New trade policy continues with old schemes

The new Foreign Trade Policy 2023 is a continuation of the 2015-20 policy that it replaces, with a few facilitation matters thrown in. Apparently, the government is happy with the export performance and is satisfied that no radical changes are required in the policy, at least for now. The new policy gives no specific period for its validity or any expiry date, but it can be

amended anytime.
 

The schemes that form the core of the 2015-20 policy, such as the Duty Exemption Scheme (DES), Export-Oriented Unit (EOU) scheme, Export Promotion Capital Goods (EPCG) scheme, Remission of Duties or Taxes on Export Products (RoDTEP) scheme, and deemed exports scheme continue. These co-exist with the special economic zones (SEZ) scheme, and the scheme for manufacture in bonded warehouses.
 

A panel at the World Trade Organization (WTO) has already ruled some of these schemes incompatible with the disciplines of the multilateral trade agreements, but with that dispute stuck at the appellate stage, the government has continued with the schemes, although these competing schemes offer different dispensations to achieve the same objectives giving scope for distortions.
 

The government has preferred to continue with the existing schemes rather than try something different. The suggestions to consolidate all the competing schemes and come out with a simpler scheme that will be administered through the Customs have not found favour with the government.
 

Even procedurally, the idea to create separate specialised cells that will deal with authorisations/licences required in each sector, such as engineering, chemicals etc., has been ignored. For the Directorate General of Foreign Trade (DGFT) and its regional offices, it’s business as usual. Higher value limits under e-commerce, export assistance at districts level, intent to encourage trade in rupees, more cities in the list of Towns of Export Excellence scheme, lower export obligation under the EPCG scheme for green energy items, waiver of annual average under EPCG scheme for dairy products, lower threshold for status recognitions, lower fees for export obligation extensions, etc. will all help, but it is far from

certain that they will be significantly impactful.
 

Allowing merchanting trade in restricted and prohibited items also, except for those in the CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora) and SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) list, is a sensible overdue move.
 

The amnesty scheme is attractive for defaulters under the DES and EPCG scheme because the interest will be capped at 100 per cent of the Customs duty amount payable, but more importantly, no interest will be charged on additional duty of customs (CVD) and Special Additional Customs Duty (SAD).
 

The government has done well to avoid giving any new subsidies for exports, given that exports of goods and services have grown significantly after abolition of subsidies under the Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS). Many exporters are disappointed that the RoDTEP scheme is not extended for exports under DES and exports from EOU and SEZ.
 

This is no era for licensing or authorisations or permits. The government should aim at doing away with licensing altogether rather than focusing on giving licences quickly at lesser fee. The aim should be to reduce tariffs across the board and help our businesses enter global value chains through multilateral trade deals.

Email: tncrajagopalan@gmail.com