Trade policy yet to be implemented fully

EXIM MATTERS

The commerce minister released the annual supplement to the Foreign Trade Policy almost two months ago. Some announcements have been given effect but action on many is awaited.

Last week, the government announced the products that qualify for duty credit at 1.25 per cent of the freight-on-board (FOB) value of exports under the focus product scheme.

The coverage includes 15 entries under the head, "value-added leather products and leather footwear," 18 under "sports goods, fireworks and stationery items, 11 under the head, "handicraft items", one entry under the head, "handloom products" and 29 under "value-added fish products."

The above entries are covered under a new Appendix 37D of the Handbook of Procedures. Quite a few of these cover a range of items. For example, the single entry under the head "handloom products" says, "all handloom products bearing handloom mark will be entitled for benefit under the scheme."

Two weeks back, the director-general of foreign trade (DGFT) notified 24 gram udyog products for inclusion in Appendix 37A. Export of these items will earn duty credit at 5% of the FOB value of exports under the Vishesh Krishi Gram Udyog Yojana (VKGUY) scheme.

These duty credits will be in addition to other export incentives like the duty entitlement passbook scheme (DEPB). In fact, DEPB rates have been announced for some of these items. The duty credits under the VKGUY scheme can be sold in the market.

The DGFT has, however, not yet notified the list of countries under the focus market scheme. Under this scheme, exporters will earn duty credit of 2.5 per cent of the FOB value against exports to notified countries. These credits can be sold in the market and thus amount to direct subsidies.

The commerce minister justified the subsidies as offsetting the cost disadvantages that Indian exporters suffer when they export to countries in Latin America, Africa and the former Soviet Union.

The DGFT has not yet notified the application form for obtaining licences under the duty free import authorisation (DFIA) scheme. This scheme replaced the duty free replenishment certificate (DFRC) scheme from May 1 this year.

The finance ministry has notified the necessary exemption notification and the Central Board of Excise and Customs (CBEC) has issued the circular to implement the scheme. But the exporters are unable to take advantage of the scheme in the absence of the application form. The new DFIA scheme is not free from controversy. So there is a lurking suspicion that the delay is due to a rethink on the part of the bureaucracy.

The commerce minister had announced that interest would be paid on delayed refunds. The announcement gladdened the hearts of deemed exporters, who wait for months for refund of the terminal excise duty. So far, however, there are no tangible provisions under which they can claim interest for the delay.

The commerce minister had said that incidence of service tax and fringe benefit tax will be rebated on exports. So far, this announcement has not been given effect. Perhaps by not revising downwards the duty drawback or DEPB rates, despite a cut in the peak Customs duty from 15 per cent to 12.5 per cent , the government compensates exporters for such tax incidence.

email : tncr@sify.com