Towards A Sensible Exim Policy

On the imports side, two elements have to be kept in mind. First, quantitative restrictions have to be phased out. Thus, although 92 items have recently been moved to the Special Import Licence (SIL) list, with another 69 items moved to the OGL (open general licence) category, around 3,000 items remain on the restricted list. This means that quantitative restrictions on around 600 tariff lines have to be phased out, annually, over the next five years. One must hope that the new exim policy will make a beginning in this direction. Secondly, there must be duty reductions on the capital goods side. The working of the Export Promotion Capital Goods (EPCG) scheme (which permits imports at 15 percent concessional duty if export obligations of four times the import value are undertaken over five years) explains why. In addition, the EPCG permits zero duty imports for projects worth more than Rs 20 crore. But the threshold of Rs 20 crore is arbitrary and the duty of 15 per cent too high. Import duties on textile

 

machinery are already 10 per cent. This suggests that the EPCG may have lost its attractiveness. It is not surprising that many exporters have asked for extensions of the export obligation period. The EPCG duty must be brought down to 10 percent, if not 5 per cent.