125624235-24650411-EXIM-Policy-Project

7/30/2019 125624235-24650411-EXIM-Policy-Project

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Study of EXIM policy

INDEX

SR

N

O. TOPIC

PAG

E

NO.

1 PRE 1991 SCENARIO OF FOREIGN TRADE

Brief Review of Indias Trade Policy Indias Share In World Trade General Provisions Regarding Imports And Exports

2 JOURNEY OF EXIM POLICY

Exim Policy, 1992-97 Exim Policy, 1997-2002 Modified Exim Policy, April 1998 Exim Policy 1999-2000 Exim Policy 2000-2001 Exim Policy 2001-2002

Exim Policy 2002-2007

Exim Policy, 2003-2004 Mini EXIM Policy, Jan 2004 Foreign Trade Policy, 2004-2009

3 HIGHLIGHTS OF EXIM POLICY & ITS IMPACT

Special Economic Zone (SEZ) Duty Free Replenishment Certificate (DFRC) Scheme Duty Entitlement Pass Book (DEPB) Scheme Quantitative Restrictions (QR) Agricultural Export Zones (AEZ) Status Holders Export Promotion Capital Goods Scheme (EPCG) Deemed Exports Advance License Scheme

4 EXIM BANK

5 EXPORTS, IMPORTS & TRADE BALANCE

6 INDIA V/S WORLD: ANNUAL EXPORT GROWTH RATE

7 FUTURE OF EXIM

8 BIBLIOGRAPHY


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PRE 1991 SCENARIO OF FOREIGN TRADE

Exim is the principal financial institution in the country for co-

coordinating working of institutions engaged in financing exports and

imports. The import policy in the post independence period was guided

by consideration of a growth oriented policy which should ultimately lead

us to the objective of self reliance:

a) Imports should be limited as far as possible so as to conserve

foreign exchange.

b) Imports of those items were to be encouraged which would help the

industrialization of the economy and imports of such items which

could be produced at home were discouraged or completely banned.

This distinction between essential and non-essential items of imports

were necessary in view of the fact that even the demand for imports

of capital goods and other equipment in a developing economy could

be of such a magnitude that it might become difficult to find foreign

exchange for developmental imports.

c) The nature of imports should be so modified that it helped export

promotion, and thus mitigate the deficit in the balance of payments

position ultimately.

The government appointed the Import and Export Policy

Committee headed by Mr. Mudaliar in 1962 to review Governments

trade policy. The recommendations of the committee were accepted by

the government. Mr.V.P.Singh, the then Commerce Minister, announced

the Export Import policy on the 12th of April, 1985.It was here that for the

first time the Government announced the policy on a three year basis.

The basic aim of the policy was to facilitate production through easier


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and quicker access to imported inputs, impart continuity and stability of

Exim Policy, strengthen the export production base, facilitate

technological up gradation and affect all possible savings in imports.

Brief Review of Indias Trade Policy

Indias foreign trade policy during the last five decades may be

broadly split into import substitution policy, export drive policy and export

acceleration policy. The import substitution was followed in the first two

decades. With fears of external dominance, the Indian planners adopted

a somewhat introvert external trade strategy which relied on encouraging

domestic production for the domestic market with the help of high tariffs

and high degree of protection. Far from viewing foreign trade as an

engine of growth, Indian planners sought to minimise import demand by

adopting an import substitution policy and gave secondary place to

exports primarily as a source to generate the foreign exchange earnings

to meet that part of the import bill not covered by external assistance.

There were controls over both imports and exports. However, this policy

of import substituting industrialisation and system of controls failed to

produce rapid growth and self-reliance.

With the realisation of the drawbacks of the excessively inward-

looking strategy on one hand and the need for modernisation and

technology upgradation on the other, certain policy measures were

initiated in the late seventies. Export incentives in the form of cash

compensatory support (CCS), import replenishment (REP), duty

drawback (DDS), market development assistance (MDA) etc and exportservices in the form of export promotion councils, commodity boards and


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specialised services institution were introduced. The strategy towards a

greater integration of the Indian economy with the rest of the world has

been pursued since then. In 1975-76 import policy was liberalised to

make available imported inputs for registered exporters. In mid-1980s

the government adopted a three-year import-export policy (1985-88) with

the aim to provide easy access to imports, essential for maximizing

production and exports. The main policy changes were abolition of

automatic licensing, inclusion of 201 items of industrial machinery under

capital goods import under OGL, decentralisation of 53 import items and

granting facility for import of capital goods against REP license from Rs

1 lakhs to Rs 2 lakhs.

The second three-year policy (1988-91) carried forward the

process of trade liberalisation to make exports more competitive. The

policy was designed to stimulate industrial growth by providing easy

access to essential imported capital goods, raw materials and

components to industry so as to sustain movements towards

modernization, technological upgradation and making Indian industry

competitive internationally. The liberal imports of capital goods and

technology were viewed as a means to enable exporters to undertake

technological upgradation in order to compete more effectively in the

international market.

In the 1990s many short run adjustments were made in the trade

policy in order to overcome the external sector crisis, which hit the

country in 1991. Two major measures taken in trade policies were (a)

liberalisation of imports entailing successive expansion in the OGL list

and (b) linking expansion in exports to import liberalisation. CCS scheme

was suspended; REP license was substituted by EXIM scrips. The rupee


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was devalued in July 1991 and the country saw transition towards the

market-based exchange rate regime.

From Independence in 1947 till mid 1990s, India with someexceptions, always faced deficit in its balance of payments i.e. imports

always exceeded exports. This was characteristic of a developing

country struggling for reconstruction and modernization of its economy.

Imports galloped because of increasing requirements of capital goods,

defence equipments, petroleum products, and raw materials. Exports

remained relatively sluggish owing to lack of exportable surplus,

competition in the international market, inflation at home, and increasing

protectionist policies, of the developed countries.

India embarked on the path of globalization in the early 1990s

with the objective of improving overall productivity, competitiveness and

efficiency of the economy in order to attain a higher growth profile.

Concomitantly, industrial, financial and external sector reforms were

initiated with a view to creating an environment conductive for the

expansion of trade. As a result, growth in trade accelerated in the early

part of the 1990s. This momentum however could not be sustained in

the face of various domestic bottlenecks and exogenous constraints like

East Asia crisis and slowdown in the US economy. These external

factors along with stagnation in investment rate, sluggish industrialgrowth and slow down in manufacturing productivity, predicted Indias

trade during the closing years of the 1990s. Thus while the opening of

the economy presented a range of opportunities and advantages to the

trade sector in India, the greater integration with the global economy has

posed several challenges as well.


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Since the initiation of economic reforms, Indias outward

orientation has increased considerably. The destination pattern of Indian

exports has remarkably changed in the sense that the importance of

developing countries as an export market has increased considerably.

There are, however, concerns that the country the dramatic changes in

exports of East Asia. Indias experience has seemingly fallen short of

expectation. Indias share in global trade did not rise as impressively

and the commodity structure of Indias export remained almost

unchanged until the mid 1990s.

Moreover, unlike the East Asian countries where industry has

been the major driver of exports growth, the contribution of industrial

exports in India has been comparatively low. This could perhaps be

attributed to small scale industry reservations and inflexible labour laws

besides infrastructural bottlenecks. The labour cost in India however is

one of the lowest among the competitor countries. Given the export

structure on India, the potential for higher exports of manufactures,

especially to the developed countries is high.

On the imports side, despite some initial apprehensions,

liberalization has not adversely affected Indias balance of payments.

On the contrary, increased trade liberalization along with the prudent

management of capital account liberalization has imparted withsignificant strength to the balance of payments since the mid 1990a.

With the increased competitiveness of Indian Industries imports of low

and medium technology intensive products have declined. At the same

time, imports of high technology intensive products and imports used for

export production have increased. There is growing evidence that

accessibility to imports has a positive impact on the growth performanceof the country.


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In the 1990s, a liberalised trade regime was put in place, which

marked a significant turnaround from the earlier controlled regime. The

challenge of restoring the macro-economic balance initially was

combined with a long term new trade policy which formed a major

ingredient of the economic reforms programme. It was recognized that

trade policies should form a part of an integrated policy framework if the

aim was to improve the overall productivity and efficiency of the

economic system. Apart from devaluation of the exchange rate and a

switch over to a unified marked determined exchange system in 1993,

the new trade policy was characterized by a short negative list of imports

and exports, lowering of the level and dispersion of nominal tariffs,

withdrawal of quantitative restrictions on imports and phasing out of the

system of import licensing. The new trade policy reforms also

encompassed significant changes in the system of export incentives,

moving away from direct subsidies to indirect export promotional

measures.

The multi-pronged strategy undertaken in the beginning of the

1990s gradually had its desired effects on the economy and ushered in a

phase of a stable and high growth. The rising exports combined with

significant surge in capital flows provided opportunities for further

liberalization of essential imports from quantitative restrictions. The

stability in the exchange rate of the rupee maintained the

competitiveness of Indian exports and at the same time prevented the

upsurge of cheap imports. The loss of the East European markets since

the early 1990s was successfully countered by diversifying into newer

markets of developing countries of Asia and the Organization of the

petroleum Exporting Countries(OPEC).


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The economic reform process introduced in the beginning of

the 1990s wit focus on liberalization had enabled increased integration

of the Indian Economy with the rest of the world. The growth rate of

Indias trade is increasingly dependent on exogenous factors such as

world trade growth, international price changes and developments in the

competitor countries. Cross currency exchange rates as well as solar-

rupee exchange rate movements also get reflected in the performance of

Indias trade. Although the level and dispersion of Indias tariff have

considerably come down since the early 1990s it remains among the

highest as compared to emerging market economies.

It is increasingly being realized that the desirable structure of

tariff rates should comply with the basic principles of simplicity,

transparency, stability and international practices. As noted in the tenth

plan document, the most effective means of encouraging outward

orientation is to lower tariffs on imports so that the anti-export bias

corrected. Further, it may be noted that as the duty rates fall, the need

for refunds will commensurately decline thereby bringing down the

transaction cost.

It has been observed that in contrast to the structural and

compositional shifts in world trade towards higher technology intensive

products, the commodity structure of Indias exports remained largelyunchanged until the mid 1990s. Although, of late Indias exports have

shown a steady trend towards higher technology content, Indias

specialization of in exports lies in manufacturing goods, especially to the

developed markets remains high. However, given the general trend of

movement of terms of trade towards higher technology intensive

products, it may be imperative for India to move up the technologyladder.


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At the same time, the policy of reservation for SSIs had

declined successful small scale units to expand and achieve economies

of scale and upgrade technology. This in turn has affected export

growth, manufacturing production and employment generation.

A noteworthy fact is that despite significant liberalization of

imports during the 1990s the overall balance of payments has been in

surplus for most of the years with the country foreign exchange reserves

crossing US$ 100 billion mark. Thus, in contrast to fears expressed at

the time if the opening up of the economy, import, and liberalization

policies have in fact strengthened the countrys external sector since

1990-91. The implication is that continued reduction in import tariffs will

help in inducing greater efficiency and competitiveness in the economy,

while reducing avoidable transaction costs in trade. For the future, the

prospects of sustained growth in exports of goods and services are

bright provided the Indian economy can face the challenge of enhancing

productivity and competitiveness in an increasingly integrated global

environment.

Import Substitution: Cornerstone of Trade Policy

India adopted an inward looking development strategy afterindependence wherein import substitution constituted a major element of

both trade and industrial policies. The focus in the initial stages of

planned development was on stimulating home grown industrialization,

essentially based on the infant industry argument ,wherein production for

domestic market was shielded behind high tariff walls and high

effective protection .this policy not only underestimated the export


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possibilities but also the import intensity of the import substitution

process itself.

Import substitution was the prime objective of Indias trade policy tillthe mid 1970s. This policy was largely based on the imports and exports

act of 1947. Liberal incentives were granted to firms if they were

undertaking production of an imported item that was not domestically

produced.

Protective quotas however remained more or less intact and

domestic industry continued to be shielded from import competition.

Production for exports cannot be isolated from production for the home

market and trade policy would have to be integrated with the policy for

domestic industrialization.

A three year export import policy was introduced in 1985 to provide a

definite focus to the trade sector. A major ingredient of this policy was

the provision of easy access to essential capital goods, raw materials

and component from abroad since these were viewed as a major

incentive for exporters in undertaking technological up gradation for

reducing cost and improving quality.

In short prior to mid 1991, foreign trade of India suffered from strict

bureaucratic and discretionary control. Foreign exchange transactions

were controlled by the government and the Reserve Bank of India.

Beginning mid1991 the government of India introduced a series of

reforms to liberalize and globalize the Indian economy. The process of

globalization is a reality which cannot be denied and also should not be

avoided .It needs to be managed so that we can derive the maximum

advantage from world markets.


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Balance of payment crisis, 1991

The balance of payment situation became very difficult in 1991-

1992 despite of softening of oil price in the world market. Even with a

substantial import compression, the pressure on the balance of

payments persisted throughout the current financial year.

The government attempted to mobilize support for balance of

payments for multilateral financial institutions the international monetary

fund, the World Bank and the Asian development bank.

Another important initiative taken by the government to meet the

urgent need for the balance of payments financing was the

announcement of two schemes designed to encourage the inflow of

capital funds from abroad .The India development bond scheme and the

immunity scheme for repatriation of funds held abroad were introducedin October1991.

Foreign currency assets, which had declined to $1.1 billion at their

lowest point in june1991, had risen to $4.4 billion by February1992.

The build up of the reserves in the course of 1991-92 was

necessary to restore confidence in the system, but it also meant theadditional resources mobilized from the multilateral financial institutions

and the IDB and immunity schemes were primarily used for building up

reserves and not to liberalize imports, which remain severely constrained

in 1991-92.

Following adjustments were called for a broad based, rapid and

sustained growth of exports.


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Reduction in the excess domestic demand-Domestic demand had

to be restrained and supply increased.

Enhanced Competiveness-This required two changes, a change inthe exchange rate of rupee and a reduction in a relative prices of

those products which were costly vis--vis competing goods

abroad. The first step was taken by means of a downward

adjustment of about 18 percent in the external value of the

rupee .The second step required a phasing down of import

restrictions and a reductions in the high levels of protection ,which

characterize Indian industries.

Deregulation-One of the obstacles to exports lied in the

cumbersome administrative procedures involved, arising from

controls over imports and exports, exchange control and also

procedures.

Measures which were taken for lowering the inflation rate in the

economy are:-

Reducing subsidies and external support to production enterprises

so as to make more responsive to price and demand changes.

Ensuring that buffer stock operations for food grains and

interventions in agricultural markets were counter cyclical.

Encouraging savings to be high not only as a proportion of GDP

but in relation to demand for investment funds in the economy.

Keeping entry barriers low in the industrial sector and improving

industrys access to imported inputs at low tariffs.


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Indias Share In WorldTrade

In 1950, India accounted for 1.8 percent (1.85 percent of exports

and 1.71 percent of imports) of world trade, gradually declining to 0.53

percent by 1991; it marginally improved to 0.61 percent in 1994. The

decline in Indias share in world trade has not only been arrested but

reversed. Below table shows trends in Indias share in the world trade

during the post-Independence period. It is discernible that of late Indias

share in world exports in on the increase. It s noteworthy that India

commands an important place in world trade in tea, precious, and semi-

precious stone, spices, iron ore, leather and coffee. The Foreign Trade

Policy, 2004 2009 has set an ambitious task of achieving 1.5 percent

share in the world trade by the year 2009.

Selected Years

(percent)

Year Exports Imports Trade

1950 1.85 1.71 1.78

1960 1.03 1.69 1.36

1970 0.64 0.65 0.65

1980 0.42 0.72 0.57

1990 0.52 0.66 0.59

1991 0.50 0.56 0.53

1992 0.53 0.61 0.57

1993 0.58 0.60 0.59


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1994 0.60 0.63 0.61

1998 0.60 - -

2000 0.70 - -

2001 0.70 - -

2003 0.86 - -

Sources: Government of India, Economic Survey, 1996-1997, p.88, andEconomic Survey, 2005-2006 p. S-95

General Provisions Regarding Imports And Exports

Exports and Imports free unless regulated2.1 Exports and Imports shall be free, except in cases where

they are regulated by the provisions of this Policy or any

other law for the time being in force. The item wise export

and import policy shall be, as specified in ITC(HS)

published and notified by Director General of Foreign

Trade, as amended from time to time.

Compliance with Laws


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2.2 Every exporter or importer shall comply with the provisions

of the Foreign Trade (Development and Regulation) Act,

1992, the Rules and Orders made there under, the

provisions of this Policy and the terms and conditions of

any license/certificate/permission granted to him, as well as

provisions of any other law for the time being in force. All

imported goods shall also be subject to domestic Laws,

Rules, Orders, Regulations, technical specifications,

environmental and safety norms as applicable to

domestically produced goods.

Interpretation of Policy

If any question or doubt arises in respect of the

interpretation of any provision contained in this Policy, or

regarding the classification of any item in the ITC(HS) or

Handbook (Vol.1) or Handbook (Vol.2), the said question or

doubt shall be referred to the Director General of Foreign

Trade whose decision thereon shall be final and binding.

If any question or doubt arises whether a licence/

certificate/permission has been issued in accordance with

this Policy or if any question or doubt arises touching upon

the scope and content of such documents, the same shall

be referred to the Director General of Foreign Trade whose

decision thereon shall be final and binding.

Procedure

The Director General of Foreign Trade may, in any case or

class of cases, specify the procedure to be followed by an


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exporter or importer or by any licensing or any other

competent authority for the purpose of implementing the

provisions of the Act, the Rules and the Orders made there

under and this Policy. Such procedures shall be included in

the Handbook (Vol.1), Handbook (Vol.2) and in ITC(HS)

and published by means of a Public Notice. Such

procedures may, in like manner, be amended from time to

time.

The Handbook (Vol.1) is a supplement to the EXIM Policy

and contains relevant procedures and other details. The

benefits available under various schemes of the Policy are

given in the Handbook (Vol.1).

Exemption from Policy / Procedure

Any request for relaxation of the provisions of this Policy or

of any procedure, on the ground that there is genuine

hardship to the applicant or that a strict application of the

Policy or the procedure is likely to have an adverse impact

on trade, may be made to the Director General of Foreign

Trade for such relief as may be necessary. The Director

General of Foreign Trade may pass such orders or grant

such relaxation or relief, as he may deem fit and proper.

The Director General of Foreign Trade may, in public

interest, exempt any person or class or category of persons

from any provision of this Policy or any procedure and may,

while granting such exemption, impose such conditions as

he may deem fit. Such request may be considered only

after consulting ALC if the request is in respect of a


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provision of Chapter-4 (excluding any provision relating to

Gem & Jewellery sector) of the Policy/ Procedure.

However, any such request in respect of a provision other

than Chapter-4 as given above may be considered only

after consulting Policy Relaxation Committee.

Principles of Restriction

DGFT may, through a notification, adopt and enforce any

measure necessary for:-

Protection of public morals. Protection of human, animal or plant life or health.

Protection of patents, trademarks and copyrights and

the prevention of deceptive practices.

Prevention of prison labour.

Protection of national treasures of artistic, historic orarcheological value.

Conservation of exhaustible natural resources.

Protection of trade of fissionable material or material

from which they are derived; and

Prevention of traffic in arms, ammunition and

implements of war.Restricted Goods

Any goods, the export or import of which is restricted under

ITC(HS) may be exported or imported only in accordance

with a license/ certificate/ permission or a public notice

issued in this behalf.


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Terms and Conditions of a License / Certificate / Permission

Every license/certificate/permission shall be valid for the

period of validity specified in the license/

certificate/permission and shall contain such terms and

conditions as may be specified by the licensing authority

which may include:

a. The quantity, description and value of the goods;

b. Actual User condition;

c. Export obligation;

d. The value addition to be achieved; and

e. The minimum export price.Licence/ Certificate/ Permission not a Right

No person may claim a license/certificate/ permission as a

right and the Director General of Foreign Trade or the

licensing authority shall have the power to refuse to grant

or renew a license/certificate/permission in accordance with

the provisions of the Act and the Rules made there under.

Penalty

If a license/certificate/permission holder violates any

condition of the license/certificate/ permission or fails to

fulfill the export obligation, he shall be liable for action in

accordance with the Act, the Rules and Orders made there

under, the Policy and any other law for the time being in

force.

State Trading

Any goods, the import or export of which is governed

through exclusive or special privileges granted to State


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Trading Enterprise(s), may be imported or exported by the

State Trading Enterprise(s) as specified in the ITC(HS)

Book subject to the conditions specified therein. The

Director General of Foreign Trade may, however, grant a

license/certificate/permission to any other person to import

or export any of these goods.

In respect of goods the import or export of which is

governed through exclusive or special privileges granted to

State Trading Enterprise(s), the State Trading Enterprise(s)

shall make any such purchases or sales involving imports

or exports solely in accordance with commercial

considerations, including price, quality, availability,

marketability, transportation and other conditions of

purchase or sale. These enterprises shall act in a non

discriminatory manner and shall afford the enterprises ofother countries adequate opportunity, in accordance with

customary business practices, to compete for participation

in such purchases or sales.

Importer-Exporter Code Number

No export or import shall be made by any person without

an Importer-Exporter Code (IEC) number unless specifically

exempted. An Importer-Exporter Code (IEC) number shall

be granted on application by the competent authority in

accordance with the procedure specified in the Handbook

(Vol.1).

Trade with Neighbouring Countries

The Director General of Foreign Trade may issue, from


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time to time, such instructions or frame such schemes as

may be required to promote trade and strengthen economic

ties with neighbouring countries.

Transit Facility

Transit of goods through India from or to countries adjacent

to India shall be regulated in accordance with the bilateral

treaties between India and those countries.

Trade with Russia under Debt- Repayment Agreement

In the case of trade with Russia under the Debt Repayment

Agreement, the Director General of Foreign Trade may

issue, from time to time, such instructions or frame such

schemes as may be required, and anything contained in

this Policy, in so far as it is inconsistent with such

instructions or schemes, shall not apply.

Actual User Condition

Capital goods, raw materials, intermediates, components,

consumables, spares, parts, accessories, instruments and

other goods, which are importable without any restriction,

may be imported by any person. However, if such imports

require a license/certificate/ permission, the actual user

alone may import such goods unless the actual user

condition is specifically dispensed with by the licensing

authority.

Second Hand Goods

All second hand goods shall be restricted for imports and

may be imported only in accordance with the provisions of

this Policy, ITC(HS), Handbook (Vol.1), Public Notice or a


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licence/certificate/permission issued in this behalf.

Import of samples

Import of samples shall be governed by the provisions

given in Handbook (Vol.1).

Import of Gifts

Import of gifts shall be permitted where such goods are

otherwise freely importable under this Policy. In other

cases, a Customs Clearance Permit (CCP) shall be

required from the DGFT.

Passenger Baggage

Bonafide household goods and personal effects may be

imported as part of passenger baggage. Samples of such

items that are otherwise freely importable under this Policy

may also be imported as part of passenger baggage

without a licence/certificate/ permission. Exporters coming

from abroad are also allowed to import drawings, patterns,

labels, price tags, buttons, belts, trimming and

embellishments required for export, as part of their

passenger baggage without a licence/certificate/

permission.

Import on Export basis

New or second hand capital goods, equipments,

components, parts and accessories, containers meant for

packing of goods for exports may be imported for export

without a licence/certificate/permission on execution of

Legal Undertaking/ Bank Guarantee with the Customs

Authorities.

Re-import of goods repaired abroad


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Capital goods, equipments, components, parts and

accessories, whether imported or indigenous, may be sent

abroad for repairs, testing, quality improvement or

upgradation or standardization of technology and re-

imported without a licence/certificate/permission.

Import of goods used in projects abroad

After completion of the projects abroad, project contractors

may import, without a licence/certificate/permission, used

goods including capital goods provided they have been

used for at least one year.

Sale on High Seas

Sale of goods on high seas for import into India may be

made subject to this Policy or any other law for the time

being in force.

Import under Lease Financing

Permission of licensing authority is not required for import

of new capital goods under lease financing.

Clearance of Goods from Customs

The goods already imported/shipped/arrived, in advance,

but not cleared from Customs may also be cleared againstthe licence/ certificate/ permission issued subsequently.

Execution of BG/LUT

Wherever any duty free import is allowed or where

otherwise specifically stated, the importer shall execute a

Legal Undertaking (LUT)/Bank Guarantee (BG) with the

Customs Authority before clearance of goods through theCustoms, in the manner as may be prescribed. In case of


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indigenous sourcing, the licence/certificate/ permission

holder shall furnish BG/LUT to the licensing authority

before sourcing the material from the indigenous

supplier/nominated agency.

Private/ Public Bonded Warehouses for Imports

Private/Public bonded warehouses may be set up in the

Domestic Tariff Area as per the terms and conditions of

notification issued by Department of Revenue. Any person

may import goods except prohibited items, arms and

ammunition, hazardous waste and chemicals and

warehouse them in such private/public bonded

warehouses. Such goods may be cleared for home

consumption in accordance with the provisions of this

Policy and against Licence/certificate/ permission,

wherever required. Customs duty as applicable shall be

paid at the time of clearance of such goods. If such goods

are not cleared for home consumption within a period of

one year or such extended period as the custom authorities

may permit, the importer of such goods shall re-export the

goods.

Free Exports

All goods may be exported without any restriction except to

the extent such exports are regulated by ITC(HS) or any

other provision of this Policy or any other law for the time

being in force. The Director General of Foreign Trade may,

however, specify through a public notice such terms and

conditions according to which any goods, not included in

the ITC(HS), may be exported without a licence/ certificate/


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permission.

Export of samples

Export of samples shall be governed by the provisions

given in Handbook (Vol.1)

Export of Passenger Baggage

Bonafide personal baggage may be exported either along

with the passenger or, if unaccompanied, within one year

before or after the passenger's departure from India.

However, items mentioned as Restricted in ITC(HS) shall

require a licence/certificate/permission, except in the case

of edible items.

Export of Gifts

Goods, including edible items, of value not exceeding

Rs.1,00,000/- in a licensing year, may be exported as a gift.

However, items mentioned as restricted for exports in

ITC(HS) shall not be exported as a gift, without a licence/

certificate/ permission, except in the case of edible items.

Export of Spares

Warranty spares, whether indigenous or imported, of plant,

equipment, machinery, automobiles or any other goods

may be exported upto 7.5% of the FOB value of the exports

of such goods along with the main equipment or

subsequently but within the contracted warranty period of

such goods.

Third Party Exports

Third party exports, as defined in paragraph 9.56 shall be

allowed under the Policy.

Export of Imported Goods


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Goods imported, in accordance with this Policy, may be

exported in the same or substantially the same form without

a licence/certificate/ permission provided that the item to be

imported or exported is not mentioned as restricted for

import or export in the ITC(HS). Exports of such goods

imported against payment in freely convertible currency

would be permitted against payment in freely convertible

currency.

Goods, including those mentioned as restricted item for

import or export (except prohibited items) in ITC(HS), may

be imported under Customs Bond for export in freely

convertible currency without a licence/certificate/

permission.Export of Replacement Goods

Goods or parts thereof on being exported and found

defective/damaged or otherwise unfit for use may be

replaced free of charge by the exporter and such goods

shall be allowed clearance by the customs authorities

provided that the replacement goods are not mentioned as

restricted items for exports in ITC(HS).

Export of Repaired Goods

Goods or parts thereof on being exported and found

defective, damaged or otherwise unfit for use may be

imported for repair and subsequent re-export. Such goods

shall be allowed clearance without a licence/certificate/

permission and in accordance with customs notification

issued in this behalf.


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Private Bonded Warehouses for Exports

Private bonded warehouse exclusively for exports may be

set up in DTA as per the terms and conditions of the

notifications issued by Department of Revenue. Such

warehouse shall be entitled to procure the goods from

domestic manufacturers without payment of duty. The

supplies made by the domestic supplier to the notified

warehouses shall be treated as physical exports provided

the payments for the same are made in free foreign

exchange.

Denomination of Export Contracts

All export contracts and invoices shall be denominated in

freely convertible currency and export proceeds shall be

realised in freely convertible currency. Contracts for which

payments are received through the Asian Clearing Union

(ACU) shall be denominated in ACU Dollar. The Central

Government may relax the provisions of this paragraph in

appropriate cases. Export contracts and Invoices can be

denominated in Indian rupees against EXIM

Bank/Government of India line of credit.

Realisation of Export Proceeds

If an exporter fails to realise the export proceeds within the

time specified by the Reserve Bank of India, he shall,

without prejudice to any liability or penalty under any law for

the time being in force, be liable to action in accordance

with the provisions of the Act, the Rules and Orders made

there under and the provisions of this Policy.

Free movement of export goods No seizure of Stock


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2.42.1 No seizure of stock shall be made by any agency so as to

disrupt the manufacturing activity and delivery schedule of

export goods. In exceptional cases, the concerned agency

may seize the stock on the basis of prima facie evidence.

However, such seizure should be lifted within 7 days.

Export Promotion Council

2.43 The basic objective of export promotion councils is to

promote and develop the exports of the country. Each

Council is responsible for the promotion of a particular

group of products, projects and services. The list of the

councils and their main functions are given in Handbook

(Vol.1).

Registration -cum-Membership Certificate

2.44 Any person, applying for (i) a licence/ certificate/ permission

to import/ export, [except items listed as restricted items in

ITC(HS)] or (ii) any other benefit or concession under this

policy shall be required to furnish Registration-cum-

Membership Certificate (RCMC) granted by the competent

authority in accordance with the procedure specified in the

Handbook (Vol.1) unless specifically exempted under the

Policy.

JOURNEY OF EXIM POLICY

India`s foreign trade is regulated by the foreign trade

(Development and Regulation) Act, 1992 which replaced the import and


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export (control) Act, 1947. The act of 1992 empowers the central

government to formulate and announce from time to time the export and

import policy and to amend it in like manner.

Prior to mid -1991, foreign trade of India suffered from strict

bureaucratic and discretionary controls. However, the new government

which took over at the centre in June 1991 soon realised that Indias

foreign trade policy must respond to the changes (liberalization and

openness) sweeping across the world. To reduce controls, simplify

procedures and to create a congenial environment for trade, the

government made a statement on trade policy in parliament on august

13, 1991, ushering a new era in the foreign trade policy of India. Instead

of controls and regulations, the focus shifted to promotion and

development of foreign trade.

Before 1985-86, the annual export-import policy was announced at

the beginning of the financial year. In 1985-86 , a three year export-

import policy was announced for the period April 1985 through march

1988, providing a reasonable degree of stability to the policy framework.

On its expiry, the new policy for three years 1988-91 was announced in

March 1988 which laid even greater emphasis on promotion of exports.

EXIM POLICY, 1992-97

On March 31, 1992, the government announced the export and

import policy for a period of five years (April 1, 1992 to march 31, 1997),

coinciding with the period of eighth five year plan. The chief controller of

imports and exports was re-designated as director general of foreign

trade. EXIM Policy, 1992-97 made a conscious effort to dismantle


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various protectionist and regulatory policies and accelerate India`s

transition towards a globally oriented economy. The export-import policy

was further liberalized by the government on March 31, 1993.

Substantial concessions were announced to boost agricultural exports.

The government also announced a centrally sponsored scheme to set

up industrial parks in different states.

EXIM POLICY, 1997-2002

The export and import policy, 1997- 2002 (coinciding with the period

of ninth five year plan) sought to consolidate the gains of the previous

policy and further carry forward the process of liberalization by

deregulating and simplifying procedures and removing quantitative

restrictions in a phased manner. It set an ambitious target of attaining an

export level of US$ 90-100 billion by the year 2002 and achieving 1 per

cent share in world trade.

Objectives:

The principal objectives of the policy were the following:

1. To accelerate the country`s transition to a globally oriented vibrant

economy to derive maximum benefits from expanding global marketopportunities.

2. To stimulate sustained economic growth by providing access to

essential raw materials, intermediates, Components, consumables and

capital goods required for augmenting production.


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3. To enhance the technological strength and efficiency of Indian

agriculture, industry and services, thereby improving their competitive

strength while generating new employment opportunities, and encourage

the attainment of internationally accepted standards of quality.

4. To provide consumers with good quality products at reasonable

prices.

Salient Features:

Following were the salient features of the policy:

1. Exports and imports shall be free, except to the extent they are

regulated by the provisions of this policy.

2. The Central Government may in public, interest, regulate the import

or exports of goods by means of a negative list of imports or a negative

list of exports, as the case may be.

3. The negative list may consist of goods, the import or export of which

is prohibited, restricted through licensing, or canalised.

4. Prohibited items in the Negative list of Imports shall not be imported

and prohibited items in the Negative list of exports shall not be exported.

5. Any goods, the export or import of which is restricted through

licensing , may be exported or imported only in accordance with a

license issued in this behalf.

6. Any goods, the import or export of which is canalised, may be

imported or exported by canalising agency specified in the negative list.


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7. No export or import shall be made by any person without an importer

exporter code (IEC) number unless specifically exempted.

MODIFIED EXIM POLICY, APRIL 1998

The new government at the centre, which assumed office in March1998, announced its exports and import policy for the year 1998-99 on

April 13, 1998. As part of the annual export-import policy modification,

the government freed from import restrictions a large number of

consumer goods and liberalized all major export promotion schemes.

This new dose of liberalization of the trade regime by the new

government was necessitated by the commitments made by India at theWorld Trade Organization (WTO). The timing of the import policy

liberalization coincided with the scheduled review of India`s trade policy

by WTO on April 16 and 17, 1998. Apart from the general global

pressure on India to remove restrictions on imports, the US had filed a

complaint with the WTO against India`s import regime. The following

were the main provisions of the modified Export-import policy unveiled

by the Commerce Minister on April 13, 1998.

1. 340 more items were shifted from restricted list to open general

licence (OGL). Thus out of the total number of 10, 202 items covered

under the export-import policy, only 2200 remained on the restricted

list.


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2. The revised policy set an export growth target of 20 percent for the

year 1998-99 which in other words required total exports of the order

of US$ 41.4 billion during 1998-99.

3. Zero duty export promotion capital goods (EPCG) scheme was

extended to all the software exporters by lowering the threshold limit

of importable capital goods from Rs 20 crore to Rs 10 lakhs. The

lowering of the threshold limit was expected to help the software

companies to proliferate throughout the length and breadth of the

country. In other words they could import any capital goods without

paying any import duty and in return sign an export obligation of 5

times the value of capital goods on net foreign exchange earning

basis for a period of six years. In the case of garments, agriculture,

food processing, gems and jewellery, electronics leather, sport goods

and toys the minimum limit was lowered to Rs 1 crore.

4. In a bid to prevent cheap imports being dumped at unreasonableprices, the government set up an anti-dumping cell called Directorate

General (DG) of Anti-Dumping and Allied Duties. The DG would be

responsible for investigation into alleged cases of dumping as well as

subsidised cases. DG would be recommended Anti Dumping duties

where it is found that dumped imports are causing harm to the

domestic industry. Where harm is caused to the domestic industry by

subsidising exports of the exporting countries then the DG would have

the jurisdiction to investigate all such cases and recommend possible

imposition of countervailing duties. The DG would also advice the

industry groups and consumer for on how to go about collecting

information and procedures involved in making out a case for anti-

dumping duties.


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5. Other provisions include:

Delegation of powers to regional licensing offices, Doing away with

the minimum value addition of 33 percent under advance licensingscheme, Simplified procedures for clubbing of advance license

scheme and Private bonded warehouses to be set up to import, stock

and sell even negative list items.

EXIM POLICY 1999-2000

In its effort to further dismantle the import control regime and hasten

the integration of the Indian economy with the world economy, thegovernment announced a revised export-import policy on March 31,

1999 which came into force on April1, 1999.

The new export import policy freed import of 894 items of consumer

goods, agricultural products and textile from licensing requirements. Inother words a number of

Consumer items could now be imported license-free subject only to the

payment of import duty. Physical controls on imports were removed and

the only control over imports was fiscal in nature, i.e. adjusting import

duty to regulate imports. These adjustments were to be made within the

upper limit prescribed by WTO.


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Moreover, another 414items were removed from the restricted list,

allowing these to be imported against special import licenses. India`sinternational commitments require it to remove licensing curbs on

imports by the year 2003.

EXIM POLICY 2000-2001

The union commerce and industry minister announced on march 31,

2000 the new export-import policy of the government of India for the year

2000-2001. The export import policy envisaging a 20 percent export

growth in dollar terms in 2000-2001, brought about a major

rationalisation in export promotion schemes and launched a series of

sector specific initiatives.

Export Promotion: In a major initiative to boost exports, the

Government announced the following measures:

Special Economic Zones (SEZ): in the pattern of Chinese models the

government announced the setting up of two SEZs at Positra in Gujarat

and Nangunery in Tamil Nadu ]. Industrial units located in SEZs will be

exempted from rules and regulations governing exports and imports. The

entire production will have to be exported from these zones. Sales from


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Domestic Tariff Area (DTA) can be done only on full payment of custom

duty. Several Export Processing Zones (EPZs)will shortly be converted

into SEZs. The EPZs located in Kandla, Vizag and Kochi will be

converted into SEZs immediately. It was further announced that 100

percent foreign direct investment (FDI) would be allowed in all products

in SEZs.

SEZs would be treated as if they are outside the customs

territory of the country. The units would be able to import capital goods

and raw material duty free. The movement of goods to and from SEZs

would be unrestricted.

It is noteworthy that SEZs have played a crucial role in

boosting China`s exports and presently the country derives 40 percent of

its exports from such zones. However, Chinese SEZs are based on

contract labour system (hire and fire policy). The commerce minister

while announcing the EXIM policy categorically ruled out any changes in

labour laws. Moreover, there is no systems of reservation of items for

small scale industries in China. It is unclear if the Government of India

would allow the production of reserved item for small industries in the

SEZs. Still further there are various infrastructural bottlenecks like power

shortage, lack of transport facility and of course procedural delays.

Hence the success of SEZs in India is a moot question

Sector-Specific Packages: the Export-import policy 2000-2001

announced sector-specific packages for sever core areas to boost


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export, viz. Gems and jewellery, pharmaceuticals, agrochemicals,

biotechnology, silk, leather and garments.

For the gems and jewellery exporters, the government announced

a diamond-dollar account (DDA) scheme export proceeds can be

retained in a dollar account and the exporters can use funds in this

account for import of rough diamonds.

For agrochemicals, biotechnology and pharma units (considered

as knowledge-intensive), the government has allowed duty free imports

of laboratory equipment, chemicals and reagents upto 1% of the FOB

value of exports. Similarly the government increased duty free import of

trimmings, embellishments and other items from 2 to 3% of the total

export value

Involvement of State Governments in Export Promotions: Since the

stages forgo taxes (mainly sales tax) on exports, they have little

incentive to promote exports. [1] the 2000-2001 export -import policy

announced financial incentives to states based on their export

performance. An incentives scheme with an initial outlay of Rs. 250

crores to secure states involvement in the national export drive was

unveiled. The states can use the funds for export promotions activities

such as infrastructure development. The commerce and industry

minister said that he would request the state to treat all units exporting

more than 50 percent of their turnover as public utility services. This


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would enable them to keep their international commitment on delivery

schedule.

Furthermore, the minister observed that the recent spectacular growth of

software exports was, apart from Indias knowledge in high-tech, due to

hands off policy of government towards this sector .A similar approach

to hardware electronics is called for.

Import liberalisation: The export import policy 2000 to 2001 lifted

quantitative restrictions on 714 commonly used items (agricultural

products and consumer durables ) which can now be freely imported.Thus, commodities like meat, milk powder, coffee, tea, fish, pickles,

cigars , cigarettes, television , radio , tape recorders , foot wares &

umbrellas can be imported freely from April 1, 2000. However most of

these items will attracts peak rates of basic import duty.

The lifting of licensing and quota restrictions on 714 import items was in

line with Indias WTO obligations. The government promised to abolish

licensing and quota curbs on the remaining 715 items (such liquor, cars

etc) in April 2001.

Many critics of new policy fear that that removal of licensing and quota

restriction will lead to surge in imports of these items, hurting the

domestic industry. However, it is noteworthy that import restrictionare

being phased out since 1966 but no extraordinary growth has occurred

in the import of freed items. The commerce minister maintain that anti-

dumping and anti-subsidy tariffs and other safeguards would be used if

there is sudden search in imports, causing serious injuries to the

domestic industry.

EXIM Policy, 2001-2002


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The union commerce And industry minister unveiled on march 31, 2001,

the export import policy for the year 2001-2002.

Removal of Quantitative restrictions: The process of removal of import

restrictions , which began in 1991, was completed in a phased manner

bye the Export-Import Policy 2001-2002 with the removal of restriction

on the remaining of 715 items. This was in tune with the commitments

made to the WTO. Out of these 715 items 342 were textile products, 147

were agricultural products and 226 were other manufactured products.

However, import of agricultural products like wheat, rice, maze, copraand coconut oil was placed in the category safe trading . the nominated

state trading enterprise will conduct the import of this commodity solely

as per commercial consideration . similarly, import of petroleum products

including petrol , diesel & ATF was placed in the category of state

trading in all 27 out of 715 items taken of the quantitative restrictions list

were put under the state trading category.

The minister was confident that the Indian market will not swamped by

imported brands of commonly used articles. To prevent dumping,

government will take recourse to anti-dumping duties and other non-tariff

barriers. Arrangements have been made to track, collate and analyse

data on 300 sensitive items which mainly comprise farm goods and

items produced by small scale sectors.

Agricultural Export Zones: With a view to boost agricultural exports and

provide remunerative returns to the farming community, the Export-

Import policy proposed the setting up of agricultural export zones. Three

such zones are proposed to be set up in himanchal Pradesh , jammu

Kashmir (to promote export of apples) and Maharashtra. Government

will make efforts to provide improved access to the produce/products of


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the agriculture and allied sectors in the international market. State

governments have been asking to identify product specific agricultural

export zones for development for export of specific products from a

geographically contiguous area.

EXIM Policy , 2002-2007

The EXIM Policy 2002-07 was unveiled on march 31, 2002. The policy

entailed several institutional, infrastructural and fiscal measures intended

to promote exports which are conductive to the economic developmentof the country. The following were the salient features of the policy.

Special Economic zones (SEZs): Offshore banking units (OBUs) were

permitted in SEZs . Units in SEZ were permitted to undertake hedging of

commodity price risks, provided such transactions are undertaken by the

units on stand-alone basis. This will impart security to the returns of the

unit.

It has also been decided to permit external commercial borrowings

(ECBs) for tenure of less than three years in SEZs. The detailed

guidelines will be worked out by RBI. This will provide opportunities for

accessing working capital loan for these units internationally competitive

rates.

Employment Generation: In an effort to generate additional

employment , the following announcements were made pertaining to

agricultural and small industry sectors.

Exports restrictions like registration and packaging requirement were

removed forthwith on butter, wheat & wheat products, coarse grains

groundnuts oil and cashew to Russia . Quantitative and packaging


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restrictions on wheat and its products, butter, pulses, grains and flour of

barley, maize, bajra, ragi and jowar had already been removed on march

5, 2002.

Restrictions on export of all cultivated varieties of seed, except jute

and onion, were removed.

To promote export of agriculture and agriculture-based products, 20

agriculture export zones were notified.

In order to promote diversification of agriculture, transport subsidy

shall be available for export of fruits, vegetables, floriculture, poultry

and dairy products.

3 percent special DEPB rate was announced for primary and

processed foods exported in retail packaging of 1 kg or less

An amount of Rs 5 crore under Market Access Initiative (MAI)

Was earmarked for promoting cottage sector exports coming under te

KVIC.

The units in the handicrafts sector can also access funds from MAI

scheme for development of website for visual exhibition of their

product.

Under the export of Promotion Capitals Goods (EPCG) scheme, these

units will not be required to maintain average level of exports, while

calculating the export obligation.

These units shall be entitled to the benefit of Export House Status on

achieving lower average export performance of Rs 5 crore as against

Rs 15 crore for others.


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The units in handicraft sector will be entitled to duty free imports of an

enlarged list of items as embellishments up to 3 percent of FOB value

of their exports.

With a view to encouraging further development of centers of

economics and export excellence such as Tirupur for hosiery, wollen

blanket in Panipat, wollen knitwear in Ludhiana, following benefits

shall be available to small scale sector:

1. Common service providers in these areas shall be entitled for facility

of EPCG scheme.

2. The recognized associations of units in these areas will be able to

access the funds under the Market Access initiative scheme for

creating focused technological services and marketing abroad.

3. Such areas will receive priority for assistance for identified critical

infrastructure gaps from the scheme on Central Assistance to States.

4. Entitlement for Export House Status at Rs 15 crore for others.

Technology Upgradation: Electronic Hardware Technology

Park(EHTP) scheme was modified to enable the sector to face the

zero duty regime under ITA(Information Technology Agreement)-1.The

units shall be entitled to following facility.

Net Foreign Exchange as a Percentage of Exports (NFEP) positive in

5 years.

No other export obligation for units in EHTP.


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Supplies of ITA-1 items having zero duty in the domestic market to be

eligible for counting of export obligation.

Growth-oriented: The status holders shall be eligible for the followingnew/special facilities.

License/Certificate/Permissions and customs clearance for both

exports imports on self-declaration basis.

Fixation of input-output norms on priority.

Priority finance for medium and long-term capital requirement as per

conditions notified by rbi.

Exemption from compulsory negotiation of documents through banks.

The remittances, however, would continue to be received through

banking channels.

100 percent retention of foreign exchange in Exchange EarnersForeign Currency (EEFC) account.

Enhancement in normal repatriation period from 180 days to 360

days.

EXIM Policy, 2003-2004

It had the following provisions:

The policy provided a massive thrust to export of services by

introducing duty free export facility for the service sector units having a

minimum foreign exchange earning of Rs 10 lakh.


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Encouragement of corporate sector with proven credential to sponsor

Agri-Export Zones for boosting farm exports.

EPCG scheme made more flexible and attractive so that even thesmall scale sector could set up and expand its manufacturing base for

exports.

Fixing of input-output norms for status holders on priority basis within

a period of 60 days and permission to status holders in Software

Technology Parks India(STPI) for free movement of professional

equipments.

Simplification and codification of rules, regulations and procedures

application on SEZ and EOU units by putting all these rules and

regulations in one place, thus greatly facilitating both potential

investors and existing units.

To increase the overall competitiveness of export clusters, a scheme

for upgradation of infrastructure in existing clusters/industrial locations

would be implemented.

Extension of Duty Free Replenishment Certificate(DFRC)scheme to

deemed exports and reduction in its value addition norms from 33

percent to 25 percent.

Mini EXIM policy, Jan 2004

Preceding the dissolution of the 13 th Lok Sabha on Feb. 6, 2004 the

government of India announced mini EXIM policy on Jan 28, 2004. It

included facilitation and simplification measure to sustain the momentum


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of export growth. Specifically it was aimed at providing boost to exports

of gems and jewellery, encouraging tourism and making energy

generation cheaper. Highlights of new policy were.

Free import of gold and silver for export purpose permitted. In other

words, gold and silver can now be imported without paying any

commission to channelling agents. (in 10997, the government

authorized three canalizing agencies viz MMTC, STC and HHEC, and

eight banks to import gold and silver for sales in the domestic

market ). Likewise, import of rough, uncut and semi polisheddiamonds will not be valued for export obligations. Quantitative

restriction on gold and silver imports has also been lifted. Government

also announced the introduction of a gold card for creditworthy

exporters to make available cheaper foreign currency debt on easier

terms.

Duty free import facility available to star hotels extended the heritage,

one and two star hotels and stand alone restaurants. All these hotels

have been allowed duty free import equivalent to 5% of their export

earnings in three preceding years.

Restriction on import of electrical energy lifted

Online license electronic fund transfer facility for exporters. These

measures are expected to reduce transaction cost for exporters and

make export administration transparent

FOREIGN TRADE POLICY, 2004-2009


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In radical move the government of India announced on August 31

2004 a new forign trade policy for the period 2004-09, replacing the

hitherto nomenclature of EXIM policy by foreign Trade policy. A vigorous

export led growth strategy of doubling Indias share in global

merchandise trade in the next 5 years , with a focus on the sector having

prospectus for export expansion and potential for employment

generation, constitute the mail plank of the policy. These measures are

expected to enhance international competiveness and aid in further

increasing the acceptability on Indian exports.

Objective and strategy

The new FTP takes an integrated view of the overall development

of Indias foreign trade and essentially provides a roadmap for the

development of this sector. It is built around two major objectives of

doubling Indias share of global merchandise trade by 2009 and using

trade policy as an effective instrument of economic growth with a thrust

on employment generation. Key strategies to achieve these objectives,

inter alia, include: unshackling of controls and creating an atmosphere of

trust and transparency; incidence of all levies on input used in export

products; facilitating development of India as a global hub of

manufacturing, trading and services; identifying and nurturing special

focus area to generate additional employment opportunities, particularlyin semi urban and rural areas; facilitating technological and

infrastructural up gradation of the Indian economy, epically and ensuring

that domestic sector are not disadvantage in trading agreements

upgrading the infrastructural network related to the entire foreign trade

chain to international standards revitalizing the board of trade by

redefining its role and inducting into it experts on trade policy andactivating Indian embassies as key players in export strategies.


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Special focus initiatives

The FTP 2004 has indentified certain thrust sector having

prospects for export expansion and potential for employment generation.

These thrust sector include agriculture, handlooms and handicraft, gems

and jewellery and leather footwear sector. Sector specific policy

initiatives for the thrust sector include for agriculture sector introduction

of new scheme called vishesh krishi upaj yojana to boost export exports

of fruit, vegetables, flowers minor forest produce and their value added

products. Under the scheme exports of these products qualify for duty

free credit entitlement for importing inputs and other goods under EPCG

scheme permitting the installation of capital goods imported under EPCG

for agriculture anywhere ASIDE scheme for development of AEZs,

liberalization of import of seeds bulbs tuberts and planting material and

liberalization of the exports of plant portion, derivatives and extract to

promote export of medicinal plants and herbal produce

The special focus initiatives for handlooms and handicraft sector

include extension of facilitating like enhancing duty free imports of

trimming and embellishment for handlooms and handicrafts exemption of

samples from CVD authorizing handicraft export promotion council to

import trimmings embellishment and samples for small manufacturing

and establishment of a new handicraft special economic zone.

New Export Promotion scheme

A new scheme to accelerate growth of export called the target plus

has been introduced. Under the scheme exporters achieving a quantum

growth in exports are entitled to duty free credit based on incremental


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exports substantially higher than the general actual export target fixed.

Rewards are granted based on a tired approach. For incremental growth

of over 20%, 25% and 100%, the duty free credit are 5%, 10%, and 15%

of f.o.b value of incremental exports. Another new scheme called

vishesh kishi upaj yojana has been introduced to boost exports of fruits,

vegetables and flower. Exports of these products qualify for duty free

credit entitlement equivalent to 5% of f.o.b value of exports. The

entitlement is freely transferable and can be used for import of a variety

of input and goods. To accelerate growth in export of service so as to

create a powerful and unique served from India brand instantly

recognized and respected the world over the earlier duty free export

credit scheme for service has been revamped and re cast into the

served from India scheme. Individual service providers who earn foreign

exchange of at least 5 lakh, and other service providers who earn foreign

exchange of at least Rs. 10 lakh are eligible for a duty-credit entitlement

of 10% of total foreign exchange earned by them. In the case of hotels itis 5%. Hotels and restaurants can use their duty credit entitlement for

import of good items and alcoholic beverages. To make India into global

trading hub a new scheme to establish Free trading and warehousing

zones has been introduced to create trade related infra to facilitate the

import and export of goods and service with freedom to carry out trade

transaction in convertible currency. Besides permitting FDI up to 100% inthe development outlay of Rs 100 cr and five lakh sq. mts built up area.

Units in the FTWZ qualify for all other benefits as applicable for SEZ

units.


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Simplification, rationalization and modification of ongoing

schemes:

EPCG scheme has been further improved upon by providingadditional flexibility for fulfilment of export obligation, facilitating and

providing incentives for technological up gradation, permitting transfer of

capital goods to group companies and managed hotels, doing away with

the requirement of certificate from central excise and improving the

viability of specified projects by calculating their exports obligating based

on concessional duty permitted to them. Import of second hand capitalgoods without any restriction on age has been permitted and the

minimum depreciated value for plant and machinery to be re located into

India has been reduced from Rs 50 cr to Rs 25 cr. The new policy has

been allowed transfer of the import entitlement under duty free

replenishment certificate scheme in respect of fuel to the marketing

agencies authorized by the ministry of petroleum and natural gas to

facilitate sourcing of such import by individual exporters.

The Duty Entitlement passbook scheme will continue until replaced

by a new scheme to be drawn up in consultation with exports. Additional

benefits have been provided to EOU , including exemption from service

tax in proportion to their goods and service, permission to retain 100% of

exports earnings in export earners foreign currency accounts, extensionof income tax benefits on plant and machinery to DTA unit which convert

to EOU, EHTP, STP, BTP units allowing imports of capital goods on self

certification basis and permission to dispose of leftover material and

fabrics up to 2% of c.i.f value or quantity of import on imports on

payment of duty on transaction value only. Minimum investment criterion

has been waived for handicraft, agriculture, floriculture. The FTP


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propose setting up to BTPs by granting all facilitates of 100% EOUs.

The FTP 2004 has introduced a new rationalization scheme of

categorization of status holders as star export houses with

benchmarking for exports performance varying from Rs15 cr to Rs

5000cr.

Simplification of rules and procedure and institutional

measures:

Policy measures announced to further rationalize/simplify the rule

and procedure include exemption for exporters with minimum turnover of

Rs 5cr and good track record from furnishing bank guarantee in any of

the scheme service tax exemption for exporters of all goods and service

uniformly to 24 months reduction in number of return of returns and

forms to be filled delegation of more power to zonal and regional officesand time bound introduction of electronic data interface. Institutional

measures proposed in the FTP 2004 include revamping and revitalizing

the board of trade setting up of council to map opportunities for key

service in key markets and setting up of common facility centres for use

of professional home based service providers in state and district level

towns.

Annual supplement 2005-06 to the foreign trade policy 2004-05

The union commerce and industry minister announcement on april 8

2005, the 2005-06 supplement to the five year foreign trade policy,

giving a big boost to exports from agriculture and manufacturing sector.

Auto components pharmaceuticals gems and jewellery and seafood


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exports firms stood to gain the most. Highlights of the annual

supplement were as follows

Push to exports of farm, marine, manufacture and pharmaproducts

Exports cess on farm commodities abolished

Infra imitative to reduce port congestion

Imports by hotels, other service industry made duty free

Setting up of interstate trade council mooted

Procedure simplified cut transaction costs aayat niryat introduced

HIGHLIGHTS OF EXIM POLICY & ITS IMPACT

SPECIAL ECONOMIC ZONE (SEZ)

Special economic zone is a particular area inside a state which acts as

foreign territory for tariff and trade operations. Govt. provides tax

exemption (IT, Excise, customs, sales etc.), subsidised water and

electricity etc.

SEZ can be sector specific or multi product SEZ. It helps in the

development of infrastructure of the area around the SEZ, provides

employment to people, makes the exports more viable. All this will helps

the country's products to become more competitive vis-a-vis providing all

round development of region.


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It should be noted that if 100 acres are allotted for SEZ, then only 30-

35% of area is used for setting up plants. rest of the area is used to

provide housing facilities, malls, multiplexes etc.

Also Tax exemption is for specific period say for 10 yrs or so

Units in SEZ would be permitted to It has also been decided to permit

Special Economic Zones (SEZs)

Offshore Banking Units (OBUs) shall be permitted in SEZs. Detailed

guidelines are being worked out by RBI. This should help some of our

cities emerge as financial nerve centres of Asia & undertake hedging of

commodity price risks, provided such transactions are undertaken by the

units External Commercial Borrowings (ECBs) for a tenure of less than

three years in SEZs. The detailed guidelines will be worked out by RBI.

This will provide opportunities for accessing working capital loan for

these units at internationally competitive rates.

The SEZ scheme has undergone few changes:

FDI permitted under automatic route for all manufacturing sectors,

except a small negative list.

No licence required to set up units for items reserved under SSI.

Units in SEZs can bring back their proceeds in 365 days and retain

100 per cent of proceeds in EEFC account.

No CR waiver is required for sending sample goods for participation

in exhibitions.


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SEZ developers will be given infrastructure status under the Income-

Tax Act, as provided in the Finance Bill, 2001, and will be entitled to

concessional duty for procuring goods for setting up SEZs.

All the necessary steps were initiated to give permission to set up SEZs

to the States, the private sector and the joint sector.

Special Economic Zones Scheme

Sales from Domestic Tariff Area (DTA) to SEZs to be treated as

export. This would now entitle domestic suppliers to Drawback/

DEPB benefits, CST exemption and Service Tax exemption.

Agriculture/Horticulture processing SEZ units will now be allowed

to provide inputs and equipments to contract farmers in DTA to

promote production of goods as per the requirement of importing

countries. This is expected to integrate the production and

processing and help in promoting SEZs specialising in agroexports.

Foreign bound passengers will now be allowed to take goods from

SEZs to promote trade, tourism and exports.

Domestic sales by SEZ units will now be exempt from SAD.

Restriction of one year period for remittance of export proceeds

removed for SEZ units.

Netting of export permitted for SEZ unit provided it is between

same exporter and importer over a period of 12 months.

SEZ units permitted to take job work abroad and exports goods

from there only.


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SEZ units can capitalise import payables.

Wastage for subcontracting/exchange by gem and jewellery units

in transactions between SEZ and DTA will now be allowed.

Export/import of all products through post parcel/courier by SEZ

units will now be allowed.

The value of capital goods imported by SEZ units will now be

amortised uniformly over 10 years.

SEZ units will now be allowed to sell all products including gems

and jewellery through exhibitions and duty free shops or shops set

up abroad

Goods required for operation and maintenance of SEZ units will

now be allowed duty free.

According to the Exim Policy (1997-2002), SEZs may be set up for

manufacture of goods and rendering of services, production, processing,

assembling, trading, repair, remaking, reconditioning, re-engineering,

including of making of gold/silver/platinum jewellery and articles.

An SEZ is a specially delineated `duty free' enclave and shall be

deemed to be foreign territory for trade operations, duties and tariffs.

Thus, there should be necessary `check posts' and Customs duty

vigilance as in the case of airport and ports. However, there are many

advantages, and of course, one or two disadvantages.

In a major step towards achieving sustained, quantum growth in exports,

Special Economic Zones (SEZs) will soon be established in different

parts of the country, as in China. Announcing the annual Export & Import


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(Exim) Policy for 2000-2001 at a press conference here today, Shri

Murasoli Maran, Union Minister of Commerce and Industry, said that

India's first two Special Economic Zones would come up in the States of

Gujarat and Tamil Nadu. The SEZs would come into operation very

soon, with the basic idea being to establish the Zones as areas where

export production could take place free from all rules and regulations

governing imports and exports and to give them full operational flexibility.

The movement of goods to and from the SEZs would be unrestricted and

without any hindrance and any State government or corporate entity or

individual may furnish proposals for setting up such Zones in the

country. Land for the first two SEZs in Gujarat and Tamil Nadu has

already been earmarked, the Minister said. Observing that India, by not

following vigorous policies, was ceding billions of dollars in FDI to its

East Asian neighbours each year (investment flows that otherwise would

have come to India), Shri Maran expressed the hope that with the

establishment of the SEZs, procedural constraints and delays would betaken care of and foreign direct investment in the export sector would

become attractive. The units in the SEZs would be able to import capital

goods and raw materials duty-free and would also be able to access the

same from the Domestic Tariff Area (DTA) without payment of terminal

excise duty. The entire production of the units in these SEZs would be

exported and DTA sales would be permitted on payment of fullapplicable customs duty. The minimum size of the SEZs would be 400 to

500 hectares or more. Shri Maran also announced that immediately, the

existing Export Process Zones at Santa Cruz, Kandla, Vizag and Cochin

would be converted into SEZs, although the area of these existing Zones

were limited due to historical reasons


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Major advantages

SEZs may export goods and services, including agro-products, partly

processed jewellery, sub-assemblies and components. It may alsoexport by-products, rejects, waste from the production process.

SEZs may import all types of goods without payment of duty. This

includes capital goods, but not prohibited items for imports.

Even SEZ units can lease capital goods from a domestic/foreign

leasing company.

But, both the SEZ unit and domestic foreign lease company shall

jointly file the documents to enable import/procurement of the capital

goods.

SEZs may procure goods required by it without payment of Duty

125624235-24650411-EXIM-Policy-Project

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