Reform legal dispensations

EXIM MATTERS

The finance ministry, in its mid-year review, has conceded that capital inflows might hit economic growth through exchange rate and trade and monetary variables, at least in the short run. The exporters should focus on improving productivity and competitiveness, says the review, implying that their prospects do not lie in asking for concessions.

The commerce ministry, however, is of the view that the finance ministry must fully implement its package of fiscal relief measures to help the exporters overcome the effects of the strengthening rupee.

What the two ministries can do immediately is to get together and find ways to reform the legal dispensations and procedures. Here is a brief list of what they can do.

The Export Promotion Capital Goods (EPCG) can be revamped allowing greater flexibility to fulfil the export obligation. The requirement of installation certificate can be abolished and replaced with a simple declaration. The imported machinery may be allowed to be installed in any factory of the importer or supporting manufacturer. The requirement of 'nexus' certificate from Chartered Engineer can be abolished. The requirement of maintaining past three years average exports can be reviewed. The conditions for 'clubbing' can be liberalised for even licences issued in the earlier Policy periods.

The duty free import authorisation (DFIA) scheme, unlike the earlier duty free replenishment certificate (DFRC) scheme, does not allow procurement of indigenous inputs without excise duty payment. It gives no special advantage compared to the DFRC scheme. On the contrary, it gets messier when transferability is sought. The commerce ministry must admit its mistake and replace the DFIA scheme wit DFRC scheme, which was simpler and much more convenient.

The advance licence/authorisation scheme must be liberalised to allow extension of export obligation beyond 36 months. The requirement of 'nexus' can be liberalised. The Appendix-23 statement of consumption can be reviewed. 'Clubbing' can be made easier. Liberal view may be taken to facilitate closure of licences issued during the earlier Policy periods. Appeals against 'Norms' fixation decisions can lie with an independent authority.

The deemed exports scheme can be liberalised to allow excise duty exemption of goods cleared to holders of EPCG licence/authorisation. The concept of supplies through third party can be more specifically incorporated in the scheme.

The conditions for numerous exemptions on re-imported goods are outdated and not too rational. All such exemption notifications can be consolidated and conditions rationalised. Excise examination can be accepted for grant of drawback of duties on goods re-exported in the same form.

Transferability can be allowed for duty free certificates issued under Served from India scheme. The CVD paid through the scrip should be allowed as Cenvat credit. Domestic suppliers against the scrip should be allowed to retain the Cenvat credit and not pay 10 per cent of the price. Even the CVD paid through Duty Entitlement Passbook (DEPB) issued before 1.9.2004 can be allowed as Cenvat credit.

This is only a brief list. A task force of the knowledgeable can look into every aspect of the rules and regulations. Unlike physical infrastructure, the soft infrastructure of rules and regulations can be reformed without investing much money and time.

tncr@sify.com