The Hindu Business Line : Steps mooted to cut down transaction costs for exporters

INDIAN exporters, suffering from several structural constraints that impede the country's foreign trade and contribute substantially to transaction cost, might look for a comfort zone, if the proposed recommendations of an official team are implemented by the Government.

Official sources told Business Line here that a team comprising the Directorate General of Foreign Trade (DGFT), and senior representatives from the Federation of Indian Export Organisation (FIEO) and the Federation of Indian Chambers of Commerce and Industry (FICCI) recently toured Australia and the Philippines. They got to know first-hand how the transaction cost for trade and industry has been kept minimal there.

The sources said that Australia, which has strict quarantine regulations for its agricultural trade, has a seamless system to facilitate import and export of agricultural produce so that no time is lost in transit. On the other hand, an onion exporter/importer in the country has to face a lot of problems while trading.

Time factor: For instance, an export consignment of onions is stopped at the customs for testing. A sample needs to be sent across the country for testing before the consignment is shipped. This takes considerable time and increases the detention of the export cargo, the sources said.

Similarly, the sources said, container movement from Delhi to Mumbai takes at least seven days. The loading of the same for shipping takes a few days more because of logistical problems and also the absence of 100 per cent electronic data interchange at the various operational levels, including the customs.

High incidental costs: The sources said that if the incidental costs that occur in foreign trade operations are factored in, they are substantially higher than the duty. This is an important cost disability that needs to be reckoned with.

A recent Exim (Export-Import) Bank of India study said that exporters who pay multiple taxes and duties, which include octroi duties, electricity duties, fringe benefit taxes, entry tax, and sales tax, have to contend with 7 to 8 per cent of these in their cost of production.

The sources said that by far, 60 per cent of the country's foreign trade comprising both export and import supervene at the Mumbai port, while the other 10 major ports account for another 30 per cent of overall foreign trade. If an effort is made to put in place a system to help ease documentation and testing of foreign trade consignments in these places, the transaction cost for trade and industry would be considerably brought down.

Better documentation: With this in view, the official team has suggested far-reaching recommendations to tone up documentation procedures in major customs houses at ports. The sources said that the team has finalised its recommendations and would be submitting the same to the Government in a couple of days.

Asked about the two-member committee set up by the Government to evolve a WTO-compatible export promotion scheme in place of a plethora of export incentive schemes that are disapproved of by trading majors, the sources said that the Committee consisting of DGFT and Member (Customs) had met only once to draw details on the various schemes. The Committee would forward its proposals within two months as directed by the Government.

They said that the $100-billion export target for this fiscal being aimed at after the recent meeting of the chiefs of the Export Promotion Council and the commodity boards chaired by the Union Commerce and Industry Minister, Mr Kamal Nath, is feasible, as the first-half trends in foreign trade remain encouraging.

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