Seize the chance, revamp procedures

EXIM MATTERS

The annual revision to the foreign trade policy is due this month-end. The government should use this opportunity to significantly cut unnecessary paperwork and simplify procedures. Some tangible benefits for exporters are also necessary to sustain the export momentum.

In the last three years, very little has been done to reduce the paperwork for exporters except electronic verification of the DEPB (Duty Entitlement Passbook). The facility for electronic verification can very well be extended to advance licence, duty-free import authorisation, duty-free replenishment certificate etc.

The requirement for submission of Annexure-23 consumption statement duly certified by a chartered accountant must be done away with. It is named as consumption register without even calling for details of receipts and issues. It is based on the assumption that the standard input output norms are too liberal. It targets only the advance licence holders when even the DEPB rates or duty drawback rates that have not been targeted are based on the same input output norms. It serves no useful purpose.

The government must realise that inflation has hit not only the weaker sections of the society but even the other sections. The export competitiveness is getting steadily eroded with higher costs, service tax on almost all the services that exporters use, higher interest rates and so on. With the global economy slowing down, it would be very difficult for the exporters to maintain the export growth rate.

The duty cuts in the Budget will certainly result in more imports. The government cannot rely only on capital account inflows to contain the growing trade deficit. Indeed, the outflows on capital account have been growing steadily with more and more Indian companies preferring to invest abroad. The government must, therefore, encourage exports.

The export promotion capital goods (EPCG) scheme must be revamped to make it simpler and also the duty rate under the scheme must be brought down to zero. There is no point in a 5 per cent EPCG scheme when the duty rates on capital goods have come down to 7.5 per cent.

A bold and brave move would be to allow exporters to take Cenvat credit of basic Customs duty with the condition that the credit must be reversed if the final products are cleared for home consumption. Such a move would eliminate the need for duty exemption/remission scheme, liberating the exporters from the clutches of the licensing authorities and significantly bringing down the transaction costs. The manufacturers who are not entitled to take Cenvat credit (such as those manufacturing non-dutiable products or those having home clearances below Rs. 1.5 crores) may be allowed to use the duty drawback rate.

The entitlements under the focus product and focus market schemes must be increased. The focus market scheme must not be restricted only to exports through EDI-enabled customs stations. Export houses need simpler renewal procedure and some tangible benefit to encourage more exports.

Finally, corruption in the licensing offices has gone up significantly in the last three years. The government that swears by the 'Aam Aadmi' has turned a blind eye to the practical problems and untold sufferings at the ground level, especially for the small exporters. The commerce minister seems too busy traveling abroad and unable spare even little time for the small exporters in the country.

email : tncr@sify.com