Onion and cotton exports may lose export incentives

Senior officials pointed out that some products are on one hand availing export incentives under FMS while on the other hand there are curbs on their exports

Products like onion and cotton are likely to lose export incentives as there are restrictions on their outbound shipments, a senior commerce ministry official said today.

The matter is under active consideration of the Commerce Ministry. The issue came up during a meeting of senior officials of the ministry recently.

"The senior officials pointed out that some products like onion and cotton are on one hand availing export incentives under Focus Market Scheme (FMS) or Focus Product Scheme (FPS) while on the other hand there are curbs on their exports," the official told PTI.

The objective of the FMS is to offset the high freight cost and other disabilities to select international markets with a view to enhancing export competitiveness.

It allows a duty credit of 2.5% of free-on-board value of exports to countries that are identified as focus markets by the government. The duty credit may be used for import of inputs or goods including capital goods.

And, the products covered under FPS are entitled for 2% duty credit scrip.

In the case of onion, the government has fixed minimum export price of $650 per tonne and the commodity also avail export incentive under FMS or FPS.

"It is not logical that on one hand we are giving incentives to boost the export and on the other hand also putting restrictions on the shipments," the official added.

Similarly, the government has imposed quantitative restrictions on the exports of cotton and cotton yarn.

Exporters can apply for registration certificate (RC) for a maximum quantity of 30,000 bales or actual quantity exported in the previous cotton season, whichever is less. One bale contains 170 kg of cotton.

India is the world's second largest cotton producer. Cotton production was estimated to be around 340 lakh bales for the 2012-13 cotton season (October to September).

India's cotton exports are likely to remain flat at around 100 lakh bales (170 kg each) in the 2013-14 season due to lesser demand from China. China is the biggest importer of the Indian natural fibre.