In this election campaign, one of the issues relates to bringing back the money stashed abroad by Indians. The estimates of such money have varied but everyone seems to agree that large amounts are kept abroad by some Indians. On the issue of bringing the money back, several opinions have been expressed, but the best way seems to be to create a more favourable investment climate in India that will entice the money back.
While this issue may be debated endlessly, a poser for the Reserve Bank is whether it is worthwhile continuing with GR/SDF/PP/Softex form procedure, when the people who want to secrete their money abroad are able to do so in any case. An allied point is whether the export incentives should be linked to realisation of export proceeds in foreign exchange.
Under the GR/SDF/PP/Softex form procedure, the exporter is required to declare that he will realise the export proceeds within a certain time. The GR form has to be filed with the Customs, along with every shipping bill. In EDI enabled Customs stations, the system generates the SDF form. The PP form comes into play when exports are made through post. The Softex forms are used when software exports are made through the electronic medium. The exporters have to submit the duplicate forms to banks that will monitor the realisation.
This procedure is like putting a policeman behind every transaction. Similarly, there is policing of outward remittance for imports to make sure the goods have indeed come to India. All this means lot of paperwork and does not seem to work, as money goes to safe havens anyway.
The commerce ministry wants its own police behind every transaction and so, has prescribed Bank Realization Certificate (BRC). The exporters have to produce BRC for claiming DEPB or for closure of duty-free licences. But where ‘hawala’ premiums are less than the incentives that exporters get, it is really not too difficult to manage. So the unscrupulous get away while the procedure only raises the compliance costs for the law-abiding.
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To be fair, the RBI has said that the GR form need not be submitted for export transactions up to $25,000 and that in some cases, Chartered Accountant certificates (CAC) can be submitted, confirming imports against outward remittances. The commerce ministry also grants benefits under some reward schemes and closure of EPCG licences on the basis of CAC confirming export proceeds realisation.
The finance ministry grants duty drawback and then monitors export realisations through CAC. But the formats are not uniform and any number of excise rebates, DEPB claims and closure of duty-free licences case remain pending for want of flawless BRC.
It is time the RBI, the finance ministry and the commerce ministry examine whether GR forms and BRC are necessary and whether realisation of export proceeds need be monitored at all. After all, every exporter, in his own interest, will try to get his export proceeds and every importer will get his goods against payments that he makes.
Otherwise, he can’t run his business. Even if the RBI, finance ministry and commerce ministry decide to continue monitoring realisation of export proceeds and import of goods against each outward remittance, they can agree on a common format of CAC to be submitted periodically. That will reduce transaction costs.
E-mail : tncr@sify.com