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| Some changes are baffling |
| Buiness Standard / New Delhi Aug 28, 2009, 01:34 IST |
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Commerce Minister Anand Sharma has presented a ‘status quo’ Foreign Trade Policy (FTP) 2009-14 with some incremental benefits for exporters. The situation called for bold efforts to cut transaction costs to help boost sentiments and help exporters do less paperwork and concentrate more on their business. The FTP does little of that sort.
The new FTP has some positives. Expected dispensations like the zero-duty Export Credit Guarantee Corporation (EPCG) scheme (for select sectors), higher support for market (increase from 2.5 per cent to 3 per cent under the Focus Market Scheme) and product (increase from 1.25 per cent to 2 per cent under the Focus Product Scheme) diversification and significant increase in the number of products under the Market-Linked Focus Product Scheme and unexpected benefits like duty credit scrips to status holders up to 1 per cent of the previous year’s FOB (free on board) value of exports for technology upgrade will actually put more money in the hands of the exporters.
Some steps will definitely help but not significantly impact exports. These include greater flexibilities under the duty exemption scheme, reduction of fees for filing applications for licences, use of information technology to serve the exporters better, reduction in export obligation against import of spares under the EPCG scheme, transferability of scrips under the Vishesh Krishi and Gram Udyog Yojana (VKGUY), extension of the Duty Entitlement Passbook (DEPB) scheme and procedural simplification for sectors like marine products, sports goods, gems and jewellery, agriculture, leather, tea, pharmaceutical, handloom, export-oriented units, etc. A big relief is the decision not to recover export incentives if the exporters fail to realise export proceeds and the Reserve Bank of India grants a write-off.
Some changes in the FTP are baffling. Why 15 per cent value addition has come back under the advance licence scheme is anyone’s guess. It is a retrograde step and seems driven by sheer lack of appreciation of ground reality. The value addition under duty exemption was made positive after a great deal of persuasion. Now, exporters have to start all over again to persuade the commerce ministry to go back to positive value addition. There is no reason why textile exporters availing the Technology Upgradation Fund (which is an interest subvention scheme) should be excluded from the zero-duty EPCG scheme.
The new FTP seems to be founded on the belief that time-tested export promotion schemes have contributed to export growth and, therefore, must be retained. So, it fails to make a significant break from the past. It creates more reasons for the exporter to go to the licensing offices and do more paperwork. It puts more power in the hands of the officers in the licensing offices and thus, creates more avenues for corruption.
Sharma had a tough task making a Policy at a time when demand from rich countries was falling, industry associations were crying for more subsidies and the finance ministry had a resource constraint. Considering all the factors, Sharma has played safe. He had an opportunity to revamp the schemes and improve delivery systems. Sharma has not shown the courage to throw away time-tested schemes and put new ones in place but has done well to resist outrageous demands of some industry associations for more subsidies.
TNC Rajagopalan
Foreign Trade Expert
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