Definition of Indian EXIM Policy

Indian EXIM Policy

EXIM Policy or Foreign Trade Policy is a set of guidelines and instructions established by the DGFT in matters related to the import and export of goods in India.

The Foreign Trade

Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian Government and is regulated by the Foreign Trade Development and Regulation Act, 1992.

DGFT (Directorate General of Foreign Trade) is the main governing body in matters related to EXIM Policy. The main objective of the Foreign Trade (Development and Regulation) Act is to provide the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India. Foreign Trade Act has replaced the earlier law known as the imports and Exports (Control) Act 1947.

Indian EXIM Policy contains various policy related decisions taken by the government in the sphere of Foreign Trade, i.e., with respect to imports and exports from the country and more especially export promotion measures, policies and procedures related thereto. Trade Policy is prepared and announced by the Central Government (Ministry of Commerce). India’s Export Import Policy also know as Foreign Trade Policy, in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payments position.

History of EXIM Policy of India In the year 1962, the Government of India appointed a special

EXIM Policy Committee to review the government previous export import policies. The committee was later on approved by the Government of India. Mr. V. P. Singh, the then Commerce Minister and announced the EXIM Policy on the 12th of April, 1985. Initially the EXIM Policy was introduced for the period of three years with main objective to boost the export business in India

Objectives of the Exim Policy

Government control import of non-essential items through the EXIM Policy. At the same time, all-out efforts are made to promote exports. Thus, there are two aspects of EXIM Policy; the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation.

The main objective of the Government’s EXIM Policy is to promote exports to the maximum extent. Exports should be promoted in such a manner that the economy of the country is not affected by unregulated exportable items specially needed within the country. Export control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country.

In other words, the main objective of the EXIM Policy is:

To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities.

To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components,’ consumables and capital goods required for augmenting production.

To enhance the techno local strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness.

To generate new employment.

Opportunities and encourage the attainment of internationally accepted standards of quality.

To provide quality consumer products at reasonable prices.

Governing Body of EXIM Policy

The Government of India notifies the EXIM Policy for a period of five years (1997-2002) under Section 5 of the Foreign Trade (Development and Regulation Act), 1992. The current

Export Import Policy covers the period 2002-2007. The EXIM Policy is updated every year on the 31st of March and the modifications, improvements and new schemes became effective from 1st April of every year.

All types of changes or modifications related to the EXIM Policy is normally announced by the Union Minister of Commerce and Industry who co-ordinates with the Ministry of Finance, the Directorate General of Foreign Trade and network of DGFT Regional Offices.

EXIM Policy: 1992-97

The EXIM policy 1992-97 focused on liberalisation openness transparency and globalisation. the policy also provided incentives through promotion schemes.

EXIM Scrips

The replenishment licences for exporters were replaced by EXIM scrips, which were basically import licences, issued on the basis of 30% of the FOB value of exports, irrespective of the nature of the export product, for most of the exports. this was completely abolished on 1.3. 1992 when the dual exchange rate for the exports proceeds and remittances came into being.

Decimalization

A number of items of export and import which were being canalized through public sector agencies have been decimalized by the new policy.

Approval

Automatic approval for technical collaboration and foreign equity participation upto 51% in Indian companies in 34 high priority industries has been approved

Equity

it was made essential than 51% in Indian trading companies primarily engaged in export activities.

FIPB

Foreign investment promotion board has been constituted to process and give speedy approvals for foreign investment.

Technology Imports

It was agreed automatic approvals of foreign technology agreements, if the technology is to be imported for the 34 high priority industries provided the fee does no exceed US$385,000 and royalty does not exceed 5% of domestic and 8%of export sales.

Foreign Technicians

Hence forth, there is no need for prior approval of the reserve bank of India to engage foreign technicians by Indian firms/companies, if the terms of appointment conform to specific guide-lines.

Foreign Companies

Here after the foreign companies can open laison and branch officer in India if they bring exchange for their activities. the branch offices will be allowed to carry on trading activities

FERA Companies

General permission has been granted by RBI to FERA companies:

To use overseas trade marks

To accept appointment as an agent or technical or management adviser of any person or company in India

To borrow money and accept deposits in India

Foreign Investment- Up to 100% equity is permitted for setting up power plants in India

In the budget announced on the floor of the parliament on 29.2.1992, the finance minister introduced a new system of partial convertibility, in order to give a powerful boost to exports. Under the new system which came into being on 1.3.1992, all foreign exchange remittances whether earned through export of goods or services, or remittances are converted 40% of the foreign exchange remitted is converted at the official exchange rate, while the remaining 60% is converted at a market determined rate. In august 1994 the government of India made supply fully convertible into foreign exchange.

The foreign exchange surrendered at official exchange rates is made available to meet the foreign exchange requirements of essential imports such as, petroleum and oil products, defense and life saving drugs. all other imports of raw material, components and also capital goods will be made freely importable on OGL, but the foreign exchange for these imports will have to obtained from the market. a specified negative list of raw material, components an capital goods has been released which will continue to be importable only against licences. There is no change in the import policy for consumer goods.

It will remain restricted at present. Foreign exchange required for other payments on private account including travel, debt service payments, dividends, royalties and other remittances will also have to be obtained at the market rate.

This new system completely replaced the issuance of EXIM scrips for exports. since august 1994 those who earn foreign exchange have also an option to retain 50% of earnings in a foreign currency account in India for all permissible uses as were previously available in the blanket permit and another permit altogether.

Export Promotion Measures Introduced

They include:

Advanced Licence Scheme

An advance licence is now granted for the duty free import of raw material, com-ponents, intermediaries, consumables, and parts, spares, including mandatory spares and packing materials. Such licences are subject to the fulfillment of a time bound export obli-gation and value addition as may be specified. Advance licences may be based on either val-ue or quantity. an exporter may apply for a value based or quantity based advanced licence.

International Price Disbursement Scheme (IPRS)

This was introduced to make available to exporters raw materials at international prices. In the case of raw materials, notified by the Government as coming under the IPRS, the difference between the international prices as notified by the government and the domestic price, is reimbursed to the exporters.

Cash Compensatory Support (CCS)

In existence till 1 July, 1991 this scheme provided cash payment to exporters at a predetermined percentage on the FOB value of exports. This incentive was removed when the rupee was devalued in the 1st week of July 1991.

Drawback of Duties

There is a substantial element of customs duty paid on imported components, as well as excise duty on the indigenous purchase.

In the manufacture of many export products, these are evaluated on a yearly basis, and the exact quantum of these drawback duties is published by the Ministry of Finance. Accordingly, they are refunded to the exporter after the completion of the export.

Marketing Development Fund (MDF)

Founded in 1963-64, its nomenclature was changed to Marketing Development of Assistance (MDA) in 1975. It is administered bodies, also for special for providing grants/ assistance to Export Promotion Councils promotion efforts. As other export schemes approved for specific set export in recent years the fund sufficient amount has not been apart is on the decline.

Fiscal Benefit

The government has exempted export profits from tax under 80HHC provisions of the I.T. Act to promote exports and enable the exporters to plough back into the export trade their profits for higher exports.

For an exporter who is engaged in the sale of goods, both in the export and domestic market, the proportion of profits is now taken in the same ratio of the export turnover to total turnover items like petroleum products, fertilizers, news print, sulphur, nonferrous metal, etc., on the rupee payment basis It has helped to diversify Indian exports to these countries and balance the trade by substantial exports from India on a rupee basis.

Exim Policy 1997-2002

‘The Export and Import Policy 1997-2002 was aimed at:

Giving a major thrust to acceleration of lndia’s exports through restructuring and revamping of various export promotion schemes and wide ranging measures for simplification and streamlining of procedures with a view to making them more transparent and easy to administer.

The Policy aims at continuing process of trade reforms and trade liberalisation with a view to achieving a higher rate of export growth.

The EXIM Policy focused on the need to allow the exporters to concentrate on the manufacture and marketing of their products globally in an environment unhindered by discretionary controls and procedural bottlenecks.

The policy aimed at enabling the industry to enhance its competitiveness in the global market and to achieve its full potential in the areas of its strength. The Policy has been modified from time to time.

The major thrust areas of this EXIM Policy have been promote to agricultural exports, take Market Access Initiative provided separate incentives for Special Economic Zones, removal of quantitative restriction to facilitate imports and exports, liberalisation and streamlining of other existing schemes.

The principal objectives of this Policy include—.

To accelerate the country’s transition to globally orient vibrant economy with a view to deriving maximum benefits from expanding global market opportunities.

To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production.

To enhance the technological strength and efficiency of Indian agricultural. Industry and services, thereby improving their competitive strength while generating new employment opportunities, and to encourage the attainment of internationally accepted standards of quality.

To provide consumers with good quality products at reasonable prices.

It was decided to achieve these objectives through the coordinated efforts of all the departments of the general of Government in and the Ministry of Commerce and Industry, and the Directorate General Foreign Trade and its network of Regional Offices in particular, with a shared vision and commitment, in the interest of export promotion.

EXIM Policy & Procedures— 2002-2007

Salient Features

Agricultural Export Zones

With a view to providing the remunerative returns to the fanning community in a sustained manner, it has been decided to make efforts lndia’s Foreign policy procedures Trade and to provide improved access to the produce/products of the Agricultural and Allied sectors in the international market. The State Governments may identify Agri—export zone for end—to—end development for export of specific products from a geographically contiguous area.

State Government may evolve a comprehensive package of services provided by all State Government Agencies, State Agricultural Universities and all institutions and agencies of the Union Government for intensive delivery in these zones. Such services would include provision of pre/post harvest treatment and operations, plant protection, processing, packaging, storage and related research & development, etc. The service providers, setting up common infrastructural facilities such as sorting, grading, polishing, packaging, cold storage, transport equipment/refrigerated vans, vapor treatment heat treatment, plant, X-ray screening facility etc., shall be entitled for EPCG Scheme. Agri-exporters shall be entitled for recognition as Export House/Trading House, Star Trading House/Super Star Trading House on achieving 1/3”‘of the threshold limit prescribed for exporters of goods.

‘Market Access Initiative (MAI)

The Government would assist the industry in research & development, market research, specific market and product studies, warehousing and retail marketing infrastructure in select countries and direct market promotion activities through media advertising and buyer—seller meets.

A Plan Scheme has been evolved for this purpose.

Special Economic Zones

A new Chapter on Special Economic Zones has been introduced in the new policy.

Special Economic Zones developers are allowed duty free import/ procurement from DTA for development of SEZ to give a boost for development of integrated infrastructure for exports.

Duty free import/procurement from DTA of goods for setting up of factory in the Zone permitted.

Items reserved for SSI do not require any licence for setting Li units in SEZ.

Units in SEZ can bring back their export proceeds in 365 days: 3 against normal period of 180 days and can retain 100% of till proceeds in the EEFC account

Special Economic Zones trading units permitted to sell goods in the DTA in accordance with the import policy in force

Subcontracting of part of production abroad permitted.

To facilitate greater flexibility and to attract capital intensive units into Special Economic Zones, amortization of value of imported Capital Goods is being spread over a period of 8 years instead of 5 years at that time.

SEZ developer is given infrastructure status under Income Tax Act as provided in the Finance Bill, 2001.

Removal of Quantity Restrictions (QRs)

The process of removal of import restrictions, which began in 1991 has completed in phased manner this year with removal of restriction on 715 items. Out of these 715, 342 are textile products, 147 an agricultural products including automobiles.

Import of agricultural products like wheat, rice, maize, other corals cereals, copra and coconut oil has been placed in the category of Stat‘, Trading. The nominated State Trading Enterprise will conduct the imports of these commodities solely as per commercial considerations similarly; import of petroleum products including petrol and ATF has also been placed in the category of State Trading. Import of urea will also be done through the mechanism of State Trading.

Care has been taken to ensure a level playing field to domestic producers vis-a-vis imports. In conformity with the “National Treatment Principle” of GAIT, imports have also made subject to the following domestic regulations.

Import of all food products will be subject to compliance of a provision of Food Adulteration Act and Rules there under.

Import of meat and poultry products will be subject compliance of all the provisions of Meat Food Product Order.

Import of Tea Waste will be subject to compliance of Tea Waste (Control) Order.

No import of textile material using the prohibited dyes like azo dye shall be allowed. For this purpose, a pre-shipment inspection certificate has been made mandatory.

In view of road safety and environment considerations, imports of second hand automobiles have been allowed subject to the following conditions.

Import of automobiles older than three years is not allowed.

Imported vehicles need to conform to Central Motor Vehicle Rules.

Import of left—hand drive vehicles not allowed

\ For ensuring the requirements, pre shipment as well as post shipment certification made mandatory

Imported automobiles to have a minimum and service during this residual life of five years and the importer to ensure supply of spares period; and

Such imports of new automobiles allowed subject to following conditions.

Similarly, import of new automobiles allowed subject to following conditions

Import allowed only from the country of manufacture

Import of left hand drive vehicles not allowed

Imported vehicles to conform to the provisions of Motor Vehicles Act, 1988

Prototype of vehicle to be approved by notified agencies in India; and abroad.

To ensure that import of agricultural products do not lead to unwanted infiltration of exotic diseases and pests in the country, it has been decided to subject to import of primary products of plant and animal origin to ‘Bio Security & Sanitary and Phyto-Sanitary Permit’ to be based on Import Risk Analysis of the product to be conducted on scientific principles, in accordance with the WTO agreement, on application of Sanitary and Phyto-Sanitary Measures.

Introduction of Export Promotion under Capital Goods Scheme

Imports of jigs, fixture, dies, moulds to be allowed for the value full CIF value of the licence, instead of restricting to 20% of the CIF of licence.

Time limit of 180 days prescribed for final is at ion of nexus by EPCG Committee failing which the nexus applied by the applicant becomes final.

Extension in export obligation period under EPCG for Bank licences issued during 1990-1996 up to 31.3.2002, upon execution of Guarantee with the licensing authority..

Extension in export obligation period for two years in respect and of EPCG issues under customs notification 29/1997 dated 1.4.97 and 49/2000 dated 27.4.2000.

No penalty for value wise shortfall under EPCG except for the customers’ duty together with interest.

Facility for partial fulfillment extended under EPCG scheme to reduce transaction time.

For redemption, the licence holder has been extended the facility to submit either a consolidated statement signed by all banks or separate statements signed by individual banks.

Introduction of Annual Advance Licence

Extension of Annual Advance Licence facility for deemed exports and intermediate supplies.

The entitlement for Annual Advance Licence increased from 125% to 200% of the FOB value of preceding year exports.

Extension of Annual Advance Licence to other Standard Input Output- Norms exports.

Clubbing facility for Annual Advance Licence.

Dispensing with the need of technical characteristics for inputs except for items in the sensitive list.

Extension of Advance Licence

Duty free import/ procurement of fuel cost is more than allowed under Standard Input/ Output Norms for sectors where the same 10% of the manufacturing cost.

The facility of Advance Licences extended the buyer. even to the cases where some of the inputs are supplied free of cost by

The entitlement for Advance Licence where o year SION does not exist increased from 100% to 200% of the FOB value preceding exports for Exports House/Trading House/Star trading House/Super Star Trading House.

Additional facility for Advance Licence where SION does not exist beyond entitlement as well against execution of Bank Guarantee.

Dispensing with the need of technical characteristics for inputs except for items in the sensitive list.

The facility of back to back LC for Advance extended to cover Licence, which is presently confined to one bank and one branch, any bank and branch.

Revalidation of expired Advance Licences, where export obligation has been completed, by six months.

506 new Standard Input Output Norms fixed during 2000-01.

No penalty for value wise shortfall under the licence Advance Licence except for the customs duty together with interest provided holder has achieved positive/minimum value addition.

Coverage of additional ports under Advance Licence.

Simplification off form relating to Advance Licence on SION.

Extension of Duty Free Replenishment Certificate Scheme (DFRC)

Validity of DFRC to be extended from 12 months to 18 months.

Dispensing with the need of technical characteristics for inputs except for items in the sensitive list.

Automatic calculation of CIF value under DFRC scheme without reference to international price of individual inputs.

Provision incorporated for claim of DFRC against advance payment.

Coverage of additional ports under DFRC.

Split up facility extended to DFRC scheme to give operational flexibility to the holder of DFRC.

Extension of Duty Entitlement Passbook Scheme

Provision made for claiming DEFB against advance payment.

Validity of DFEB extended up to the last day of the month; in which the same is expiring.

Rationalisation of DEPB rates in line with changes in Customs duty on account of Union Budget.

Coverage of additional of DFPB rates in line with changes in Customs duty on account of Union Budget.

TRA facility extended to all notified ports under DEFB scheme.

Extension of EOU/EPZ/EHTP/STEP Units

Gem and Jewellery provisions relating to EOU/EPZ units contained in Chapter 8 merged into Chapter 9 for greater clarity.

Supplies made to bounded warehouses set up under para 11.14 and 9.21 of the policy by EOU/EPZ units to be treated as exports for the purpose of domestic sales entitlement.

Sub-contracting of production process abroad permitted. At present sub-contracting is permissible only with the country.

DTA sales against foreign exchange, which is counted toward NEFP/IEP is being confined to payment made from EEFC account of the buyer only.

Simplification of procedure regarding utilization of goods. EOUI EPZ units now have to account for duty free goods in overall terms and not consignment-wise. This is expected to facilitate ease in operation.

E-Mail address is being made compulsory for approving EOU/EPZ units from 1.4.2001.

Greater delegation to Development Commissioners to approve EOU/EPC projects. At present, Development Commissioners cannot approve project beyond US $20 million. This value restriction is being withdrawn.

Suitable procedure provided for conversion of DTA units into EOU under advance licensing scheme having outstanding export obligation scheme by carrying forward goods imported under Advance Licensing Scheme.

Joint Monitoring of EOU/EPZ units by a Committee consisting of DC and customs

Extension of Gems & Jewellery Sector

Extension of Diamond Dollar Account Scheme (DDAS) to diamond studded jewellery exporters, having an average annual turnover of ` 5 crore or above during the preceding earlier and allowing non- DDAS holder to supply cut and polished diamonds to DDAS holder, which would be counted towards discharge of his export obligations or entitle for a Replenishment licence, as the case may be.

With a view to facilitate certification/ grading by international laboratories/agencies cut and polished diamonds weighing 0.50carats and above, have been permitted for export and return of such diamonds for certification purposes.

More flexibility to exporters under the Gold Loan Scheme by allowing exporters to fix the price and repay the gold loan within180 days from the date of export of subject to this price being also confirmed by the final buyer and the nominated agency supplying the gold.

Exporters allowed to personally carrying gems and jewellery of a value not exceeding US$2 million for purposes of holding/participating the gold.

To foreign buyer scheme wherein precious metals can be supplied free of cost to the Indian manufacturers for job working, has been extended to exporters having an annual “average turnover of ` 5crores during the preceding three years.

The provisions of personal carriage of gems and jewellery export and import parcels are now available from Bangalore Airport also in addition to Delhi, Mumbai, Kolkata and Chennai.

Extension of Deemed Exports

The suppliers have been given the option to file application either project wise or covering supplies to all projects during a month quarter, or half yearly while claiming Terminal Excise duty Drawback facility. They have also been given the option to file claim covering all the supplies to a project.

Standard format prescribed for receipt of payment through normal banking channel.

For supplies under paragraph 10.2(d) (e) (f) and (g) of the Policy, the sub-contractor has been given the facility to file Terminal Excise Duty Refund without for payment from the main contractor.

Extension of Computerization

The facility of electronic filing of applications extended to 29 out of 31 offices of DGFT.

The facility of off-line filing introduced.

The electronic filing shall be extended to all categories of licences.

Extension Of Procedural Simplification

Profit of importer/exporter to be submitted once and to be submitted thereafter only in case of any change in the information already furnished.

facility of clarifications/interview through E-Mail

no time limit for filing application for golden status

Restricted import licensing committee, export licensing committee, classification committee abolished.

More Jobs And More Exports Promised ( On A High Growth Trajectory)

For industry and commerce, foreign trade is not just about earning foreign exchange and expanding the trade basket for Indian goods and services. going by the UPA’s common minimum programme, it has promised the creation of one crore jobs while boosting export revenues to $150 billion during the next 4 years. Commencing from 2004-2005

Unveiling the annual supplement to the five0-year trade policy, the reverend committee to add 25lakh jobs each year while setting an export growth target of 15% for 2005-06 in quantitative terms, exports will touch $92 billion during 2005-2006 as against $80 billion in 2004-2005, making a 24% growth. Previous year, exports have surpassed the $75 billion target.

According to this policy, about 10 lakhs additional jobs were created in 2004-2005 owing to enhanced exports lone. Citing the finding of a study commissioned by industry ministry, the minister said about one crore new added during last year alone.

The focus areas indentified for boosting export revenues and jobs creation are: agriculture products, dairy and poultry, marine products, pharmaceutical, auto components, gems and jewellery.

A package of incentives and comprehensive strategy has been put together for each sector. for instance, the export cess currently being levied on agricultural and plantation exports has been abolished. export concessions currently available to fruits, flowers vegetables, minor forest produce and value added farm products have been extended to poultry and dairy products.

Stringent quality norms have been put in place for tea exports to retain India’s share in world tea markets and brand the unique quality of Indian tea.

A package has also been announced for boosting marine exports, hit by the Tsunami. it includes allowing the import of duty-free inputs, chemical and favoring oils used in processing seafood for export markets.

For the gems and jewellery sector duty free import of samples up to ` 3 lakh has been allowed in a year. The earlier limit was ` 1 lakh to ensure availability of high quality fold purity over 0.995 per cent, designated agencies ( MMTC and STC) have been directed to provide the metal for export purposes.

High Growth Trajectory

exports zoom to record high of $80 billion & double India’s share in World trade

steps to enhance competitiveness of manufacturing sector and employment generation

Big thrust on agri-export, removal of export cess on agri, plantation, and commodities proposed.

New initiative on infrastructure to reduce congestion at major ports, EOCG extended.

Imports under several from India scheme to allow bulk sourcing.

Focus on marine sector in the wake of Tsunami.

DEFB to continue, replacement scheme being finalized.

Setting up of Interstate trade council mooted.

Procedures simplified to cut transaction costs. ‘aayat niryat’ form introduced.

Renewed Thrust to Export Promotion

The governments announced initiatives to give a renewed thrust to export promotion capital goods schemes. Underlining the significance of EPCG scheme as an important building block for sustained export growth, commerce and industry ministry announced that firms fulfilling 75 per cent or more of export obligation shall be freed from the balance export obligation.

To simplify the procedures for availing the benefits under EPCG, the annual supplement to foreign trade policy stated that hereafter all EPCG licenses issued under the same customs notification can be clubbed, considerably reducing the paper work of exporters.

In order to create modern infrastructure in the retail sector concessional duty benefits under the EPCG scheme shall be extended for import of capital goods required by the retailers. the retailers with a shopping area of 1000 square meters are expected to fulfill their export obligations from payments received against counter sales in foreign exchange through banking channels.

Extending the benefits of EPCG to agriculture and small scale sector, it said import of capital goods at concessional rates will be allowed with a reduced export obligation. agro units would now have to fulfill export obligation of six time, the duty saved over a 12 year period, instead of the normal window of eight times duty saved in eight years.

The SSI sector has been allowed to import capital goods at five per cent customs duty subject to a fulfillment of an export obligation equivalent to six times the duty save on capital goods imported under EPCG scheme over 8 year.

Evaluation and Control of Export Policy

Before the company actually enters into export operations, it will evaluate its export policy. The various components of the export policy must be thoroughly screened to ensure that they are mutually consistent. The various policies should also be related to the business environment at home and to the target export market. Finally, a continuous review of the export policy should be made to keep it in line with changing conditions

India’s Foreign Trade Policy 2009-14

In the wake of global economic slowdown, India’s merchandise exports faced significant adverse impact. Exports, which had grown by 48.1% during April to September, 2008, suffered a decline during the next 12 months from October, 2008 to September, 2009, due to the shrinkage of the demand worldwide and particularly the contraction in demand in the traditional markets of our exports.

In May, 2009, the exports declined by as high as 34.2% in US$ terms. The downward trend was arrested from October, 2009 onwards and our exports ended up with an export figure of US$ 178.75 billion in 2009-10 against US$ 185.30 billion in 2008-09, which indicates an overall decline of 3.5% in dollar terms.

The growth in exports since October, 2009 can be attributed to growth in some sectors, but is primarily due to the lower base effect of the exports in the corresponding months of previous financial year. This year, exports have registered a growth of about 27% in US$ terms and it is expected that we exceed the merchandise export target of US$ 200 billion by the end of 2010-11.

Foreign Trade Policy, 2009-14

The Foreign Trade Policy (FTP), 2009-14 was announced on 27th August, 2009 in the backdrop of a fall in India’s exports due to global slowdown. The immediate and the short term objective of the policy was to arrest and reverse the declining trend of exports as well as to provide additional support especially to those sectors which were hit badly by recession in the developed world. The Policy envisaged an annual export growth of 15 per cent with an annual export target of US $ 200 billion by March 2011 and to come back on the high export growth path of around 25 per cent per annum in the remaining three years of this Foreign Trade Policy i.e. up to 2014. The long term policy objective for the Government is to double India’s share in global trade by 2020.

What is Foreign Trade Policy?

The Union Commerce Ministry, Government of India announces the integrated Foreign Trade Policy FTP in every five year. This is also called EXIM policy. This policy is updated every year with some modifications and new schemes. New schemes come into effect on the first day of financial year i.e. April 1, every year. The Foreign trade Policy which was announced on August 28, 2009 is an integrated policy for the period 2009-14.

Objectives of Foreign Trade Policy 2009-14:

To arrest and reverse declining trend of exports is the main aim of the policy. This aim will be reviewed after two years.

To Double India’s exports of goods and services by 2014

To double India’s share in global merchandise trade by 2020 as a long term aim of this policy. India’s share in Global merchandise exports was 1.45% in 2008.

Simplification of the application procedure for availing various benefits

To set in motion the strategies and policy measures which catalyse the growth of exports

To encourage exports through a “mix of measures including fiscal incentives, institutional changes, procedural rationalization and efforts for enhance market access across the world and diversification of export markets.

Aim in General

The policy aims at developing export potential, improving export performance, boosting foreign trade and earning valuable foreign exchange. FTP assumes great significance this year as India’s exports have been battered by the global recession. A fall in exports has led to the closure of several small- and medium-scale export-oriented units, resulting in large-scale unemployment.

Targets:

Export Target: $ 200 Billion for 2010-11

Export Growth Target: 15 % for next two year and 25 % thereafter.

EPCG Scheme:

Obligation under EPCG scheme relaxed.

To aid technological upgradation of export sector, EPCG Scheme at Zero Duty has been introduced.

Export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced by 50%.

Refixation of Annual Average Export Obligation

Taking into account the decline in exports, 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. Support for Green products and products from North East extended.

Announcements for FPS, FMS, MLFPS

26 new markets added in this scheme.

Incentives under FMS raised from 2.5 % to 3 %

Incentive available under Focus Product Scheme (FPS) raised from 1.25% to 2%.

Extra products included in the scope of benefits under FPS

Market Linked Focus Product Scheme (MLFPS) expanded by inclusion of products like pharmaceuticals, textile fabrics, rubber products, glass products, auto components, motor cars, bicycle and its parts. etc. (However, 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).

Focus Product Scheme benefit extended for export of ‘green products’ and some products from the North East.

A common simplified application form has been introduced to apply for the benefits under FPS, FMS, MLFPS and VKGUY.

Announcements for MDA & MAI

Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) has been announced.

Towns of Export Excellence (TEE)

The following cities have been recognized as towns of export excellence (TEE)

Handicrafts: Jaipur, Srinagar and Anantnag

Leather Products: Kanpur,Dewas and Ambur

Horticultural Products: Malihabad

Scheme for Status Holders (Status Holders means Star Status Holders)

Additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports accelerate exports and encourage technological upgradation.

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).

This facility shall be available up to 31 March, 2011.

Transferability for the Duty Credit scrips being issued to status holders under VKGUY Scheme permitted only for the procurement of cold chain equipments.

Extension of Income Tax Exemption to EOU and STPI

Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of Income Tax Act has been already extended for the financial year 2010-11 in the Budget 2009-10.

Extension of ECGC

The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95%, to the adversely affected sectors, is continued till March, 2010. Announcements For Marine sector:

Fisheries exempted from maintenance of average EO under EPCG Scheme (along with 7 sectors) however Fishing Trawlers, boats, ships and other similar items shall not be allowed for this exemption.

Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for the marine sector.

Announcements for Gems & Jewellery Sector

Duty Drawback is allowed on Gold Jewellery exports to neutralize duty incidence.

Plan to establish “Diamond Bourse (s) with an aim to make India and International Trading Hub announced.

Introduction of a new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification.

13 value limits of personal carriage have been increased from $ 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.

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.

Announcements for Agro Exports

Introduction of a single window system to facilitate export of perishable agricultural produce with an aim to reduce transaction and handling cost.

This system will involve creation of multi-functional nodal agencies. These agencies will be accredited by APEDA.

Announcements for Leather Exports

On the payment of 50 % applicable export duty, Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses.

Announcements for Tea Exports

The existing Minimum value addition under advance authorisation scheme for export of tea is 100 %. It has been reduced from the existing 100% to 50%.

DTA (Domestic Tarriff Area) sale limit of instant tea by EOU units increased from 30% to 50%.

Export of tea has been included under VKGUY Scheme benefits.

Announcements for Pharma Exports

Export Obligation Period for advance authorizations issued increased from existing 6 months to 36 months.

Pharma sector included under MLFPS for countries in Africa and Latin America & some countries in Oceania and Far East.

Announcements for Handloom Exports

The claims under Focus Product Scheme, the requirement of “ Handloom mark” was required earlier. This has been removed.

Scheme for Export Oriented Units

EOUs have been allowed to sell products manufactured by them in DTA (Domestic Tariff Area) up to a limit of 90% instead of existing 75%, without changing the criteria of ‘similar goods’, within the overall entitlement of 50% for DTA sale. (This means that instead of 75% these units can sell up to 90 % of their products in the domestic markets)

EOU allowed procuring finished goods for consolidation along with their manufactured goods, subject to certain safeguards.

Extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs kept under consideration.

EOU allowed CENVAT Credit Facility.

Announcements for Value Added Manufacturing (VAM)

To encourage Value Added Manufactured export, a minimum 15% value addition on imported inputs under Advance Authorization Scheme.

Announcements for Project Exports

Project Exports and a large number of manufactured goods covered under FPS and MLFPS.

Fuel included in DEPB Scheme:

Custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norm included in factoring.

Easy Import of Samples

Number of sample pieces has been increased from the existing 15 to 50. This will facilitate the the duty free import of samples by exporters.

Convertibility of Shipping Bills

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.

Reduction in Transaction Costs

Dispatch of imported goods directly from the Port to the site has been allowed under Advance Authorisation scheme for deemed supplies. (Presently the duty free imported goods could be taken only to the manufacturing unit of the authorisation holder or its supporting manufacturer.

Maximum applicable fee for 18 Authorisations/ licence applications (except those mentioned in Chapter 3 of FTP) has been reduced to ` 100,000 from the existing ` 1,50,000 (for manual applications) and ` 50,000 from the existing ` 75,000 (for EDI applications).

No fee shall now be charged for grant of incentives under the Schemes in Chapter 3 of FTP.

Disposal of Manufacturing Wastes

Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable excise duty also before fulfillment of export obligation under Advance Authorisation and EPCG Scheme. Earlier it was allowed after fulfillment of export obligation.

Announcements for Sports Weapon

Licenses for the import of sports weapon will be issued now by Regional Authorities provided a NOC (No Objection Certificate) is issued by Ministry of Sports & Youth Affairs. (Earlier DGFT Headquarters had to be approached for this)

Announcements for Medical Devices

To solve the problem of medical device industry, 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.

Announcements for Automobile Industry

Those Automobile industries which have their R&D establishment will 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. Simplification in EPCG for automobile industry.

Announcements for EDI Initiatives

Export Promotion Councils & Commodity Boards have been advised to issue RCMC through a web based online system.

It is expected that issuance of RCMC would become EDI enabled before the end of 2009.

Set up of Directorate of Trade Remedy Measures Announced

A Directorate of Trade Remedy Measures shall be set up, which will enable support to Indian industry and exporters, especially the Micro Small & medium Enterprises MSMEs in availing their rights through trade remedy instruments,

Duty Credit Scrips

Earlier the payment of customs duty for Export Obligation (EO) shortfall under Advance Authorisation, DFIA or EPCG Authorisation was allowed in cash only. Now this payment can be done in the way of debit of Duty Credit scrips.

Import of Restricted Items

Restricted Items can be imported now (as replenishment) against transferred DFIAs (Duty Free Import Authorisations) as the present DFRC (Duty Free Replenishment Card) scheme.

There is a provision for state-run banks to provide dollar credits

Dollar Credits

Thereafter, as promised in FTP, to continue regular interaction with stakeholders to maintain a close watch on the performance of the policy in the field, a number of interactions were held with members of Board of Trade, Open Houses with exporters and sectoral reviews with EPCs. Constant dialogues were held with all key stakeholders in industry and the exporting community for sectoral assessment of exports at regular intervals. The first review was undertaken in December 2009 and thereafter in February 2010, which demonstrated that some sectors were still facing difficulties. Need-based additional support measures were announced in January, 2010, March, 2010 and on 11th February, 2011 for certain product groups / products.

The recovery has been fragile and economies around the world are still emerging out of the shadows of a grim recessionary period. The IMF projections indicate that the world economy is recovering at varying speeds for different regions. Though, there had been marginal improvement in some of the developed economies like US, UK, Germany, France, Japan etc., the nervousness continued in the markets about the fiscal situation and sovereign indebtedness in several high income countries of Europe. In this setting, it was expected that the developed countries would aim at economic recovery through consolidation and export led growth, which would pose a challenge to Indian exporters in accessing overseas markets for their products. The uncertainty surrounding Indian exporters’ prospects, therefore, continued to linger.

Though the exports growth moved towards the positive trajectory from October, 2009 onwards, our exports were not yet out of the woods.

Under this global situation of slow recovery, it was necessitated to take stock of the situation so as to make mid course corrections. Accordingly, sectoral reviews were continued in the current financial year 2010-11, and the first such review for 2010-11 was undertaken in July 2010. It was observed that despite the measures announced in the FTP and additional support extended in January and March, 2010, some sectors continued to face difficulties. It was also realized that there was a shroud of uncertainty continuing over the fragile nature of global economic recovery. Even as global economic rebalancing had been proceeding apace, it was not going to be an easy patch for Indian exporters. In view of resource constraints, it was not simply possible to sustain support to all sectors and there was need to calibrate the support measures appropriately. On the other hand, exports of certain products had been placed under restriction in view of domestic situation i.e. inflationary pressures and unemployment. It was also essential to be conscious of the need for and the inevitability of fiscal consolidation. Keeping all these factors in mind and based on the sectoral review held in July, 2010, need based additional initiatives were undertaken in the Annual Supplement 2010-11 to FTP 2009-14, announced on 23rd August, 2010. While emphasis on stability of policy regime was continued, additional measures were announced to support exports particularly for the labour intensive sectors. In order to promote technological upgradation, zero duty EPCG and Status Holder Incentive Schemes were expanded and validity extended. It will add to expansion and modernization of production base at a time when investment is drying up in export industry.

A new facility of Annual EPCG authorization was introduced.

While exports have shown a rising trend during the last few months, certain sectors are still not out of woods. Further, fragile economic recovery and consequent slower demand growth in the developed markets has necessitated greater emphasis on improving the competitiveness of our exports. To access the export performance of various sectors, second sectoral performance review was conducted during November-December, 2010. Accordingly, to enhance competitiveness for products which are labour intensive, technology intensive and value added, further export incentives were undertaken on 11th February, 2011 for more than 600 products for sectors viz. Agriculture, Chemicals, Carpets, Engineering, electronics and plastics. In addition, as a continuing endeavor for procedural simplification and trade facilitation, a few measures were taken.