New steps to reduce transaction costs

THE NEW RULE BOOK

The Foreign Trade Policy has simplified several procedures aimed at cutting down transaction costs, including increasing the validity of licences and entitlements issued under various schemes to an uniform 24 months.

Commerce and Industry Minister Kamal Nath has also exempted exporters, who have a minimum turnover of Rs 5 crore and a good track record, from furnishing bank guarantees in any of the schemes. This will help small exporters who incur high transaction costs.

The age restriction on import of second-hand capital goods has also been removed to make import of such goods cost effective and Indian industry more competitive. As Commerce Secretary Dipak Chatterjee pointed out, there are several countries that were moving away from the manufacture of specific commodities. For instance, he said, Scotland had decided to stop steel production. "Equipment and machinery from such countries can now be easily imported," he said.

The debut Foreign Trade Policy has also reduced the minimum depreciated value for such plant and machinery to Rs 25 crore from Rs 50 crore at present. Smaller textile units were finding it difficult to import equipment as the threshold was pegged at a higher level. They too can expect to be more competitive with the leeway in this policy, according to commerce ministry officials.

The exemption from the 10 per cent service tax is a major relief that has been extended to exports of all goods and services, including those from domestic tariff areas. This will further reduce costs of Indian exports and help them compete with countries in Southeast Asia and China.

The ministry has also considerably reduced the number of returns and forms that need to be filed with the Director General of Foreign Trade (DGFT) and the revenue department. It will continuously engage itself in dialogue with the Central Board of Excise and Customs to further cut down on the number of returns to be filed.

To streamline the clearance mechanism, the ministry has also delegated more powers to the zonal and regional offices of the DGFT. "This will result in speedy and less cumbersome disposal of matters," Nath said, while announcing his policy.

Further, the ministry has announced a time-bound introduction of electronic data interface (EDI) for export transactions. It has said 75 per cent of all export transactions will be on EDI within six months. This will ensure online availability of data and significantly reduce paperwork.