Capital goods imports under EPCG at 0% to encourage exporters

Written by RS Gujral | Updated: Aug 29 2009, 05:28am hrs
Indias Foreign Trade Policy for 2009-14 comes in the backdrop of nine months of continuous dip in exports, as demand in overseas markets collapsed. Commerce secretary Rahul Khullar and director general of foreign trade RS Gujral talk about the details of the policy and its intended impact on foreign trade: Excerpts:

How do you guarantee that policy statements on reducing procedural hassles will benefit exporters

Gujral: A very significant portion of the EDI (electronic data interchange) initiative and the reduction of transaction cost is the early implementation of the e-trade project. This is monitored on a regular basis by the commerce secretary once in three months and sometimes every two months. Once the computerised system in customs is totally centralised, the issues of transactionsfor example, getting a TRA (telegraphic release advice) from one port to anotherwill disappear.

As far as DGFT is concerned, you are aware that the advance authorisation, DEPB, EPCG (export promotion capital goods) have already been automated. The incentive schemes during the next three months will be made online. Once this e-trade project is extended, the number of EDI-enabled ports can easily be extended to 70 from 34. This system should be in place by December. But extension of the system to ports will be done on a gradual basis.

How long is the DEPB extension valid

Gujral: The extension of DEPB (duty entitlement passbook) is for one year or till an alternative scheme is finalised, whichever is earlier

How will you reconcile the differences with the finance ministry

Gujral: There are no differences with the finance ministry. You will have simultaneous notifications from the finance ministry from today (on the FTP).

How will the committee on dollar credit help traders

Khullar: Understand the problem commercial banks opened two windows rupee and dollar. You, as an exporter come and apply, and they (banks) say thank you very much, we will lend you in rupees but not in dollars. What happens then You get the rupees and you convert it into dollars.

But interest costs that you carry are on rupee credit. Those exporters who have large imports to make for their exports need dollars. For those exporters, this (the committee) is a very good step forward. What will happen now is the coordinating committee comprising the finance secretary, the chairman of the IBA (Indian Banks Association) and me, will ensure that commercial banks actually operate the dollar window. There will be pressure on banks to lend in dollars and not in rupees.

How much is the FTP expected to cost the exchequer

Khullar: It cant be estimated.

Can you elaborate on the new markets you plan to open up

Gujral: New 520 focus products have been announced. In the market-linked focused products, over 1,550 products have been added for 13 additional countries. As many as 26 new countries have been added to the focus market scheme. Most of the new products are for the manufacturing sector.

What is being done to upgrade technology

Khullar: Capital goods imports under EPCG can now be done at 0%, which is a very special concession. It has a sunset provision. The window is open till March 31, 2011. We want to encourage exporters to import capital goods. You dont have to pay any duty, raise your productivity or lower your costs. Become competitive and take that opportunity now. Dont wait till March 2011. This is a very special concession that the finance minister has given us. It entails a significant revenue outgo.

Can you explain the initiative taken by DGFT on standard input-output norms (SION)

Gujral: SION norms are finalised with DGFT. These are very important for schemes like advance authorisation, DEPB or duty drawback and are done over a period of time. But they were compiled for the past five and a half years. This has now been compiled and updated.

Will you continue with the annual supplement to the FTP

Khullar: We will see about it next year.

What about the mid-term review

Khullar: In the policy for five years what we are saying is we will take stock in 2011. Nobody knows when the turnaround will happen. Its a good thing to pause and reflect on what have you achieved. Supposing by March 2011 exports turn around and everything is booming, then maybe it will be time for us to reset our targets. Similarly, if there are problems at that time do you want us to continue with a policy without recognising them

Will the FTP take into account the proposed introduction of the Goods and Services Tax

Khullar: I have nothing to do with the rollout of GST.

The state trade councils have never met.

Khullar: We will get them on board at a next meeting of the National Development Council.

Is there a policy measure to address currency fluctuation

Khullar: There is no way to address the forex fluctuation. I cant predict what will happen. Over the last six months its been, by and large, okay. There has been no volatility.