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TNC Rajagopalan: Exploring new vistas in foreign trade policy

TNC Rajagopalan 

The annual supplement to the (FTP), released last week, gives some additional benefits to exporters by way of duty credits, removes some unnecessary hurdles, makes some procedures simpler and fails to address some issues. Its new features allow duty credits under post-export EPCG (Export Promotion Capital Goods) scheme and utilisation of duty credits for payment of excise duty on domestic sourcing. 

The annual supplement adds seven new countries in the (FMS) and seven more in the Special FMS. One hundred and ten new items get added in the Focus Product Scheme (FPS), two more in the (VKGUY) scheme and 46 more in the Market Linked Focus Product Scheme (MLFPS). Export of garments to European Union and United States will continue to earn duty credits under MLFPS. Exporters in the North-East, exporting through specified land customs stations can earn one per cent additional incentives. Exporters getting the duty credits will be happy that they can augment their revenues by selling them in the market but increased supplies of duty credit scrips can bring down the price at which they can be sold.  

Status Holder Incentive Scrips (SHIS) can now be transferred to other status holders who are manufacturers. An unnecessary hurdle of non-transferability of SHIS thus goes away but why it cannot be transferred to anyone is unclear. A useful flexibility is that 10 per cent of the scrips can henceforth be utilised for import of spares and components by exporters in select sectors. More items can be imported under Agriculture Infrastructure Incentive Scrips.

The zero duty EPCG scheme is extended for one more year. The restrictions denying that scheme to those availing technology Up-gradation fund or SHIS gets diluted somewhat and three more sectors get exemption from maintaining annual average exports. Lower export obligation is now prescribed for exporters from North East and exporters of 16 specified green technology products under the EPCG scheme. 

Flexibility for import of catalysts and furnishing single bond/bank guarantee are also prescribed under the EPCG scheme. The post-export EPCG scheme opens an additional window and gives an option to exporters who may prefer to forego duty exemption upfront and avail the duty credits later.

Electronic transmission of foreign exchange realisation from the banks to the DGFT’s server on a daily basis will obviate the need for exporters to approach banks for issuance of Bank Export and Realization Certificate (BRC).  The ‘e-BRC’ initiative will establish a seamless EDI connectivity amongst DGFT, banks and exporters and thus facilitate early settlement and release of FTP incentives/entitlements. Also, the Transfer Release Advices will not be required for imports under Advance Authorisations through any of the EDI enabled customs houses. 

All duty credit scrips will, henceforth, be permitted to be utilised for payment of excise duty for domestic procurement, so as to encourage manufacturing, value addition, employment, import substitution and saving of foreign exchange.

The commerce minister has said that changes to Special Economic Zones (SEZ) scheme, Export Oriented Units (EOU) scheme and Deemed Exports Scheme will be announced soon. He should also review the Served from India scheme (SFIS) and see if the scrip can be made transferable (even with reduced entitlement) and more flexibility can be provided to enable better utilisation. In the latest annual supplement to the FTP, he has surpassed the expectations.  


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First Published: Mon, June 11 2012. 00:45 IST