Only two broad changes in FTP

There are two major highlights of the revised Foreign Trade Policy (FTP), unveiled last week. One, increases in duty credit entitlements for specified products and services under the reward schemes. Two, making advance authorisations available to Authorised Economic Operators (AEO) without requiring them to get the input-output norms approved by the Norms Committee at the Directorate General of Foreign Trade (DGFT). Other changes are not significant. 

Since 2015, the commerce ministry has started issuing an FTP Statement (FTPS). This gives a detailed account of various developments in the global trade environment and a broad indication of strategies to deal with challenges in the emerging scenario. These do not immediately or directly impact exporters or importers. The FTP, a notification with statutory force, is simultaneously issued, with a Handbook of Procedures. These deal with the rights, obligations, entitlements, schemes and procedures directly affecting exporters and importers. My comments are on the FTP, not the FTPS. 

Under the Merchandise Exports from India Scheme, entitlements have been raised by two percentage points for certain items. These include goods covered under labour-intensive sectors such as readymade garments and made-ups, leather, footwear, handmade carpets, handloom, coir, jute, agriculture and marine products. High technology products such as telecom and electronics components, and medical and surgical equipment, also get higher entitlements. These incentives, available from the start of November to end-June, will help exporters in these sectors cope with the severe competition in international markets. And, partly recover the unnecessary costs imposed on them  by the new Goods and Services Tax regime. 

Under the Services Exports from India Scheme, export of notified services that were already earning three per cent or five per cent duty credits will get their entitlements enhanced by two percentage points. This enhanced rate for these services will be available for export made in this financial year. The logic of across-the-board increase in entitlements is difficult to appreciate. 

The new scheme of self-ratification of input-output norms for AEO requires an exporter to give a chartered engineer’s certificate, based on which an advance authorisation will be issued. Pre-import of inputs and their physical incorporation in the export product have been prescribed as essential conditions. Wherever the value of by-products and recoverable wastage generated during a manufacturing process is more than five per cent of the CIF value, the corresponding quantity of main input shall be reduced from the entitlement, to the extent that the value of the disallowed quantity is equal to the value of by-products and recoverable wastage generated. 

Records have to be maintained regarding consumption of the inputs and the DGFT or any entity so authorised may conduct an audit. If the audit shows any wrong declaration and/or instances in claiming of inputs not used in a manufacturing process or excess over what was consumed, demand and recovery actions will be initiated, beside action against the authorisation holder, manufacturer and chartered engineer. Detailed procedures under the scheme are yet to be issued. We have to wait and see how this welcome and trust-based system works. 

The rest of what the ministry shows as FTP highlights are only narrations of what happened long before or of negligible impact.  

E-mail: tncrajagopalan@gmail.com