No clarity yet on announcement of five-year foreign trade policy on April 1

The five-year foreign trade policy (FTP) is almost ready, but there is no clarity yet on whether it will be announced as scheduled on April 1, as the government may want to add more elements to it keeping the Covid-19 situation in mind, said sources tracking the matter.

“The Directorate General of Foreign Trade (DGFT) has the FTP ready, but it includes only a few elements such as provisions for e-commerce, one-district-one-product, special economic zones (SEZs), trade facilitation and import restrictions. If the Commerce Ministry wants to add more elements then the policy may get delayed,” an official told BusinessLine .

Covid impact

The five-year FTP was initially to be in place on April 1, 2020, but was postponed by one year due to the outbreak of Covid-19. All schemes that were part of the older policy got extended by a year.

“Now that there is a resurge of Covid-19 cases in India, the government may want to wait and watch how it affects global demand and exports and, if required, incorporate more measures in the FTP. Since we haven’t heard anything about the announcement of the FTP on April 1 yet, there is a possibility that there may be a delay. But nothing is certain yet as a last-minute clearance may be sought from the PMO,” said an industry source.

With the Centre determined not to give any new incentives to exporters that are not compatible with WTO norms, the five-year policy, in its present form, does not have too much to offer in terms of sops, said the industry source.

The WTO disallows direct subsidies to exporters, and a dispute panel, in October 2019, had ruled against a number of India’s export incentives following a complaint from the US. The government did away with the popular Merchandise Export from India Scheme (MEIS) scheme, which was one of the targeted schemes from January 1.

Existing schemes

However, some existing schemes may continue such as the Advance Authorisation, which allow duty-free import of inputs that are incorporated in an export product, and the Export Promotion Capital Goods (EPCG) scheme that allows exporters duty-free import of some capital goods.

But exporters would want more support as goods exports in 2020-21 is likely to be about 10 per cent lower than last year’s $314 billion, and the global outlook is still cloudy with key markets in the EU and the US grappling with new strains of the Covid-19 virus.

While the a new scheme for exporters, the Remission of Duties and Taxes on Export Products (RoDTEP), has been announced with effect from January 1, 2021, the rates of reimbursement for various sectors are yet to be announced.

“Since the rates for RoDTEP have not been finalised yet, it will be difficult to incorporate details if policy is announced on April 1,” said the industry source.

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