$79 bn exports make job easy for trade policy

FOREIGN TRADE POLICY 2005

The annual supplement to the Foreign Trade Policy will be unveiled tomorrow in the backdrop of exports touching an all-time high of $ 79 billion during 2004-05, against $ 64 billion the previous year.

With an export growth of over 23 per cent, the supplement is expected to contain measures to boost exports by tweaking the export promotion capital goods scheme, introducing a single advance licence for physical exports, deemed exports and intermediate supplies, and widening the scope of the vishesh krishi upaj yojana to include poultry and dairy products.

The commerce ministry till late evening was pushing for notifying the target plus scheme and the vishesh krishi upaj yojana that were announced last year.

Easy foreign exchange earning norms for small ports under the export promotion capital goods (EPCG) scheme, by allowing earnings in rupee to be counted as export earnings, are also expected to be a part of the incentive package. The requirement of an installation certificate under the scheme will also be relaxed in some cases.

Exporters, who import machinery at a concessional duty under the export promotion capital goods scheme, are required to furnish an installation certificate as proof to show that the imported machinery has been used in production of exportable goods.

In addition, the fulfillment of export obligation norms will be relaxed in cases of bona fide defaults under the export promotion capital goods scheme.

Restrictions are also likely to be eased on import of high-tech machinery for the marine and the retail sector. Export obligation norms will also be relaxed for the small-scale sector.

The export promotion capital goods scheme, in its present form, allows import of capital goods for pre-production, production and post-production purposes at 5 per cent Customs duty, subject to an export obligation equal to 8 times of the duty saved on capital goods imported under the scheme, to be fulfilled over a period of 8 years from the date of issue of licence.

Outstanding issues such as income tax claims being made by exporters under the duty entitlement passbook benefits and the duty drawback scheme, and tax benefits to special economic zones and export oriented units will, however, not be part of the policy.

"Owing to the difference in perception between the commerce and the finance ministry, the decision on these issues will be made by Prime Minister Manmohan Singh himself," an official said.

Exporters are accusing tax officials of harassment on grounds that they are not treating the two schemes as business profit from exports at par with the advance licence scheme.

The popular duty neutralisation scheme, also called the duty entitlement passbook scheme, is expected to continue for the next few months, since the modalities of the new World Trade Organisation compatible scheme are yet to be finalised by the commerce and finance ministries.