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Exim Policy lifts all QRs on exports

EXIM POLICY

In a major initiative to boost export-led growth, the new five-year Exim Policy lifts all quantitative restrictions on exports, and announces more incentives for Special Economic Zones and schemes like Duty Entitlement Pass Book (DEPB), advance licence, and Export Promotion Capital Goods (EPCG).

The 2002-07 Exim Policy, unveiled by Commerce and Industry Minister Murasoli Maran on Sunday, also provides an incentive package for the hardware sector, simplifies procedures to reduce transaction costs besides adopting new commodity classification for imports and exports.

Coterminous with the Tenth Five-Year Plan, the Policy comes a year after the quantitative restrictions were dismantled on imports.

With the lifting of quantitative restrictions on exports this year, the policy has made a paradigm shift on its focus from import-liberalisation to export-orientation.

In an important decision to make SEZs globally competitive, the overseas banking units will be permitted to be set up in these zones for the first time in India.'' These units would be virtually foreign branches of Indian banks but located in India,'' Maran said.

These OBUs would also be exempt from the normal Reserve Bank of India regulations like the cash reserve ratio and statutory liquidity ratio. They would give the SEZ units access to international finance at global rates.

Targetting 8 per cent gross domestic product growth, Maran said that the policy takes 'radical steps' in line with the medium-term export strategy to fulfill the mission to capture 1 per cent of the global share of trade by 2007, up from the present level of 0.67 per cent.

Translated in value, the projected growth will mean doubling the present exports of $46 billion to more than $80 billion over the Tenth Plan, requiring a compound annual growth rate of 11.9 per cent in dollar terms, he said.

Restrictions like registration requirement, minimum export price or the requirement of export through the state trading regime on whole and infant milk food, butter, wheat and wheat products, coarse grains, groundnut oil and on cashew exports to Russia under the Rupee Debt Repayment Scheme have been removed.

Restrictions on export of all cultivated varieties of seed, except jute and onions have also been removed besides providing transport subsidy to exports of fruits, vegetables, floriculture, poultry, and dairy products, Maran said adding the details would be worked out within three months.

Maran said that units in SEZ would be permitted to undertake hedging of commodity price risks, provided such transactions are undertaken by the units on stand alone basis. This will impart security to the returns of the unit.

Maran also announced 3 per cent special DEPB rate for primary and processed food exported in retail packaging of one kilogram or less.

To promote cottage sector and handicrafts, the Exim Policy announced earmarking of Rs 50 million under market access initiative for exports of khadi products.

With a view to encouraging further development of centers of economic and export excellence such as Tirupur for hosiery, Panipaket, Ludhiana for woollen knitwear, several benefits have been announced for the small-scale sector.

Maran also announced various duty-neutralisation instruments for exports such as DEPB and advance licences.

The changes in respect of advance licence included abolition of duty exemption entitlement certificate, withdrawal of annual advance licence scheme and permission to exporters to avail advance licences for any value.

Regarding DEPB, the value cap exemption would continue and there will be no mid-term reduction of rates except in exceptional circumstances.

EPCG licences of Rs 1 billion or more will have 12-year export obligation period as against eight years earlier with a five-year moratorium, while supplies under deemed exports will be eligible for re-export obligation fulfillment along with deemed export benefits.

The government has offered many sector-specific benefits in the policy. Customs duty on import of rough diamonds has been reduced to zero per cent removing the licensing regime at the same time.

''This should help India emerge as a major international centre for diamonds,'' Maran said.

The value-addition norms for export of plain jewellery has been cut from 10 per cent to 7 per cent while export of all mechanised unstudded jewellery has been allowed at a value-addition of only 3 per cent.

Duty free imports of trimmings and embellishments up to three per cent of FOB (free on board) value has been extended to all leather products against only leather garments at present. All kinds of blended fabrics will attract the DEPB benefits.

For reducing the transaction cost of exporters and averting the disputes, a new commodity classification for imports and exports would be adopted by the Central Board of Excise and Customs and the Directorate General of Commercial Intelligence and Statistics.

The maximum fee limit for application under various schemes has been reduced. The scheme of same-day licensing has also been introduced in all the regional offices.

Other sector-specific measures include adoption and harmonisation of the 8-digit code of customs, reduction in percentage of physical examination of export cargo and finalisation of the application for fixation of brand rate of drawback within 15 days.

There would be 100 per cent retention in Export Earners' Foreign Currency accounts. Repatriation period for realisation of export proceeds from 180 days to 360 days has been allowed.

Noting that India has emerged as a global player in software, the policy underscores the need for improvement in the hardware sector as well.

Units in the Electronic Hardware Technology Park scheme have been given certain facilities. Time for achieving positive net foreign exchange as a percentage of exports has been kept at five years from the present limit of every year.

Supplies of Information Technology Agreement items having zero duty in the domestic market would be eligible for counting of export obligation.

Giving a boost to the hardware sector, the Electronic Hardware Technology Park scheme is being modified to enable the sector to face the zero duty regime under the Information Technology Agreement of the World Trade Organisation.

The SEZ package comprises income tax concessions, details of which would be presented in Parliament and exemption from the Central Sales Tax to supplies from the Domestic Tariff Area to SEZ.

The DTA suppliers would also be entitled for DEPB and drawback benefits. The transactions from DTA to SEZ would be treated as exports under the Income Tax Act and Customs Act. The restrictions on the external commercial borrowings would be lifted so far as the units in SEZ are concerned. They would have freedom to make overseas investment and carry out commodity hedging.

The government has approved Rs 3.30 billion under the Market Access Initiative scheme for 2002-2003.

Special focus would be given to 106 items identified in the medium term export strategy through various export promotion schemes and their progress would be monitored.

These 106 items are mainly in the sectors like engineering, electrical, electronics, instruments, watches and footwear.

With a view to tapping the regional markets, a 'Focus: Africa' programme has been launched.

The first phase of the programme would cover Nigeria, South Africa, Mauritius, Kenya, Ethiopia, Tanzania and Ghana.

The exporters to these markets would be given Export House Status on export of Rs 50 million. Similar programme would be launched for the Commonwealth of Independent States (CIS) countries.

PTI, UNI

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