Last week, I had suggested that Commerce Minister Anand Sharma should announce an ad hoc Foreign Trade Policy (FTP) for the remaining eight months of the current year (2009-10). It now appears that he will opt for a long-term policy, with some measures that have sunset clauses. The basic framework of the 2004-09 policy may be preserved and most of the export promotion schemes retained. Whether some rationalisation of the schemes, ad hoc measures to help distressed sectors and moves to reduce transaction costs within the existing framework will sufficiently help exporters hit by slack demand abroad is a matter of doubt.
Every export promotion scheme has its merits and justification to survive. But, due preparation, consultation and ‘out of the box thinking’ can help more than mere tinkering with the schemes.
Ramu Deora, former chairman of the Federation of Indian Exporters, has suggested many times that sector-wise or product-group wise (instead of product-wise) duty incidence rates (as a percentage of the FOB value) must be notified and the amount should be straightaway credited to the account of the exporter by the banks, along with the credit of inward remittance of foreign exchange representing the export proceeds. This is somewhat like the pre-reform days when the banks were made to disburse ‘cash assistance’.
“It will simplify matters,” says Deora, “and help get rid of many duty exemption/remission schemes that entail a lot of paperwork and transaction costs.”
Sukumar Mukhopadhyay, former member of the Central Board of Excise and Customs (CBEC), has suggested that duty exemption scheme can be administered through the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.
Even the Export Promotion Capital Goods (EPCG) scheme can be administered through the same Rules. The Customs can administer the Focus Market, Focus Product scheme, etc., without any need for duty credit scrip to be issued. With a bit of thought, even the deemed exports scheme can be administered through the excise department.
Such changes, mainly in administration of the schemes, might mean dramatic lowering of transaction costs but they might also mean eliminating any need for interface with the licensing offices of the Director General of Foreign Trade (DGFT) — something that most exporters will welcome. However, it is unlikely that the DGFT will advise anything that will mean liquidation of his empire because the Foreign Trade (Development & Regulation) Act, 1992, makes him responsible for implementing the FTP.
Exporters will, no doubt, prefer that the commerce ministry makes the Policy because they do not trust the finance ministry.
In that case, how about a situation where the commerce ministry only notifies the Policy and the finance ministry implements it, especially when the Customs and excise have to be anyway involved on any matters that entail duty concessions? It is for the commerce minister to take the initiative, if need be, by initiating amendments to the FTDR Act.
In any case, if the commerce minister meets the exporters at Open House Meets, not only in Delhi, but in various parts of the country and tries to understand their problems, he can make a better Policy.
For that, he needs to spare more time for exporters. Mere closed-door meetings with only the chiefs of industry associations and ministry officials will not be enough.
email: tncr@sify.com
