Commerce Minister Kamal Nath will be announcing the interim Foreign Trade Policy on Thursday, just a few days before the Election Commission is expected to announce dates for the coming general elections.
Officials said that the new policy would focus on procedural simplification of existing export support schemes. “The interim policy will be on the same lines as the one that was released by the previous government in January 2004,” said a government source.
Foreign Trade Policy announcements are usually made in April. But if election dates are announced, the government cannot announce any policy developments because of the model code of conduct. A full-fledged Foreign Trade Policy is expected once the new government takes over at the Centre.
In the interim policy, labour-intensive sectors like carpets and leather may get some additional benefits from the existing export promotion schemes like Focus Product and Focus Market, which give partial duty relief on imported inputs for export of certain shortlisted goods to select countries.
Extension of export obligation for many export related schemes is likely to be announced in the policy. Currently, exporters have to commit to the government that a certain value of exports will be undertaken by them against imported inputs and machinery for which lesser import duty was charged. The export obligation period is likely to be extended by at least six months.
“Exporters are not able to fulfil export obligations as the goods sent by them to overseas clients earlier still remain to be sold. In this background, some flexibility needs to be given to exporters,” officials added.
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Moreover, norms for claiming service tax benefits due to exporters may also be made simpler. According to sources, 70 per cent of the service tax reimbursement claim will be given the moment an exporter applies for it, while the rest will be given within the next 30 days.
Service tax benefit was first announced in the foreign trade policy of 2007 by Nath and about 19 services used by exporters while manufacturing goods for overseas sales were shortlisted for the benefit.
But while applying for the benefit, exporters would have to prove the linkage between the service used and the exported consignment. Exporters claim that only a handful of them have got service tax reimbursements because of the norms. In fact, a survey of 50 companies by the Federation of Indian Export Organisations (FIEO) found that only one of them was able to avail the benefit.
A committee of secretaries headed by Finance Secretary Arun Ramanathan was set up in January 2009 to look into procedural issues faced by exporters.
The interim policy will be announced at a time when overseas sale of Indian goods is dipping. According to the commerce ministry data, Indian exports have contracted for three consecutive months ending December 2008. Initial estimates available with the ministry suggest about 22 per cent dip in exports in January 2009 as well. The slowdown in exports is due to lesser demand for goods in key overseas markets like the United States and Europe. It is now fairly clear that India will not be able to meet an export target of $200 billion in 2009-10 due to a waning export growth.
Meanwhile, the government has already allowed the extension of a key export sop —interest subvention on export related loans — till September 2009. This will cost the exchequer Rs 300 crore.