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Mr Jairam Ramesh, Union Minister of State for Commerce.

G. Srinivasan

New Delhi, Dec. 16Exporters availing themselves of the Export Promotion Capital Goods (EPCG) scheme to import capital goods at a low rate of duty over a span of nine years have been found to lag behind woefully in completing the export obligations (EO) they had undertaken.

This has come up for serious concern at a recent review meeting of the Directorate-General of Foreign Trade (DGFT) recently, presided over by the Minister of State for Commerce, Mr Jairam Ramesh, in which 36 port officers of DGFT took part from across the country.

Official sources said during the period 1994-95 to 2003-04, as many as 33,169 EPCG licences valued at Rs 61,075 crore (cost, insurance and freight) and Rs 2,95,125 crore (free on board) were issued. Out of this, 31,181 licences valued at Rs 2,83,053 crore finally came up for EO fulfilment after making allowance for the surrendered/cancelled licences numbering 1,988 valued at Rs 12,050 crore.

But in the remaining valid licences, the export obligations were fulfilled in respect of 16,672 licences (53.5 per cent) for a value of Rs 71,970 crore (25.4 per cent).

However, in the case of Advance Licence (AL) the situation was better. As many as 3.76 lakh advance licences worth Rs 3,14,464 crore (c.i.f.) and Rs 5,59,983 crore (f.o.b.) were issued during 1991-92 to 2004-05. Of this, 3,26,018 licences valued at Rs 5,19,798 crore were for EO fulfilment, after making due allowance of 50,000 surrendered/cancelled licences worth Rs 36,801 crore.

In this segment, the EO was fulfilled in respect of 2,87,610 licences (88.2 per cent) for a value of Rs 3,77,353 crore (72.60 per cent) as on the period under review.

When contacted about the grossly deficient fulfilment of export obligation in the case of EPCG scheme beneficiaries, Mr Ramesh told Business Line that this is “a very serious problem and DGFT should issue notices aggressively now.”

Region-wise, he said, the Western Zone at 22 per cent and the Northern Zone at 19 per cent of fulfilling EOs were grossly inadequate, while the Eastern Zone at 64 per cent and the Southern Zone at 52 per cent were a shade better.

He said the situation is better in the case of advance licence holders as they were able to complete 73 per cent by value with 88 per cent of AL holders being compliant.

Mr Ramesh further said that today online transaction is only 65 to 70 per cent complete and said that this would be close to 100 per cent by March, 2008 so that there is no need for any physical contact between importer/exporter and DGFT.

He said that the standard input-output norms (SION) for 10,000 ad hoc and another 6,000 permanent SION established six or seven years ago should all be put on the Web site and for public domain and the system of establishing these norms should be much more transparent and effective.

He told the DGFT officers to have a much more transparent and effective system that is professional and technical as the Ministry officials are not experts and the technical experts are in the field. He further suggested that the DGFT should subject itself to external audit of its systems and procedures so that trade and industry would develop confidence while interacting with officials of the DGFT.

Trade policy analysts contend that the Finance Ministry has a justifiable reason for questioning the various export incentive schemes following the furore over more benefits being bestowed on SEZs (Special Economic Zones) in the country when the old schemes of export promotion such as AL and EPCG have not been able to deliver results in terms of ensuring higher export volume by the beneficiaries.

More Stories on : Foreign Trade | Exports & Imports | Excise and Customs

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