India’s Export Story: Expeditious regulatory clearance coping with the logistics of uncertainty

A set of statistical reports, including the National Time Release Study 2022 (NTRS 2022) presented by the Central Board of Indirect Taxes and Customs (CBIC) on April 11th has, in addition, focused on the role of trade facilitation, enabling reduction in time and costs involved in export performance.

During the TFA negotiations, it was argued that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to USD 1 trillion per year, with the biggest gains accruing to the poorest countries.
During the TFA negotiations, it was argued that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to USD 1 trillion per year, with the biggest gains accruing to the poorest countries.

By Vijay Singh Chauhan & Nikita Singla

The crossing of ambitious annual exports target of USD 400 billion on March 21st was much celebrated in the corridors of power and talked about in the media. This superlative export performance is variously attributed to post-pandemic surge in global pent up demand and fruition of government initiatives under the rubric of “Atmanirbhar Bharat”. A set of statistical reports, including the National Time Release Study 2022 (NTRS 2022) presented by the Central Board of Indirect Taxes and Customs (CBIC) on April 11th has, in addition, focused on the role of trade facilitation, enabling reduction in time and costs involved in export performance.

Though export promotion has been a priority for the Government of India for many years, facilitation of export, aimed at simplification, modernization, and harmonization of export processes, acquired greater focus and urgency since India ratified the Trade Facilitation Agreement (TFA) of the World Trade Organization in April 2016. During the TFA negotiations, it was argued that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to USD 1 trillion per year, with the biggest gains accruing to the poorest countries.

India has fulfilled all the commitments made under the TFA, including regular performance measurement through average cargo release time as a single statistical indicator of trade facilitative performance. NTRS 2022, covering 15 major customs ports in the country – including Seaports, Inland Container Depots (ICDs), Air Cargo Complexes (ACCs) and Integrated Check Posts (ICPs), with first week of the calendar year as the sample period, has been conducted in compliance of this TFA commitment and to assess the progress in achieving the specific targets set under the National Trade Facilitation Action Plan.

Even a cursory reading of the NTRS 2022 would reveal its primary focus on import clearance, linked evidently to the regulatory architecture being driven by revenue concerns. However, the export clearance process with minimal fiscal issues is expectedly fairly simple, entailing few regulatory approvals for non-fiscal concerns relating to goods such as food or pharmaceutical items. As a result, facilitation levels for shipping bills, wherein self-declaration by the exporters is accepted by the risk-management based customs automated system are as high as 89 percent for seaports and ACCs. Further, the average time taken in regulatory approvals, measured by the time taken from arrival of the goods at the customs station to completion of regulatory process, by way of grant of Let Export Order (LEO) by customs is 4:04 hours for ACCs, 11:07 hours for ICPs, 29:47 hours for seaports, and 47:41 hours for ICDs.

Notwithstanding the expeditious regulatory clearance of export consignment, NTRS 2022 has highlighted the larger logistics challenge in the export process. For better appreciation of the same, a typical export process may be divided into three stages: (a) pre- arrival stage – beginning with the filing of shipping bill and generally concurrent movement of cargo from the factory to the customs port; (b) regulatory clearance at the customs port, after arrival of the cargo till grant of LEO by Customs; and (c) post regulatory clearance stage that involves movement of cargo within the port premises until the point of final departure (vessel sail off or rake departure or aircraft take-off or truck dispatch).

The data presented by NTRS 2022 reveals that substantial amount of time is taken at pre-arrival stage and post regulatory clearance stage, as shown in the accompanying graph.

It is understood that the time taken at the pre-arrival stage is attributable mainly to the time taken in transport of goods, which depends primarily on the distance from the factory/warehouse to the customs port. This also got impacted by transport disruptions caused by Covid-19 as the NTRS was conducted during January 2022 – period affected by pandemic’s third wave. It is expected that with further progress under the ambitious Sagarmala Programme and Dedicated Freight Corridor aimed at improving connectivity of hinterland with the ports, the time taken at the pre-arrival stage would decline significantly.

The time taken at the third stage after the regulatory clearance, as high as 92 percent in the case of ACCs, is mainly on account of logistics and infrastructural issues, which are often specific to the port.

For deeper insights into the time taken in the third stage, the local studies by Jawaharlal Nehru Custom House, Mundra seaport and ICD Tughlakabad seem to suggest that it is uncertainty that is pushing the exporters to reach the customs port well ahead of the scheduled departure, as reflected in the time taken in the buffer yard or within the terminal premises before vessel loading. On the basis of these studies, it can be tentatively concluded that owing to the logistics, infrastructure, vessel/flight scheduling, congestion-related challenges and other operational anomalies, Indian exporters prefer to err on the side of caution by delivering cargo well before time, fearing the heavy consequences of missing the scheduled vessel/flight.

To conclude, while the Central Government continues to play its role in enhancing India’s exports, it is essential to undertake deeper analysis of the port-specific supply chain challenges and State Governments to actively strategize their industrial policies, etc. to boost exports. Niti Aayog’s state-specific ‘Export Preparedness Index’ is a positive initiative in this direction, encouraging states to formulate export promotion policies and promoting spirit of cooperative federalism. Just-in-time exports is the way to go to fuel India’s growth engine.

Vijay Singh Chauhan is Commissioner of Customs, Government of India and Nikita Singla is Associate Director at New Delhi-based Bureau of Research on Industry and Economic Fundamentals (BRIEF). (Views expressed are personal and do not reflect the official position or policy of FinancialExpress.com.)

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