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The new five-year export and import policy attempts to immunise the country’s exports from general constraints prevalent in the economy. The policy, unveiled by commerce and industry minister Murasoli Maran on Sunday, lifts all quantitative restrictions on exports, barring a few “sensitive” items, and rationalises existing export promotion schemes. New incentives have been offered to the special economic zones (SEZs), though export efforts located outside these SEZs remain un-immunised from the minister’s vaccine.
Unlike the current Exim policy, where the emphasis was on promoting agri exports, the policy imparts special focus to the cottage sector and handicrafts, and industrial cluster towns too, by converting them into centres of export excellence.
“Our medium term export strategy has a mission to capture one per cent of the global share of trade by 2007, up from the present level of 0.67 per cent. This will require a compound annual growth rate of 11.9 per cent in dollar terms,” Mr Maran announced.
It being the first year of this new policy, all existing export promotion schemes are being continued, including the duty entitlement passbook scheme (DEPB), in the absence of a full value added tax system. “Some countries have termed some of these schemes as not WTO-complaint though it is not so,” Mr Marain maintained, arguing that these had to remain in force till a mechanism is evolved to rebate the incidence of indirect taxes paid by the exporters.
Other highlights of Mr Maran’s policy announcement include the effort to bring down the transaction cost of exporters, giving additional facilities for status holders, like export houses, trading houses, star trading houses and super star trading houses, and obviating the need to approach the director-general of foreign trade, customs and commercial banks for their day-to-day activities.
The policy also offers an incentive package to boost exports of electronic hardware items by modifying the electronic hardware technology park scheme to enable the sector to face the zero duty regime under ITA-1, besides reducing the customs duty on import of rough diamonds to zero per cent, and more benefits for the leather and textile sectors.
Those items which continue to remain in the negative export list are onions, jute seeds and iron ore and chrome. It appears that the demand to keep onions and jute in this list was made by the Union agriculture ministry. The reason for this could not be ascertained.
For other items, there will be no stipulations like “registration with the concerned state agency, quantitative ceilings” etc. “Now manufacturers will be able to export these items freely without any hassles,” director-general of foreign trade NL Lakahnpal said.
To begin with, an amount of Rs 5 crore has been earmarked for promoting exports from the cottage sector coming under the Khadi and Village Industries Commission. Units in the handicraft sector will also be able to access funds from the market access initiative scheme for normally permissible activities, including development of websites for virtual exhibitions. Further, under the export promotion capital goods (EPCG) scheme these units will not be required to maintain average level of exports and shall be entitled to duty free imports of specified items as embellishments up to 3 per cent of the f-o-b value of their exports.
The industrial cluster towns shall also be eligible for the benefits of the EPCG scheme and recognised associations of the units will be able to access funds from the market access initiative scheme (MAI).
In the gems and jewellery sector, the licensing regime for rough diamonds is being abolished with a view to make India emerge as a international centre for diamonds. Besides, the value addition norms for export of plain jewellery are being lowered from 10 to 7 per cent. Exports of all mechanised unstudded jewellery shall be allowed at a value addition of 3 per cent only.
Replying to a question both Mr Maran and Mr Lakhanpal clarified that only Indian banks will be allowed to set up off-shore banking facilities in the SEZs. Detailed guidelines on this scheme will be issued by the Reserve Bank of India shortly.
In another move, the policy allows ‘status holders’ to be eligible for clearances of both imports and exports on self-declaration basis, besides allowing them to retain hundred per cent of their export proceeds in the exchange earners foreign currency account.
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