The Hindu Business Line : `New duty-free import authorisation scheme confers twin benefits on exporters'

The new duty-free import authorisation scheme unveiled in the annual supplement to the Foreign Trade Policy (FTP) would confer on the exporters the twin benefits of the duty-free replenishment certification (DFRC) scheme it replaced as also the unutilised component of the advance license scheme portion.

Disclosing this to Business Line here in an interview after the policy supplement was laid bare here, the Director General of Foreign Trade (DGFT), Mr K.T. Chacko, said the new scheme enables advance license user to source certain inputs which he is not able to source it through the advance licensing scheme. When an exporter importing 20 inputs for manufacturing to export, he imports only 15 inputs through advance licensing scheme as the remaining five inputs are so small in scale to give him any profit.

Hence, under the DFRC scheme, he surrendered the duty-free entitlement and instead sources duty-paid materials and exported it.

This means the products so exported were not competitive to the extent that duty neutralisation was not captured in the use of five inputs, he said.

Under the new scheme, the exporter who does not want to import small items transfers the entitlements to somebody who can import small quantities in bulk and the exporter gets the additional flexibility of transferring his duty-free entitlement and getting the credit, the DGFT clarified.

Asked how the policy supplement has helped in reducing transaction cost to trade and industry, Mr Chacko said that every successive annual policy has been trying to incrementally reduce the transaction cost and there is no "magic button" which would reduce all transaction cost at one-go.

In a real situation, certain impediments are inevitable, he said adding that they might relate to infrastructure, flexibility for units on the labour front, capital cost and interest regime or internal movement of cargo.

Refund to exporters

On the issue of giving refund to exporters suffering delay in the realisation of rightful dues in the form of drawback, he said this stemmed from the recognition at the higher level of the Government that " omissions and commissions of inaction of the Government cannot lead to an avoidable transaction cost to an exporter.

By factoring an interest payment there is an obligation on the part of the Government machinery to decide issues on a fast track. When interest is paid, some questions will be asked why it is occasioned and who is responsible for creating it?"

When his attention was drawn to the incentives extended to services sector exports, which had grown autonomously and without any support so far, the DGFT demurred it stating that it is "a somewhat limited view".

In services exports, most of the inputs do not carry the incidence of indirect taxes of the items exported as service export resides in the intellectual abilities and skills of the services sector personnel. But they do come across some impediments or deserve policy support through a flexible approach, he added.

He further said "it would also be factually incorrect to state that policy regime does not support export-import activity. Successive recognition of the need to address facilitation aspects of import-export have contributed to the growth of exports and devoid of this, obviously there would have been limitations."

DEPB scheme

He said on the issue of the rollover of the popular Duty Entitlement Passbook (DEPB) scheme for one more year, Mr Chacko said that 30 per cent of value of exports is under DEPB and 50 per cent of exporters use the DEPB. It is the stated policy of the Government that an exporter will not carry the incidence of indirect taxes and whether it is duty drawback, DEPB, advance licensing or DFRC, they are either duty exemption or duty remission schemes. These are not to be considered as incentives but rightful due to the exporters, he asserted.

He said that gauging by the response of the exporting community after the annual supplement was announced this is a right step in ensuring enhanced facilitation to exporters to perform well in the coming year.

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