In the last few columns, I had put forward a number of suggestions that can be considered while formulating the new Foreign Trade Policy. Now that it has been announced that the commerce minister is expected to unveil the new Foreign Trade Policy on August 27, 2009, here are a few more suggestions.
Under the Export Oriented Units (EOU) scheme, there are some restrictions on how the entitlement of sale in the Domestic Tariff Area (DTA) can be utilised. Firstly, the goods sold in DTA must be similar to the goods exported or to be exported. Secondly, for units manufacturing a number of products, the sale of any one product cannot exceed 75 per cent of the FOB value of exports of that product. These restrictions can be removed, considering the need for greater flexibility in the context of global slowdown.
The Letter of Permission/Intent (LOP/LOI) usually mentions the export product. To obviate the need to approach the authorities again and again for small changes, the LOP/LOI can be issued for a product group and let the EOU get necessary flexibility within the product group. There is no need to ask for a list of materials along with the Legal Undertaking. The Excise authorities take it as a restriction while issuing Procurement Certificates for imports. Doing away with the list will take away an unnecessary restriction. The instructions of the finance ministry are spread over several circulars issued over a number of years. The commerce minister should announce that consolidated instructions will be issued and pursue the finance ministry to do so.
Supplies to SEZ (Special Economic Zone) developers against payment in Indian Rupees can earn Duty Entitlement Passbook (DEPB). The policy should provide that even supplies to SEZ units can earn DEPB if payment is received in Indian Rupees. The government should also hold up fresh approvals for establishment of SEZs till more experience is gained on how the approvals already given work.
The deemed exports scheme does not explicitly recognise the role of merchant exporters. To some extent, in case of supplies to projects, the provisions allowing main contractors or sub-contractors to avail the benefits take care of the situation. But, it would be far better to explicitly recognise a situation where merchant exporters can claim the benefits and also let vendors to sub-contractors claim the benefits. Many EPC contractors parcel out projects to sub-contractors who outsource the supply as well as service from vendors and sub-vendors. Documentation in such cases needs to be very clear. Supplies to non-mega power projects can be treated on a par with supplies to mega power projects as the contractors or project owners are finding devious ways to avail the benefits anyway.
The threshold qualifying limits for export houses can also be left unchanged, considering the global slowdown. This will help small exporters avoid bank guarantees under various schemes.
There must be some procedure to appeal against the decisions of Norms Committee. Usually, it is the word of the technical officer from the concerned administrative ministry that counts, while approving the Input-Output Norms. If an exporter does not agree with his views, he can only represent for a review and the matter goes to the same technical officer. This leads to corruption.
Email: tncr@sify.com
