FOREIGN TRADE POLICY - BEST UNDER THE CURRENT CIRCUMSTANCES

By Ruma Dubey

It is ironic. The entire macro economic woe in India is about the mounting current account deficit. Yet the announcement of the Foreign Trade Policy was over and done with, in the blink of an eye.  If you had probably not been around for some 20 minutes, you would have actually felt it had not yet even been announced!

The Foreign Trade Policy, announced by the Commerce Minister, Mr.Anand Sharma was fairly good. It was more about balance, given the current global economic scenario. It was more about procedural relief and less about sops in terms of tax benefits. SEZs have got the major relief in terms of land allocation policies but the much needed reform on MAT remained untouched.

The rupee was up but this has not reflected in the exports, which was FY13 were down 1.76% at $300.6 billion. Well, another way to look at this – but for the rupee appreciation, the fall in exports would have been much sharp. There were no industry or sector specific sops, apart from further extending the EPCG scheme and allowing zero duty EPCG to all sector, there  is only this much you can do for exports. After all, it is essentially demand driven.

A quick look at the major highlights of the Policy:

Measures to revive investors’ interest in SEZs

• Minimum Land Area Requirement reduced:  For Multi-product SEZ from 1000 hectares to 500 hectares and for Sector-specific SEZ from existing 100 hectares to 50 hectares.
• Introduction of Sectoral broad-banding: Giving more flexibility to set up additional units in a sector specific SEZ
• No minimum land requirement for setting up an IT/ITES SEZ
• Minimum built up area criteria required to be met by the SEZ developers relaxed
• Introduction of Exit Policy for SEZs – allows transfer of ownership of SEZ units, including sale

Zero Duty Export Promotion Capital Goods (EPCG) Scheme

• Clubbed together Zero Duty EPCG and 3% EPCG Scheme into one scheme which will be a Zero Duty EPCG Scheme covering all sectors
• Import of motor cars, SUVs, all purpose vehicles for hotels, travel agents, or tour transport operators and companies owning/operating golf resorts will not allowed under the new Zero Duty EPCG Scheme
• Quantum of specific Export Obligation (EO) in the case of domestic sourcing of capital goods under EPCG authorizations has been reduced by 10%. This would promote domestic manufacturing of capital goods.

Widening of Interest Subvention Scheme

• 2% interest subvention scheme further widened to include 134 sub-sectors of engineering sector
• Allowed benefit of this scheme of 2% interest subvention could be available upto 31.03.2014

Market and Product Diversification

• Norway has been added under Focus Market Scheme and Venezuela has been added under Special Focus Market Scheme.
• 126 new products have been added under Focus Product Scheme. These products include items from engineering, electronics, chemicals, pharmaceuticals and textiles sector.
• 47 new products have been added under Market Linked Focus Product Scheme (MLFPS). These products are from engineering, auto components and textiles sector.
• 2 new countries - Brunei and Yemen have been added as new markets under MLFPS.
• Towns of Morbi (Gujarat) and Gurgaon (Haryana) have been added to the existing list of towns of export excellence for ceramic tiles and apparel exports respectively. These towns shall be eligible to get benefit under ASIDE Scheme
• Import of cars/vehicles is permitted through designated ports only. Now import of cars/vehicles would also be allowed at ICD Faridabad and Ennore Port (TN).