 "Some improvement but rather modest")
The Status Holder Incentive Scrip scheme has been discontinued but the Incremental Exports Incentive Scheme has been made available for 2013-14. Any incremental exports made during 2013-14 over 2012-13 will earn duty credit scrip of two per cent
The export promotion schemes implemented through the Foreign Trade Policy (FTP) help exporters to lower their prices somewhat, by passing on the subsidies to the buyers for a while. However, the schemes, on their own, cannot much boost the export growth rate, a function of a number of factors - global demand, competitiveness, supply chain efficiencies, etc.
So, while the lukewarm and rather sceptical response to the commerce minister's announcements on Thursday about changes to various schemes were expected, the helpful aspects of the changes announced will be welcomed by exporters.
On the broad thrust, the minister has tried to revive the Special Economic Zone (SEZ) scheme, simplify the Export Promotion Capital Goods (EPCG) scheme, encourage exports to new markets, persuade exporters to prefer local procurement, give greater flexibility in the utilisation of duty credit scrips and clear some messy provisions.
The basic idea of the SEZ scheme was to help build world-class infrastructure in large duty-free enclaves, the way China had done.
Our policymakers gave in to sundry demands and created too many enclaves where tax breaks alone attracted investments and merely helped diversion of exports. What is now being done is to take that process forward and help designate even smaller buildings and smaller geographical units as SEZs.
The policy tweak now cuts the minimum area requirements for an SEZ and allows transfer of ownership of SEZ units. It might help some.
The abolition of the three per cent EPCG scheme and extension of the zero duty scheme for a year to all sectors simplifies the scheme and facilitates much-needed investment.
By barring imports of used capital goods under the scheme and reducing the export obligation in case of domestic sourcing, local procurement is being encouraged.
Strangely, spares can be imported under the scheme only for imported capital goods and not for domestically sourced capital goods.
Also, the domestic suppliers have to pay excise duty and claim refund but not claim exemption upfront.
The facility to allow exports of products not having a nexus with imported capital goods and exports by a group company towards fulfillment of export obligation has been taken away.
The Status Holder Incentive Scrip (SHIS) scheme has been discontinued but the Incremental Exports Incentive Scheme has been made available for 2013-14.
Any incremental exports made during 2013-14 over 2012-13 will earn duty credit scrip of two per cent. Exports to 53 countries in Latin America and Africa will also be counted under the scheme, to encourage market diversification. SHIS can now be transferred to a non-status holder manufacturer group company of the scrip holder.
Service providers can, henceforth, earn duty credit scrips only on the basis of net foreign exchange earned.
Service providers who are also engaged in manufacturing activity can use their Served from India Scrips for importing/domestic sourcing of capital goods, including spares related to their manufacturing sector.
Certain types of duty credit scrips can be utilised for payment of application fees and composition fees under the FTP and also for payment of service tax.
Overall, the changes announced are a mix of 'give away some, take away some'. Considering the ministry's record and the narrow compass of the FTP, the expectations were always modest.
The export promotion schemes implemented through the Foreign Trade Policy (FTP) help exporters to lower their prices somewhat, by passing on the subsidies to the buyers for a while. However, the schemes, on their own, cannot much boost the export growth rate, a function of a number of factors - global demand, competitiveness, supply chain efficiencies, etc.
So, while the lukewarm and rather sceptical response to the commerce minister's announcements on Thursday about changes to various schemes were expected, the helpful aspects of the changes announced will be welcomed by exporters.
On the broad thrust, the minister has tried to revive the Special Economic Zone (SEZ) scheme, simplify the Export Promotion Capital Goods (EPCG) scheme, encourage exports to new markets, persuade exporters to prefer local procurement, give greater flexibility in the utilisation of duty credit scrips and clear some messy provisions.
The basic idea of the SEZ scheme was to help build world-class infrastructure in large duty-free enclaves, the way China had done.
Our policymakers gave in to sundry demands and created too many enclaves where tax breaks alone attracted investments and merely helped diversion of exports. What is now being done is to take that process forward and help designate even smaller buildings and smaller geographical units as SEZs.
The policy tweak now cuts the minimum area requirements for an SEZ and allows transfer of ownership of SEZ units. It might help some.
The abolition of the three per cent EPCG scheme and extension of the zero duty scheme for a year to all sectors simplifies the scheme and facilitates much-needed investment.
By barring imports of used capital goods under the scheme and reducing the export obligation in case of domestic sourcing, local procurement is being encouraged.
Strangely, spares can be imported under the scheme only for imported capital goods and not for domestically sourced capital goods.
Also, the domestic suppliers have to pay excise duty and claim refund but not claim exemption upfront.
The facility to allow exports of products not having a nexus with imported capital goods and exports by a group company towards fulfillment of export obligation has been taken away.
The Status Holder Incentive Scrip (SHIS) scheme has been discontinued but the Incremental Exports Incentive Scheme has been made available for 2013-14.
Any incremental exports made during 2013-14 over 2012-13 will earn duty credit scrip of two per cent. Exports to 53 countries in Latin America and Africa will also be counted under the scheme, to encourage market diversification. SHIS can now be transferred to a non-status holder manufacturer group company of the scrip holder.
Service providers can, henceforth, earn duty credit scrips only on the basis of net foreign exchange earned.
Service providers who are also engaged in manufacturing activity can use their Served from India Scrips for importing/domestic sourcing of capital goods, including spares related to their manufacturing sector.
Certain types of duty credit scrips can be utilised for payment of application fees and composition fees under the FTP and also for payment of service tax.
Overall, the changes announced are a mix of 'give away some, take away some'. Considering the ministry's record and the narrow compass of the FTP, the expectations were always modest.
Email: tncr@sify.com