The Hindu Business Line : Trade policy supplement may provide relief to exporters

The annual supplement to the Foreign Trade Policy (FTP) to be unveiled on April 19 may not have any grandiose schemes other than addressing specific concerns raised by exporters in the implementation of the existing schemes. Some fine-tuning of procedures is also expected to provide a level of comfort to exporters in terms of reduction in transaction cost.

Official sources told Business Line here that since the forthcoming supplement is the penultimate one to the five-year FTP that was unveiled in 2004, the scope for any innovative schemes or big-bang approach is not evidently much, especially when the country's exports have been consistently showing above 20 per cent growth during the last few years. They said that the country's share in world merchandise exports has nearly doubled, from 0.5 per cent in 1990-91 to about one per cent in 2005-06.

With the Government announcing extension of the Duty Entitlement Passbook Scheme (DEPB) for one more year, exporters contend that all the extant schemes in the FTP (2004-09), including DEPB and Duty-Free Import Authorisation (DFIA), should be allowed to run concurrently with the five-year policy till end-March 2009 so that there are no unexpected shocks in the form of withdrawal of duty remission schemes.

`Sop' charge

Taking exception to the unjustifiable charge levelled against exporters for being pampered with "sops" entailing revenue foregone to the tax authorities, the FIEO President, Mr G.K. Gupta, said that it is seldom stated that "if there were no exports, goods worth $125 billion would not get produced in the country and no customs or excise duties would be accruing to the exchequer." He pointed out that nowhere in the world duties and taxes are exported, but only goods and services are.

A general grouse of exporters pertains to the glaring deficit in physical infrastructure, which, they say, needs to be redressed on a war footing, particularly in the ports and power sector so that the operational glitches of manufacturer-exporters are overcome.

Market access fund

Mr Gupta said that there is a need to establish market access fund for exporters to diversify products and go ahead with value-added ones in the existing markets. But this costs exporters in terms of market study, market survey, product testing, warehousing and an aggressive promotion strategy. Countries like Australia, Scotland, Canada and Malaysia spend a lot of resources in this regard and India should also follow suit, he added.

Exporters, particularly small and medium enterprises, do not have the wherewithal for such aggressive marketing strategy and their efforts must be complemented by a market access fund with an annual grant of roughly 0.5 per cent to one per cent of the exports.

But since January 2005, only 16 individual exporters availed themselves of assistance of Rs 39.11 lakh under the Market Access Initiative Scheme through export promotion councils, reflecting the need to scale up this scheme to more deserving exporters.

Exporters say that with the recent success notched up by the Director-General of Foreign Trade (DGFT) and the Revenue Department about verification of DEPB Scheme issued by DGFT at Electronic Data Interchange ports when electronic transmission shipping bills are filed, similar verification could be extended to advance licence, DFIA and duty drawback scheme so as to keep interaction of exporters with other arms of the authorities to the minimum, saving time and energy to exporters and cutting down their transaction cost distinctly.

Finally, exporters also resent the lack of a stable export policy as in the case of agri exports when the ban on commodity exports such as sugar and pulses happen quite often, negating the efforts of the exporters in retaining the markets they have captured earlier.