Nath misses crucial deadlines

EXIM MATTERS

Before Kamal Nath took over the commerce ministry, one could be reasonably certain that major changes to the Export and Import Policy would be notified on the last day of March every year. The deadline was rarely missed. But since the year 2004, Nath has missed the deadline every year.

In 2004, first it was stated that the new policy would be announced on July 31, 2006. But the date was revised at least twice before the policy was finally announced on August 31, 2004. In 2005, the annual revision to the policy was delayed by a week. Similarly, in 2006 also there was a delay. In the current year, it is not yet known when Nath will announce the policy.

The present Foreign Trade Policy is for the period 2004-09. It ought to mean that the basic framework of the policy will remain unchanged for five years. Yet, major changes are made every year keeping in view the developments. For example, the Target Plus scheme was revised in 2005 and then abolished in 2006. The Duty Free Replenishment Certificate (DFRC) scheme was replaced with Duty Free Import Authorisation (DFIA) scheme in the year 2006. Several procedural changes are also expected.

This year, the trade is keenly awaiting the changes to the Export Promotion Capital Goods (EPCG) scheme. Expecting that the duty rates under the scheme will come down significantly, many have held up their shipments/clearances. Even export shipments have been held up in the expectation that the entitlements under the Focus Market scheme will be increased.

It is widely hoped that the commerce minister will make important announcements regarding extending the income-tax concessions for export-oriented units, software and hardware technology park units and bio-technology park units. Interest in these units has significantly gone up after Reliance has asked for conversion of its Jamnagar unit into an export-oriented unit. Many investment decisions are on hold awaiting the commerce minister's announcement of the policy.

The delay in clearing the applications for setting up Special Economic Zones (SEZ) is also quite surprising considering the claims of Nath regarding the investments that the policy can attract. No doubt, Nath is trying to push these proposals through and it is the group of ministers that is holding up decisions. Yet, Nath must take the responsibility for explaining the need to make quick decisions to the group of ministers.

The finance ministry has extended the last date for utilisation of duty credits under Duty Entitlement Passbook (DEPB) scheme up to March 31, 2008, strengthening the expectations that the DEPB scheme will be continued. Yet, it is for Nath to come out with a clear statement about the future of the scheme so that exporters can factor the duty credit in their pricing decisions. He should persuade the finance ministry to remove the sunset clause in the DEPB notification as there is no point in limiting utilisation of the duty credits.

Nath is one of the ministers who is regarded well for his performance in the commerce and industry ministry. He has won praise for his negotiations at the multilateral forums and attempts to facilitate foreign direct investment. He is not enhancing his reputation by delaying announcement of major changes to the Foreign Trade Policy.

e-mail: tncr@sify.com