Foreign Trade Policy review by month-end

The government is likely to review the Foreign Trade Policy (FTP) of 2009-2014 by the end of this month or early September. This is to assist those labour-intensive export sectors which have not been able to stabilise despite several measures to boost these after the recent global economic crisis.

FTP was earlier expected to be announced by the second week of this month by the Ministry of Commerce and Industry. But it was postponed for the last week of August or early September as the government has not yet been able to appoint a Director General of Foreign Trade (DGFT) after R S Gujral, who is now secretary of the Ministry of Road Transport and Highways.

Some sectors that might get additional incentives are textiles, carpets, leather and handicrafts. These have not been able to recover fully from the downturn, coupled with a slackening demand in the European markets owing to the debt crisis there.

Though FTP had provided a series of measures to help exports, which are around 22 per cent of the country’s $1.2-trillion economy, some sectors have been consistently facing problems such as slowing of orders, shorter delivery time and delay in payments.

“After the second sectoral review, we saw that some sectors are still reeling under demand shortage problems, which is also leading to huge loss of jobs. Some more measures to help these sectors would be announced by the end of this month,” a senior official from the Ministry of Commerce and Industry told Business Standard.

A review of FTP might seek to extend the Duty Entitlement Passbook (DEPB) Scheme for six months beyond December 31 this year. DEPB is an export incentive given by way of grant of duty credit against the export product, to promote diversification.

The ministry is also expected to announce the addition of more markets such as Russia, Ukraine, Turkey, Nigeria and Vietnam under the Focus Market Scheme. Besides, measures such as extension of zero duty under the Export Promotion Capital Goods scheme beyond March 2011 for some more sectors to boost technological upgrade.

“Textile exports are getting severely affected, mainly due to higher cost of raw material and large-scale export of cotton. The government should look at reducing the cost of money and increase the drawback rates,” said D K Nair, secretary general, Confederation of Indian Textile Industry.

Last month, Commerce and Industry Minister Anand Sharma had met exporters to review and identify sectors that required more assistance and what was needed to achieve the target of $200 billion exports in this financial year, with 15 per cent annual export growth.

“Order sizes have definitely come down. There has been a visible slackenig in the demand for high-end products such as carpets and silk, coupled with problems related to short deliveries of 45 days,” said Subhash Mittal, a Delhi-based silk exporter.

Mittal, who is also heading the Indian Silk Export Promotion Council, said exporters of silk items, mainly carpets, were facing payment delays even from old clients based in Europe, Dubai, West Asia and the US.

A committee set up under Minister of State for Commerce and Industry Jyotiraditya Scindia to reduce the transaction cost for exporters, is also expected to announce some measures in terms of reduction in freight costs and other procedural glitches faced by exporters.

According to Ajay Sahai of the Federation of Indian Export Organsiations, sectors such as engineering, chemicals and oil and petroleum which account for over 50 per cent of exports have shown average growth of 42 per cent in recent months. “This positive trend will likely to continue in 2011 as well. But the main concern is contraction in demand in the Eurozone.”