The Hindu : Business : Scheme to replace DEPB on anvil

Online edition of India's National Newspaper
Friday, Apr 08, 2005

Business

Business

Scheme to replace DEPB on anvil

By Sushma Ramchandran

NEW DELHI, APRIL 7. The new foreign trade policy to be announced tomorrow is set to focus on the key areas of agro-products, pharmaceuticals and marine products with the aim of doubling India's share of world trade to 1.5 per cent over the next four years.

Buoyed by steday double-digit export growth over the past year, Commerce and Industry Minister Kamal Nath is expected to try and reduce transaction costs for exporters by cutting red tape in a big way. A new export incentive scheme is also on the anvil to replace the Duty Entitlement Passbook scheme (DEPB).

Official sources say export incentives will have to continue though there could be some changes to ensure that all schemes are compatible with World Trade Organisation (WTO) guidelines. The DEPB scheme, for instance, may have to be refashioned in a manner that meets the needs of exporters even while avoiding any strictures from the WTO. Exporters have been urging that the DEPB should continue for six months even after a new scheme is announced to help in making the transition.

A host of procedural simplifications are expected to be included in the annual policy which, sources stress, will remain within the overall five year framework laid down last year by the UPA government. The Commerce Ministry feels that the broad strategy has already proved successful in as much as exports are expected to be much higher than the target of $74 billion for 2004-05, and $60 billion worth of exports were recorded in the first ten months of the last fiscal. It is pointed out that the sustained rise in exports has been achieved despite the hardening of the rupee and soaring crude oil prices.

There is a feeling among policy makers that Indian exports are finally becoming globally competitive in a wide range of areas instead of in the traditional handicrafts and textiles sectors. Even in the case of textiles, it is expected that dismantling of the quota system will bring about substantial benefits for the domestic industry over the next few years.

Boost to retailing

As far as specific sectors are concerned, the policy may also seek to help marine exporters affected by the tsnuami by making certain relaxations of procedures under the Export Promotion Capital Goods (EPCG) scheme. The retail sector is also likely be given benefits under the scheme by allowing easier imports for development of infrastructure in this sector. With FDI in the construction sector already having been eased, this is seen as a fine tuning of policies in this sector.

Exporters' proposals for reducing the import duty on capital goods under the EPCG scheme from 5 per cent to nil since the peak basic customs duty is now down to 15 per cent have been taken into consideration by the ministry. They are also seeking waiver of the condition of maintaining export performance especially since capital goods imported under the scheme for replacement and modernisation do not significantly add to the production base.

Sources say export incentives in the policy are likely to focus on critical sectors like auto components and pharmaceuticals as well as agro and horticultural products. Growth has been significant in all these areas while gems and jewellery along with handicrafts continue to be the mainstays of the export basket. Some easing of procedures can thus be expected in these critical export sectors.

But differences between the Finance and Commerce Ministries on the extent of leeway to be given to exporters are believed to have delayed decisions on various procedural issues. A divide between the two ministries over trade policy issues is not new. Even in past years the Customs authorities have taken a long time to issue notifications needed to bring various export promotion schemes into effect.

Printer friendly page
Send this article to Friends by E-Mail

Business