has been completed in a phased manner with removal of restrictions on 715 items. Out of these 715, 342 are textile products, 147 are agricultural products including alcoholic beverages and 226 are other manufactured products including automobiles. Import Import of agricu agricultu ltural ral produc products ts like like wheat, wheat, rice, rice, maize, maize, other other coarse coarse cereals, cereals, copra and coconut coconut oil has been placed placed in the category category of State Trad Tradin ing. g. The The nomi nominat nated ed Stat State e Trad Tradin ing g Ente Enterp rpri rise se will will cond conduc uctt the the imports of these commodities solely as per commercial considerations. Similarly, import of petroleum products including petrol, diesel and ATF has also been placed in the category of State Trading. Import of urea will also be done through the mechanism of State Trading.


Care Care has has been been take taken n to ensu ensure re a leve levell play playin ing g fiel field d to dome domest stic ic producers vis-à-vis imports. In conformity with the "National Treatment Prin Princi cipl ple" e" of GATT GATT,, impo import rts s have have also also been been made made subj subjec ectt to the following domestic regulations: (i) Import of all food products will be subject to compliance of all the provisions of Food Adulteration Act and Rules there under; (ii) Import of meat and poultry products will be subject to compliance of all the provisions of Meat Food Product Order; (iii (iii)) Impo Import rt Tea Tea Wast Waste e will will be subj subjec ectt to comp compli lian ance ce of Tea Wast Waste e (Control Order); (iv) No import of textile material using the prohibited dyes like azo dye shall be allowed. For this purpose, a pre-shipment inspection certificate has been made mandatory.

In view view of road road safe safety ty and and envi enviro ronm nmen entt consi conside dera rati tion ons, s, impo import rts s of second hand automobiles have been allowed subject to the following conditions: (i) Import of automobiles older than three years is not allowed; (ii) Imported vehicles need to conform to Central Motor Vehicle Rules; (iii) Import of left hand drive vehicles ve hicles not allowed; (iv) (iv) For For ensu ensuri ring ng the the requ requiireme rement nts, s, pre pre ship shipme ment nt as well well as post post shipment certification made mandatory;


(v) Imported automobiles to have a minimum residual life of five years and the importer to ensure supply of spares and service during this period; and (vi) Such imports allowed only through customs port at Mumbai.

Simi Simila larl rly, y, impo import rt of new new auto automo mobi bile les s allo allowe wed d subj subjec ectt to foll follow owin ing g conditions: (i) Import allowed only from the country of manufacture; (ii) Import of left hand drive vehicles not allowed; (iii) Imported vehicles to conform to the provisions of Motor Vehicles Act, 1988; (iv) Prototype of vehicle to be approved by notified agencies in India; and

To ensure that import of agricultural products do not lead to unwanted infi infilt ltra rati tion on of exot exotic ic disea disease ses s and and pest pests s in the the coun countr try, y, it has has been been decided to subject import of primary products of plant and animal origin to 'Bio Security & Sanitary and Phyto-Sanitary Permit' to be issued by Deptt. of Agriculture and Cooperation. This permit will be based on Impo Import rt Risk Risk Anal Analys ysis is of the the prod produc uctt to be cond conduc ucte ted d on scie scient ntif ific ic principles, in accordance with the WTO agreement on Application of Sanitary and Phyto-Sanitary Measures.

Impact of removal of QRs on imports


The Government has been unilaterally liberalizing imports since 1991 by removing Quantitative Restrictions(QRs) on imports (Box6.3). The EXIM Policy 2001 has completed this process by dismantling QRs on BOP grounds on the remaining 715 items from April 1, 2001.Apprehensions have, therefore, been expressed that such removal of QRs may result in a surge and dumping of imports in the country, thus affecting adversely the domestic industry. However, the apprehensi apprehensions ons are not borne borne out by actual import import growth growth over this this period. Import data for the full financial year 2000-01 on 714 items, restrictions on which were removed with effect from 31.3.2000, do not reveal any surge in their imports following removal of such restrictions. Out of 714 items, no imports were made for 151 items either before or after removal of QRs. Only 92 items recorded imports worth more than Rs 5 crore. Diamonds and semiprecious stones constituted 35 per cent of these imports and another 14 per cent was contributed by imports of telephonic/telegraphic equipment, indu indust stri rial al vacu vacuum um clea cleane ners rs and and cath cathod ode e ray ray pict pictur ure e tube tubes, s, item items s necessary for domestic industrial activity. Although some growth was seen in the import of prepared foodstuff, beverages and tobacco, plastic and rubber, leather products, glassware, ceramic products and products like footwear and umbrellas, instruments and apparatus, the absolute quantum of imports was not significant in relation to the aggregate domestic production of these items. Further, the monitoring reports on imports of 300 sensitive items, for the current financial year so far also do not indicate any unusual surge in imports of these items. The total imports of these


sensitive items (in Dollar terms) during the first nine months of the current financial year have increased by only 2.1 per cent due mainly to higher imports of edible oils, cotton & silk, spices , rubber and marble & granite.

AGRICULTURAL EXPORT ZONES (AEZ)

In a fast changing international trade environment and with a view to providing remunerative returns to the farming community in a sustained manner the concept of the agri export zones (AEZ) was floated. These zones have been set up for end to end development for export of specific

products

from

a

geogra graphically

contiguous ous

area.

AEZ are to be identified by the State Government, who would evolve a comprehensive package of services provided by all State Government agencies, State agriculture universities and all institutions and agencies of the the Unio Union n Gove Govern rnme ment nt for inte intens nsiv ive e deli delive very ry in thes these e zone zones. s. Corp Corpor orat ate e sect sector or with with prov proven en cred credent entia ials ls woul would d be enco encour urag aged ed to sponsor new agri export zone or take over already notified agri export zone or part of such zones for boosting agri exports from the zones. Servi ervice ces s whi which would ould be man managed aged and and coco-ordi ordina natted by Stat tate Government/corporate sector and would include provision of pre/post harv harves estt trea treatm tmen entt and and oper operat atio ions ns,, plan plantt prot protec ecti tion on,, proc proces essi sing ng,, packaging, storage and related research & development etc. APEDA will supplement, within its schemes and provisions, efforts of State Governments for facilitating such exports.


Units in AEZ would be entitled for all the facilities available for exports of goods in terms of provisions of the respective schemes.

Agri Export

Unle Unless ss we

ensur ensure e that that the the rura rurall sect sector or and and Indi Indian an farm farmer ers s rece receiv ive e

visible benefits from economic reforms and the process of globalization, it may may not not be possi possibl ble e to acce accele lera rate te econo economi mic c grow growth th.. You You woul would d recollect that we had introduced the Scheme of Agro Export Processing Zones (AEZ) in the 2002-2007 Policy for end to end development of export of specific products from a geographically contiguous area. We are gratified that there has been an enthusiastic response to the scheme from the States and the rural community. As many as 45 AEZs have been notified so far in different parts of the country. We want to further acce accele lera rate te this this proc proces ess. s. Agri Agricu cult ltur ure e and and alli allied ed prod produc ucts ts is our our core core competence. Not only is it diversified with a large variety of crops, fruits, vegetables and flourishing dairy sector, but we are among the world leaders in output of many products. One of the limiting factors in the increase in agricultural productivity and quality and for protecting it from the vagaries of monsoon is the lack of or inadequate investment in this sector for bringing to the farmer the latest technology and knowledge and for setting up critical infrastructure in the form of water harvesting and soil management, better quality of seeds and optimal use of inputs, adoption of scientific pre and post harv harves estt trea treatm tmen entt and and stor storag age e and and esta establ blis ishm hmen entt of link linkag age e with with international marketing. In spite of the enthusiasm shown by many of the State Governments, availability of investible resources in creation of such critical infrastructure even in the AEZs has been a constraint. In


view of this, we propose to also facilitate and promote association of corporate with proven credentials in the implementation of AEZs in order to give a boost to productivity and quality of specified agro products lead leadin ing g to acce accele lera rate ted d expo export rts. s. For For this this purp purpos ose, e, we are are havi having ng consultations with Ministry of Finance who are receptive to the idea, to prov proviide appr ppropr opriate iate incen ncenttives ives to ena enable ble inves nvesttment ments s by these hese corporates to infrastructure, agricultural extension, processing, packing, storage, R&D and other facilities relating to exports in the approved AEZs. Another major initiative to boost agri and allied products exports will be the modification of norms for fixing DEPB rates for export of agriculture, horticultur horticulture e and allied products. In fixing fixing DEPB rates for such products, we shall take into account inputs such as fertilizers, pesticides, certified seeds etc. used by the farmers prior to processing of the products for exports. This would also ensure that the Indian farmer uses the required inputs in a scientific manner to boost productivity and quality. To begin with, this facility will be extended only to selected products on the basis of the recommendation of an Inter-Ministerial Committee.

STATUS HOLDERS

"Status holder" means an exporter recognised as "Export House/Trading House/Star trading House/ Super Star Trading House" or servic service e provid provider er recogn recognise ised d as "Servi "Service ce Export Export House, House, Intern Internati ationa onall Serv Servic ice e Expo Export rt Hous House, e, Inte Intern rnat atio iona nall Star Star Serv Servic ice e Expo Export rt Hous House e International Super Star Service Export House" by the Director General of Foreign Trade. Over the last few decades certain areas of strength have emerged in the export sector. Definite export surpluses have emerged in sectors like


food food grai grains ns,, suga sugar, r, yarn yarn,, gar garment ments, s, stee steel, l, ceme cement nt,, alum alumin iniu ium m & petr petrol oleu eum m prod product ucts s and phar pharma mace ceut utic ical als. s. Cert Certai ain n Smal Smalll & Medi Medium um Enterprises (SMEs) and other units in DTA have been exporting more than 75% of their production. Similarly export oriented units and units in export processing zones have been contributing significantly to exports. Cert Certai ain n indu indust stri rial al clus cluste ters rs have have evol evolve ved d on thei theirr own own with withou outt any any significant official assistance, each of them collectively producing goods and services worth more than Rs.1,000 crore per year and exporting a substantial part thereof. Status certificates have been issued to units on the basis of their export performance. Keeping the above in mind, the status holders shall be eligible for the following new/ special facilities: •

• •

Licence/Cer Licence/Certifi tificate/ cate/Permi Permissions ssions and Customs Customs clearances clearances for both imports and exports on self-declaration basis. Fixation of Input-Output norms on priority; Priority Finance for medium and long term capital requirement as per conditions notified by RBI;

•

• •

•

•

Exempt Exemption ion from from compul compulsor sory y negoti negotiati ation on of docume documents nts throug through h banks. The remittance, however, would continue to be received through banking channels; 100% retention of foreign exchange in EEFC account; Enhancement in normal repatriation period from 180 days to 360 days. Status holders with a minimum export turnover of Rs 250 mn enti entitl tled ed to duty duty-f -fre ree e impo import rt of capi capita tall good goods, s, spar spares es,, offi office ce equipments and consumables, upto 10% of the incremental growth in exports subject to their achieving more than 25% growth in value of exports. Status holders to be given Annual Advance Licence facility to enabl nable e them them to plan plan for thei theirr impor mportts of raw raw mater ateriial and and comp compon onen ents ts on an annu annual al basi basis s and and take take adva advant ntag age e of bulk bulk purchases.

EXPORT PROMOTION CAPITAL GOODS SCHEME (EPCG)


The Export Promotion Capital Goods Scheme (EPCG) has been for several years now instrumental in promoting exports. The high growth rate of East Asian countries was facilitated by the transformation of their expo export rts s from from prod produc ucin ing g cheap cheap-l -labo abour ur inte intens nsiv ive e to high high tech technol nolog ogy y intensive manufacturing goods. The Exim Policy has announced a series of steps to make the EPCG scheme more flexible and attractive, so that even the small-scale sector can can set set up and and expa expand nd its its manu manufa fact ctur urin ing g base base for for expo export rts. s. This This is considered essential, as manufactured goods account for more than 77 per cent of India's total exports in the last five years. Thus, allowing the import of up to 10-year-old capital goods for pre- and post post-p -pro rodu duct ctio ion, n, remo remova vall of use use cond condit itio ions ns,, and and allo allowi wing ng impo import rt of spares to facilitate the upgradation of existing plant and machinery will make export sectors, such as textile, more competitive. Further, the rationalisation of export obligation and dispensing with the existing condition of imposing an additional export obligation of 50 per cent for products in the higher value chain will provide flexibility. Moreover, the relatively low value exports obligation will be a boon to invest investmen mentt in the domest domestic ic economy economy.. Theref Therefore ore,, the EPCG EPCG scheme scheme along with the reduction of transaction cost through the EDI will give a boost to the manufacturing sector and over all export e xport growth. •

The The sche scheme me shall shall now now allo allow w impo import rt of capi capita tall goods goods for for prepreproduction and post-production facilities also.

•

The Export Obligation under the scheme shall now be linked to the duty saved and shall be 8 times the duty saved.


•

To facilitate upgradation of existing plant and machinery, import of spares shall also be allowed under the scheme.

•

To promote higher value addition in exports, the existing condition of imposing an additional Export Obligation of 50% for products in the higher product chain to be done away with.

•

Grea Greate terr flex flexib ibililit ity y for for fulf fulfililme ment nt of expo export rt oblig obligat atio ion n unde underr the the scheme by allowing export of any other product manufactured by the exporter. This shall take care of the dynamics of international market.

•

Capital goods upto 10 years old shall also be allowed under the scheme.

•

To faci facililita tate te dive divers rsif ific icat atio ion n into into the the soft softwa ware re sect sector or,, exist existin ing g manufacturer exporters will be allowed to fulfil export obligation arising out out of impo import rt of capi capita tall good goods s unde underr the the sche scheme me for for sett settin ing g up of soft softwa ware re unit units s thro throug ugh h expo export rt of manu manufa fact ctur ured ed good goods s of the the same same company.

•

Royal Royalty ty paym paymen ents ts rece receiv ived ed from from abro abroad ad and and test testin ing g char charge ges s received in free foreign exchange to be counted for discharge of export obligation under EPCG scheme.

The The sche schem me all allows ows impo mport of capi apital tal good goods s for pre prod produc ucttion, ion, production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance issuance of licence. licence. Capital goods would be allowed allowed at 0% duty duty for for expo export rts s of agri agricu cult ltur ural al prod produc ucts ts and and thei theirr valu value e adde added d variants.


However, in respect of EPCG licences with a duty saved of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years. In case CVD is paid in cash on imports under EPCG, the incidence of CVD would not be taken for computation of net duty saved provided the same is not Cenvated. The The

capi capita tall

good goods s

shal shalll

incl includ ude e

spar spares es (inc (inclludi uding ref refurbi urbish she ed/

recond reconditi itione oned d spares spares), ), tools, tools, jigs, jigs, fixtur fixtures, es, dies dies and moulds moulds.. EPCG EPCG licence may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the licence holder. Second hand capital goods without any restriction on age may also be imported under the EPCG scheme. Spares (including refurbished/ reconditioned spares), tools, refractory’s, catalyst and consumable for the existing and new plant and machinery may also be imported under the EPCG scheme . Howe Howeve ver, r, impo import rt of moto motorr cars cars,, spor sports ts util utilit ity y vehi vehicl cles es// all all purp purpose ose vehicles shall be allowed only to hotels, travel agents, tour operators or tour transport operators whose total foreign exchange earning in current and preceding three licensing years is Rs 1.5 crores. However, the parts of motor cars, sports utility vehicles/ all purpose vehicles such as chassis etc cannot be imported under the EPCG Scheme Spar Spares es (incl (includ udin ing g refu refurb rbis ishe hed/ d/ reco recond ndit itio ione ned d spar spares es), ), tool tools, s, spar spare e refractory’s, catalyst & consumable for the existing plant and machinery may also be imported under the EPCG Scheme subject to an export


obligation equivalent to 8 times of duty saved to be fulfilled over a period of 8 years reckoned from the date of issuance of license The export obligation for such EPCG licences would be eight times the duty duty save saved. d. The The duty duty save saved d woul would d be the the diff differ eren ence ce betw betwee een n the the effe effect ctiv ive e duty duty unde underr the the afor afores esai aid d Cust Custom oms s Noti Notifi fica cati tion on and and the the concessional duty under the EPCG Scheme. The scheme covers manufacturer exporters with or without supporting manu manufa fact ctur urer er(s (s)/ )/ vend vendor or(s (s), ), merc mercha hant nt expo export rter ers s tied tied to supp suppor orti ting ng manufacturer(s) and service providers. The following conditions shall apply to the fulfilment of the export obligation:The export obligation shall be fulfilled by the export of goods capable of bein being g manu manufa fact ctur ured ed or prod produc uced ed by the the use use of the capi capita tall good goods s imported under the scheme. The export obligation may also be fulfilled by the export of same goods, for which EPCG licence has been obtained, manufactured or produced in different manufacturing units of the licence holder/specified supporting manufacturer (s). When Capital Goods are imported for pre/ post- production or license is take taken n for for impor importt of spar spares es,, the the lice licens nse e hold holder er shal shalll fulfil fulfil the export export obligation by export of products manufactured from the plant / project to which the pre/ post- production capital goods/ spares are related. The import of capital goods for creating storage and distribution facilities for products manufactured or services rendered by the EPCG licence holder would be permitted under the EPCG Scheme.


The export obligation under the scheme shall be, over and above, the aver averag age e leve levell of expo export rts s achi achiev eved ed by him him in the the prec preced edin ing g three hree licens licensing ing years years for same same and simil similar ar produc products ts except except for categor categories ies mentioned in Handbook Alternatively, export obligation may also be fulfilled by exports of other good(s) manufactured or service(s) provided by the same firm/company or group company/ managed hotel which has the EPCG licence. However, in such cases, the additional export obligation imposed under EPCG scheme shall be over and above the average exports achieved by the unit/company/group company/ managed hotel in preceding three years for the original and the substitute product(s) /service (s) even in cases where the average is exempt for the substitute product (s)/ service (s). The incremental exports to be fulfilled by the licence holder for fulfilling the remaining export obligation can include any combination of exports of the original product/ service and the substitute product (s)/ service (s). The exporter of goods can opt to get the export obligation re-fixed for the export of services and vice versa. The The lice licenc nce e can can also also opt opt for for the the re-f re-fix ixat atio ion n of the the bala balanc nce e expo export rt obligation based on 8 times of the duty saved amount for the CIF value in proportion to the balance Export obligation under the scheme The aforesaid facilities shall only be available to manufacturer exporters/ serv servic ice e prov provid ider er on all all the the licen licence ces s wher where e expo export rt obli obliga gati tion on peri period od incl includ udin ing g exte extend nded ed expor exportt obli obliga gati tion on perio period d is vali valid d on the the date date of application. In this regard, exports made only on or after submission of application for alternate item and/ or re-fixation of the export obligation


based on duty saved amount will be taken into account for fulfilment of export obligation. The export obligation under the scheme shall be, in addition to any other expo export rt obli obliga gati tion on unde undert rtak aken en by the the impo import rter er,, exce except pt the expo export rt obligation for the same product under Advance Licence, DFRC, DEPB or Drawback scheme. The export obligation can also be fulfilled by the supply of ITA-1 items to the DTA provided the realization is in free foreign exchange. Royalty payments received in freely convertible currency and foreign exchange received for R& D services shall also be counted for discharge under the EPCG scheme. Payment received in rupee terms for the port handling services, in terms of Chapter 9 of the Foreign Trade Policy shall also be counted for export obligation discharge under the Scheme.

DEEMED EXPORTS

Deem Deemed ed Expo Export rts" s" refe refers rs to thos those e tran transa sact ctio ions ns in whic which h the the good goods s supplied do not leave the country. The following categories of supply of goods by the main/ sub-contractors shall be regarded as "Deemed Exports" under this Policy, provided the goods are manufactured in India: •

Supply of goods against Advance Licence/DFRC under the Duty Exemption /Remission Scheme;


•

Supply of goods to Export Oriented Units (EOUs) or units located in Export Processing Zones (EPZs) or Special Economic Zone (SEZs) or Software Technology Parks (STPs) or to Electronic Hardware Technology Parks (EHTPs);

•

Supply of capital goods to holders of licences under the Export Promotion Capital Goods (EPCG) scheme;

•

supply supply of goods goods to projec projects ts financ financed ed by multil multilate ateral ral or bilate bilateral ral agencies/funds as notified by the Department of Economic Affairs, Minist Ministry ry of Financ Finance e under under Intern Internati ationa onall Compet Competiti itive ve Biddin Bidding g in accordance with the procedures of those agencies/ funds, where the the lega legall agre agreem emen ents ts prov provid ide e for for tend tender er eval evalua uati tion on with withou outt including the customs duty;

•

supply of capital goods, including in unassembled/ disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR value to fertilizer plants.

•

supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty coupled with the extension of benefits under this chapter to domestic supplies;

•

Supply of goods to the power and refineries not covered in (f) above.

•

Supply of marine freight containers by 100% EOU (Domestic freight cont contai aine ners rs-m -man anuf ufac actu ture rers rs))

prov provid ided ed the the

said said cont contai aine ners rs are are

exported out of India within 6 months or such further period as permitted by the Customs; and •

Supply to projects funded by UN agencies. agen cies.


Benefits for Deemed Exports

Deem Deemed ed expo export rts s shal shalll be elig eligib ible le for for the the foll follow owin ing g bene benefi fits ts in respect of manufacture and supply of goods qualifying as deemed exports •

Advance Licence for intermediate supply/ deemed export.

•

Deemed Exports Drawback.

•

Refund of Terminal Excise duty.

ADVANCE LICENSE SCHEME

An advance licence is granted for the import of inputs without payment of basic customs duty. Such licences shall be issued in accordance with the policy and procedure in force on the date of issue of the licence and shall be subject to the fulfillment of a time-bound export obligation, and value addition as maybe specified. Advance licences maybe either value based or quantity based. As per the latest amendments to the EXIM Policy, the facility of Back to Back Inland Letter of Credit has been introduced, to enable an Advance Licence holder to source his inputs from domestic suppliers. Value based advance license Under a value based advance licence, any of the inputs inputs specified in the licence maybe imported within the total CIF value indicated for those inputs, except inputs specified as sensitive items.


Under a value based advance licence, both the quantity and the FOB valu value e of the the expo export rts s to be achi achiev eved ed shal shalll be spec specif ifie ied. d. It shal shalll be obligatory on the part of the licence holder to achieve both the quantity and FOB value of the exports exp orts specified in the licence. Amendments to the Advance License Scheme The Advance License Scheme has been expanded and liberalized with the amendments made to the EXIM Policy, announced on 31st March 1995. •

Modvat credit can be taken on inputs which go into the manu manufa fact ctur ure e of expo export rt prod product ucts, s, under under the the Adva Advanc nce e Lice License nse Scheme.

•

Expansion of the concept of Advance Intermediate License, which hitherto was only quantity based to value based.

•

Advan dvance ce lice licens nses es can can now be trans ransfe ferr rred ed afte afterr the expor xportt obligation has been fulfilled, and the bank guarantee or

•

Drawbacks are permitted in respect of duty paid materials, which are imported or indigenous.

•

Import of mandatory spares upto 5% of the CIF value of the license is now allowed.

•

The list of sensitive items has been pruned. Flexibility has also been granted to the exporter for using the unutilized CIF value of sensitive items for importing non-sensitive items.

On the 1st of March, 1995, the Enginee neering Products Export ort (Rep (Reple leni nish shme men nt

of Iron Iron and and

Steel teel Inter nterme medi diat ates es)) sche schem me

was was

announced as an alternative to the International Price Reimbursement Scheme, which was withdrawn in April 1994. Under the new scheme,


primary steel producers would be able to import intermediates like coal and fuel, using advance advance licences, licences, and then provide steel to engineering engineering exporters at international prices.

EXIM BANK

Exim Bank is managed by a Board of Directors, which has representatives from the Government, Reserve Bank of India, Export Credit Guarantee Corporation (ECGC) of India, a financial institution, public sector banks, and the business community.

Functions

Exim Bank plays four-pronged role with regard to India's foreign trade: those of a coordinator, a source of finance, consultant and promoter. Exim Bank is the Coordinator of the Working Group Mechanism for clea cleara ranc nce e of Proj Projec ectt and and Serv Servic ices es Expo Export rts s and and Defe Deferr rred ed Paym Paymen entt Exports (for amounts above a certain value currently US$ 100 million). The The Work Workin ing g Group roup comp compri rise ses s Exim Exim Bank Bank,, Gove Govern rnme ment nt of Indi India a repres represent entati atives ves (Minis (Ministri tries es of Financ Finance, e, Commer Commerce, ce, Extern External al Affair Affairs), s), Reserve Bank of India, Export Credit Guarantee Corporation of India


Ltd. Ltd. and and comm commer erci cial al bank banks s who who are are auth author oris ised ed fore foreig ign n excha exchang nge e dealers. Exim Exim Bank Bank play plays s a pivo pivota tall role role in prom promot otin ing g and and fina financ ncin ing g proj projec ectt exports. Promoting Trade and Investment Promotion Agencies. Exim Bank offers Rediscounting Facility to commercial banks, enabling them to rediscount export bills of their SSI customers. We also offer Refinance of Supplier's Credit, enabling commercial banks to offer credit to Indian exporters of eligible goods, who in turn extend them credit over 180 days to importers overseas. Term

loans

for

exp export

prod roduction:

Exim

Bank

provides term

loans/deferred payment guarantees to 100% export oriented units, units in free trade zones and computer software exporters. In collaboration with International Finance Corporation, Washington, Exim Bank provides loans oans to enab enablle smal smalll and and medi medium um ente enterp rprrises ises upgr upgrad ade e expo exporrt production capability. Facilities for deeded exports; Deemed exports are eligible for funded and non- funded facilities from Exim Bank.

Indian an comp compan anie ies s estab establilishi shing ng join jointt Overse Overseas as Invest Investmen mentt finance finance:: Indi ventures overseas are provided finance towards their equity contribution in

the

joint

venture.

Finance for export marketing: This programme, which is a component of

a Worl World d Bank Bank loan, loan, help helps s expo export rter ers s impl implem emen entt thei theirr expo export rt mark market et development plans. Guaranteei Guaranteeing ng of Obligatio Obligations: ns: Exim Bank participat participates es with commercial commercial banks in India in the issue of guarantees required by Indian companies


for the export contracts and for execution of overseas construction and turnkey projects.

Advantages of EXIM

Over the last four decades India has recorded remarkable expansion and divers diversifi ificat cation ion in practi practical cally ly all areas areas of indust industria riall develo developme pment. nt. India's vast resources-human, agricultural, mineral and industrial- have been fully exploited for this purpose. The New Industrial Policy has helped in catalyzing foreign investment into India. The total amount of foreign direct investment approval which was Rs 5,341 million in 1991, swelled to Rs 141,871.9 million in 1994. Of the total FDI approvals, 80% are in the priority sectors such as power, oil refineries, electronics and electrical electrical equipment, equipment, chemicals, chemicals, telecommun telecommunicati ications, ons, food processing processing etc. Policy Resolution of 1956 and the Statement on Industrial Policy of 1991 prov provid ide e the the basi basic c fram framew ewor ork k for for the the overa overallll indu indust stri rial al polic policy y of the the Govern Governmen mentt in regard regard to the manufa manufactu cturin ring g indust industrie ries. s. In the initia initiall stages of the country's development, growth of industry was regulated through the granting of industrial licenses and other industrial approvals. The The Indu Indust stri ries es (Dev (Devel elop opme ment nt and and Regu Regula lati tion on)) Act, Act, 1951 1951 was was the the principal legislation providing the legal basis for industrial licensing. The industrial policy announced on 24th July, 1991 substantially dispensed with with indus industr tria iall licen licensi sing ng,, anno announ unce ced d meas measur ures es faci facililita tati ting ng fore foreig ign n investment and technology transfers, and threw open the areas hitherto


reserved

for

the

public

sector.

The private sector can now operate in all areas except those of strategic concern such as defense, railway transport and atomic energy. The list of industries reserved for the public sector now stands reduced to 6. Private participation is permitted in some specific areas in this list as well, such as mining; oil exploration, refining and marketing; and parts of the railway transport sectors. The requir requireme ement nt of obtain obtaining ing an indust industria riall license license for manufa manufactu cturin ring g activity is limited to: 1. Industries Industries reserv reserved ed for the pubic pubic sector. sector. 2. 16 industries industries of strategi strategic, c, social or enviro environment nmental al concern. concern. 3. Industries Industries reserv reserved ed for the the small small scale scale sector. sector. All other industries are exempt from licensing, and only subject to the location restrictions of metropolitan areas.

Exports-Imports Free Unless Regulated: Exports and imports shall be

free, unless regulated by FTI or any other law enforced. The item wise export and import policy shall be specified in ITC notified by DGFT as amended from time to time OLD: exports and imports shall be free, except in cases where they are regulated by the provision of this policy or any other law from the time being enforced.

Restricted Goods: Any goods, export or import of which is restricted

under ITC may be exported or imported only in accordance with an


authorisation or in terms of a public notice issued in this regard OLD. any goods, export or import of which is restricted under ITC may be expo export rted ed or impo import rted ed only only in accor accorda danc nce e with with lice licens nse/ e/ cert certif ific icat ate/ e/ permission or in terms of a public notice issued in this behalf

F TP was providing Employment Generation: The second objective of the FTP thrust thrust to employ employmen mentt genera generatio tion n partic particula ularly rly in semi-u semi-urba rban n and rural rural areas. The FTP announced special focus initiatives in the employment intensive areas of agriculture, handicrafts, handlooms, gems & jewellery and leather & footwear sectors. The employment generation has been encouraging not only in these sectors, but in other sectors across the boar board. d. A stud study y commi commiss ssio ioned ned by the the Mini Minist stry ry reve reveal als s that that expo export rts s generated an incremental direct employment of 10 lakh jobs in the year 2004-05, over the previous year. The total employment generated during the year corresponding to export activity valued at 78 billion was 1 crore job jobs s - 86 lakhs akhs of dir direct ect empl employ oym ment ent, and and 14 lakhs akhs of indir ndirec ectt employment in the logistics, transport and related sectors. The study further reveals that if we achieve our target of 150 dollars over the next four years, we shall be adding a further 1 crore jobs: 85% of it direct employment, and 15% indirectly associated jobs.

Sector Wise Performance: Sectors registering positive growth during

1998-99 include cereal and gems and jewellery. Commodities showing positive growth include tea, rice leather, footwear, gems and jewellery, manufacture of metals, readymade garments, etc. During the current year, so far (April-May’99) a number of items such as leather, footwear,


gem & jewellery, textiles, handicrafts and carpets have shown positive growth. Among the importable, edible oil, precious and semi-precious stones, electrical machinery, project goods, gold and silver have registered significant growth during 1998-99. Imports for April-July’99 show a rise of only 1.01 per cent in dollar terms, while imports in July’99 show a decline of 5.84 per cent in dollar terms. Engineering goods and chemicals are the main items showing a fall in imports which is a cause for concern. Gold and silver imports have also fallen.

Issues

Infrastructure: In the Custom Notification No. 138/91 dated 20.10.90 as amended from time to time, allows import of duty free capital goods for creating central facility to Software Technology Parks of India (STPI) and do not include other service providers in the private sector. With the advancement of technologies in electronics and computer software, the cost cost to crea create te such such infr infras astr truc uctu ture re requi require red d for for expor exportt is becom becomin ing g exorbitant. nt.

Theref erefo ore,

it

is

necessary

that

private

and

pub public

organi organisat sation ions s intere intereste sted d in provid providing ing infras infrastru tructu cture/ re/com common mon facili facilitie ties s should also be included included for duty exemption exemption to import import capital goods, etc. The Service Provider in view of capital imported would undertake the export obligations as provided for capital goods in the STP Scheme. The scheme was discussed in the DGFT FT//CBEC which nee need to be implemented immediately.


AntiAnti- Dumping: Dumping:

Where any article is exported from any country or

territory to India at less than its normal value then upon the importation of such article to India the central Govt. may be notification in the official gaze gazett tte e impo impose se an anti anti dump dumpin ing g duty duty not not exce exceed edin ing g the the marg margin in of dump dumpin ing g in rela relati tion on to such such arti articl cle. e. For For purp purpos ose e of iden identi tifi fica cati tion on,, assessment and collection of Anti Dumping Duty on dumped articles and for determination of injury, the Govt. has appointed Additional Secretary to the Govt. of India Ministry of Commerce as designated Authority for purpose of above rules. It is to be understood that imposition of Anti Dumping Duty is based on Commodity to Commodity, country to country and suppliers in Exporting countries Others: THE first Export-Import (Exim) policy of the new millennium

coinciding with the Tenth Plan has evoked enthusiastic response from the exporting community and some policy analysts for its perceived new initiatives to drive export growth. It is essen essenti tial al that that the the moda modaliliti ties es of gran granti ting ng tran transp spor ortt subs subsid idy y be finalised without delay. Together with a depreciating rupee, transport assi assist stanc ance e can can prov provid ide e that that litt little le extr extra a push push nece necess ssar ary y in case case of commodities facing a marginal price disparity. However, an Exim policy for a five-year period, which merely liberalises exports and removes procedural procedural irritants, irritants, is unlikely unlikely to provide provide any significant significant boost to export earnings of farm goods. A coordinated effort by various ministries at the Centre including finance, food and agriculture is necessary. There are instances of export efforts thwarted by customs authorities. In thei theirr driv drive e to incr increa ease se reve revenu nue, e, some some custo customs ms hous houses es pres pressu suri rise se


exporters not to use DEPB licence, but pay up customs duty on raw material import. A stro strong ng inpu inputt deli delive very ry syst system em,, advi advise se on agro agrono nomi mic c prac practi tice ces s and and mark market et inte intelllige ligenc nce e is key to succ succes ess. s. AEZs AEZs must ust make ake use use of information technology to deliver benefits to primary producers in the area. In sum, intentions of the new Exim policy are laudable. But how far these inte intent ntio ions ns will will be tran transl slat ated ed into into acti action on rema remain ins s to be seen seen.. Havi Having ng remo remove ved d the the cobw cobweb ebs s that that hith hither erto to rest restra rain ined ed farm farm expo export rts, s, the Gove Govern rnme men nt must ust now now proce roceed ed to inve invest st expo exporrt produ roduc cts with with competitive edge in terms of cost and quality.

Exim Bank signed Bank signed pact with IFC

Exim Bank of India has signed an agreement with International Finance Corporation (IFC), Washington, a member of the World Bank group, unde underr the the Glob Global al Trad Trade e Fina Financ nce e Prog Progra ramm mme e (GTFP (GTFP)) of IFC. IFC. This This arra arrang ngem emen entt will will enab enable le Exim Exim Bank Bank to conf confir irm m lette etters rs of cred credit it,, guarantees and other trade instruments issued by approved banks in more than forty countries of Central Asia, Central and Eastern Europe, Latin America and the Caribbean, West Asia and North Africa as also othe otherr regi region ons s of Asi Asia and and Afric frica. a. The The Exim xim Bank ank Chief hief Gene Genera rall Manager, Prabhakar, and the IFC Associate Director, Mamta H. Shah, signed the agreement on December 14, 2007.


EXPORTS, IMPORTS & TRADE BALANCE

Year

199091 199192 199293 199394 199495 199596 199697 199798 199899 199900 200001 200102 200203

Exports rts Imports Trade Exports rts ($ ($ (% mln.) mln.) Balances change) ($ mln.)

Imports rts (% change)

Exports (% to GDP)

Imports (% to GDP)

18148

23464

-5316

9.25

10.59

5.72

7.39

17998

19551

-1553

-0.83

-16.68

6.73

7.31

17437

20583

-3146

-3.12

5.28

7.13

8.42

22213

23305

-1092

27.39

13.22

8.06

8.45

26337

28662

-2325

18.57

22.99

8.14

8.86

31842

36730

-4888

20.9

28.15

8.92

10.29

33498

39165

-5667

5.2

6.63

8.62

10.08

35049

41535

-6486

4.63

6.05

8.52

10.1

33211

42379

-9168

-5.24

2.03

7.98

10.18

36760

49799

-13039

10.68

17.51

8.15

11.04

44147

50056

-5909

20.1

0.52

9.58

10.86

43958

51567

-7609

-0.43

3.02

9.16

10.75

52823

61533

-8710

20.17

19.33

10.38

12.09


200304 200405 200506 200607

63886 83502 103075 126246

78203 11147 2 14914 4 19043 8

-14316

20.94

27.09

10.61

12.99

-27970

30.7

42.54

12

16.03

-46068

23.44

33.8

12.79

18.51

-64192

22.48

27.69

13.86

20.9

INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE


FUT FU TURE OF EX EXIM IM

The new five-year Exim policy is expected to bring about a positive growth in exports in the days to come. The policy was the result of a paradi paradigm gm shift shift from from narrow narrow issues issues of mere mere proced procedura urall formal formaliti ities es to much larger aspects of exports which would work as the ``true engine of growth''. The policy was clear and required involvement of the state government to make it successful. Adequate measures have been taken to curtail transaction transaction costs. the concept of using special special economic economic zone (SEZ) and agriculture export zones to boost exports of goods, services and agricultural products is a positive step. Processed foods such as marine products, coconuts, cashews, areca nuts and fruits like mangoes need to be encourag encouraged. ed. In order order to catch up with with the changing changing world world scenario in the export trade, he felt that there was a requirement of a mindset change in government officials as well as in the industry. The participants concentrate on policy-related matters and understand the subject thoroughly and make use of seminars and workshops to update them with the latest changes and techniques. referring to the SEZ for Goa. It is required required to have a proper study study by internatio international nal consultants consultants,, and the involvemen involvementt of competent persons to push the proposal proposal further Goa has a natural advantage and it can have a unique SEZ in the service sector.


the period period AprilApril-Jul July’9 y’99, 9, export exports s Prospe Prospects cts For Indian Indian Export Export:: For the registered a growth of 4.04 per cent in dollar terms and 8.45 per cent in rupe rupee e term terms s over over Apri Aprill- June June’9 ’98. 8. The The worl world d merc mercha hand ndis ise e expo export rts s declined declined by 2 per cent during 1998, the strongest strongest decrease decrease since 1982. In fact, if we see the export performance of all the south Asian and south east Asian countries, it was negative for most of them including China. Only in the case of Philippines, the export performance was good due to its electronics sector and the FTZs. The export growth has been picking up in the current fiscal. However, the demand situation per se has not improved since the east Asian crisis and the fall in commodity prices worldwide is still far from over. An improvement in these factors will help increase exports from India Future Lies In Service Service Sectors: Sectors: This is a very important sector for the

future. We have already included the 161 services under EXIM POLICY. They will be able to avail of facilities under schemes like EPCG, Star and Super Star Houses, EPZs, etc. Unlike the goods sector, there is no possibility of any of these ese schemes to be considered as WTO inco incons nsis iste tent nt in the the serv servic ices es sect sector or as the the gener general al comm commit itme ment nts s in serv servic ices es sect sector or till till now now are are only only exte extens nsio ion n of MFN. MFN. With With serv servic ices es emerging

as

the

major

sector

in

our

GDP

and India showing proven competitiveness in many services, the Future growth depends on how we use the opportunities thrown open by a more open services commitments by some of our trading partners and negotiating for the removal of barriers in this sector. One Percent Share In World Exports: The demand situation in the

world for India’s exports have not been favourable in the last two years. The government is trying to increase the supply situation by laying emphas emphasis is on improv improvin ing g infras infrastr truct ucture ure,, credit credit to export exporters ers and policy policy


implification. Government also working towards creating an environment for second generation reforms. If we include services sector and informal trade which crosses our borders, the share of India in world exports would definitely be higher.

BIBLIOGRAPHY



Book on Foreign Trade of India: 1947-2007 (Chapter 2 & 3)



Centre for Monitoring Indian Economy – Foreign Trade & Balance of Payments (August 2007)



www.economictimes.com (25th July 2006)



www.exim.indiamart.com



www.eximbank.com



www.commerce.nic.in



www.thehindubusinessline.com




www.rediff.com

EXIM Policy Project

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