FTP extension gives time to rethink present policies

Last Monday, the government decided to extend the present Foreign Trade Policy 2015-20 (FTP) till the end of this fiscal year. On Thursday, the government issued the notification to this effect.

In a press release, the government said the FTP extension is a response to requests from exporters and industry bodies due to the uncertain and volatile global economic and geopolitical situation. Few are willing to take this explanation, as the government had prepared an FTP to be unveiled on Thursday and had even sent out invitations to many for attending the event. The bureaucracy was taking confirmation from each invitee on attending the event, when the announcement regarding cancellation of the event came through suddenly on Monday evening. The widespread impression is that the commerce ministry could not get the nod for making some headline-grabbing announcements. This impression is bolstered by media reports that the decision to not announce a new FTP came soon after a meeting of the commerce minister with the prime minister. 

Some organisations of exporters welcomed the government’s decision to extend the FTP but they would have welcomed even the announcement of a new FTP. The fact is that the decisions to bring in a new FTP and to dump the move came from the commerce ministry. The exporters were quite indifferent either way for the simple reason that no new ideas for a new FTP were in sight.

In 2015 and 2017, the commerce ministry released FTP statements explaining the vision, goals, objectives, market and product strategies and other measures required for export promotion and enhancement of the entire trade ecosystem, keeping in view the global trade developments. If a similar document was prepared this time, the commerce ministry should release the same, in the interest of transparency and to enable the trade to understand its thought process.

The commerce ministry should now get into serious discussions with the finance ministry, industry and academia to understand and review whether so many schemes like duty exemption, Export Promotion Capital Goods, Export Oriented Units, Special Economic Zones, Manufacture and Other Operations in Warehouse Regulations, etc. are necessary for allowing duty-free import of capital goods and inputs required for export production. It should ask some serious questions. Is it better to trim the exemptions and have a lower rate for capital goods and inputs across the board and let the duty drawback scheme rebate the duty incidence on the inputs used in export production? 

Is it better to grant the benefits of Remission of Duties and Taxes on Exported Products scheme in cash instead of through duty credit scrips that can be used only for payment of basic customs duties? Should there be a better and transparent institutional mechanism to arrive at decisions on erecting protectionist tariff and non-tariff barriers for imports? Is there a better way to administer the export promotion schemes through the Customs using information technology? And so on.

The commerce ministry should rethink its strategy of walking away from multilateral/regional trade negotiations and getting into more and more bilateral trade agreements. The extension of FTP for six months ensures continuity during turbulent times but also gives time to rethink the present policies/strategies and make course corrections.

email: tncrajagopalan@gmail.com