Sukumar Mukhopadhyay: Basic issues not addressed by Kamal Nath

Policy based on showering tax benefits on exports

The policy of export and import announced yesterday for 2004-9 is basically the annual policy for 2004-5 and is wholly based on showering tax benefits on exports and on imports made for export.

It is basically a faulty approach since ultimately all exports are zero-rated. This means that even if duty is paid for import or on exports ultimately all of them are refunded not only on the actual exports but on inputs as well. We have the system of drawback, export refund etc in place all along. No export of duty ever remains unrefunded.

So when the Commerce Minister chooses to say that the policy is one of "neutralising incidence of all levies and duties on inputs used in export products....", it gives a wrong impression that it is something being done now. In fact it was always there for decades. There is nothing new about it.

For development of export of agricultural products the only proper benefit seems to be duty free credit entitlement of 5% of FOB value of exports. But this is nominal and cannot serve the purpose. It has been proposed to bring improved seeds from abroad but customs duty on seeds is now 30%, which should have been selectively reduced, as it is not easy for agriculturists to claim drawback.

The idea of Target Plus which is to give duty free credit to those exporting more than 20% or more compared to the annual target is good. Some fundamental issues have not been addressed which would have made more difference than the fringe benefits now bestowed on the exporters.

One is about the Special Export Zones that have been created three years back. There is no account of how many of them have been functional and how many of their problems are now to be solved. EOU and SEZ are two different but very similar organisations. It was felt for long that they may be merged so that there are not too many organisations. This problem persists.

The problem of port congestion has lately become a serious issue for exporters in meeting the target date of export. They lose the export order if the target is not met. Bombay and JNPT are so congested that the shipments are missing the ships frequently. Even the roads to the port of JNPT are so bad that the vehicles cannot move easily.

One solution to the problem of port congestion is to clear the import cargo quickly, which is an achievable target. The problem could be solved by determined effort. Or at least some idea of how to solve the problem could be discussed, but there is no such mention. The import of second hand machinery has been allowed without any age limit. This is not going to help export at all. All the very old machines of the western world, which will come to India, are in any case outdated and dilapidated which have been replaced by modern machines.

(The author is a former CBEC member)