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What is a foreign trade policy? And what is the difference between an FTP and an Exim policy? It is a policy that lays down the ground rules and also modifies them for carrying out the country’s exports and imports. Apart from prescribing general provisions relating to imports and exports, it also provides special focus initiatives, duty exemption and remission schemes and promotional measures to help exporters compete in the global marketplace. The FTP and the Exim policy are basically two names for the same policy. commerce and industry minister Kamal Nath decided it would be more appropriate to call the policy the foreign trade policy. He argued that it was necessary for the policy to go beyond exports and imports and have an integrated approach to the developmental requirements of India’s foreign trade. The FTP announced last year, like the Exim policies of the previous regime, was for a five-year period. The commerce ministry will make annual revisions to the policy, as was done with the Exim policies of the previous years.
Why is an annual revision necessary? Since international trade is dynamic, market conditions change frequently, requiring quick responses. Five years is a long period for a policy to be continued without incorporating requisite changes. That is why it is revised annually. How is the trade policy is formulated? While the commerce ministry is the nodal ministry for formulating the policy, not much can move without the blessings of the finance ministry. All export promotion, duty exemption and remission schemes require the approval of the finance ministry. Also, the notifications for implementing most of the schemes which entail sacrifice of revenue are passed by the department of revenue. The government has sacrificed more than Rs 41,000 crore of revenue on various export promotion schemes during 2003-04. The revenue foregone in favour of exporters...
Features of New Trade policy
Duty entitlement passbook scheme extended till December 2010 Extension of sops for export-oriented units till March 2011 Export target of $200 billion set for 2010-11 Growth target of 15 percent for next two years, 25 percent thereafter Inter-ministerial group to address issues raised by exporters Obligation under export promotion capital goods scheme relaxed Permission for tax refund scheme for jewellery sector No fee on grant of incentives to cut transaction costs
Steps to help exporters reduce transaction costs Plan for diamond bourses in the country Single-window scheme for farm exports Re-export of unused leather allowed subject to 50 percent duty Minimum value addition for tea reduced to 50 percent from 100 percent Export units allowed to sell 90 percent of goods in domestic market Provision for state-run banks to provide dollar credits Twenty-six new markets added to focus market scheme
Highlights of NFTP
Higher Support for Market and Product Diversification Technological Upgradation EPCG Scheme Relaxations Support for Green products and products from North East Status Holders Stability/ continuity of the Foreign Trade Policy Marine sector Gems & Jewellery Sector Agriculture Sector Leather Sector Tea Pharmaceutical Sector Handloom Sector
EOUs Thrust to Value Added Manufacturing DEPB Flexibility provided to exporters Waiver of Incentives Recovery, On RBI Specific Write off Simplification of Procedures Reduction of Transaction Costs Directorate of Trade Remedy Measures
DEPB Scheme upto December 2010. To encourage value addition in our manufactured exports and towards this end, have stipulated a minimum 15%. 100% export oriented units for one additional year till 31st March 2011. The Government seeks to promote Brand India through six or more ‘Made in India’ shows to be organized across the world every year. Foreign Trade Policy is to help exporters for technological upgradation export sector infrastructure, ‘Towns of Export Excellence’ and units located therein would be granted additional focused support and incentives. 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.
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. Incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%. Incentive available under Focus Product Scheme(FPS) has been raised from 1.25% to 2%. 26 new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 10 in Asia-Oceania. 153 ITC(HS) Codes at 4 digit level Product classified for Market Linked Focus Product Scheme (MLFPS) Focus Product Scheme benefit extended for export of ‘green products’; and for exports of some products originating from the North East. 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. Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of Income Tax Act, has been extended for the financial year 2010-11 in the Budget 2009-10.
In Tea Sector Minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%. DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%. EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education Cess on DTA sale. 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. Duty Free Import of samples by exporters, number of samples/pieces has been increased from the existing 15 to 50. Exemption for up to two stages from payment of excise duty in lieu of refund, in case of supply to an advance authorisation holder (against invalidation letter) by the domestic intermediate manufacturer. Reduce transaction costs, dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorisation scheme for deemed supplies. Free Sale Certificate has been simplified and the validity of the Certificate has been increased from 1 year to 2 years.
Higher Support Diversification
Incentive schemes under Chapter 3 have been expanded by way of addition of new products and markets. 26 new markets have been added under Focus Market Scheme. These include 16 new markets in Latin America and 10 in Asia-Oceania. The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%. The incentive available under Focus Product Scheme(FPS) has been raised from 1.25% to 2%. 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.
Market Linked Focus Product Scheme (MLFPS) hasbeen greatly expanded by inclusion of products classified under as many as 153 ITC(HS) Codes at 4 digit level. Some major products include; Pharmaceuticals, Synthetic textile fabrics, value added rubber products, value added plastic goods, textile madeups, 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 (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia and New Zealand). 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. A common simplified application form has been introduced for taking benefits under FPS, FMS, MLFPS and VKGUY. Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) schemes is being provided.
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