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Extra revenue outgo on sops at Rs 1,000 cr -- Total outflow may top Rs 27,000 cr in 2002-03

Hema Ramakrishnan

NEW DELHI, March 31

WILL the concessions given to exporters under various export promotion schemes aid in doubling exports from $40 billion to $80 billion over the Tenth Five-Year Plan?

While the Commerce Ministry's answer is yes, the Finance Ministry has its apprehensions. Top sources contend that the relaxation of the stipulated time period for fulfilling export obligations - particularly in the Export Promotion Capital Goods (EPCG) Scheme - coupled with the continuation of the policy to allow EOUs to sell in the Domestic Tariff Area (DTA) may act as a dampener to exports.

Apprehensions notwithstanding, in a break from the practice of rejecting several Exim policy proposals, the Finance Ministry has virtually given its go-ahead to most of the duty concessions for exporters sought by the Commerce Ministry this time round to reverse the slowdown in export growth.

"Barring differences over some of the proposals on the policy package for Special Economic Zones which are yet to be ironed out, the Revenue Department has agreed to operationalise all other policy pronouncements shortly,'' said a senior Commerce Ministry official.

The extra revenue outgo on account of the Exim policy proposals would be less than Rs 1,000 crore, according to the Director-General of Foreign Trade, Mr N.L. Lakhanpal. This is mainly on account of the special dispensation announced for Export Promotion Capital Goods (EPCG) licence holders, waiver of customs duty on import of rough diamonds and additional sops to Special Economic Zones (SEZ).

Back-of-the-book calculations show that the extra revenue outgo during fiscal 2002-03 could touch Rs 27,000 crore - which works out to a whopping 60 per cent of the budgeted net customs collection. The estimate for the ensuing fiscal is based on the assumption of a 10 per cent growth in the outgo, which stood at Rs 21,658.16 crore for the entire fiscal 2000-01.

The break-up on the notional revenue forgone from various schemes (excluding the Special Economic Zone) shows a decline in the outgo from the duty drawback scheme and Duty Entitlement Pass Book Scheme (DEPB) during April- December 2001 as compared to the corresponding period the previous year.

The host of sops given to Export Processing Zones (EPZ) over the last two years has resulted in a near doubling of the revenue outgo in the current fiscal. Similarly, the revenue forgone on the 100 per cent EOU scheme is up by around 44 per cent.

The revenue implications notwithstanding, the Commerce Minister, Mr Murasoli Maran, made it clear that sops were required to propel export growth.

While contending that exporters, the world over, are eligible for duty remissions on input taxes, Mr Maran hastened to add that the Government would wield the stick if exporters were found to be misusing the incentives.

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