The Finance Ministry is considering restoration of the duty free import entitlement scheme for exporters of labour intensive goods such as handloom, leather, sports goods and toys in the Union Budget 2022-23, sources have said.

The scheme — which allows duty free import entitlement on select inputs for specified sectors with a limit that ranges from 1–5 per cent of the value of exports carried out during the previous fiscal — was discontinued last year.

“The Commerce Ministry has proposed to the Finance Ministry to consider re-introduction of the duty free import entitlement scheme that was withdrawn last year. Exporters, too, have discussed the proposal with officials from the Department of Revenue and there is a possibility that this may be restored in the Budget for 2022-23,” the source said.

Expanding employment

Special focus sectors including handlooms, handicraft, leather & footwear, marine, sports goods and toys, were initially extended duty free entitlements (restricted to basic customs duty since 2017) for specific inputs under the Foreign Trade Policy (2015-20), with a wider objective of expanding employment opportunities.

“These entitlements contributed in lowering the manufacturing costs of the beneficiary sectors and increased their competitiveness in the global market,” the source said.

Handloom and made ups were extended duty free import entitlement for specified inputs up to 5 per cent value of exports during previous financial year while hand knotted carpet samples and handicrafts were extended entitlements of up to 1 per cent and 5 per cent, respectively.

Exporters of leather and footwear and toys were extended duty free import entitlement of inputs up to 3 per cent each while the marine sector was extended an entitlement of up to 1 per cent of export value.

‘Counter competition’

 “It has been pointed out to the Finance Ministry by the Commerce Ministry and exporters that restoring the duty free import entitlement scheme will not cause a big dent in available finances as it may involve an outlay of around ₹100 crore annually. The benefits, however, will be big as it would help exporters counter competition in the global market from low-cost economies such as Bangladesh, Vietnam and Cambodia,” the source said.

The Commerce & Industry Ministry has set an ambitious export target of $400 billion for 2021-22 against exports worth $291 billion attained last financial year. Export performance, so far, has show great resilience in the current fiscal with total exports in April-December 2021 valued at $301.38 billion registering a growth of 49.66 per cent over exports in the comparable period last year.

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