The Hindu Business Line : Duty-free import of capital goods for agri units

THE new Foreign Trade Policy (FTP) has a few new initiatives for agri-exporters, including allowing duty-free import of capital goods under the Export Promotion Capital Goods (EPCG) scheme and providing duty credit entitlement to horticulture products up to 5 per cent of the f.o.b value of exports.

The nil duty applicable on import of capital goods for exports of agricultural products and their value-added variants under the EPCG scheme is significant because the normal duty charged under the scheme is 5 per cent.

Moreover, while the EPCG scheme generally requires the exporter to discharge an export obligation equivalent to eight times of the duty saved and to be fulfilled over an eight year period, in the case of EPCG licences issued to units in Agri Export Zones (AEZ), the "fulfilment" of export obligation is to be reckoned over a 12 year period.

The agro units in the AEZ will also be given the flexibility to move or install the capital good imported under the EPCG scheme in any area within the AEZ. The units in the AEZ are further exempt from furnishing bank guarantee and they need to only give a legal undertaking or bond. According to the Chairman of the Agricultural and Processed Food Products Export Development Authority (APEDA), Mr K.S. Money, the moves announced today would give a big boost to exports from the 48 AEZs in 19 States.

The projected investment requirement in the 48 identified AEZs is about Rs 1,325 crore, which would generate exports of over Rs 10,000 crore during the next 5 years. The Government hopes that the facility of duty free import of capital goods under EPCG goods would kick-start investments in the AEZs in a big way.

The other major initiative in the FTP is a new scheme called the Vishesh Krishi Upaj Yojana, aimed at promoting export of fruits, vegetables, flowers, minor forest produce and their value-added products. Under the scheme, exports of these products (which the Government will specify from time to time) would be entitled to a duty credit scrip equivalent to 5 per cent of the free-on-board value of exports for each licensing year, commencing from April 1, 2004. The scrip and the items imported against it would be freely transferable.

Horticulture exporters can use the duty credit for import of inputs or goods, including capital goods as may be specified, provided the same under freely importable. The Department of Revenue would frame rules providing for adjustment of additional customs duty or excise paid in cash or through debit under the scheme as CENVAT credit or duty drawback.

"The new scheme can be availed of by agri exporters who are not able to avail of Duty Entitlement Pass Book (DEPB) credit, especially in products against which no standard input-output norms or credit percentage have been specified," a Finance Ministry official said.

The FTP has also liberalised import of seeds, bulbs, tubers and planting material, while freeing export of plant portions, derivatives and extracts with a view to promoting export of medicinal plants and herbal products.

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