Government should decide on continuation of DEPB scheme

While unveiling the report of the task force for reducing transaction costs in exports, the finance minister asked the exporters to fight their own battles and stop expecting incentives from the government. Within four days, the commerce ministry announced a series of measures that would cost the exchequer additional Rs 500 crore by way of export incentives.

At the eight-digit level, the commerce ministry added 335 new products under the Market Linked Focus Product Scheme (MLFPS), besides 71 new products of Chapter 63 (textile made ups at 8-digit level) for exports to European Union (27 countries). Under the Focus Product Scheme (FPS), 147 products were added for bonus benefits besides 57 new products under the regular FPS. Egg powder got in as a special focus product for duty credit at 5 per cent of the FOB (freight on board) value of exports. Under the Vishesh Krishi Gram Udyog Yojana, six new products were added.

Quite obviously, the commerce ministry believes that the subsidies are necessary to promote exports and given the alacrity it has shown in responding to the finance minister, a reasonable inference is that it wanted to quickly dispel any anxieties that the finance minister’s statements may have caused the exporters. Another view is that the finance minister was responding to demands for income-tax concessions and not necessarily to the existing schemes in the Foreign Trade Policy. In any case, the government should quickly make it clear as to whether the Duty Entitlement Passbook scheme will continue beyond June this year, so that the exporters can plan accordingly.

The commerce ministry also announced some procedural simplifications that include online application facility for obtaining importer-exporter code (IEC) number, allowing up to five authorisations for a product group (instead of one) every year and flexibility to declare the technical characteristics/quality etc. of certain specified items of imports at the time of clearance of import consignment and not at the time of filing application, under the annual advance authorisation scheme.

A very sensible change relates to sensitive items in respect of which a reduced export obligation period is stipulated under the advance authorisation scheme. The change now allows the export obligation period to be reckoned from the date of clearance of each consignment instead of the date of clearance of the first consignment.

From July 1, 2011, exporters of pharmaceutical products will be required to affix barcodes on their products, in accordance with GS 1 global standards, to facilitate tracing and tracking of their products. A new facility of input combination for pharmaceutical products manufactured through non-infringing process (i.e., where the product patent has expired and exporters want to manufacture through a process that is different from a process that is patented and still in force), allowing actual quantum of duty-free inputs required for manufacturing such export product has been introduced to enable pharmaceutical manufacturers to work towards getting a major share of exports of such products to regulated markets such as the US or the EU. This facility is available only to manufacturers and subject to specific conditions and documentation requirements.

The chief merit of these dispensations and especially their timing is the message from the commerce ministry to the exporters that their interests will be guarded despite the stern talk of the finance minister asking them not to look at the government for any reliefs.

Email: tncr@sify.com