Abolish the office of DGFT

EXIM MATTERS

Since Independence, India's foreign trade policy has gone through many momentous changes. Though more significant changes are needed, they are unlikely to happen anytime soon.

Till 1991, the policy was to allow import of goods only against licences, except for a few items mentioned in the Open General Licence (OGL). It was P Chidambaram who, as commerce minister, turned the policy on its head and allowed import of all goods without a licence, except those covered under a negative list. This policy has stood the test of time.

The exports were being supported through the Cash Compensatory Support (CCS) and Replenishment (REP) license schemes, before they were abolished in 1991. Since then many export promotion schemes have come and gone but some have helped boost the exports more than the others.

The advance licence scheme, the duty drawback scheme, the 100 per cent export oriented units (EOU) scheme, the export promotion capital goods (EPCG) scheme and the deemed export scheme have been around since quite some time and have been quite stable.

The schemes involving subsidies like the Value-Based Advance Licence scheme, the Duty Entitlement Passbook scheme and the Target Plus scheme have, in their short span of life, attracted the attention of big companies to exports and encouraged them to export more.

The Free Trade Zones scheme, introduced in 1965, has been replaced with a new Special Economic Zones scheme. The new scheme is a significant break from the past because it gives significant tax breaks to encourage the private sector to invest in creating infrastructure in the zones.

Overall, the foreign trade policy of the commerce ministry has achieved its objective. Timely changes in the foreign trade policy have, besides other factors, contributed in no small measure to growth in exports.

Yet, the commerce ministry has not got enough recognition or credit for its good work. That is because the procedures have not been reformed enough and it is not very easy to get work done at the operating levels without greasing the channels.

The first serious effort to simplify procedures and reform the mindset of the staff at the operating levels was made by Shyamal Ghosh, during his tenure (1994-96) as the Director General of Foreign Trade (DGFT). During his fairly long stint (1997-2003) as DGFT, Lakhanpal took many meaningful steps to simplify the procedures and clarify many issues.

The other officers who took over as DGFT have had limited tenures and made little impact. In the last three years, corruption has increased at the offices of the DGFT.

There is a reasonable case to abolish the licensing offices of the Director General of Foreign Trade and administer the export promotion schemes like duty exemption scheme, EPCG scheme etc through only Central excise and Customs. The exporters cannot avoid these revenue department authorities, anyway. If the revenue department is the only agency entrusted with the grant of exemptions that export promotion schemes entail, the unnecessary costs of transacting with the DGFT's licensing offices can be eliminated altogether.

However, this is unlikely to happen because it is the commerce ministry that makes the foreign trade policy and it would not like to let the exporters go elsewhere to meet their needs. For obvious reasons, it would force the exporters to be at its doors for getting any export promotion benefits.

tncr@sify.com