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With cost pressures weighing on entrepreneurial initiatives, the three policy pillars of improvement in export-related infrastructure, lowering of transaction costs to trade and industry and providing full refund of all indirect taxes and levies have to be kept efficient in order that they benefit the stakeholders.
The report of the Task Force on Transaction Cost in Exports, released recently by the Finance and Commerce and Industry Ministers together, has received the approval of apex industry and export organisations, including the CII, FICCI and the Federation of Indian Export Organisations (FIEO).
The report on pruning transaction costs has been brought out under the leadership of the Minister of State for Commerce & Industry, Mr Jyotiraditya M. Scindia, who said he felt “a sense of accomplishment that out of the 44 issues identified, we have achieved closure on 23 issues, resulting in a benefit of approximately Rs 2,100 crore in perpetuity to the stakeholder community.”
With the Doha Round of trade liberalisation talks stuck in a limbo, India, like other countries, has favoured bilateral free trade agreements to get relief from tariff and non-tariff barriers and secure market access for products. Any gains from such bilateral deals would get translated only if Indian exporters are able to reach these overseas markets “as cost effectively and quickly as possible” the report says.
Trade-related transaction costs relate to a host of regulatory requirements, compliance measures, procedures and infrastructure-related costs, including communication costs with clients, domestic transportation costs to bring goods from the production site to the border, the time and money expended at ports, border procedures and to make products ready for shipment, international transport costs and inspection and certification costs.
The report points out that the combined transaction cost of containerised and non-containerised and air cargo aggregates to $17-billion in port charges payable to the port authorities, which is among the highest in the world. It has called for standardisation of charges across ports and an across-the-board reduction of port charges to bring them on a par with other countries.
The Task Force has also suggested that the freight rates charged by CONCOR should be rationalised to make exports more competitive. The 5-6 per cent hike in freight rates implemented by CONCOR in January 2010 translated into an increase of Rs 190 crore, given that CONCOR had carried 1.9 million TEUs (20-feet container) of international cargo.
Electronic Data Interchange (EDI) that would ensure “effective and complete automation of the export process across” various community partners in the export business remains a pipedream for exporters/importers. As the report aptly points out, at the very least this would require timely implementation of the eTrade Missions Mode Project being undertaken by the Government. The report also said this should be supplemented with an online, one-stop portal that would provide a single-window facility to business users in place of the extant method of going to the independent systems of each partner agency in the eTrade project.
It is rather distressing that the timelines to establish EDI connectivity between Central Excise and other agencies, including Customs and the DGFT, is still “under consultation with the concerned ministries for agreement/ implementation. In the eventual analysis, there can be no substitute to a single-window eTrade initiative providing a unified interface with the Government to exporters and developments in sport and hinterland infrastructure that remain key areas of reform crying for expeditious implementation.”
The fact that the Task Force had recommended 44 issues, which if fully implemented would reduce the transaction cost to trade by roughly Rs 6,500 crore, speaks of the long road ahead given that only 23 issues had been taken up (21 already implemented and two to be implemented in the near future) entailing a cushioning effect on exporters of the order of Rs 2,100 crore, trade policy analysts say wryly.
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