In the second annual review of the Foreign Trade Policy 2009-14 (FTP) due to be announced this month-end, Commerce Minister Anand Sharma should consider responding to the popular mood by issuing guidelines for the appointment of an Ombudsman in his ministry with full powers to give awards on any issue relating to imports and exports and, in particular, to resolve issues of varying and at times contradictory interpretations of FTP provisions and procedural aspects that lead to disputes. Most exporters and importers may still prefer not to file complaints for fear of vindictive retaliation they may encounter at the ground level. Even so, it is an initiative worth considering.
The finance ministry has already issued guidelines for the appointment of one or more persons as Indirect Tax Ombudsman to enable resolution of complaints relating to public grievances against the Customs, Central Excise and Service Tax Department. The ministry took the decision to have Ombudsman because the present system of resolving grievances or deciding disputes is unsatisfactory and time consuming. In case of the commerce ministry also, the system of resolving grievances or settling disputes may be improved by appointing an Ombudsman. If he does decide to have an Ombudsman, the commerce minister should keep the procedures for filing the complaints simple and not bind the Ombudsman to any legal rules of evidence. The Ombudsman should be allowed to follow such procedures as may appear fair to him and the proceedings before him should be summary in nature. Besides other issues, the Ombudsman should be empowered to consider cases of delays in deciding appeals or fixation of input-output norms and award com ensations also.
Considering the export growth figures, Sharma may like to leave the FTP mostly unchanged but he must consider whether inputs should be allowed for import under the Status Holder Incentives Scrip (SHIS) scheme and whether the policy of not allowing transferability of duty credit scrips issued under Served From India Scheme and SHIS scheme should be continued. Exporters are quite worried about the potential impact of decision to discontinue the Duty Entitlement Passbook (DEPB) scheme.
No alternative scheme has yet been announced. Sharma should quickly announce the alternative to the DEPB scheme. Even if the All Industry Drawback Rate schedule is expanded, the un-rebated taxes such as sales tax on petroleum products, electricity duty and local taxes would need to be reimbursed through a simple mechanism. The continued increase in interest rates and withdrawal of the interest subvention scheme has made export credit very costly for exporters.
According to the Federation of Indian Export Organisations, exporters dealing with leading banks are getting rupee export credit at 11.25 per cent as against seven per cent in July 2010, a jump of 60.7 per cent in a year. For other banks, the jump has been from seven per cent to 11.5 per cent, an increase of 64.2 per cent, says FIEO. Sharma should respond to the pleas for reduction in interest rates for exports.
The challenge before the commerce minister is to sustain the export growth momentum. The revised target of $500-billion exports by 2014 would be difficult to achieve in the face of a financial crisis in Europe, political turbulence in West Asia, debt ceiling crisis in the US and economic slowdown in China. The global trading environment calls for proactive policy initiatives that will reduce transaction costs for exporters and quicker resolution of grievances.
Email: tncr@sify.com
