The commerce ministry put the Foreign Trade Policy (FTP) 2009-14 through an annual review on August 23 last year. There is no indication yet on when the FTP will be reviewed this year. Although the Policy framework is likely to remain stable, there are some expectations from the ministry this year.
First, the very high growth in exports this year (46 per cent in the first quarter and 81 per cent in July) needs more credible explanation. The critical parameters like GDP growth in India or abroad, industrial output, world trade growth, lower base figures, the rupee exchange rate, the one per cent Status Holder Incentive Scrip scheme, wider coverage under Focus Market Scheme and Focus Product Scheme or possibility of abolition of DEPB (Duty Entitlement Passbook) scheme etc. do not fully explain such high export growth rates reported. The export figures get more intriguing considering high inflation and high interest rates at home, lower commodity prices abroad, abolition of interest subvention scheme, income-tax exemptions for export oriented units and dividend distribution tax for entities in special economic zones (SEZs) besides imposition of Minimum Alternate Tax for entities in SEZ.
There is a suspicion that supplies to SEZ are being counted as exports and that is boosting the export figures. If that is so, the figures must be reported separately. Supplies to SEZ developers go towards building infrastructure and suppliers to SEZ units are intermediates that are used to manufacture final products that are exported. So, counting such supplies to SEZ may mean higher export figures but not necessarily higher foreign exchange earnings or higher industrial activity. The commerce ministry should do its bit to come clean and dispel any wrong impressions.
Second, the commerce ministry must unveil the alternative for the DEPB scheme quickly. The DEPB scheme is to be discontinued by end-September. Exporters have to quote for fresh orders based on the dispensations that take the place of the DEPB scheme. The new All Industry Rates of Drawback must be announced quickly so that firm prices can be quoted for deliveries in October and beyond.
Third, the exporters have to see some credible action for curbing rampant corruption in the offices of the Director General of Foreign Trade (DGFT). This can be done by simplifying the policy and processes and easing the documentation requirements. Ways must be found to reduce the discretion with the officials engaged in fixing input-output norms. Once the shipping bill and bank certificate are submitted, the officials must accept the fact of discharge of export obligation and sort out technical deficiencies later. Having an ombudsman to deal with complaints that do not get resolved efficiently through existing systems will help.
Fourth, the deemed exports provisions need to be redrafted removing all ambiguities. The forms prescribed for getting the benefits need to be redesigned with a keen understanding of how the transactions take place at the ground level. Fifth, a review of the condition for maintaining annual average exports under the Export Promotion Capital Goods scheme is necessary. Sixth, unnecessary categories of licenses/authorisations under duty exemption scheme need to be abolished.
These are only some of the expectations from the commerce ministry. Although there is no sanctity about any date for annual review of the FTP, unexplained delays strengthen apprehensions of uncertainty at the decision-making levels.
Email: tncr@sify.com