EXIM
Policy, 2002 - 2007
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EXIM
Policy, 2002 - 2007
1. Let me first extend my warm
welcome to all of you.
2. I am here with you today to announce the first Five Year EXIM Policy of the New Millennium. But I want to be realistic and state that if some commentators feel that the presentation of Five Year EXIM Policy is just a ritual, they may be right because every year at the end of March, we attempt to make about 200 amendments in the full policy-set of 5 volumes and other Departments too have their own contribution of changes which they deem fit. 3. Nonetheless, the fact remains that this ritual underscores the necessity of taking a telescopic view of the future and reformulate the goals accordingly, after due introspection. Naturally, we have to take into account the changing dynamics of international trade. Sometimes, even one incident like September 11 of last year had catastrophic effect which necessitated mid-course changes and needs necessary corrections even now. 4. I had constituted a High Level Committee headed by former Commerce Secretary Thiru P.P. Prabhu comprising eminent economists, business-leaders representing the Chambers of Commerce, the Export Promotion Councils and experienced professionals. This Committee had made important recommendations regarding various schemes and procedures of different departments handling exports. Those recommendations of the Committee have guided us as the pole star in formulating this EXIM Policy. In addition, the report of the Medium Term Export Strategy (2002-2007) of our Ministry released in January, 2002 provides a mine of Market Intelligence Information and industry-specific initiatives. I think that both the documents may make the ritual meaningful and effective by providing the substance, parameters, direction, and strategy for the Five Year Policy. OUR MISSION 5. The Prime Minister has directed the Planning Commission to examine the feasibility of doubling our per capita income in the next ten years. The Approach Paper to the Tenth Five Year Plan aims at an intermediate indicative target of 8.0% (instead of 8.7% needed). Almost all the experts are of the opinion that 8 to 9 % annual growth for the next ten years while technically feasible, cannot be achieved through "a business as usual" approach. We will need to take radical steps. In line with this approach, our Medium Term Export Strategy has a mission to capture 1% of the global share of trade by 2007, up from the present level of 0.67%. Translated in value, the projected growth will mean doubling the present exports of 46 billion dollars to more than 80 billion dollars over the Tenth Five Year Plan, requiring a Compound Annual Growth Rate (CAGR) of 11.9% in dollar terms. 6. To achieve this, we should wake up from the stupor of export fatalism of the earlier years, release ourselves from the feelings of export pessimism and apathy and employ international trade as an engine of growth. Although the empirical debate on the growth effects of trade policy reforms remains unsettled, there is a strong co-movement between exports and output growth in a liberalised trade environment. This lends support to the need for persisting with an open trade system. Anti-export bias - both in policies and mind-set - needs to be corrected. Unless capacities are created in India specifically for the export market, it is unlikely that the export growth expectations can be met. - Therefore, there should be appreciation of the fact that international trade is a vital part of development strategy, and it can be an effective instrument of economic growth, employment generation and poverty alleviation. 7. With this Mission Statement, let me proceed with my proposals. A. REMOVAL OF QRs ON EXPORTS 8. Last years EXIM Policy evoked a lot of interest, because we removed the QRs on imports and the Quota Raj it symbolised. We created an Inter-Ministerial Standing Group to track 300 sensitive items and to swing into immediate action, if necessary. I appreciate the vigilant attitude of this "War-Room". Contrary to the apprehensions expressed, I find that there has not been any surge in imports during the year. 9. This year we propose to remove all Quantitative Restrictions on exports except a few sensitive items. Only a few items have been retained for exports through State Trading Enterprises. B. AGRICULTURE 10. It is estimated by some economists that every one per cent switch in the terms of trade in favour of agriculture will result in diversion of about Rs.8,500 crores annually in favour of agriculture from the non-agriculture sector. This additional rural purchasing power will create a phenomenal effective demand. Promotion of agricultural exports is important for creating conditions for providing remunerative prices to farm products. I have no doubt that our farmers will rise to the occasion, and that we shall be able to make a mark in international trade in agriculture with a farm-to-port approach as reflected in the Agri Export Zones Scheme and in the proposed Agri-Export Policy which are but small steps forward in the right direction. I am happy to state that the actions initiated in earlier years have begun to bear fruits. 11. Government have made major break-through in the export of food grains. As against the anticipated export of 80 lakh MTs of foodgrains during the year we have exported about 73 lakh MTs. India is now exporting foodgrains to about 16 countries of the world and according to the International Grain Council reports, in respect of wheat export, we are at the 7th position amongst the wheat exporting countries. 12. The major initiatives being planned in the EXIM Policy are as follows:
C. SPECIAL FOCUS ON COTTAGE SECTOR AND HANDICRAFTS 13. The word Exports brings to our mind sophisticated articles, urban centres and a privileged few at the upper crest of the society. But it is the small scale sector, which forms 50% of our exports. Therefore, with a view to strengthen them we have embarked on a programme this year called "SPECIAL FOCUS ON COTTAGE SECTOR AND HANDICRAFTS". 14. The following facilities will be made available to them:-
15. In addition, since they have a very strong propensity for economic activities with export possibilities, we are embarking on a programme of identifying those places. To begin with, places like Khurja (U.P.) famous for its pottery will be undertaken for an in-depth study for their revealed and potential special characteristics for developing an export market. D. TOWNS OF EXPORT EXCELLENCE 16. I have not forgotten the small scale sector also. A number of towns in specific geographical locations have emerged as dynamic industrial locations and handsomely contributing to Indias exports. These industrial clusters, rooted in history, symbolise the bursting force of the free market spirit and are essentially collective response to common problems of competitiveness. Some have become globally renowned manufacturing bases. It is necessary to grant recognition to these industrial cluster-towns with a view to maximize their export profiles and help in upgrading them to move up in the higher value markets. 17. A number of such industrial
cluster-towns are exporting a substantial portion of their products
which, are world-class. For example, Tirupur is exporting 80% of its
production of hosiery. A beginning is being made to consider industrial
cluster towns such as Tirupur for hosiery, Panipat for woollen blanket,
Ludhiana for woollen knitwear to be eligible for the following benefits:-
18. Common service providers in these areas shall be entitled for facility of EPCG scheme. The recognised associations of units will be able to access the funds under the Market Access Initiative scheme for creating focused technological services. Further, such areas will receive priority for assistance for identified critical infrastructure gaps from the scheme on Central Assistance to States. The units in these notified areas would be eligible for availing all the EXIM policy schemes as per their choice and the provisions of these schemes shall stand relaxed to the extent provided in this para in respect of such units. E. Gems & Jewellery
iii) Personal carriage of jewellery allowed through Hyderabad and Jaipur airport as well. F. SPECIAL ECONOMIC ZONEs (SEZs) 19. Special Economic Zones, announced in 2000 after visit to China is taking up roots and four existing EPZs have been converted into SEZs. 13 New SEZs have already been given approval, list of which is at Annexure-II. 20. In a world dominated by the WTO, India cannot be left behind and SEZs are the symbols of Indian endeavour to remain internationally competitive and relevant. They are our best dream-projects and are firmly based on success everywhere. 21. Besides the fiscal packages already announced, I am happy to state the following entitlements that will be allowed:-
22. For the first time in India, Overseas Banking Units (OBUs) will be permitted to be set up in SEZs. These units would be virtually foreign branches of Indian banks but located in India. These Overseas Banking Units, inter alia would be exempt from CRR, SLR and would give access to SEZ units and SEZ developers to international finances at international rates. This, I need to mention, is a very significant decision in making SEZs internationally competitive. G. ASSISTANCE TO STATES FOR INFRASTRUCTURAL DEVELOPMENT FOR EXPORTS (ASIDE) 23. You may all remember that during 2000, I have announced a scheme for participation of States in the export endeavour. This new Scheme "ASIDE" would provide funds to the States based on the twin criteria of gross exports and the rate of growth of exports from different States. 80% of the total funds would be allotted to the States based on the above criteria and the remaining 20% will be utilised by the Centre for various infrastructure activities that cut across State boundaries etc. A sum of Rs.49.5 crores has already been sanctioned for this year. Further, a sum of Rs.330 crores has also been approved for the year 2002-03. H. MARKET ACCESS INITIATIVE (MAI) 24. I had also announced last year the launching of the Market Access Initiative Scheme for undertaking marketing promotion efforts abroad on country-product focus approach basis. This Scheme is in line with market promotion and development schemes being implemented by many other countries. A beginning has already been made this year with a small allocation of Rs.14.50 crores, which has been increased to Rs.42.0 crores in 2002-03. I intend to further broaden the scope of this scheme to include activities considered necessary for focussed market promotion efforts. I. INCENTIVE PACKAGE FOR ELECTRONIC HARDWARE 25. In software, India is a global player. But in hardware out presence in international arena is insignificant. Therefore, to give a boost to the hardware industry, we propose to modify the Electronic Hardware Technology Park (EHTP) scheme to enable the sector to face the zero duty regime under ITA-1. The units shall be entitled to following facility:-
26. To encourage re-location of industries to India, plant and machineries would be permitted to be imported without a licence, where the depreciated value of such relocating plants exceeds Rs.50 crores. K. ACTION PLAN UNDER MEDIUM TERM EXPORT STRATEGY (MTES) 27. In our Medium Term Export Strategy, we have given a list of 47 potential items in the top imports of major markets. A five percentage share for these items in major markets would mean an increase in our exports by more than 18 billion dollars. We have also identified a list of 59 items figuring in the top imports of major markets and Indias exports. A 5% share in these items in major markets would mean an addition of 36 billion dollars exports. These 106 items are mainly Engineering/Electrical/Electronics items, Instruments, Watches etc., Footwear items, Marine & Poultry items, some Textiles and Chemical items, Jewellery items and items for repairs. 28. We will give special focus to these items through our Export Promotion Schemes and continue to monitor their progress. L. REDUCTION IN TRANSACTION TIME AND COSTS 29. Our disadvantages arising from the state of the infrastructure, power tariffs, interest rates, industrial relations, taxation structure etc. are well known. The new policy contains several initiatives to immunise atleast the export sector against these disadvantages. Thus while airports, ports and roads are looked after say the ministries of Civil Aviation and Shipping and Surface Transport which are grappling with these issues, our scheme for assistance to the states will take care of the complementary infrastructure. Similarly, even while the power situation continues to confront our industries, the export industry can go for captive power generation and our scheme announced to day will provide duty free fuel for such power ranging from three to seven percent of the fob value of exports. The packing credit rate has already been linked to PLR so that the benefits of any further softening of interest rates shall pass on automatically to the exporters. The Reserve Bank of India is examining the question of requesting Banks to treat at least the Status holders as prime borrowers even for term loans. Some states have taken steps towards differential treatment for export oriented units in matters pertaining to industrial relations to enable them to adhere to rigorous delivery schedules. The simplification of Exim policy schemes being announced today will more effectively rebate all indirect taxes on imports. The export sector will thus be substantially immunised against the constraints affecting domestic economy. 30. In the last few years we have taken several steps to simplify the rules and procedures and improve the speed of transactions in the Directorate General of Foreign Trade with the help of information technology. As a result all the 32 offices of the DGFT have been fully computerised and the exporters can transact all business with the DGFT on-line without having to visit these offices and in fact 75% of the licence applications are already being filed and processed on-line. All the rules and notifications are available real time on the DGFT website which is recording more than a million hits every year. I consider this as a remarkable achievement indeed and I must compliment the DGFT and his staff. Even three years ago no one would have believed that you could obtain a licence in India on the same day you made the application. But this miracle has actually happened and while saying this I am not being guided by official reports alone. Exporters all over the country have endorsed this perception in the Open Houses in my presence. In fact, so confident has this organisation become of its performance and its potential that it has applied for ISO:9000 certification. This is a remarkable instance of how a whole organisation can transform itself from a "dyed in the wool" regulator and controller to a service organisation and a facilitator given the right leadership and mandate. 31. With a view to further reducing
transaction costs, various procedural simplifications have been
introduced. These include:-
DGFT
(b) CUSTOMS
(c) Banks
iii) The repatriation period for realisation of export proceeds extended from 180 days to 360 days. The facility is already available to units in SEZ and exporters exporting to Latin American countries. - These facilities are being made available to status holders only. M. Diversification of markets
N. Duty neutralisation instruments 32. I know exporters will be eagerly awaiting to know about the fate of DEPB and other schemes like Advance Licences, EPCG and DFRC. 33. Let me now end the suspense and say that DEPB and all other schemes will continue along with existing dispensation of not having any value caps. The changes in those schemes are as follows :- I. Advance Licence
II. Duty Free Replenishment Certificate (DFRC) Technical characteristics to be dispensed with for audit purpose. III. Duty Entitlement Passbook (DEPB)
IV. Export Promotion Capital Goods Scheme (EPCG)
O. Leather 34. Duty free imports of trimmings and embellishments upto 3% of the FOB value hitherto confined to leather garments extended to all leather products. P. Textiles (i) Sample fabrics permitted duty free within the 3% limit for trimmings and embellishments. ii) 10% variation in GSM to be allowed for fabrics under Advance Licence. iii) Additional items such as zip fastners, inlay cards, eyelets, rivets, eyes, toggles, velcro tape, cord and cord stopper included in input output norms. iv) DEPB rates for all kinds of blended fabrics permitted. Such blended fabrics to have the lowest rate as applicable to different constituent fabrics. Q. Status Holders. 36. Over the last few decades certain areas of strength have emerged in the export sector. Definite export surpluses have emerged in sectors like food grains, sugar, yarn, garments, steel, cement, aluminium & petroleum products and pharmaceuticals. Certain Small & Medium Enterprises (SMEs) and other units in DTA have been exporting more than 75% of their production. Similarly export oriented units and units in export processing zones have been contributing significantly to exports. Certain industrial clusters have evolved on their own without any significant official assistance, each of them collectively producing goods and services worth more than Rs.1,000 crore per year and exporting a substantial part thereof. Status certificates have been issued to units on the basis of their export performance. Based on all these parameters and the results expected from the new initiatives announced in the last two years, I envision a critical mass emerging on the countrys export horizon. In the new policy I propose to nurture this mass so that the countrys exports can reach a stage of criticality from where onwards they would perhaps not require even the policy support. 37. Keeping the above in mind, the status holders shall be eligible for the following new/ special facilities:
The threshold for obtaining status certificate as Export House has been brought down to Rs. 5 crore for tiny, cottage, small scale, handloom, handicraft, agri exports, services, units having ISO:9000 (series ) status, exporters exporting to Latin American countries, Sub-Saharan Africa and CIS countries. 38. As is evident from the details mentioned above, a number of new initiatives have been launched and existing initiatives strengthened. Some may ask: where are the resources? The answer is as follows: in the current Budget, the outlay of Deptt. of Commerce for 2002-2003 has been increased by 55% to Rs.775 Crore. Further, as already mentioned there has been a quantum jump in the funds allocated for both the MAI and the ASIDE schemes. It is expected that these budgetary enhancements will allow us to provide the financial back-up to the various initiatives mentioned herein. 39. In sum, I would say that the EXIM Policy announced today is comprehensive in scope encompassing Agri-Sector, Cottage and Handicrafts and Small Scale sectors, thus taking care of more than 80% of the population living in the rural areas and will also benefit a wide range of people and give an additional fillip to exports. Most importantly, I have tried to forge a lasting partnership amongst the Union Government, the State Governments, exporters and people at large. I also wish to say that we have further simplified the process of exporting to such an extent that even the small artisans feel motivated to export. 40. Needless to say, our SEZs now will be second to none, in this part of the world regarding incentives offered. They will act as magnet and glue magnet to attract FDI and glue to identify and bind strategies that will benefit a large number of people and organizations, thereby creating a bright future for India. Altogether our efforts will, we hope, expand our competitiveness, broaden horizons and hold up a comparative mirror against world standards. Thank you. *****
ANNEXURE-I DETAILS OF AGRI EXPORT ZONES
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