Incentive for exporters exceeding target

RUN-UP TO THE FOREIGN TRADE POLICY

The government will unveil 'Target Plus', a scheme aimed at allowing duty-free import of inputs by the services sectors and large merchandise exporters.

The scheme, to be unveiled by Commerce and Industry Minister Kamal Nath in the Foreign Trade Policy on August 31, would provide additional sops to exporters who achieve more than the export target for the fiscal, officials told Business Standard.

The scheme goes ahead of the Duty Free Entitlement Certificate (DFEC) scheme, which was launched in March 2003, enabling service exporters to import consumables, office and professional equipment, spares and furniture equivalent to 10 per cent of the average foreign exchange export earnings in the previous three years. For hotels and restaurants, the entitlement has been fixed at 5 per cent.

Status holders, exporting goods worth at least Rs 25 crore during a financial year, and having attained 25 per cent incremental growth, were permitted to import inputs valued at 10 per cent of the incremental exports.

"The present restrictions of having at least 25 per cent incremental export growth over the previous year are being done away with. The scheme, however, will continue to be non-transferable," an official said.

Industry chambers like Fieo had proposed that the limit for status holders should be reduced to Rs 10 crore from the Rs 25 crore at present. Similarly, the percentage for incremental growth should also be reduced to 10 per cent.

According to officials of the Federation of Indian Export Organisations (FIEO), the new scheme with the relaxed norms could be more acceptable to exporters since the present provisions are being found to be too restrictive.

"Exporters were not using DFEC since the imports are permitted only in the sector in which exports take place. For instance, a rice exporter can only import inputs used for growing or processing rice," a Fieo functionary said.

FIEO officials pointed out that no exporter had so far availed benefits under the DFEC scheme.

Meanwhile, the government will announce a new focus initiative in the foreign trade policy called Focus Asean Plus 2. The focus programme will include all the Asean members and New Zealand and Australia. This will be the fourth focus initiative after the focus programmes for Latin America (LAC), Commonwealth of Independent States (CIS) and Africa.

The budgetary allocations for Focus Africa and Focus CIS initiatives, for the current financial year, are also being raised to Rs 3 crore from Rs 2 crore and Rs 40 lakh, respectively.

Increasing exports to the Asean region is among the priority area for the government this fiscal. In keeping with the focus on Asean, Commerce and Industry Minister Kamal Nath is also slated to attend the Asean economic ministers meeting in Indonesia in the first week of September.

The commerce ministry is also planning to extend the existing programme, Focus-LAC, beyond its current tenure of March 2005.

For the next financial year, the grant under the market development assistance for the Focus-LAC is proposed to be Rs 4 crore. The government has already increased allocation for the market access initiative scheme to over Rs 100 crore for 2004-05.

The scheme provides funds to exporters for undertaking market studies and surveys, opening of showrooms and warehouses, as also for participation in fairs and publicity campaigns including brand promotion.

Officials said the coverage of the programme had been expanded to include state governments and Indian missions. Until now the scheme was limited to the export and trade promotion organisations and exporters.

State governments, like Andhra Pradesh, have already been sanctioned funds from the programme and some other states have already been submitted their proposals to the ministry.

Along with the market access initiative scheme, the ministry has also revamped the market development assistance programme, which will encourage participation in fairs and buyer and seller meets.

in four focus areas""Latin America, Africa, the Commonwealth of Independent States and Asean (including New Zealand and Australia).

The funds for the market development assistance have also been hiked marginally to Rs 55 crore this fiscal from Rs 52 crore last year.