The Hindu Business Line : `Transaction cost reduction primary focus of foreign trade policy'

On the exemption of services taxes on exports and those services rendered abroad, Mr Pillai said this has been done on the fundamental principle that countries all over the world only export goods and not taxes.

MR GOPAL K. PILLAI

New Delhi April 20 The measures outlined in the annual supplement to Foreign Trade Policy (FTP) to cut down transaction cost and time to exporters would be monitored by the Commerce Ministry and Directorate General of Foreign Trade (DGFT) regularly to ensure that such costs are slashed by 50 per cent by 2009.

Disclosing this to Business Line here, the day after the policy modifications were unveiled, the Commerce Secretary, Mr Gopal K. Pillai, said, "We require the cooperation of every other ministries and departments of revenue, ports, shipping and National Highway" since the "primary focus" of the Policy is reduction in transaction cost.

Asked about the additions to focus markets and focus products schemes, Mr Pillai said, "We want to ensure export basket in all continents and countries so that any sudden fluctuations in one way or the other does not affect the overall export."

New products

He said that apart from traditional exports, India has been diversifying into new products. Mr Pillai pointed out that though textile exports were not doing well last fiscal, investment into the industry was in the order of Rs 40,000 crore over the last couple of years, which would get reflected in higher production and export volume in the next few years.

He said that India's exports to the US, the single largest market, were of the same volume last year as in the fiscal 2005-06, but unit value realisation has come down because of appreciation of rupee. However, "we manage to hold our share in the market" because of competitiveness in other non-price areas.

To a specific query about the feasibility of high export target of $160 billion set for the current fiscal, the Commerce Secretary said that a meeting of the Export Promotion Councils and Commodity Boards would be convened next month to fix sectoral targets and assess the ground level situation. He further added, "With EPCs, we have started a process by which we are getting them to look inward at its own industry, find the structural weaknesses and address them."

Exporting tax

On the exemption of services taxes on exports and those services rendered abroad, Mr Pillai maintained that this has been done on the fundamental principle that countries all over the world only export goods and not taxes. "Unfortunately, we don't have any sophisticated machinery for trapping the tax components in exports. When taxes get exported, you are not competitive in the global arena."

Referring to the extension of certain benefits to 100 per cent export-oriented units and special economic zones, Mr Pillai said that "there is a misunderstanding and there is no additional sop. It is already there. We have just incorporated that into the FTP what is already there in the rules of SEZs".

As regards EOUs, when the direct tax benefits have gone, they are on par with domestic tariff area units. Hence, in order to incentivise them on their primary focus of dedicated exports, certain benefits were conferred.

Land ceiling

When his attention was drawn to the controversy over the ceiling on land area for SEZs set by the Empowered Group of Ministers that might upset some SEZs having in-principle approval for 10,000 hectares, Mr Pillai said that "once the eGoM has set the ceiling on this, the Board of Approval will not approve any case beyond the ceiling".

He said, "We have only six cases having in-principle approval for 10,000 hectare and to the best of my knowledge not even one of them had acquired 5,000 hectares full and at best they have acquired 1,000 or 2,000 ha." Now these units might recast their plans and go up to 5,000 ha area only and "we will be making appropriate amendments to the Rules of SEZs".

On export prospects, Mr Pillai said that he was quite confident that the target would be feasible as the country clocked $125 billion in the fiscal 2005-06.

On doubts raised about the country's exports growing by $16 billion in the month of March 2007, Mr Pillai said that the country's exports throughout the last fiscal hovered between $8 billion to $12 billion each month, and in the month of March 2007 it was $12.6 billion. He said that because there were some late entry of data from non-EDI ports and some classification problems, there is difference between provisional and revised figures, which would be sorted out soon.