Foreign trade policy review on April 18 to perk up dwindling exports

Thrust areas to be engineering, SEZ

The government is going to unveil annual supplement to the Foreign Trade Policy 2009-2014 on April 18 to provide incentives for the country’s ailing export sector which contracted for eight straight months before rising a tad in January and February of 2012-13.

The sectors that are going to get special focus are engineering, gems & jewellery and leather. Besides, the government is expected to give a major thrust to the special economic zone (SEZ).

The package is going to be worth Rs 1,500-2,000 crore. Considering the fact that exports in US and European markets have taken major hit in 2012-13, the government might announce some special incentives for exporters to regain their market share in these traditional destinations. This will be announced under the Focus Market Scheme (FMS).

As a long term measure, the government is, however, expected to propose creation of an Export Development Fund having a specific corpus to give incentives for exporters to venture into newer markets since the demand in traditional markets of US and Europe has seen a sharp decline and is not expected to rise anytime soon.

The annual supplement to the FTP this year may extend two% interest subvention to engineering, gems & jewellery and leather, officials in the commerce department told Business Standard.

Besides, this year the government may give a major thrust to the units situated inside special economic zones (SEZ) that enjoy a 100% income tax exemption for the first five years of operations. This was earlier supposed to come as part of the budget 2013-14 only. However, the government is now likely to announce some major scheme in this regard in the FTP.

The zones are facing rough weather ever since the government imposed a minimum alternate tax (MAT) and dividend distribution tax (DDT) in the 2011-12 Budget. Units were levied MAT, while developers both MAT and DDT. Of the 588 SEZs formally approved, 385 have been notified but only 161 are operational.

“In the current policy framework, SEZs no longer provide lucrative offer for unit holders or developers to continue investing in SEZs," said Adi Godrej, chairman of the Godrej group and president of CII.

He hoped that the Government will provide policy impetus by taking into consideration abolition of MAT and DDT.  

After a 3.23% growth in April, exports continued to fall till December, before rising 0.82% in January and 4.23% in February of 2012-13. The figures for March and hence the entire 2012-13 would be announced before the FTP supplement.