Diminished role for commerce ministry in export promotion may continue

In his revamp of the Council of Ministers last week, the Prime Minister let the   incumbent cabinet ministers at the Finance and Commerce Ministries retain their positions. So, the exporters, importers and domestic producers can expect certain trends as seen in the last two years to continue. 

The quantitative restrictions on imports, higher import duties, non-tariff barriers such as quality standards, minimum import prices and pre-import registration requirements were already in vogue before the call for Atmanirbharata (self-sufficiency) from the Prime Minister last May gave more impetus to such measures. Also, there is a conscious effort to reduce imports from China after the military clashes at the borders.

So, the domestic producers lobbying for protection from imports are likely to get sympathetic hearings at the two ministries. 

Exports are doing well this year despite high freight rates, logistic hurdles, supply chain disruptions due to the pandemic, withdrawal of the Merchandise Exports from India Scheme (MEIS), delay in the notification of Refund of Duties and Taxes on Export Products (RoDTEP) scheme and so on. So, the focus may be more on encouraging exp­orts of select products through the Production Linked Incentives (PLI) schemes rather than schemes to promote exports across the board. With the Commerce Minister holding the additional charge of the Textiles Ministry, it is likely that more funds will be diverted to encourage exports of labour intensive textiles. 

The Finance Ministry may continue to have greater say in the formulation and implementation of export promotion schemes. The RoDTEP scheme was announced by the Finance Ministry and was introduced through an advisory at the customs portal for filing bills of entry and shipping bills. It will be implemented through duty credits, transfer and debits at the ledger that the Customs will maintain.

The facility to claim MEIS duty credits for exports made during 2020-21 that was disenabled for want of allocation from the Finance Ministry might be re-activated only when the Finance Ministry decides to allow it. No rates have been notified under the Services Exports from India Scheme (SEIS) for exports since 2019-20. Going forward, the Finance Ministry may agree to some incentives thro­ugh a similar scheme to help the travel and tourism sector recover from the setbacks during the pandemic, as and wh­en internatio­nal travel mo­ves tow­a­rds normalcy. 

The Fina­nce Ministry is more incli­ned to enco­urage duty-free imports of capital goods and inputs requ­ired for exp­ort production thro­ugh the Manu­facture and Other Operations in Warehouse (no.2) Regulations, 2019 (MOOWR) and doing away with the Export Oriented Units scheme, Export Promotion Capital Goods scheme and Duty Exemption Scheme that includes advance authorisation scheme and its variants like Duty Free Imports Authorisation scheme.

The government is unlikely to reverse its decision to stay out of the Regional Comprehensive Economic Partnership (RCEP) agreement that includes China, Japan, Australia, New Zealand, South Korea and ten other Asian countries. The backlash against globalisation, especially in the US, makes it difficult to take the multilateral negotiations at the World Trade Organisation forward. So, the Commerce Ministry may go through the routines of negotiating bilateral trade negotiations with some developed countries but much depends on what market access the parties to such parleys are willing to give.

Overall, the Commerce Ministry may have a lesser role in export promotion. 

email: tncrajagopalan@gmail.com