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While the policy does contain several welcome features, it is possibly
not one to catapult the country into the league of big exporters in the short to medium run. There is danger the euphoria generated since
Sunday last may not last long because the policy does little to address fundamental issues that affect export competitiveness.
THE first Export-Import (Exim) policy of the new millennium coinciding with the Tenth Plan has evoked enthusiastic response from the exporting
community and some policy analysts for its perceived new initiatives to drive export growth.
Much of the euphoria seems to have been generated not so much on the basis of positive measures the policy contains, but because the fears
of exporters that export benefits such as DEPB (Duty Entitlement Pass Book) licence may be withdrawn or watered down have been happily
allayed.
The policy statement has sought to exhort Indian exporters to take advantage of the new liberalised climate. It is anybody's guess if
exporters would be in a position to surmount challenges including infrastructure constraints they are currently facing.
While the policy does contain several welcome features, it is possibly not one to catapult the country into the league of big exporters in the
short to medium run. There is danger the euphoria generated since Sunday last may not last long because the policy does little to address
fundamental issues that affect export competitiveness.
Removal of registration and packaging stipulation on some items, in addition to the removal of quantitative restrictions a few weeks
earlier, is projected as a major step in the process of export liberalisation. Indeed, these decisions should have been taken at least
three years ago, if not even earlier.
Take the case of foodgrains. On paper, the new dispensation no ceiling, no registration facilitates market access. But given the international
market conditions comfortable supplies, competitive prices, lack of major growth markets wheat and rice exports from the country cannot
take place in respectable volumes unless the policy of export promotion at subsidised prices continues and is fine-tuned from time to time
depending on market imperatives.
However, even today, there is no stability relating to pricing by Food Corporation of India as exporters are not sure when prices might be
changed; and so, are unwilling to take the risk of making forward commitment.
Similarly, packaging restrictions have been done away with. In the first place, they were not required to remain in the policy book till
now. Groundnut oil export is a good example. Packaging restriction on all edible oil (except groundnut oil which was required to be packed in
five kilograms or less) export was lifted a couple of years ago.
Free exports did not lead to any surge in shipment because vegetable oils here are expensive as compared with world prices and India is a
net importer of oil. There is some demand for unrefined oils of Indian origin - such as coconut oil, mustard oil and sesame oil. This needs to
be tapped.
Transport cost (movement from production centre to port) constitutes a significant element in the export cost of products. The proposed
transport assistance for fresh and processed fruits and vegetables, floriculture, poultry, dairy products as well as rice and wheat
products (atta, suji, maida) is sure to bring some relief to exporters and improve competitiveness.
It is essential that the modalities of granting transport subsidy be finalised without delay. Together with a depreciating rupee, transport
assistance can provide that little extra push necessary in case of commodities facing a marginal price disparity. However, an Exim policy
for a five-year period, which merely liberalises exports and removes procedural irritants, is unlikely to provide any significant boost to
export earnings of farm goods. A coordinated effort by various ministries at the Centre including finance, food and agriculture is
necessary.
There are instances of export efforts thwarted by customs authorities. In their drive to increase revenue, some customs houses pressurise
exporters not to use DEPB licence, but pay up customs duty on raw material import.
For the success of agri-export zones (AEZ), State Governments and local authorities will have to play a proactive role. Standardisation of
quality of primary produce, especially fruits, is critical for boosting farm exports. It is hoped that AEZs will be encouraged to develop as
zones of excellence for the respective products so that more and more
primary producers are attracted.
A strong input delivery system, advise on agronomic practices and market intelligence is key to success. AEZs must make use of
information technology to deliver benefits to primary producers in the area.
In sum, intentions of the new Exim policy are laudable. But how far these intentions will be translated into action remains to be seen.
Having removed the cobwebs that hitherto restrained farm exports, the Government must now proceed to invest export products with competitive
edge in terms of cost and quality.
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