Looking back at 2013, the major achievement of the international trade community was the modest agreement to streamline it - allow developing countries more options for providing food security, boost least developed countries' trade and help development, at the Bali meet of member-states of the World Trade Organisation.
More important than the agreement was the commitment it signalled, however faint, to the relevance of WTO and the Doha Development Round. The estimated benefits from the agreement might be exaggerated. However, a step forward has been taken to make trade easier and eliminate some distortions.
At home, the major story was rupee depreciation, helping exports and growth revive. The customs exchange rate for exports was Rs 54.30 to a dollar at the end of last year. This year-, it is Rs 61.90 a dollar. The falling rupee helped exporters regain the ground lost when it had remained relatively steady but inflation had pushed up their costs. Towards the year end, exports were losing steam again as inflation continued to remain high. Luckily, however, the global economy started showing signs of revival. Domestic producers also got some respite as imports became costlier.
On foreign trade policy, the commerce ministry significantly simplified the Export Promotion Capital Goods (EPCG) Scheme, by merging the three per cent and zero duty schemes. The Status Holder-I Scheme gave way to an annual Incremental Export Incentivisation Scheme. Coverage under the Focus Market Scheme and Focus Product Scheme were widened. However, the curtailment of drawback rates took away any gains the exporters could get from these.
The ambiguities relating to net foreign exchange earning criteria under the Served from India Scheme, the narrow interpretation of the meaning of 'group company', payment in rupees from Special Economic Zones (SEZs) all remained unresolved. The measures to revive SEZs through easier norms for developers failed miserably, in the absence of remedial measures to address the concerns of entrepreneurs or investors who want to set up units in these.
On its part, the Reserve Bank re-wrote the rules for write-off of export proceeds and formally allowed third-party payments for imports and exports but with some unrealistic conditions. The interest subvention for exporters was restricted during the year. The Central Board of Excise and Customs (CBEC) introduced a Risk Management System for exports, tried to encourage stakeholder participation and gave some clarifications on classification. The useful clarification that exemption from excise duty by way of debit to duty credit scrips will not necessitate reversal of Cenvat credit helped avoid a lot of unnecessary litigation.
The revisionary authority dealing with drawback and excise rebate appeals continued to surprise exporters, with many decisions adverse to them. The procedure for service tax exemption/refund for services provided to SEZ units and developers was simplified. Overall, CBEC seemed bereft of ideas and short of energy to improve its administration.
Looking ahead, exporters face the prospect of getting priced out of markets due to increasing costs in the domestic economy. Their best hope is a strong revival of growth, especially in developed countries.
More important than the agreement was the commitment it signalled, however faint, to the relevance of WTO and the Doha Development Round. The estimated benefits from the agreement might be exaggerated. However, a step forward has been taken to make trade easier and eliminate some distortions.
At home, the major story was rupee depreciation, helping exports and growth revive. The customs exchange rate for exports was Rs 54.30 to a dollar at the end of last year. This year-, it is Rs 61.90 a dollar. The falling rupee helped exporters regain the ground lost when it had remained relatively steady but inflation had pushed up their costs. Towards the year end, exports were losing steam again as inflation continued to remain high. Luckily, however, the global economy started showing signs of revival. Domestic producers also got some respite as imports became costlier.
On foreign trade policy, the commerce ministry significantly simplified the Export Promotion Capital Goods (EPCG) Scheme, by merging the three per cent and zero duty schemes. The Status Holder-I Scheme gave way to an annual Incremental Export Incentivisation Scheme. Coverage under the Focus Market Scheme and Focus Product Scheme were widened. However, the curtailment of drawback rates took away any gains the exporters could get from these.
The ambiguities relating to net foreign exchange earning criteria under the Served from India Scheme, the narrow interpretation of the meaning of 'group company', payment in rupees from Special Economic Zones (SEZs) all remained unresolved. The measures to revive SEZs through easier norms for developers failed miserably, in the absence of remedial measures to address the concerns of entrepreneurs or investors who want to set up units in these.
On its part, the Reserve Bank re-wrote the rules for write-off of export proceeds and formally allowed third-party payments for imports and exports but with some unrealistic conditions. The interest subvention for exporters was restricted during the year. The Central Board of Excise and Customs (CBEC) introduced a Risk Management System for exports, tried to encourage stakeholder participation and gave some clarifications on classification. The useful clarification that exemption from excise duty by way of debit to duty credit scrips will not necessitate reversal of Cenvat credit helped avoid a lot of unnecessary litigation.
The revisionary authority dealing with drawback and excise rebate appeals continued to surprise exporters, with many decisions adverse to them. The procedure for service tax exemption/refund for services provided to SEZ units and developers was simplified. Overall, CBEC seemed bereft of ideas and short of energy to improve its administration.
Looking ahead, exporters face the prospect of getting priced out of markets due to increasing costs in the domestic economy. Their best hope is a strong revival of growth, especially in developed countries.
email: tncr@sify.com