Policy has fallen prey to wrangles between finance and commerce ministries

FOREIGN TRADE POLICY/ BACKDROP

Not only was the announcement of the policy delayed by a week, but several sops announced in the five- year Foreign Trade Policy in August last year have been deleted

The annual supplement to the Foreign Trade Policy, which comes in the backdrop of a 24 per cent growth in exports to around $ 80 billion during 2004-05, appears to have fallen prey to the differences of opinion between the commerce and industry ministry and the finance ministry.

The two ministries do not see eye to eye on the modalities for operating various schemes.

Not only was the announcement of the policy delayed by a week, but several sops announced in the five-year Foreign Trade Policy in August last year had also been deleted.

For instance, duty-free import of capital goods under the export promotion capital goods scheme for agriculture has been withdrawn along with the exemption from bank guarantees for units in agri export zones.

The commerce ministry has tried to soften the blow by relaxing the threshold limit for bank guarantees from 25 per cent to 15 per cent.

DGFT officials said the two concessions had been withdrawn as the department of revenue had so far not agreed to issue the requisite notification to operationalise the benefit.

Similarly, the facility of granting reimbursement of central excise duty, paid on bulk tea procured from the licenced auction centres by the development commissioner of a special economic zone, has also been withdrawn.

Another victim has been the withdrawal of the easier documentation requirements.

The policy had, in August 2004, stated that "pending the finalisation of a single common document (SCD) for international trade, the government documents dealing with exports and imports will honour the permission or licence or certificate issued by the other government departments based on the verification of export documents like the shipping bill, bank realisation certificate, packing list and the bill of landing, and will not insist upon fresh submission of these documents".

The Prime Minister's Office has been asked to step in to resolve some of the outstanding issues between the two ministries.

The Prime Minister's economic council has been asked to take a view not only on the issue of income tax claims on the duty entitlement passbook scheme but also on the issues of exempting export oriented units (EOUs) from service tax, the sunset clause for withdrawal of income tax benefits to EOUs by 2009 and the deemed export benefits to domestic tariff area units for supply to units in SEZs under the 'served from India' scheme.