FTP should be extended for six more months

The present Foreign Trade Policy (FTP) 2015-20 was introduced on April 1, 2015. It was to expire on March 31, 2020, but was extended till March 31, 2022, due to pandemic-induced uncertainties. Given the present context, it is better to extend it, at least, by six months.

Since 2015, various components of the FTP, such as the general provisions relating to imports and exports of goods, the duty exemption scheme, the Export Promotion Capital Goods (EPCG) scheme, the Export Oriented Units (EOU) Scheme, the Deemed Exports scheme, and most other provisions have remained more or less unchanged. The provisions for Special Economic Zones (SEZ), administered through different laws, have also remained quite stable. In 2021, the Merchandise Exports from India Scheme (MEIS) was replaced with the Refund of Duties and Taxes on Export Products (RoDTEP) scheme. The benefits under the Services Exports from India Scheme (SEIS) have been pruned somewhat after increasing them in 2017.

When the goods and services tax (GST) was introduced, suitable consequential amendments were made in various provisions of the FTP and SEZ laws without disturbing their basic structure.  Whenever required, restrictions on imports and exports on various items were imposed or removed, especially to help cope with the pandemic and shield the domestic producers from imports.  Most processes for issue and redemption of licences and getting other approvals and registrations have been facilitated through increased adoption of information technology. The Finance Ministry has put in place a new Manufacture and Other Operations in Warehouses (No.2) Regulations, 2019, allowing import of capital goods and raw materials, components, etc. duty free without any export obligation. The government has also introduced the production-linked incentives scheme in 13 sectors with a view to help boost investment in manufacturing.

In 2019, a panel at the Dispute Settlement Body (DSB) of the World Trade Organisation ruled that the EPCG scheme, EOU scheme, MEIS, and SEZ scheme are incompatible with the agreed multilateral disciplines, as they were directly linked to export performance. Our government has appealed against that decision and so, is not bound by the panel ruling for now. The appeal has not come up for hearing because appointment of enough judges to the appellate body of the DSB has been stalled by the United States. Whenever the US decides to clear the appointment of judges to the appellate body, the appeal will be heard and the chances are that the panel decisions will be upheld. So, there is no point introducing a new policy containing the existing schemes and then withdrawing them soon after the appeal is decided. It is better to continue with the present FTP and bring in a new FTP after that appeal is decided.

The government has said the SEZ laws will be replaced with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’ and that this will cover all large existing and new industrial enclaves to optimally utilise available infrastructure and enhance competitiveness of exports. The contours of the new scheme are not yet clear. Finally, no new ideas have emerged on what the new FTP should be, despite meetings with the stakeholders through the Board of Trade and Export Promotion Councils.

Thus, there are enough reasons to continue with the present FTP.

email: tncrajagopalan@gmail.com