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India is looked upon as a country with immense resources available through its length and breadth. By the time India gained Independence from the Britishers in 1947, the economy was entirely geared to only trade. There were hardly any manufacturing facilities to suffice the needs of the growing Indian population. The past couple of decades in the history of Indian Trade have seen the country struggle to create manufacturing capacities across the board to be self sufficient. The government has been focusing on the same to enable broad basing the development to move the economy from an underdeveloped status to being a developed nation. India today stands at an over a trillion economy. Darjeeling tea, Indian khadi cotton, Bombay Duck, Kashmiri carpets, Indian spices and dry fruit are just a few of the famous gifts India has given to the world. The economic levels have improved in the urban and semi-urban areas. With economic reforms, globalisation of the Indian economy has been the guiding factor in formulating the trade policies. The reform measures introduced in the subsequent policies have focused on liberalization, openness and transparency. They have provided an export friendly environment by simplifying the procedures for trade facilitation. The announcement of a new Foreign Trade Policy for a five year period, replacing the hitherto nomenclature of EXIM Policy by Foreign Trade Policy (FTP) is another step in increasing foreign trade. It takes an integrated view of the overall development of India’s foreign trade and provides a roadmap for the development of this sector. A vigorous export-led growth strategy of doubling India’s share in global merchandise trade, with a focus on the sectors having prospects for export expansion and potential for employment generation, constitute the main plank of the policy. All such measures are expected to enhance India's international competitiveness and aid in further increasing the acceptability of Indian exports. The policy sets out the core objectives, identifies key strategies, spells out focus initiatives, outlines export incentives, and also addresses issues concerning institutional support including simplification of procedures relating to export activities. The key strategies for achieving its objectives include:
Unshackling of controls and creating an atmosphere of trust and transparency; Simplifying procedures and bringing down transaction costs;
Neutralizing incidence of all levies on inputs used in export products; Facilitating development of India as a global hub for manufacturing, trading and services; Identifying and nurturing special focus areas to generate additional employment opportunities, particularly in semi-urban and rural areas;
Facilitating technological and infrastructural upgradation of the Indian economy, especially through import of capital goods and equipment;
Avoiding inverted duty structure and ensuring that domestic sectors are not disadvantaged in trade agreements;
Upgrading the infrastructure network related to the entire foreign trade chain to international standards;
Revitalizing the Board of Trade by redefining its role and inducting into it experts on trade policy; and
Activating Indian Embassies as key players in the export strategy.
2.0 FOREIGN TRADE POLICY 2009-2014
The UPA Government has assumed office at a challenging time when the entire world is facing an unprecedented economic slow-down. The year2009 is witnessing one of the most severe global recessions in the post-war period. Countries across the world have been affected in varying degrees and all major economic indicators of industrial production, trade, capital flows, unemployment, per capita investment and consumption have taken a hit.Though India has not been affected to the same extent as other economies of the world, yet our exports have suffered a decline in the last 10 months due to a contraction in demand in the traditional markets of our exports. After four clear quarters of recession there is some sign of a turnaround and the emergence of ‘green shoots’.Announcing a Foreign Trade Policy in this economic climate is indeed a daunting task. We cannot remain oblivious to declining demand in the developed world and we need to set in motion strategies and policy measures which will catalyse the growth of exports.
The short term objective of our policy is to arrest and reverse the declining trend of exports and to provide additional support especially to those sectors which have been hit badly by recession in the developed world. We would like to set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% per annum. By 2014, we expect to double India’s exports of goods and services. The long term policy objective for the Government is to double India’s share in global trade by 2020.
In order to meet these objectives, the Government would follow a mix of policy measures including fiscal incentives, institutional changes, procedural rationalization, enhanced market
access across the world and diversification of export markets. Improvement in infrastructure related to exports; bringing down transaction costs, and providing full refund of all indirect taxes and levies, would be the three pillars, which will support to achieve this target. We need to encourage value addition in our manufactured exports to take an initiative to diversify our export markets and offset the inherent disadvantage for our exporters in emerging markets to deepen our trade engagement with other major economic groupings in the world. The Government seeks to promote Brand India through six or more ‘Made in India’ shows to be organized across the world every year. In the era of global competitiveness, there is an imperative need for Indian exporters to upgrade their technology and reduce their costs. The status holders will be permitted to import capital goods duty free (through Duty Credit Scripts equivalent to 1% of their FOB value of exports in the previous year), of specified product groups. For upgradation of export sector infrastructure, ‘Towns of Export Excellence’ and units located therein would be granted additional focused support and incentives. The policy is committed to support the growth of project exports. We would like to encourage production and export of ‘green products’ through measures such as phased manufacturing programme for green vehicles, zero duty EPCG scheme and incentives for exports. To enable support to Indian industry and exporters, especially the MSMEs, in availing their rights through trade remedy instruments under the WTO framework, we propose to set up a Directorate of Trade Remedy Measures. In order to reduce the transaction cost and institutional bottlenecks, the e-trade project would be implemented in a time bound manner to bring all stake holders on a common platform. Additional ports/locations would be enabled on the Electronic Data Interchange over the next few years. An Inter-Ministerial Committee has been established to serve as a single window mechanism for resolution of trade related grievances.
OF FOREIGN TRADE POLICY 2009-2014
3.1 HIGHER SUPPORT FOR PRODUCT AND MARKET DIVERSIFICATION
India’s export to developed countries faced a declining trend in this period. To insulate Indian exports from the decline in demand from developed countries, in this policy focus is on diversification of Indian exports to other markets, especially those located in Latin America, Africa, parts of Asia and Oceania. The main area of changes has been mentioned below. 1. Incentive schemes under Chapter 3 have been expanded by way of addition of new products and markets. 2. 26 new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 10 in Asia-Oceania. 3. The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%. 4. The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%. 5. A large number of products from various sectors have been included for benefits under FPS. These include, Engineering products (agricultural machinery, parts of trailers, sewing machines, hand tools, garden tools, musical instruments, clocks and watches, railway locomotives etc.), Plastic (value added products), Jute and Sisal products, Technical Textiles, Green Technology products (wind mills, wind turbines, electric operated vehicles etc.), Project goods, vegetable textiles and certain Electronic items. 6. Market Linked Focus Product Scheme (MLFPS) has been greatly expanded by inclusion of new products. Some major products include; Pharmaceuticals, Synthetic textile fabrics, value added rubber products, value added plastic goods, textile made ups, knitted and crocheted fabrics, glass products, certain iron and steel products and certain articles of aluminium among others. Benefits to these products will be provided, if exports are made to 13 identified markets.
7. MLFPS benefits also extended for export to additional new markets for certain products. These products include auto components, motor cars, bicycle and its parts, and apparels among others. 8. A common simplified application form has been introduced for taking benefits under FPS, FMS, MLFPS and VKGUY. 9. Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) schemes is being provided.
3.2 TECHNOLOGICAL UPGRADATION
In the era of global competitiveness, there is a vital need for Indian exporters to upgrade their technology and reduce their costs. Accordingly, an important element of the Foreign Trade Policy is to help exporters for technological upgradation. Technological upgradation of exports is sought to be achieved by promoting imports of capital goods for certain sectors under EPCG at zero percent duty. Under the present Foreign Trade Policy, Government recognizes exporters based on their export performance and they are called ‘status holders’. For technological upgradation of the export sector, these status holders will be permitted to import capital goods (through Duty Credit Scrips equivalent to 1% of their FOB value of exports in the previous year) of specified product groups duty free. This will help them to upgrade their technology and reduce cost of production. Jaipur, Srinagar and Anantnag have been recognised as ‘Towns of Export Excellence’ for handicrafts; Kanpur, Dewas and Ambur have been recognised as ‘Towns of Export Excellence’ for leather products; and Malihabad for horticultural products. The policy is committed to support the growth of project exports. A high level coordination committee is being established in the Department of Commerce to facilitate the export of manufactured goods / project exports creating synergies in the line of credit extended through EXIM Bank for new and emerging markets. (‘Towns of Export Excellence’- Selected towns producing goods of Rs. 1000 crore or more will be notified as Towns of Exports Excellence on the basis of potential for growth in exports. However for the Towns of Export Excellence in the Handloom, Handicraft, Agriculture and Fisheries sector, the threshold limit would be Rs 250 crores.)
A number of initiatives have been taken in this Policy to focus on technological upgradation; such initiatives include: 1. EPCG Scheme at zero duty has been introduced for certain engineering products,
electronic products, basic chemicals and pharmaceuticals, apparel and textiles, plastics, handicrafts, chemicals and allied products and leather and leather products. (Export Promotion Capital Goods Scheme- The scheme allows import of capital goods for pre production, production and post production 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 of licence. Capital goods would be allowed at 0% duty for exports of agricultural products and their value added variants) 2. 3. The existing 3 % EPCG Scheme has been considerably simplified, to ease its usage by To encourage value added manufacture export, a minimum 15 % value addition on the exporters. imported inputs under Advance Authorisation Scheme has been stipulated. (Advance Authorisation Scheme- Advance Authorisation is issued to allow duty free Import Exports of inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed/utilised in the course of their use to obtain the export product, may also be allowed under the scheme) 4. 5. A number of products including automobiles and other engineering products have been Steps to encourage Project Exports shall be taken. included for incentives under Focus Product, and Market Linked Focus Product Schemes.
3.3 STATUS HOLDERS
To accelerate exports and encourage technological upgradation, additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports. The duty credit scrips can be used for procurement of capital goods with Actual User condition. This facility shall be available for sectors of leather (excluding finished leather), textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals in primary and intermediate form, automobiles & two wheelers, nuclear reactors & parts, and ships, boats and floating structures),
plastics and basic chemicals (excluding pharma products) [subject to exclusions of current beneficiaries under Technological Upgradation Fund Schemes (TUFS)]. This facility shall be available upto 31.3.2011.
3.4 MARINE SECTOR
Fisheries have been included in the sectors which are exempted from maintenance of average EO under EPCG Scheme, subject to the condition that Fishing Trawlers, boats, ships and other similar items shall not be allowed to be imported under this provision. This would provide a fillip to the marine sector which has been affected by the present downturn in exports. Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders has been given to Marine sector.
3.5 FREE TRADE & WAREHOUSING ZONES
The objective is to create trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in free currency. The scheme envisages creation of world-class infrastructure for warehousing of various products, state-of-the-art equipment, transportation and handling facilities, commercial office-space, water, power, communications and connectivity, with one-stop clearance of import and export formality, to support the integrated Zones as ‘international trading hubs’. These Zones would be established in areas proximate to seaports, airports or dry ports so as to offer easy access by rail and road. The Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing.
3.6 TEA SECTOR
The Minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%. Domestic Tariff Area(DTA) sale limit of instant tea by Export Oriented Units(EOU) units has been increased from the existing 30% to 50%. Export of tea has been covered under Vishesh Krishi and Gram Udyog Yojana (VKGUY) Scheme benefits. Under this scheme, exporters are entitled to 5 per cent duty credit scrip on the export value of the consignment. Duty scrip benefits are granted with an aim to compensate high transport costs.
3.7 PHARMACEUTICAL SECTOR
Export Obligation Period for advance authorizations issued with 6-APA(Additional Personal Allowance) as input has been increased from the existing 6 months to 36 months, as is available for other products. Pharma sector extensively covered under Market Linked Focus Product Scheme (MLFPS) for countries in Africa, Latin America and some countries in Oceania and Far East.
3.8 HANDLOOM SECTOR
The requirement of ‘Handloom Mark’ for availing benefits under Focus Prodoct Scheme(FPS) has been removed to simplify claims under FPS.
• As per the FTP 2004-09, new handicraft SEZ shall be set up which would procure products from cottage sector and then the finishing will be done for exporting. • Duty – free import entitlement of tools, trimmings and embellishments is 5% of Free on Board (FOB) value of exports during previous financial year. (remains unchanged from FTP 2004-09) • Handicraft Export Promotion Council is authorized to import trimmings, embellishments and consumables on behalf of those exporters for whom directly importing may not be viable. (remains unchanged from FTP 2004-09) • Specific funds are earmarked under Market Access Initiative (MAI) & Market Development Assistance (MDA) Schemes for promoting Handicraft exports. (remains unchanged from FTP 2004-09) • Countervailing Duty is exempted on duty free import of trimmings, embellishments and consumables.
New towns of export excellence with a reduced threshold limit of Rs 150 crore (Rs 250 cr. in FTP 2004-09) shall be notified.
Machinery and equipment for effluent treatment plants are exempt from customs duty. All handicrafts exports would be treated as special focus products and entitled to higher incentives.
3.10 SPORTS GOODS AND TOYS
• • Newly added into the special focus initiatives. Duty free import of specified specialized inputs allowed to the extent of 3% of FOB value of preceding financial year’s export. • Sports goods and toys shall be treated as a Priority sector under MDA/MAI Scheme. Specific funds would be earmarked under MAI/ MDA Scheme for promoting exports from this sector. • Applications relating to Sports Goods and Toys shall be considered fast track clearance by Director General of Foreign Trade (DGFT). • Sports Goods and Toys are treated as special focus products and entitled to higher incentives.
3.11 EPCG SCHEME RELAXATIONS, SUPPORT FOR GREEN PRODUCTS AND PRODUCTS FROM NORTH EAST
EPCG SCHEME RELAXATIONS EPCG stands for export promotion capital goods. EPCG scheme allows import of capital goods for pre production, production and post production at 3% Customs duty (compared to 5% customs duty in 2004 EXIM policy), subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 8 years reckoned from Authorisation issue-date.
The main focus is on:
To increase the life of existing plant and machinery, export obligation on import of spares, moulds etc.
EPCG Scheme has been reduced to 50% of the normal specific export obligation. The facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country, has been extended for the 5 year Policy period 2009-14.
3.12 EXPORT ORIENTED UNIT
The Export Oriented Units (EOUs) scheme, introduced in early 1981, is complementary to the SEZ scheme. It adopts the same production regime but offers a wide option in locations with reference to factors like source of raw materials, ports of export, hinterland facilities, availability of technological skills, existence of an industrial base and the need for a larger area of land for the project. As on 31st December 2005, 1924 units are in operation under the EOU scheme. The main objectives of the EOU scheme is to increase exports, earn foreign exchange to the country, transfer of latest technologies stimulate direct foreign investment and to generate additional employment.Currently EOU scheme is mentioned in the Chapter 6 of the Foreign Trade Policy (2009-2014), Volume-I (HOP). The EOUs can export all products except prohibited items of exports in ITC (HS). Recent Policy Changes in the EOUs Scheme
EOUs have been allowed to sell products manufactured by them in DTA upto a limit of 90% instead of existing 75%, without changing the criteria of ‘similar goods’, within the overall entitlement of 50% for DTA sale.
To provide clarity to the customs field formations, DOR shall issue a clarification to enable procurement of spares beyond 5% by granite sector EOUs. EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.
During this period of downturn, Board of Approvals (BOA) to consider, extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs. EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education Cess on DTA sale.
3.13 SUPPORT FOR GREEN PRODUCTS AND PRODUCTS FROM NORTH EAST
It emphasises on encouraging production and export of green products through measures such as phased manufacturing programme for green vehicles, zero duty EPCG scheme and incentives for exports. It focuses on Product Scheme benefit extended for export of ‘green products’; and for exports of some products originating from the North East.
3.14 THRUST TO VALUE ADDED MANUFACTURING
To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme has now been prescribed. Coverage of Project Exports and a large number of manufactured goods under FPS and MLFPS.
3.15 WAIVER OF INCENTIVES RECOVERY, ON RBI SPECIFIC WRITE OFF
In cases, where RBI specifically writes off the export proceeds realization, the incentives under the FTP shall now not be recovered from the exporters subject to certain conditions.
3.16 SIMPLIFICATION OF PROCEDURES
Foreign trade policy of 2009-2014 simplified some of the complex procedures existed in the earlier policies they are listed below.To facilitate duty free import of samples by exporters, number of samples or pieces has been increased from existing 15 to 50. Customs clearance of such samples shall be based on declarations given by the importers, which specify the limit of value and quantity of samples.
To allow exemption for up to two stages from payment of excise duty in lieu of refund, in case of supply to an advance authorization holder (against invalidation letter) by the domestic intermediate manufacturer. It would allow exemption for supplies made to a manufacturer, if such manufacturer in turn supplies the products to an ultimate exporter. At present, exemption is allowed upto one stage only. Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export Promotion scheme to other scheme. Customs shall now permit this conversion within three months, instead of the present limited period of only one month. To reduce transaction costs, dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorisation scheme for deemed supplies. At present, the duty free imported goods could be taken only to the manufacturing unit of the authorisation holder or its supporting manufacturer. Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty, even before fulfillment of export obligation under Advance Authorisation and EPCG Scheme. Regional Authorities have now been authorised to issue licences for import of sports weapons by ‘renowned shooters’, on the basis of NOC from the Ministry of Sports & Youth Affairs. Now there will be no need to approach DGFT (Hqrs.) in such cases. The procedure for issue of Free Sale Certificate has been simplified and the validity of the Certificate has been increased from 1 year to 2 years. This will solve the problems faced by the medical devices industry. Automobile industry, having their own R&D establishment, would be allowed free import of reference fuels (petrol and diesel), up to a maximum of 5 KL per annum, which are not manufactured in India.
Acceding to the demand of trade & industry, the application and redemption forms under EPCG scheme have been simplified.
3.17 EXPORT OF GOODS
This is included only in Foreign Trade Policy 2004-2009 and not in 2009-2014 policy.
scheme called ‘Target Plus Scheme’ introduced. Exporters to be entitled to duty free
credit based on incremental exports for 2004-05. For incremental growth of over 20 per cent, 25 per cent and 100 per cent, the duty free credits would be 5 per cent, 10 per cent and 15 per cent of Free on Board (FOB) value of incremental exports.
Entitlement Pass Book (DEPB) scheme to be continued until a new scheme is drawn up
in consultation with exporters.
of categorization of status holders as ‘Star Export Houses’ rationalized and categories
from ‘One Star Export House’ to ‘Five Star Export House’ introduced. FREE ON BOARD (FOB) When a seller is asked to quote his FOB price, it means that (s)he should give a price that includes the transportation and loading costs of goods that are to be supplied to the destination from where the buyer bears the rest of the costs like the unloading costs etc. This simply means that the seller assumes the risks of the goods till it is loaded on to the mode of transportation (e.g. Ship). After the goods have been loaded, from there on the risks are borne by the buyer. TARGET PLUS SCHEME ‘Target Plus Scheme’ has been introduced to accelerate the growth of exports. Status Holders who have achieved a quantum growth in exports would be entitled to duty free credit based on incremental exports substantially higher than the general actual export target fixed. (Since the target fixed for 2004-05 is 16 percent, the lower limit of performance for qualifying for rewards is pegged at 20 percent for the current year). Government has modified Target Plus Scheme for exports during 2005-06 by providing duty credit benefits at 5% of incremental exports, removing petroleum, cereals, ores, sugar and gems & jewellery from purview of the scheme, and by
lowering eligibility criteria to Rs.5 crore from Rs.10 crore. After being in operation for exports during 2004 05 and 2005-06, Target Plus Scheme has been abolished for exports from 1/4/2006 onwards.
3.18 EXPORT OF SERVICES
This is included only in Foreign Trade Policy 2004-2009 and not in 2009-2014 policy.
Free Credit Entitlement Certificate (DFEC) Scheme for service providers revamped /re-
cast into the Served from India Scheme.
goods including spares, office equipment and professional equipment, office furniture
and consumables for use in main line of business eligible for import against DFEC.
service providers who had foreign exchange earnings of at least INR 5 lakhs in the
preceding financial year and other service providers who had foreign exchange earnings of at least INR 10 lakhs in the preceding or current financial year, to be eligible for a duty credit entitlement of 10 per cent of foreign exchange earned by them in the preceding financial year.
and Educational Institutions also eligible for duty credit entitlement.
Services Export Promotion Council to be set up. to promote establishment of Common Facility Centres for use by home-based
service providers, particularly in areas like engineering and architectural design, multi- media operations, software developers etc., in State and District-level towns.
of installation certificate from Central Excise Office done away with in case of
imports of movable capital goods by service providers under Export Promotion Capital Goods (EPCG) Scheme.
3.19 COMMON FOR EXPORT OF GOODS AND SERVICES
This is included only in Foreign Trade Policy 2004-2009 and not in 2009-2014 policy.
license can also be used for import of capital goods for supply to specified notified
of second-hand capital goods to be permitted without any age restrictions. Minimum
depreciated value for plant and machinery to be relocated into India reduced from Rs.50 crores to Rs.25 crores.
exporters with minimum turnover of Rs.5 crores and good track record to be exempt from
furnishing bank guarantee in any of the schemes.
goods and services exported, including those from Domestic Tariff Area (DTA) units, to
be exempt from Service Tax (Notification from Finance Ministry is awaited).
Oriented Units (EOUs) to be exempted from Service Tax in proportion of export of
goods and services (Notification from Finance Ministry is awaited).
to be permitted to retain 100 per cent of export earnings in Export Earners Foreign
Currency (EEFC) accounts.
Tax benefits on plant and machinery to be extended to DTA units, which convert to
Parks to be set up and granted all facilities of 100 per cent EOUs.
of filing digitally signed applications and use of Electronic Fund Transfer Mechanism
for paying application fees made available to exporters.
of all licenses/entitlements issued under various schemes modified to a uniform
period of 24 months. These are not provided in the foreign trade policy 2009-14.
3.20 GEMS AND JEWELLERY SECTOR
(a) To neutralize duty incidence on gold Jewellery exports, it has now been decided to allow Duty Drawback on such exports. (b) In an endeavor to make India a diamond international trading hub, it is planned to establish “Diamond Bourse (s)”. (c) A new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification purposes has been introduced. (d) To promote export of Gems & Jewellery products, the 13value limits of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has also been increased from US$ 0.1 million to US$ 1 million.
3.21 AGRICULTURAL SECTOR
Agriculture and industry has shown remarkable resilience and dynamism in contributing to a healthy growth in exports during the year 2009 – 2014. (a) To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multifunctional nodal agencies to be accredited by APEDA. Agricultural sector does not come under the foreign trade policy for 2004 – 2009.
3.22 DUTY ENTITLEMENT PASS BOOK
DEPB (Duty Entitlement Pass Book is an export incentive scheme of Indian Government provided to Exporters in India. It is a Duty Credit Entitlement issued on Post Export Basis to neutralise the incidence of Customs duty on the import content of the export product. Under the DEPB scheme, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. Notified on 1/4/1997, the DEPB Scheme consisted of: (a) Post-export DEPB (b) Pre-export DEPB.
The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book Scheme at a predetermined credit on the FOB value. The DEPB rates is allows import of any items except the items which are otherwise restricted for imports. Items such as Gold Nibs, Gold Pen, Gold watches etc. though covered under the generic description of writing instruments, components of writing instruments and watches are thus not eligible for benefit under the DEPB scheme. The objective of DEPB is to neutralize the incidence of Customs duty on the import content of the export product. Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. TRANSFERABILITY: The DEPB and/or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port 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 or through debit under DEPB shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue.
3.23 FLEXIBILITY PROVIDED TO EXPORTERS:
Payment of customs duty for Export Obligation (EO) shortfall under Advance Authorisation / DFIA / EPCG Authorisation has been allowed by way of debit of Duty Credit scrips. Earlier the payment was allowed in cash only.Import of restricted items, as replenishment, shall now be allowed against transferred DFIAs, in line with the erstwhile DFRC scheme.
Time limit of 60 days for re-import of exported gems and jewellery items, for participation in exhibitions has been extended to 90 days in case of USA. Transit loss claims received from private approved insurance companies in India will now be allowed for the purpose of EO fulfillment under Export Promotion schemes. At present, the facility has been limited to public sector general insurance companies only.
3.24 ELECTRONICS HARDWARE TECHNOLOGY PARK
The Units undertaking to export their entire production of goods and services except permissible sales in Domestic Tariff Area (DTA) may be set up under the Electronics Hardware Technology Park (EHTP). An EHTP unit may export all kinds of goods and services except items that are prohibited in Indian Trade Classification (Harmonised System) Classification for Export &Import Items. An EHTP unit may import and or procure, from DTA or bonded warehouses in DTA / international exhibition held in India, without payment of duty, all types of goods, including capital goods, required for its activities, provided they are not prohibited items of import in the ITC (HS). Goods imported by a unit shall be with actual user condition and shall be utilized for export production. The EHTP units may import / procure from DTA, without payment of duty, certain specified goods for creating a central facility. The EHTP unit shall be a positive net Earnings foreign exchange earner except for sector specific provision of Appendix 14 -I-C of HBP v1, where a higher value addition shall be required. NFE earnings shall be calculated cumulatively in blocks of five years, starting from commencement of production. Whenever a unit is unable to export due to prohibition / restriction imposed on export of any product mentioned in Letter of Permit, the five year block period for calculation of NFE earnings may be suitably extended by Board of Approval. The units manufacturing electronics hardware and software, NFE and DTA sale entitlement shall be reckoned separately for hardware and software.An EHTP unit may export goods manufactured / software developed by it through another exporter or any other EHTP unit subject to conditions The EHTP units shall be entitled to following:19
(i) Reimbursement of Central Sales Tax (CST) on goods manufactured in India.. (ii) Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India. (iii) CENVAT Credit on service tax paid. Other entitlements of EHTP units are as under: (a) Exemption from Income Tax as per Section 10A and 10B of Income Tax Act. (b) Export proceeds will be realized within 12 months. (c) Units will be allowed to retain 100% of its export earnings in the Exchange Earners’ Foreign Currency account. (d) Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA subject to provisions.
3.25 STABILITY | CONTINUITY OF THE FOREIGN TRADE POLICY
To impart stability to the Policy regime following measures are undertaken. 1. 2. 3. 4. Duty Entitlement Passbook (DEPB) Scheme is extended beyond 31-12-2009 till Interest subvention of 2% for pre-shipment credit for 7 specified sectors has been Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of The adjustment assistance scheme initiated in December, 2008 to provide enhanced
31.12.2010. extended till 31.3.2010 in the Budget 2009-10. Income Tax Act has been extended for the financial year 2010-11 in the Budget 2009-10. ECGC cover at 95%, to the adversely affected sectors, is continued till March, 2010.
4.0 PROMOTIONAL MEASURES
4.1 ASIDE- Assistance to States for Developing Export for Infrastructure and Allied Activities .
ASIDE provides assistance to the States Governments for creating appropriate infrastructure for the development and growth of exports. The Scheme is administered by Department of Commerce (DoC).It also provides export performance linked financial assistance to them. The specific purposes for which funds allocated under the Scheme can be sanctioned and utilized are as follows: • • • • Creation of new Export Promotion Industrial Parks/ Zones (SEZs/Agri Business Zones) and augmenting facilities in the existing ones. Setting up of electronics and other related infrastructure in export conclave. Equity participation in infrastructure projects including the setting up of SEZs. Development of complementary infrastructure such as, roads connecting the production centres with the ports, setting up of Inland Container Depots and Container Freight Stations.
• • • •
Stabilizing power supply through additional transformers and islanding of export production centre etc. Development of minor ports and jetties to serve export purpose. Assistance for setting up Common Effluent Treatment facilities and Any other activity as may be notified by DoC.
4.2 MARKET ACCESS INITIATIVE
Under MAI scheme, Financial assistance is provided (MAI) for export promotion activities on focus country, focus product basis. Financial assistance is available for Export Promotion Councils (EPCs), Industry and Trade Associations (ITAs), Agencies of State Government, Indian Commercial Missions (ICMs) abroad and other national level institutions/eligible entities as may be notified. A whole range of activities can be funded under MAI scheme. These include, amongst others, • • • • • • • • • • Market studies/surveys, Setting up of showroom / warehouse, Participation in international trade fairs, Displays in International departmental stores, Publicity campaigns, Brand promotion, Reimbursement of registration charges for pharmaceuticals and expenses for carrying out clinical trials etc., in fulfillment of statutory requirements in the buyer country, Testing charges for engineering products abroad, Assistance for contesting Anti Dumping litigations etc
Each of these export promotion activities can receive financial assistance from Government ranging from 25% to 100% of total cost depending upon activity and implementing agency.
4.3 MARKET DEVELOPMENT ASSISTANCE (MDA)
Under MDA Scheme, financial assistance is provided for a range of export promotion activities implemented by EPCs and Trade Promotion Organizations on the basis of approved annual action plans. The scheme is administered by DOC. Assistance includes, amongst others, participation in: • • Trade Fairs and Buyer Seller meets abroad or in India, and Export promotions seminars. Financial assistance with travel grant is available to exporters traveling to focus areas, viz., Latin America, Africa, CIS region, ASEAN countries, Australia and New Zealand. In other areas, financial assistance without travel grant is available. • MDA assistance is available for exports having an annual export turnover as prescribed in MDA guidelines.
4.4 MEETING EXPENSES FOR STATUTORY COMPLIANCES IN BUYER COUNTRY FOR TRADE RELATED MATTERS
DOC provides for reimbursement of charges/expenses for fulfilling statutory requirements in the buyer country, including registration charges for product registration for pharmaceuticals, biotechnology and agro-chemicals products on recommendation of EPCs.
4. 5 TOWNS OF EXPORT EXCELLENCE
Selected towns producing goods of Rs. 7 0 Crore or more will be notified as TEE based on potential for growth in exports. However for TEE in Handloom, Handicraft, Agriculture and Fisheries sector, threshold limit would be Rs 150 Crores. • Recognized associations of units will be provided financial assistance under MAI scheme, on priority basis, for export promotion projects for marketing, capacity building and technological services. • • Common Service Providers in these areas shall be entitled for EPCG scheme. The projects received from TEEs shall be accorded priority by SLEPC for financial assistance under ASIDE.
4.6.BRAND PROMOTION AND QUALITY
DOC provides funds for capacity building for up-gradation of quality to national level Institutions and EPCs to organize training programmes for the skill improvement of the exporters for quality up-gradation, reduction in rejection, product improvement etc. as provided under the Market Access Initiative (MAI) Scheme of DOC.
4.7 TEST HOUSES
Central Government will assist in modernization and upgradation of test houses and laboratories to bring them at par with international standards.
This year’s Foreign Trade Policy comes at a challenging time as the entire world is facing an unprecedented economic slowdown. These are difficult times and we have set an ambitious goal for ourselves. But if the industry and government work in tandem we will be able to ensure that the Indian exports become globally competitive and we are able to achieve a target which we have set for ourselves.
1. http://pib.nic.in/archieve/ForeignTradePolicy/ForeignTradePolicy.pdf 2. http://www.eximpolicy.com/ 3. http://exim.indiamart.com/foreign-trade-policy/ftp-04-05-highlights.html 4. http://www.infodriveindia.com/Exim/DGFT/Exim-Policy/2009-2014/default.aspx 5. http://www.wooltexpro.com/docs/Highlights_Foreign_Trade_Policy_2009-2014.pdf
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