By Shashi Mathews, Abhishek Boob and Rajitha Nair
The Government recently notified the new Foreign Trade Policy, 2023 (FTP), which has come into force from 1 st April 2023. For the first time, the FTP is prescribed without an end date, with an aim to provide certainty while meeting the evolving needs of the trade. With the new FTP, the Government has although not notified any substantially new schemes to incentivize exporters, some of the erstwhile schemes which have garnered success in the past are being continued, including the Advance Authorization and EPCG Schemes. At the same time, government has focused on providing boost to certain identified sectors, and on trade facilitation measures in general.
The immense success achieved by the e-commerce sector in the domestic market has led the Government to tap into the export potential of the said sector. Under the new FTP, the Government has proposed to create E-commerce Export Hubs and Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA). On the same lines, it grants recognition to already existing export hubs for handloom, handicrafts and carpets in Faridabad, Mirzapur, Moradabad and Varanasi by recognizing them as Towns of Export Excellence.
The above policy initiatives seek to identify economic zones which will have dedicated infrastructure facilities in the regions mentioned above, assisting in facilitation of business through shared facilities and consequential reduction in capital and operating expenditure. The Government has also extended the Common Service Provider (CSP) Scheme to Towns of Export Excellence and PM MITRA, which will incentivize investment in capital goods by the CSP. This action supports the activities like job-work and other common services offered in such regions. Additionally, the trade bodies of these regions are offered financial assistance from the export promotion funds, under the Market Access Initiative (MAI) Scheme, which can be used for marketing and capacity building. Government has also rationalized courier rules and expanded Indian Postal Service with new infrastructure to support e-commerce and extend the reach of international markets to small-scale market players in land-locked regions.
Similarly, the Government is also focusing on identifying new markets for export through the creation of district level export hubs. This will be facilitated through the creation of committees, with identified action plans. It may certainly benefit various domestic businesses, especially MSMEs, who may not have the necessary means or understanding to export their products to international markets. With effective implementation and the necessary administrative support, one may expect new players contributing to the export revenue of the country, as also creating new employment opportunities in the region.
The new FTP has also rationalized and digitized various processes, fees and timelines for export authorizations and other export promotion schemes towards ease of doing business in India. The export thresholds for status holder certification have also been substantially rationalized, which directly expands the exporter base who will be entitled to the consequent privileges available to star-rated export houses like export-import authorizations on self-declaration, exemption from bank guarantees, facilitation in fixation of inputoutput norms, etc. Export obligations for several key sectors have been rationalized including dairy, green technology products, electronic vehicles, and fruit and vegetable products. These expansion initiatives of the Government are a welcome inclusion in the policy and appears to have been included based on peculiar business circumstances of each sector.
Taking a cue from the global market around shortage of US Dollar and picking from the steps taken by RBI, Government has found it appropriate to provide a push to allow international trade in INR. While it may take some time to find traction in the international trade circuit, the exporters worry around losses associated with rate fluctuations in the exchange rate may become a thing of past.
With the Government’s focus on reducing litigation, an amnesty scheme on past defaults of export obligations, under FTP 2004-09 and 2009-14, has been provided, with a deadline of 30 th September 2023. Any interested exporter looking to settle the case may benefit from the interest payable on additional customs duty and special additional customs duty. While it may look incentivizing on first blush, one may really need to evaluate the merits of each case before opting for the scheme, given that the differential customs duty to the extent of export obligation not met and interest thereon is still payable.
Looking at the narrative, one may expect the Government to rationalize obligations and extend benefits to additional sectors in the future. Sectors requiring special consideration and which have been currently missed out from the FTP may find it favourable to represent their case before the Government to seek necessary extension of FTP to any particular sector. Given the nature of prescriptions, a lot will depend on the effective implementation at the ground level, for the policy to meet the logical end.
(The authors are Shashi Mathews, Partner, Abhishek Boob, Principal Associate and Rajitha Nair, Senior Associate, IndusLaw.)
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