A year's wishlist from the trade

As the New Year dawns, like many other people, exporters and importers also have their wish lists. Here are some wishes the government can grant without much of pain.

A stable policy framework, with suitable fine tuning to help reduce transaction costs, is something almost all exporters and importers want. Last year, Special Economic Zone (SEZ) developers and units got a shock with the imposition of Minimum Alternate Tax. That was seen as the government going back on its promises and the resultant uncertainty deterred many developers and entrepreneurs. By the year-end, the interest in SEZs had waned sufficiently to force the commerce ministry to think of diluting some of the conditions for setting up SEZs and SEZ units.

Developers and entrepreneurs investing substantial money in developing infrastructure and establishing manufacturing facilities can do without such uncertainty about promised dispensations. SEZ Units will also look forward to transferable duty credits under the Focus Product Scheme (FPS) and Focus Market Scheme (FMS).

In April last year, the Reserve Bank of India withdrew the interest subvention scheme and, six months later, restored it with retrospective effect for specific sectors. As it turned out, the withdrawal of subvention coincided with rising interest rates and higher inflation, that eroded the margins for exporters. With the global economy facing uncertain days ahead, thanks to the economic crisis in Europe, the RBI should revisit its wisdom of restricting the scheme to select sectors.

The commerce ministry needs to reappraise its system of collecting and processing of export and import data. Putting up wrong figures misleads policy makers and can lead to misallocation of resources. When there is blatant misalignment between export figures and allied economic data, the ministry should double-check before putting out figures.

Exporters need certainty on the duty drawback rates and undisturbed availability of duty credits under FMS, FPS and other schemes. The deemed exports’ benefits may continue but various provisions and procedural aspects can be re-written to ensure greater clarity. The wisdom of allowing new units under the export oriented unit (EOU) scheme needs a revisit.

The directorate-general of foreign trade (DGFT) should examine whether it is necessary to issue duty credit paper scripts when technology is available for electronic grant of duty credits and debit duty credits, and to effect transfer of duty credits. Using technology more effectively may eliminate the need to approach the DGFT’s regional offices for duty credits and thereby help exporters reduce transaction costs significantly.

The finance ministry should ensure the time limits for sanction of excise rebates and grant of refunds of unutilised Cenvat credit on account of exports under bond/UT-1 are adhered to and institute a suitable mechanism to monitor and enforce its instructions. The exemption notifications need to be examined afresh, and redundant and ambiguous provisions removed or re-drafted suitably.

Finally, like most other businesses, exporters and importers would also like to see the Goods and Services Tax regime implemented, the Direct Taxes Code put in place, the fiscal deficit to be reduced, inflation reigned in, interest rates brought down, labour laws reformed, corruption reduced, better infrastructure built, and a stable exchange rate, depreciating just enough to adjust for inflation, maintained.

tncr@sify.com