Exporters hope for more tariff aid in foreign trade policy

Exporters have asked for greater government support in the Foreign Trade Policy, to be released on Tuesday, especially with exports dipping for the first time in 15 months in October.

After being postponed repeatedly for five straight months, the government is due to come up with the mid-term review of the foreign trade policy (FTP) on Tuesday. The five-year FTP has been in effect since April 1, 2015, and aims to facilitate exports, so that the country manages to send out $900-billion worth of goods and services by 2020. It also aims to increase India’s share of world exports to 3.5 per cent, from two per cent.

Exports had declined 1.1 per cent in October, with the trade deficit widening the most in three years, at $14 billion.

To tackle falling exports, the Federation of Indian Export Organisations (FIEO) has asked for tariff support. “We have demanded that the government increase tariff support across export segments by providing two per cent additional support under the Merchandise Exports from India Scheme (MEIS) as well as widening of the Integrated Incremental Export Incentivisation Scheme (IEIS),” FIEO President Ganesh Kumar Gupta told Business Standard.

The mid-term review of the FTP is aimed to take stock of the changing aspects of global trade, rationalise norms and bring into play new policies, including tweaks in promotion schemes, to boost trade facilitation. This was supposed to coincide with the July 1 roll-out of the goods and services tax (GST). At the last assessment meeting of the FTP, senior officials said the December deadline was difficult to meet. However, work was expedited under Commerce and Industry Minister Suresh Prabhu, senior ministry officials told Business Standard.

FIEO has also suggested that traders selling goods to foreign tourists be exempted from paying taxes as the goods were deemed exports. “Around 15 years back, there was a similar policy. Even now, the government exempts duty-free shops in airports,” Gupta said. The FIEO had informed the ministry the $900-billion target needed to be trimmed down to $700 billion, taking into consideration global trade growth and the country’s export competitiveness in key sectors, he added. 

The effects of the GST regime and the export promotion schemes were throwing up new challenges every week, said exporters. They also pointed out that traders’ prime concern of Rs 50,000-crore dues of GST refunds must be addressed in the FTP. FIEO Director General Ajay Sahai said exports would need to grow at a compound rate of 27 per cent annually until 2020 for the target to be reached.

 “With global trade growth forecasts still slow at 2.4 per cent, I’m expecting a compound growth of 15 per cent annually for India’s exports.” This would allow exports to reach a cumulative $700-750 billion by 2020, he added.

Complaints regarding the reduced utility of duty credit scrips, which only covers basic Customs duty and not other charges under the Integrated GST, were also being looked into, another official said.

The textile industry has asked for streamlining tariff rates. “MEIS and IEIS support needs to be extended to cotton yarns as well, since this is the only textile segment currently not getting the support,” Sanjay Jain, chairman of the Confederation of Indian Textile Industry, said.