NEW FOREIGN TRADE POLICY (FTP) AIMS 900 BILLION EXPORTS BY 2020

A BANE OR BOOST?

A Comment on FTP 2015-2020 – By A Sathyanarayana – Trade Expert

Amidst falling exports, widening balance of payments account, the New Foreign Trade Policy (FT) was notified on 1st April, 2015 by DGFT. The policy emphasizes the need to simplify the licensing system and procedures to boost exports. Many salient features of the policy are welcome, but mostly bureaucratic and not in line with “Make in India” slogan of this Government,

Reward Scrip scheme simplified and merged into a single scheme with now only MEIS (Merchandise Exports from India Scheme) put in place. There would be no conditionality attached to the scrips issued under the scheme. The country groupings and the products supported for this scheme do not correlate with each other. The dispensation given towards basic customs duty and adjustment as duty drawback are worthy to mention in the new FTP. The definition of SEIS (Service Exports from India Scheme) has been widened to apply “service providers located” in India instead of earlier Indian Service Providers regardless of the constitution or profile of the service provider, the moot question is that licensing authorities should not insist upon IEC number for this purpose, if this is made clear, the ease to do business concept will realize its objective. MEIS & SEIS incentives are extended to SEZ units, it is not clear how this SEIS benefit can be availed by SEZ units. Basic Customs Duty paid in cash or through debit under Duty Credit Scrip can be taken back as Drawback if inputs imported are used for exports is indeed a welcome step, but the paper work relating to this should have been streamlined further.

The Status Holders policy good to show up in FTP, yet, the question of how changing the Rupee value to US dollar earnings for granting Status like Export House, Star Export House etc will benefit, is not addressed properly.

One of the major and note worthy schemes of this new FTP is Approved Exporter Scheme – Self certification by Status Holders . They are now allowed to self-certify their manufactured goods as originating from India to qualify for preferential treatment under different PTA agreements etc. But this does not do away with Certificate of Origin requirement which is mandatory under these agreements, unless this is amended, the new facility of self-certification is of any use, rather useless.

The reduced export obligation under EPCG scheme in case capital goods are bought from local manufacturers which is currently 90%, now reduced to 75% is a step in right direction, however, the percentage of benefit under this scheme is still minimal compared to the value of foreign exchange outgo on account of procuring these Capital Goods from overseas.

The revamping of EPCG scheme by simplifying procedures/processes, digitization will be a great relief to EPCG licence holders. The CE (Chartered Engineer) certificate from an independent CE has been removed and maintaining records for a period 2 years by the EPCG Authorization Holders would relieve them greatly.

Although holding an IEC number is a status symbol for exporters and importers, it is felt by the common man that IEC should be simply granted on the basis PAN card and easing from submitting applications, verifications etc. This starting point for exports or imports should begin with easiest way of obtaining IEC numbers, which should pave the way for the rest of the export import process to ease further as the exporter and importer moves into doing business.

Further, any product which is grown in India and not used within India must be freely allowed to be exported. For example, Red Sanders which is highest priced wood available in South India in plenty, neither this wood is used within India nor gives any utility to the areas where this is grown. This wood has plenty of demand in China, Japan, Germany, Taiwan etc with local selling price until recently Rs.1 crore per ton. This wood species under the pretext of falling under CITES group is unnecessarily restricted to export. Recently some legislations passed in Andhra Pradesh, Tamil Nadu allows anyone to grow these trees, but they are not allowed to harvest. Such a legislation is useless especially when agro-crops are permitted to export. The Government of India should prevail upon the CITES organisation to remove Red Sanders (Pterocarpus Santalinus) from Appendix 2 . This major amendment can give India a whopping USD 40 million Dollars every year. In fact, if Government is serious about achieving 900 billion export target by 2020, easing Red Sanders export will fulfil this promise and it will also contribute to the “ make in India” indirectly.. China is the largest buyer of red sanders followed by Japan, Taiwan, US and Germany.

The other new initiatives proposed for EOUs, EHTPs and STPs are expected to help exports to go up in these categories of stakeholders. Steps taken to push up and encourage export of defence exports still needs much more. The Advance Authorisation export obligation extended in this category exporters should have been made 36 months instead of 24 months. Defence export obligation fulfilment is time consuming for various reasons which are practically difficult to curtail.

The DFTP scheme which extends basic customs duty exemption to nearly 33 countries as Least Developed Countries. In fact, the UN –OHRLLS notified 48 countries Government of India should approach rest of the countries to submit their applications for this facility to the Commerce Ministry. The import levies under this facility is enormous and many importers are unaware this great facility. Government should give wide publicity so that importers can avail this facility and offer lower prices of commodities which will bring down inflation. It must be remembered, the outgo of foreign exchange when imported from these LDCs are also minimal as compared to HDCs (Highly Developed Countries) because the export prices in these countries are much lower for the local reasons such as lower labor costs , less paper work, easy access to smaller ports of despatch etc.

The Chapter on Complaints and Trade Disputes has been redefined, however, there must a provision to punish all those exporters and importers involved in scams also.

The FTP partly addresses the internal factors, exporters face high operational and transactional costs, complex tax regime, high interest rates, inadequate incentives and difficulty in availing incentives, difficult custom procedures, further, like labour laws and tedious transportation processes and harassment by officials. In my opinion, concerted efforts should be directed towards conceptualizing more sensitive export-friendly policies based on the realities at the ground level. It may be recalled inspite of global slowdown India’s exports stood at US$314bn in 2013-14, now the global scenario of foreign trade gone drastically with falling oil prices, sluggish commodity prices, many more weak economic factors, it is now mind boggling question, how the new FTP can achieve USD 900 Billion by 2020 remains to be seen.