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The long-term vision of the Department of Commerce is to make India a major player in world trade by 2020, and assume a role of leadership in the international trade organizations commensurate with India’s growing economic and demographic profile. In consonance with its vision of ensuring sustained accelerated growth of exports and making India a major player of world trade, the Government announces a Foreign Trade Policy (FTP) every five years. FTP is annually reviewed to incorporate changes necessary to take care of emerging economic scenarios both domestically and globally. The underlined philosophy of supplement to Foreign Trade Policy is based on seven broad principles: a) Give a focused thrust to employment intensive industry. b) Encourage domestic manufacturing for inputs to export industry and reduce the dependence on imports Promote technological up gradation of exports to retain a competitive edge in global markets Persist with a strong market diversification strategy to hedge the risks against global uncertainty Encourage exports from the North Eastern Region given its special place in India’s economy Provide incentives for manufacturing of green goods recognising the imperative of building capacities for environmental sustainability g) Endeavour to reduce transaction cost through procedural simplification and reduction of human interface The FTP 2009-14, was updated on June, 2012. The salient features of this focussed on reducing interest burden and extension of the Interest Subvention Scheme upto 31st March, 2013, focus on labour intensive sectors such as Toys, Sports Goods, Processed Agricultural Products and ReadyMade Garments. The Supplement also provided for extension of the Zero Duty EPCG Scheme (Export Promotion Capital Goods Scheme) till 31st March 2013 with enlarged scope. Other critical initiatives include: Support for Export of Green Technology Products, Support for Infrastructure for Agriculture Sector, Incentives for Promoting Investment in Labour Intensive Sectors, Encouragement for Manufacturing Sector in Domestic Market, adding three new towns of export excellence, simplification of procedures, focussing on E enabled transmission of foreign exchange etc. In view of the Department’s strategy of export diversification with focus on new markets and commodities, 7 new markets have been added to Focus Market Scheme (FMS), 7 new markets have been added to the Special Focus Market Scheme (Special FMS) and 46 new items have been added to Market Linked Focus Product Scheme (MLFPS).
Additional incentives to boost exports
Government has recently reviewed the situation arising out of current economic scenario and declining growth in the western world. Some urgent steps are required for policy stability, to boost the exports and to reverse this declining
Annual Report 2012-13
trend. Accordingly, it has been decided to: (a) Extend period of Interest subvention: 2% Interest Subvention Scheme on rupee export credit is available to certain specific export sectors. These are (i) Handicrafts, (ii) Carpets, (iii) Handloom, (iv) Readymade Garments, (v) Processed Agriculture Products, (vi) Sports Goods and (vii) Toys. In addition Small and Medium Enterprises (SME) in all sectors enjoy this benefit. Currently the scheme ends on 31st March, 2013. Now this scheme of 2% interest subvention to these specific sectors will be extended by one more year, i.e., up to 31st March, 2014. (b) Widen Interest Subvention Scheme: Engineering Sector contributes handsomely to both job creation and value addition of Indian manufacture. To retain this competitive edge and also to give a boost to our engineering exports, certain specific sub-sectors of engineering sector would be extended the benefit of 2% interest subvention. They will receive this benefit for the last quarter of the current financial year, that is, from 1st January 2013 to 31st March 2013. The general interest subvention scheme is being continued till 31st March, 2014. Accordingly these specific engineering sub-sectors would continue to enjoy this benefit of interest subvention till 31st March, 2014. (c) Introduce a “pilot scheme” of 2 % Interest Subvention for Project Exports through EXIM Bank: A “pilot scheme” of 2% interest subvention is being introduced for Project Exports, through EXIM BANK for countries of SAARC region, Africa and Myanmar. This scheme is being made operational for year 2012-13 onwards, for a combined worth of 500 million USD to begin with. The interest subvention would be linked to the Buyers’ Credit Scheme which was introduced in the last financial year and which is being implemented through EXIM BANK, ECGC and the National Export Insurance Account (NEIA). The essence of the scheme is to boost India’s Project exports in the SAARC/African region and to our neighbour Myanmar, by providing long term concessional credit through the EXIM BANK, as co-financing for the project exports in infrastructure sectors. After the experience of this initial pilot, the upper cap may be raised. The eligible cases for such incentive would be sponsored by EXIM BANK. (d) Incentive on Incremental Exports: It has been decided to grant incentive on incremental exports made during the period January-March 2013 over the base period January-March 2012. The incentive would be granted to an IEC holder at the rate of 2% on the incremental growth of exports made to USA, EU and Asian Countries during this particular quarter i.e., January-March 2013. Certain exports like deemed exports, service exports, third party exports, export-turnover of SEZ units etc. would not be eligible under the scheme. Thus there will be focus on increasing export to certain specific destinations. (e) Additions in the Chapter 3 Schemes: Certain products under the Focus Product Scheme and markets under Focus Market Scheme have been added. Similarly some additions have been made to MLFPS/VKGUY. These additions under Focus Market Scheme (FMS)/Focus Product Scheme (FPS)/ Market Linked Focus Product Scheme (MLFPS)/ Vishesh Krishi & Gram Udyog Yojna (VKGUY) would be eligible for incentives on exports from 1.1.2013 which has been notified through Public Notice 42 dated 31.12.2012.
Duty neutralization / remission schemes are based on the principle and the commitment of the Government that “Goods and Services are to be exported and not the Taxes and Levies”. Purpose is to allow duty free import / procurement of inputs or to allow replenishment either for the inputs used or the duty component on inputs used. There are two categories of these schemes namely, pre-export schemes and the post-export schemes. Brief of these schemes alongwith the amendments
External Sector and India’s Foreign Trade Policy (FTP) 2009-14 Duty free import / procurement of precious metal (Gold / Silver / Platinum) from the nominated agencies is allowed either in advance or as replenishment. In addition, exporters of Gems & Jewellery items are allowed access to duty Free Import of consumables for export production upto a certain specified percentage of FOB value of previous years’ export. List of items allowed for duty free import by Gems & Jewellery sector has been expanded by inclusion of additional items such as tags and labels, security censor on card, staple wire and poly bag. This will reduce the cost of the product to some extent. Monitoring of import of Gold by Nominated Agencies as per the new guidelines has begun and this would result in better compliance.
carried out during the current year are given below.
Pre - Export Schemes
Advance Authorization Scheme
Scheme allows duty free import of inputs, along with fuel, oil, catalyst etc., required for manufacturing the export product. Inputs are allowed either as per Standard Input Output Norms (SION) or on adhoc Norms basis under actual user condition. Norms are fixed by Technical Committee i.e., Norms Committee. This facility is available for physical exports (also including supplies to SEZ units & SEZ Developers) and deemed exports including intermediate supplies. Minimum value addition prescribed is 15%, except for certain items. Exporter has to fulfil the export obligation over a specified time period, both in quantity and value - wise. This year the facilities to club authorizations have been simplified and powers have been decentralized to RAs. Export obligation period in respect of Advance Authorisations have been reduced to 18 months from 36 months. The validity of Advance Authorisations / Duty Free Import Authorisation (DFIAs) has been reduced from 24 months to minimum 12 months or up to 31.3.14 from issue date, whichever is more.
Post- Export Schemes
Duty Drawback Scheme
Duty Drawback scheme allows refund of customs duty and the excise duty on the inputs used in the manufacture of the export product at a specified percentage of FOB value of exports. Service Tax on the input services has also been factored in the All Industry rate of Duty Drawback. Duty drawback scheme for physical exports is being administered by the Department of Revenue and that of deemed exports, by the DGFT. Duty drawback rates for a number of products have been reduced on account of reduction in tariff and roll back of adhoc increase effected earlier. The products which were in the DEPB scheme are given appropriate rates of duty drawback so that taxes suffered by the inputs which go in the manufacture of the export product are rebated. The Duty Drawback Scheme was announced on 20.09.2011 in place of DEPB scheme.
Duty Free Import Authorization (DFIA)
DFIA Scheme has been made operational from 01.05.2006. One of the objectives of the scheme is to facilitate transfer of the authorisation or the inputs imported as per SION, once export is completed. Provisions of DFIA Scheme are similar to Advance Authorisation scheme. A minimum value addition of 20% is required under the scheme.
Schemes for Gems & Jewellery Sector
Gems & Jewellery exports constitute a major portion of our total merchandise exports. It is an employment oriented sector. Exports from this sector suffered significantly on account of the global economic slowdown.
Other Policy Initiatives
Interest subvention of 2 per cent has been extended upto March 2014. It has also been extended to labour intensive sectors, namely, Toys,
Annual Report 2012-13
Sports Goods, Processed Agricultural Products and Ready-Made Garments, in addition to four sectors viz. Handicrafts, Carpets, Handlooms and SMEs benefiting from the scheme earlier. With effect from January 2013, certain sub-sectors of Engineering sector has also been added to the list for 2% Interest Subvention. Time period of export realization for non-status holder exporters has been increased to 12 months, at par with the Status holders. This facility had been extended upto 30.09.2012. Further extension is under consideration of RBI. In case of Status Holder, higher incentive is available in the form of duty credit scrip (Agri. Infrastructure Incentive Scrip) equal to 10% of FOB value of agricultural exports, limited to Rs. 100 crore per annum, for products covered under ITC HS Chapters 1 to 24. This includes incentive under VKGUY scrip. These scrips can be utilised to import Capital Goods and equipments for Cold Storage Units, Pack-houses etc. These scrips will also be eligible for import of following specified equipments for setting up of Pack-houses:
• • • • • • • • • • • • • •
Vishesh Krishi and Gram Udyog Yojana (Special Agriculture and Village Industry Scheme) [VKGUY]
Objective of this scheme is to promote employment generation in rural and semi urban areas. Duty Credit Scrip benefits are granted with an aim to compensate high transport costs and to offset other disadvantages. VKGUY has been gradually expanded to include export of Agricultural Produce and their value added products; Minor Forest Produce and their value added variants; Gram Udyog Products; and Other Products, as notified under Appendix 37A of HBP vol.1, from time to time. Exporters of notified products are entitled for Duty Credit Scrip equivalent to 5% of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards. Exporter who has availed benefits of Drawback, at rates higher than 1% of FOB value of exports; or Specific DEPB rate (i.e. other than Miscellaneous Category – Sr.Nos. 22D & 22C of Product Group 90); or Advance Authorization or Duty Free Import Authorization for import of inputs (other than catalysts, consumables and packing materials) for the exported product for which Duty Credit Scrip under VKGUY is being claimed then rate is reduced to 3%. Few products are also eligible to additional 2% over & above the 5% or 3%, as admissible for specified products in Appendix 37A of HBP vol.1.
Packing grading equipments for fruits and vegetables Equipments for ripening of fruits including ethylene generator Adiabatic humidifiers for cold rooms Gas sensor and controlled system covering Co2, ethylene and oxygen levels Ethylene scrubbers Co2 scrubbers Blast freezers for IQF plants Doors for gastight rooms, applications like CA, Banana/fruit ripening Nitrogen generators Gas controlling systems for CA stores Bulk bins for CA stores Reach stackers warehouses for cold stores and
Belt driven conveyors for bulk handling of cargo Gantry cranes, unloading, mechanized loaders for bulk and break bulk cargo
For import of Cold Chain Equipment, this Incentive Scrip shall be freely transferable amongst Status Holders as well as to units in the Food Parks.
Focus Market Scheme (FMS)
For offsetting high freight cost and other externalities to select international markets with a
External Sector and India’s Foreign Trade Policy (FTP) 2009-14 the scheme, which include leather products and footwear, handloom products, handmade carpets and other textile floor covering, handicrafts, coir and jute products, technical textiles, engineering products, green technology products, electronic products, etc.
view to enhance India’s export competitiveness in these countries, “Focus Market Scheme” has been launched w.e.f. 1.4.2006. Exporters of all products to notified countries (as in Table 1 & Table 2 of Appendix 37C of HBP vol.1) shall be entitled for Duty Credit Scrip equivalent to 3% of FOB value of exports. Another 7 markets added to Focus Market Scheme (FMS) w.e.f. 5th June, 2012. These countries are Algeria, Aruba, Austria, Cambodia, Myanmar, Netherland Antilles, and Ukraine. So far, the Scheme covers a total of 119 markets. However, additional duty credit scrip @1% FOB value of exports is given to markets listed in Table 3 of Appendix 37C with effect from 1.4.2011 under Special Focus Market Scheme. 7 new markets have been added to the Special Focus Market Scheme (Special FMS) w.e.f. 5th June, 2012 taking the total countries under Special FMS to 48. These countries are Belize, Chile, El Salvador, Guatemala, Honduras, Morocco and Uruguay. Another five new markets have been added to FMS w.e.f. 01.01.2013. These countries are Cayman islands, New Zealand, Latvia, Lithuania and Bulgaria. One new market namely Eritrea has been added to the Special FMS w.e.f from 01.01.2013.
Market linked Focus Products Scrip (MLFPS)
To give significant boost to market penetration for specific products in specified markets, a variant under Focus Product Scheme called Market Linked Focus Products Scrip has been introduced from 1.4.2008. Export of products / sectors of high export intensity / employment potential (which are not covered under present FPS List) would be incentivised @ 2% of FOB value of exports (in free foreign exchange) under FPS when exported to the Linked Markets (countries), which are not covered in the present FMS List, as notified in Appendix 37D of HBP vol.1, for exports made from 27.8.2009 onwards. Further, all Garments covered under Chapter 61 and Chapter 62 of ITC HS Classification of Export and Import Items have been extended the benefit of duty credit scrip @2% of FOB value of exports to USA and EU from 1.4.2011 till 31.3.2012. This benefit has now been extended till 31st March 2013. Presently the products covered under the scheme include Motor vehicles, auto-components, bicycles and parts, apparels, knitted and crocheted fabrics, pharma products, value added plastic and rubber goods, glass products, dyes and chemicals, household articles, Machine Tools, Earth Moving equipments, Transmission towers, electrical and power equipments, steel tubes, pipes and galvanized sheets, Compressors, Iron and Steel Structures, Auto components, three wheelers and cotton woven fabrics etc. The countries covered under the Scheme include Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Ukraine, Australia, New Zealand, Cambodia, Vietnam, Japan and China amongst others. There are around 5000 products so far covered at 8 digit level. Table 2 of
Focus Products Scheme (FPS)
To incentivise export of such products which have high export intensity / employment potential, so as to offset infrastructure inefficiencies and other associated costs involved in marketing of these products, a scheme called Focus Products Scheme, has been introduced w.e.f. 1.4.2006. Exports of notified products (as in Appendix 37D of HBP vol.1) to all countries (including SEZ units) shall be entitled for Duty Credit Scrip equivalent to 2% or 5% of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards. Further, Bonus Benefits @2% of FOB value of exports is given over and above the existing benefit for specified products covered under Appendix 37D for exports made from 1.4.2010 onwards. So far, around 1200 products have been covered at 8 digit level under
Annual Report 2012-13
Appendix 37D of HBP vol.1 may be referred for the list of products and countries. of exports made during 2009-10 for six sectors, viz: Leather Sectors (excluding finished leather); Textiles and Jute Sector; Handicrafts; Engineering Sector (excluding Iron & Steel, Non-ferrous Metals in primary or intermediate forms, Automobiles & two wheelers, nuclear reactors & parts and Ships, Boats and Floating Structures); Plastics; and Basic Chemicals (excluding Pharma Products), and expanded for exports in 2010-11 and 2011-12 of additional sectors listed in para 3.10.8 of Hand Book of Procedures vol.1, in the form of duty credit [subject to prescribed exclusions as specified in Policy] with actual user condition. This shall be over and above any duty credit scrip claimed/availed under Chapter-3 of FTP. This facility is available upto 31.3.2013. Status holders are issued Status Holders Incentive Scrip (SHIS) to import Capital Goods for promoting investment in up-gradation of technology of some specified labour intensive sectors like Leather, Textile & Jute, Handicrafts, Engineering, Plastics and Basic Chemicals. It is now decided that up to 10% of the value of these scrips will be allowed to be utilized to import components and spares of capital goods imported earlier. Such a dispensation was not available earlier. These scrips were subject to Actual User Condition and were not transferable. Since a status holder may or may not have manufacturing facility, limited transferability of SHIS has been allowed. However, such Transferee shall have to (a) be a status holder and (b) have manufacturing facility.
Served from India Scheme (SFIS)
The objective of the Scheme is to accelerate growth in export of services so as to create a powerful and unique ‘Served From India’ brand, instantly recognized and respected the world over. Indian Service Providers, of services listed in Appendix 41 of HBP vol.1, who have free foreign exchange earning of at least Rs.10 lakh in current financial year shall qualify for Duty Credit Scrip. For Individual Indian Service Providers, minimum free foreign exchange earnings would be Rs. 5 lakh. Service Providers are entitled to Duty Credit Scrip @10% of the free foreign exchange earned. However, Services and Service Providers listed in Para 3.6.1 of Hand Book of Procedures vol.1 are not eligible. Imports are allowed with actual user condition for import of capital goods, office equipments, consumables, vehicles which are in the nature of professional equipment to the service provider, etc.
Status Holders Incentive Scrip (SHIS)
With an objective to promote investment in upgradation of technology of some specified sectors such as leather, textiles, Jute, handicrafts, plastics, basic Chemicals, rubber products, glass and glassware, paper and books, paints and allied products, plywood and allied products, electronics products, sports goods and toys, engineering products viz. iron and steel, pipes and tubes, ferro-alloys etc., Status Holders shall be entitled to incentive scrip @ 1% of FOB value
CHAPTER-4 Policy initiatives
External Sector and India’s Foreign Trade Policy (FTP) 2009-14
Box 4.1 A. Policy Initiative Announced in the Annual Supplement to FTP on 5th June, 2012
• • • • • • •
7 new markets have been added to Focus Market Scheme (FMS). These countries are Algeria, Aruba, Austria, Cambodia, Myanmar, Netherland Antilles, and Ukraine. 7 new markets have been added to the Special Focus Market Scheme (Special FMS). These countries are Belize, Chile, El Salvador, Guatemala, Honduras, Morocco, and Uruguay. 46 new items have been added to Market Linked Focus Product Scheme (MLFPS). This has the effect of including 12 new markets for the first time. MLFPS has been extended till 31st March 2013 for export to USA and EU in respect of items falling in Chapter 61 and Chapter 62. 100 new items have been added to the Focus Product Scheme (FPS) list. 3 new towns have been declared as Towns of Export Excellence (TEE). These are Ahmedabad (Textiles), Kolhapur (Textiles), and Saharanpur (Handicrafts). Export of specified products through notified Land Customs Stations of North Eastern Region has been provided additional incentive to the extent of 1% of FOB value of exports. This benefit is in addition to any other benefit that may be available under Foreign Trade Policy in respect of these exports. Now Duty Credit Scrips shall be permitted to be utilized for payment of Excise Duty for domestic procurement. Earlier only scrips under SFIS were so permitted for procurement of goods from domestic market. Now all scrips would be permitted to source from domestic market so as to encourage manufacturing, value addition and employment. This will be an important measure for import substitution and will help in saving of foreign exchange in addition to creating additional employment. It is now decided that up to 10% of the value of Status Holders Incentive Scrip (SHIS) will be allowed to be utilized to import components and spares of capital goods imported earlier. Since a status holder may or may not have manufacturing facility, it is now decided to allow limited transferability of SHIS scrip. However, such Transferee shall have to (a) be a status holder and (b) have manufacturing facility.
Now Agri. Infra. scrips will be eligible for import of 14 specified equipments for setting up of Pack-houses.
The Union Minister for Commerce, Industry and Textiles, Shri Anand Sharma releasing the Annual Supplement 2012-13 to the Foreign Trade Policy 2009-14, in New Delhi on June 05, 2012
Annual Report 2012-13
Box 4.2 B. Measures announced on 26th December, 2012
(a) Extending period of Interest subvention
2% Interest Subvention Scheme on rupee export credit is available to certain specific export sectors. These are (i) Handicrafts, (ii) Carpets, (iii) Handloom, (iv) Ready - made Garments, (v) Processed Agriculture Products, (vi) Sports Goods and (vii) Toys. In addition Small and Medium Enterprises (SME) in all sectors enjoy this benefit. Currently the scheme ends on 31st March, 2013. Now this scheme of 2% interest subvention to these specific sectors has been extended by one more year, i.e., up to 31st March, 2014. Engineering Sector contributes handsomely to both job creation and value addition of Indian manufacture. To retain this competitive edge and also to give a boost to our engineering exports, certain specific sub-sectors of engineering sector would be extended the benefit of 2% interest subvention. They will receive this benefit for the last quarter of the current financial year, that is, from 1st January 2013 to 31st March 2013. The general interest subvention scheme is being continued till 31st March, 2014. Accordingly these specific engineering sub-sectors would continue to enjoy this benefit of interest subvention till 31st March, 2014.
(b) Widening of Interest Subvention Scheme
(c) Introduce a “pilot scheme” of 2 % Interest Subvention for Project Exports through EXIM Bank
A “pilot scheme” of 2% interest subvention is being introduced for Project Exports, through EXIM BANK for countries of SAARC region, Africa and Myanmar. This scheme is being made operational for year 2012-13 onwards, for a combined worth of 500 million USD to begin with. The interest subvention would be linked to the Buyers’ Credit Scheme which was introduced in the last financial year and which is being implemented through EXIM BANK, ECGC and the National Export Insurance Account (NEIA). The essence of the scheme is to boost India’s Project exports in the SAARC/African region and to our neighbour Myanmar, by providing long term concessional credit through the EXIM BANK, as co-financing for the project exports in infrastructure sectors. After the experience of this initial pilot, the upper cap may be raised. The eligible cases for such incentive would be sponsored by EXIM BANK. It has been decided to grant incentive on incremental exports made during the period JanuaryMarch 2013 over the base period January-March 2012. The incentive would be granted to an IEC holder at the rate of 2% on the incremental growth of exports made to USA, EU and Asian Countries during this particular quarter i.e., January-March 2013. Certain exports like deemed exports, service exports, third party exports, export-turnover of SEZ units etc. would not be eligible under the scheme. Thus there will be focus on increasing export to certain specific destinations. Some specific type of exports would not be eligible. Detailed notification would follow. Certain products are being added to the Focus Product Scheme. A few markets are being added to Focus Market Scheme. And similarly some additions are being made to MLFPS / VKGUY. These additions under Focus Market Scheme (FMS)/ Focus Product Scheme (FPS) / Market Linked Focus Product Scheme (MLFPS) / Vishesh Krishi & Gram Udyog Yojna (VKGUY) would be notified separately.
(d) Incentive on Incremental Exports
(e) Additions in the Chapter 3 Schemes
External Sector and India’s Foreign Trade Policy (FTP) 2009-14 procure capital goods on full payment of applicable duties and choose to opt for this scheme. (b) Duty paid on capital goods (excluding portion CENVATed/ Rebated) shall be remitted in the form of freely transferable duty credit scrip(s). (c) Specific EO under this scheme shall be 85% of the applicable specific EO, if the imports of such capital goods had taken benefit of duty exemption. (d) Duty remission shall be in proportion to the EO fulfilled. (e) These duty credit scrip(s) can be used for payment of applicable custom duties for imports and applicable excise duties for domestic procurement. (f) All provisions of the existing EPCG scheme shall apply insofar as they are not inconsistent with this scheme.
A. Changes in Zero duty EPCG Scheme
(i) For continued technological up gradation of exports sector this Scheme has now been extended up to 31st March 2013. There is no change in the coverage of the sectors benefiting from this scheme.
(ii) Zero Duty EPCG Scheme shall be available to such exporter who may have obtained benefit under Technology Upgradation Fund Scheme (TUFS) but the exact line of business in TUFS is different from the line of business under EPCG. Further, if it is the same line of business, Zero Duty EPCG Scheme could still be availed if the benefits of TUFS already availed are surrendered /refunded with applicable interests. (iii) Up to 31st March 2012, the benefit of Zero Duty EPCG Scheme was not available to such applicants who would have availed benefit of Status Holder Incentive Scrip (SHIS). It is now decided that if such SHIS benefit already availed is surrendered subsequently with applicable interest to the concerned RA, and then the benefit of Zero Duty EPCG Scheme would be extended. B. Specific Export Obligation (EO) in respect of export of Green Technology Products shall be 75% of the normal EO as mentioned in the Para 5.1 or Para 5.2 of FTP. The list of Green Technology products is given in Para 5.24 of HBP vol.1. (w.e.f. 05.06.2012). For units located in North Eastern Region including Sikkim, specific EO shall be 25% of the EO as stipulated in Para 5.1 or 5.2 of FTP.
Export Oriented Units.
A Committee under the chairmanship of Shri S.C. Panda was constituted to review and revamp the EOU Scheme. The Committee has submitted its report in July, 2011 which is under consideration with the Department of Commerce.
Deemed Export Issues
Chapter 8 of Foreign Trade Policy (FTP) mentions that various categories of supply which are regarded as “deemed exports” under FTP, provided goods are manufactured in India. In deemed exports transactions, goods supplied do not leave country. Essentially, Deemed Export Scheme is for encouraging import substitution and mainly covers such supply of goods which are otherwise allowed at Zero custom duty. In case of EPCG authorizations, deemed export benefit is allowed even though import is allowed at concessional duty as well. For deemed export supplies, benefit of Advance Authorization, duty drawback of duties
D. Post export EPCG Duty Credit Scrip(s)
A new scheme ‘Post export EPCG Duty Credit Scrip(s)’has been introduced w.e.f. 05.06.2012 with following salient features: (a) EPCG Duty Remission Scheme shall be available to exporters who intend to import/
Annual Report 2012-13
paid on inputs and refund of Terminal Excise Duty (TED) paid on final goods/exemption, as applicable, as per Foreign Trade Policy, are available. Chapter 8 of the FTP and HBP vol.1, relating to deemed exports has been completely rewritten in the Annual Supplement to the FTP 2009-14, released on 05.06.2012. In this rewritten Chapter, provisions of FTP have been aligned with relevant Customs Notifications, clarifications, issued by Policy Interpretation Committee, have been incorporated and language has been re-drafted to make it more user friendly. The benefits available under various categories of deemed exports supplies have been prescribed in a tabulated form, which removes all ambiguities. During Financial year 20011-12, an amount of Rs.740 crores was spent by different Regional Authorities of DGFT. In the beginning of 201213, approved claims amounting to Rs.320 crores were pending for payment. During this year, amount of Rs.850 crores has been earmarked for this Directorate for meeting claims of TED refund/Deemed export drawback. Up to the end of December, 2012, DGFT(HQ) has released Rs.769.33 crores to its different Regional Authorities. made e-BRC mandatory w.e.f. 17.8.2012. Earlier Banks issued Bank realization Certificates (BRCs) to exporters in physical formats. The e-BRC system will significantly lower the transaction cost of exporters who will not have to visit or pay for BRC issuance to banks. Exporters can print BRC details on the DGFT site and submit it to any Department, which can, in turn verify the accuracy of the data from the DGFT website. This would mean all round manpower and effort savings for the Government agencies like Customs, Central Excise and at the State Government level, the Departments dealing with imposition and refund of Value Added Tax (VAT). These departments can source such information from the DGFT. The system may also supplement RBI’s efforts towards Foreign Exchange Realization Monitoring. a) All authorizations are being issued online by DGFT. Message exchange with Customs has been implemented for Advance Authorization, EPCG and DFIA. Exporters can track, monitor their applications online at the DGFT website. A system has been established to receive RCMC from the Export Promotion Councils, Commodity Boards and FIEO in secured online format. DGFT offices will not ask for a copy of the RCMC from the Exporters. Electronic Fund Transfer facility is being used by exporters for payment of application fee. The facility has been extended to additional banks. So far additional 7 Banks have been added into the existing number of 13 (Total: 20 Banks). Import/Export Code (IEC) is the mandatory registration for the exporters. Steps have been taken to simplify the issuance of IEC. For this purpose, an online Module has been developed with effect from 1st January 2011 for receipt of application, processing and issuance of IEC. Integration with PAN database for validation is likely to be completed shortly.
DGFT is the first Indian Government organization to start Web Based application processing (1997) using Secured Digital Certificates (2048 Byte Key encryption- 2004). Currently, DGFT receives Shipping Bills, Bank Realization Certificates and RCMC from Customs, Banks and Export Promotion Council respectively through Digitally Secured Formats. c)
Introduction of e-BRC system
DGFT has established an e-BRC system to receive details of export proceeds from banks in digitally signed secured electronic format. DGFT dispensed with the issuance of physical copy of BRCs by banks for the purpose of DGFT use and
CHAPTER-4 Task Force on Transaction Costs
External Sector and India’s Foreign Trade Policy (FTP) 2009-14 As can be seen from the table, Transaction Cost issues amounting to Rs. 395 crore have been implemented since February, 2011. These include web based tracking and monitoring software for Advance Authorization and EPCG monitoring; expeditious issuance of NOC from Animal Quarantine Certification Services (Department of Animal Husbandry) for import consignment of finished and semi-finished leather and; allowing duty free commercial shipment through courier subject to certain conditions.
Department of Commerce had constituted a ‘Task Force on Transaction Costs’ in October, 2009 to assess the procedural bottlenecks affecting India’s exports and imports. Report of the Transaction Cost has been released on 8.2.2011 resulting in reduction of approximately Rs. 2100 crores of transaction cost. Subsequent to release of report, 21 issues relating to transaction cost have been identified. These are under consultation for agreement /implementation from 8 departments / ministries that include Agriculture (1), revenue (7), banking (7), commerce & industry (2), railway (1), shipping (1) and environment & forest (1). Following is the status of 21 issues:
Sr. No. 1 2 3 4 Estimated reducNumber tion in TransacStatus of Issues tion Cost (in Rs. crore) Implemented 3 Issues 395 Under implementation 6 Issues 565 Not Agreed but not 2 Issues 2200 Dropped Dropped 10 Issues 520 Total 21 Issues 3680
Norm Committee performs the function of fixation of Standard Input Norm (SION), revision of existing SION and fixation of adhoc Norms for various products. This is an Inter Ministerial Committee, wherein representative of concerned administrative Ministries also represented. There are Seven Norms Committee dealing with various commodity groups and their progress during the period April, 2012 to December, 2012 is given below.
Fixation of new SION Nil 7 Nil Nil 1 Nil Nil Modification in existing SION Nil 1 3 3 Nil 1 5 Total
Norms Committee (NC) NC-I NC-II NC-III NC-IV NC-V NC-VI NC-VII
Number of cases where adhoc-norms fixed 470 364 843 758 608 98 372
Engineering Electronics Pharma Organic Chemicals & Allied Textiles Food, Marine, Misc. Plastic & Rubber
470 372 846 761 609 99 377
Policy Relaxation Committee (PRC)
In terms of Para 2.5 of FTP, DGFT may pass such orders or grant such relaxation or relief, as he may deemed fit and proper, on grounds of genuine hardship and adverse impact on trade, DGFT may, in public interest, exempt any person or class or a category of persons from any provision of FTP or any
procedure and may, while granting such exemption, impose such conditions as he may deemed fit. Such request may be considered only after consulting with Norms Committee/EPCG Committee/PRC, as the case may be. During the financial year 2012-13, the committee received as many as 1128 requests for relaxation in Policy/Procedures. Out of which
Annual Report 2012-13
981 cases were disposed of during 33 meetings conducted up to 31.12.2012. December 2012), as many as 133 applications (which constitute approx. 86% share) have been given export permission and remaining 20 are pending with the concerned Ministry/Deptt. for want of written technical comments.
Import Cell considers the applications for items which are restricted for import. The applications for issuance of import authorization for Restricted Items (such as Live Animals, Scrap of rubber / plastic, Refrigerant Gases and Arms and Ammunition etc.), are considered by an Exim Facilitation Committee (EFC), consisting of representatives from various Administrative Ministries and Departments, headed by Addl. DGFT. Such cases are decided on the basis of written technical inputs / comments of concerned Administrative Ministry / Department. Apart from this permissions are also granted under para 2.11 of FTP with the approval of DGFT for the items (such as Maize and Oats etc), import of which are allowed through State Trading Enterprises. Out of total 704 applications received in Import Cell during 2012-13 (upto 31st Dec 2012), as many as 435 applications (which constitute 61.78% share) have been given import permission/ EXIM facilitation Committee meetings are also held on every month on third Thursday.
“Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) items are dual-use items having potential for both civilian and military applications. Export of such items is either restricted, requiring an authorization for their export, or is prohibited. The export policy relating to SCOMET items is given in Paragraph 2.49A of Hand Book of Procedures in Vol. –I, 200914 and the list of such items is given in Appendix 3 to Schedule 2 of ITC (HS) Classification of Export and Import Items. There are eight categories of such items. All applications for export of SCOMET items are considered on merits by an Inter-Ministerial Working Group (IMWG) in the DGFT under the Chairmanship of Additional Director General of Foreign Trade as per guidelines and criteria laid down in Para 2.49A of the Handbook of Procedure Vol. 1. Members include, inter-alia, MEA, Cabinet Secretariat, DRDO, ISRO, DAE and Deptt. of C&PC. No export permission is required for supply of SCOMET items from DTA to SEZ. However, Export permission is required if the SCOMET items are to be physically exported outside the country from SEZ. There is an increasing trend in export of SCOMET items from India. The total value of exports of SCOMET items in 2011-12 were US$ 50.61 million while during 2012-13, upto December 2012, authorizations for items worth US$ 336.15 million have been issued”.
Export Cell deals with licensing of the items which are Restricted in the ITC (HS) Classification for export (other than SCOMET items). The applications for issuance of export authorization for Restricted Items e.g. as Onion seeds, live animals, seaweeds, husk, fodder, chemicals under Montreal Protocol are considered by an Exim Facilitation Committee (EFC) chaired by Addl. DGFT with representatives of various Ministries and Departments. Such cases are decided on the basis of written inputs/comments and /or No Objection Certificate of concerned Ministry/Department. Meeting of EFC is generally held once in a month. In addition, clarifications on Export Policy are also issued. Out of the total 153 applications received for export permission during 2012-13 (upto 31st
Commodity Specific Measures- Exports
The export of following agricultural products which are sensitive in nature due to their direct impact on
External Sector and India’s Foreign Trade Policy (FTP) 2009-14 ban vide Notification No. 31(RE-2012)/200914 dated 04.02.2013. (v) Export of edible oils was permitted in branded consumer packs of upto 5 Kgs with a limit of 10,000 tons from custom EDI Ports. This was first notified on 20.11.2008 and extended from time-to-time. Through Notification No. 24(RE-2012)/2009-14 of 19.10.2012, the limit was increased to 20,000 tons. Vide Notification No. 32 dated 05.02.2013 export of edible oils in branded consumer packs of upto 5 Kgs has been permitted with a Minimum Export Price of USD 1500 per MT. (vi) Through Notification No. 87 dated 05.12.2011, exemption has been given for export of 2400 MTs per annum of Edible Oils to Bhutan.
the public as well as domestic trade and industry are monitored regularly by the Government and suitable modifications are made from time-totime in order to ensure adequate availability for domestic consumption and to keep the prices under check. The policy provisions as on 11.02.2013 are as under:-
1. Edible oil
(i) The export of all edible oils prohibited w.e.f. 17.03.2008.
(ii) Vide Notification No. 24(RE-2012)/2009-14 dated 19.10.2012 ban on export of edible oils has been extended till further orders. (iii) Vide Notification No. 92 dated 01.04.2008 and Notification No. 33 dated 19.08.2008, certain exports of edible oil were granted exemption from this prohibition, namely (a) export of Castor Oil (b) Deemed export of edible oils (as input raw material) from DTA to 100% EOUs for production of non-edible goods to be exported and (c) export of oil produced out of minor forest produce even if edible, ITC(HS) Code 15159010, 15159020, 15159030, 15159040, 15179010 and 15219020. These exemptions will continue till further orders. (vi) Vide Notification No. 32 dated 05.02.2013 export of coconut oil has been permitted through all EDI ports and through Land Custom Stations (LCS) to be notified separately. Earlier, export of coconut oil was permitted only from Cochin Port. With effect from 05.02.2013, export of edible oils from Domestic Tariff Area (DTA) to Special Economic Zones (SEZs) to be consumed by SEZ units for manufacture of processed food products, subject to applicable value addition norms has also been exempted from ban on export of edible oils. Peanut Butter, ITC (HS) Code 15179020 has been exempted from
2. Non Basmati Rice
(i) Export of non-basmati rice was prohibited vide Notification No. 38 dated 15.10.2007 and was completely prohibited vide Notification No. 93 dated 1st April, 2008. Exemption was given for export under Food Aid Programme and export to Maldives under Bi-lateral Trade Agreement between Government of India and Republic of Maldives. However, export of PUSA-1121 variety of non-basmati rice was allowed w.e.f. 3.9.08.
(ii) Exemption has been given for export of 10,000 MTs per annum of Organic Non Basmati Rice, duly certified by APEDA. (iii) Export of all varieties of non-Basmati rice made free w.e.f. 09.09.2011. Such export to be made by private parties from privately held stocks only through EDI ports. Export is also allowed through non-EDI Land Custom Stations (LCS) on Indo-Bangladesh and Indo-Nepal border subject to registration of quantity with DGFT. (iv) Through Notification No. 87 dated 05.12.2011, exemption has been given for export of 21,200 MTs per annum of non-basmati rice to
Annual Report 2012-13
Export of wheat and wheat products was prohibited vide Notification No. 33 dated 8th October, 2007.
3. Basmati Rice
(i) Minimum Export Price for export of Basmati rice was reduced from US$ 900 PMT to US $ 700 per ton vide Notification No.97 dated 21.02.2012. Minimum Export Price on export of basmati rice removed vide Notification No. 6 dated 04.07.2012.
(ii) Exemption has been given for export of 5,000 MTs per annum of Organic Wheat, duly certified by APEDA. (iii) Export of wheat made free w.e.f. 09.09.2011. Such export will be only through EDI ports. Export is also allowed through non-EDI Land Custom Stations (LCS) on Indo-Bangladesh and Indo-Nepal border subject to registration of quantity with DGFT. (iv) Through Notification No. 87 dated 05.12.2011, exemption has been given for export of 24,000 MTs per annum of wheat to Bhutan.
(ii) Grain length of 6.61 mm and length to breadth(L/B) ratio of 3.5 mm has been notified for export of Basmati rice vide Notification No. 57/2009-14 dated 17.08.2010. (This was earlier Grain length of 7 mm and length to breadth(L/B) ratio of 3.6 mm). (iii) PUSA-1121 variety of non-basmati rice was categorized as ‘Basmati rice’ and it became exportable as basmati rice subject to applicable conditions. (iv) Export of Basmati rice has been permitted from all EDI ports vide Notification No. 97 dated 21.02.2012. (Earlier it was permitted only through the ports of Kandla, Kakinada, Kolkata, JNPT, Mundra and Pipavav).
6. Wheat Products
(i) Vide Notification No. 116 dated 3.7.2009 (amended by Notification No. 41 dated 18.05.2010 and Notification No. 61 (RE2010)/2009-14 dated 20.07.2011) export of Wheat Flour (Maida), Semolina (Rava / Sirgi), Wholemeal atta and Resultant Atta was permitted freely subject to a limit of 6,50,000 MTs from 3.7.2009 to 31.3.2012 only from Customs EDI Ports. This permission has been extended upto 31.3.2013 through Notification No. 110 dated 02.04.2012.
(i) Vide notification No. 15 (RE-2006)/20042009 dated 27th June, 2006 export of pulses had been prohibited initially for a period of six months but extended till 31.3.2007 vide Notification No. 17 dated 3.7.2006.
(ii) Export of pulses (except Kabuli Chana and 10,000 MTs per annum of Organic Pulses, duly certified by APEDA) is prohibited till 31.3.2013 (Vide Notification No.109 dated 27.03.2012). (iii) Export of pulses to Sri Lanka under specific permission granted by DGFT is exempted from ban. (iv) Through Notification No. 87 dated 05.12.2011, exemption has been given for export of 1200 MTs per annum of pulses to Bhutan.
(ii) Wheat or Meslin Flour, ITC (HS) Code 1101 has been exempted from restriction/ban vide Notification No. 31(RE-2012)/2009-14 dated 04.02.2013.
7. Cotton Yarn
(i) Export of cotton yarn was subjected to registration of contracts with the Textile Commissioner prior to shipment through Notification No. 38 dated 09.04.2010.
(ii) Export of Cotton Yarn (Tariff code 5205, 5206 & 5207) was “Restricted” vide Notification No. 14 dated 22.12.2010.
External Sector and India’s Foreign Trade Policy (FTP) 2009-14 Krishnapuram onion was allowed for export through 13 National/State level cooperative marketing federations subject to MEP fixed by NAFED. (ii) Export of onion including Bangalore rose onion and Krishnapuram onion was prohibited through Notification No. 13 dated 22.12.2010. (iii) Through Notification No. 24 dated 18.2.2011, the ban on export of onion including Bangalore rose onion and Krishnapuram onion was removed and was allowed for export through 13 National/State level cooperative marketing federations subject to Minimum Export Price (MEP) fixed by DGFT from time to time. (iv) Export of all varieties of onions including Bangalore rose onion and Krishnapuram onion was again prohibited w.e.f. 09.09.2011. (v) Ban on export of onion including Bangalore rose onion and Krishnapuram onion was removed through Notification No. 75 dated 20.09.2011 and it was allowed for export through 13 National/State level cooperative marketing federations subject to MEP fixed by DGFT from time to time. (vi) Through Notification No. 116 dated 08.05.2012 export of onion was allowed without Minimum Export Price till the midnight of 02.07.2012 which has been extended till further orders through Notification No. 3 dated 29.06.2012. (vii) Value Added products of onion ITC (HS) Code 0712 has been exempted from restriction/ ban vide Notification No. 31(RE-2012)/200914 dated 04.02.2013.
(iii) Export of Cotton Yarn (Tariff code 5205, 5206 & 5207) has been made free subject to registration of contracts with DGFT with effect from 1.4.2011 through Notification No. 40 dated 31.3.2011.
(i) Export of cotton under ITC(HS) code 5201 & 5203 was prohibited as per Notification No. 102 dated 05.03.2012. The ban was revoked through Notification No. 106 dated 12.03.2012. Presently export of cotton is free subject to registration of contract with DGFT as per Notification No. 17 dated 01.10.2012 (amended by Notification No. 26 dated 30.11.2012).
(ii) Export of cotton waste ITC(HS) code 5202 has been made free w.e.f. 01.10.2011 as per Notification No. 78 dated 10.10.2011. Requirement of registration of contract for export of cotton waste has been dispensed with. (iii) Export of 5,000 bales of Assam Comilla cotton has been exempted from any restrictions on export of cotton subject to registration of contract with DGFT vide Notification No. 18 dated 01.10.2012.
(i) With effect from 01.01.2009 export of sugar was free subject to release order from the Directorate of Sugar, Department of Food & Public Distribution, Govt. of India.
(ii) Exemption has been given from the requirement of obtaining release orders from Directorate of Sugar for export of 10,000 MTs per annum of Organic Sugar, duly certified by APEDA. (iii) With effect from 14.05.2012 export of sugar is free subject to registration of quantity with DGFT.
Milk & Milk Products
(i) Export of milk and milk products was free till 18.02.2011.
(i) Upto December, 2010, the export of onion including Bangalore rose onion and
(ii) Export of milk powders (Skimmed Milk Powders, Whole Milk Powders, Dairy Whitener, Infant Milk Foods etc.), Casein
Annual Report 2012-13
and Casein Derivative was prohibited till further orders vide Notification No. 23 of 18.02.2011. Transitional arrangements under para 1.5 of Foreign Trade Policy were also made inapplicable on export of milk powders (Skimmed Milk Powders, Whole Milk Powders, Dairy Whitener, Infant Milk Foods etc.), Casein and Casein Derivative through Notification No. 25 of 24.02.2011. (iii) Through Notification No. 87 dated 05.12.2011, exemption has been given for export of 1600 MTs per annum of milk powders to Bhutan. (iv) Ban on export of casein and casein products was removed vide Notification No. 112 dated 01.05.2012 and it became exportable under licence. Casein and casein products ITC (HS) Code 3501 has been exempted from restriction/ban vide Notification No. 31 (RE-2012)/2009-14 dated 04.02.2013. (v) Export of Skimmed Milk Powders (SMP) was made free vide Notification No. 2 dated 08.06.2012.
Trends of authorizations issued under Export Promotion & duty neutralization scheme of Foreign Trade Policy during the period AprilNovember, 2012
During the period April 2012 – November 2012, a total of 1,27,726 authorisations having CIF/ Duty credit value of Rs. 1,95,531 crores and FOB/Export obligation of Rs. 4,78,622 crores have been issued. This represents a decrease of 28.9% in number, an increase of 3.1% in CIF/Duty credit value and further a decrease of 22.9% in FOB value/EO over the corresponding period of last year. A statement on total number of authorizations issued and their CIF/Duty credit & FOB values during April, 2012-November, 2012 and during the corresponding period of last year is given in Table-4.1.
External Sector and India’s Foreign Trade Policy (FTP) 2009-14
Table 4.1 Number and Value of various categories of Authorizations issued during April - November 2012 and its Comparison with Authorizations issued during April - November 2011
Category Advance Authorisation Advance Authorisation for Annual Requirements DEPB-Post Export DFRC for Deemed Export Served from India scheme DFCE for Status Holder Duty Free Import Authorisation (DFIA) Duty Free Replenishment Certificate Import licence for negative list of import items Target Plus Scheme Focus Market Scheme Focus Product Scheme Vishesh Krishi and Gram Udyog Yojana EPCG Concessional Duty 03% Zero duty EPCG Scheme Status Holder Incentive Scrip Gem & Jewellery TOTAL 2011-12 April 2011 to November 2011 Number 12722 66 90059 1 1101 1 2273 CIF / Duty credit (Rs. Crore) 120286 30046 8251 25 813 1 8512 FOB (Rs. Crore) 153770 32925 188244 33 15 0 10542 2012-13 April 2012 to November 2012 Number 12413 73 23274 0 1322 0 1898 CIF / Duty credit (Rs. Crore) 128146 7395 1276 0 982 0 5677 FOB (Rs. Crore) 160495 8628 31061 0 1 0 8555
946 31 5450 34589 15065 9075 4349 874 26 179628
6443 22 596 2232 1515 5556 5043 352 6 189699
0 0 20431 80328 33702 39422 25616 35729 54 620811
866 11 12379 48151 12667 9590 2946 2079 52 127726
36439 9 1062 3324 1697 5270 3767 367 117 195531
0 0 30573 127669 41369 45364 23112 1130 661 478622
Annual Report 2012-13
Comparative picture of authorizations issued & their CIF values during the period April-November for the years 2011-12 & 2012-13 is depicted through charts –4.1 & 4.2. Percentage share of authorizations issued & their CIF value by category during April-November, 2012 is depicted through charts 4.3 & 4.4. Chart 4.1 Comparative Picture of Authorizations issued during April-November 2012 vs April-November 2011
Chart 4.2 Comparative Picture of Value of Authorizations issued during April-November 2011 vs. April-November 2010
External Sector and India’s Foreign Trade Policy (FTP) 2009-14
Chart 4.3 Percentage Share of Authorizations by Category issued during April-November 2011
Chart 4.4 Percentage Share of Value of Authorizations by Category issued during April-November 2011
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