Small exporters to get policy push

RUN-UP TO EXIM POLICY/ agro-processing industry to gain from new foreign trade policy

The national foreign trade policy, to be unveiled by Commerce and Industry Minister Kamal Nath next month, is likely to see a new category of status holders being created for the benefit of small exporters, duty cuts for imports by the agri-processing sector, and steps to bring export-oriented units (EOUs) at par with special economic zones (SEZs).

According to senior government officials, a new status holder category will be created for small exporters with a turnover of up to Rs 5 crore.

This means they will get benefits like licences and Customs clearances on a self-certification basis, 100 per cent retention of foreign exchange and also enhanced repatriation period from 180 days to 360 days.

Moreover, agro-processing units may be entitled to undertake duty-free import of inputs, such as equipment, fertilisers and pesticides, against their exports. The duty-free entitlement could be between 3-5 per cent of the value of their exports.

The commerce ministry was also trying to bring EOUs at par with SEZs by exempting them from paying the central sales tax and service tax, the officials said.

While the Duty Entitlement Passbook (DEPB) scheme "" a duty neutralisation export benefit "" is likely to be continued till March 2005, the benefit may be withdrawn for textile exporters, in line with the Budget proposals.

The foreign trade policy will also touch upon the role of states and ports in promoting trade. Besides simplifying existing procedures and initiating new measures for cutting transaction costs, like use of digital signatures, the policy will also ease exporters' access to finances.

Officials said the government was considering prescribing a minimum investment and export turnover limit for declaring certain areas as 'virtual SEZs' as proposed in the SEZ Bill.

Such virtual SEZs would be promoted in sectors like tourism, hotels, agriculture, leather, gems and jewellry, handloom and handicraft as also agriculture, they said.

The move to withdraw the DEPB benefit to textile exporters is being considered to check the possible misuse of the scheme by garment exporters.

"With the withdrawal of mandatory excise on textiles (except man-made yarn and fibre), the incentive for garment exporters to claim a refund of duties paid through the duty drawback scheme has reduced substantially. Since the duty drawback, which has both an excise and a Customs duty component, has become less attractive, garment exporters will like to opt for the next available alternative, the DEPB. And since the DEPB is a transferable instrument, there is a large scope of misuse," an official told Business Standard.

Officials said the government was examining the option to retain only the duty drawback for textiles and withdraw the DEPB.