Address by Shri Anand Sharma Minister of
Commerce, Industry and Textiles
At the Release of Annual Supplement 2012-13
To the FTP 2009-14
5th June 2012
Ladies and Gentlemen, I have the privilege of presenting the Annual
Supplement 2012-13 to the Foreign Trade Policy.
Three years ago, the Government had announced the 5-year Foreign Trade Policy
for the period 2009-14 and we are now halfway through this 5-year period. This
presents for us an opportunity to take stock of our performance, recognize the
challenges we face and make mid-course correction where necessary to ensure that
we are able to achieve the target of US$ 500 billion exports by 2013-14.
It is indeed a difficult task to present a policy which aims for rapid growth
in exports in the face of weak global demand and the unabated persistence of the
global economic crisis which erupted 4 years ago. The difficult economic
situation in the Euro Zone crisis poses a real risk of destabilizing the fragile
recovery and sinking the world into yet another recession. We are also faced
with an unprecedented volatility in commodity prices and the crude oil prices
touched a new high last year, adding pressure on our import bill.
The Indian economy has also not remained insulated from these developments
and the GDP figures of last quarter are indeed a cause of serious worry. The
Index of Industrial Production has also highlighted the slowdown in
manufacturing. The Gross Fixed Capital Formation has also slipped to less than
30% indicating a deceleration in investments. The weakening of the rupee will
have its own implication on our annual import bill. Clearly Indian economy is
passing through a difficult phase.
However, as we look at the achievements of the year gone by, we can derive
some satisfaction from the fact that Indian exports maintained their momentum
registering a 20.9% growth last year to touch US$ 303 billion. This by all
accounts is a commendable achievement and a critical turnaround, given the fact
that exports had declined to US$ 178 billion in 2009-10. We have been able to
reach thus far by providing a stable policy environment and the market
diversification strategy which enabled an outreach to newer markets in Asia,
Africa and Latin America has clearly paid off. Throughout the last 3 years, we
have worked in a spirit of true partnership between government and the exporting
community, and we have intervened effectively when necessary to give stimulus to
the struggling sectors.
We had unveiled an Action Plan in May 2011 for doubling India’s merchandise
exports to US$ 500 billion which was based on a strategy which hinged on four
pillars:
- Developing products with a considerable growth potential
- Market diversification strategy
- Nurturing high technology exports
- Build a Brand India
In the last 3 years, we have significantly expanded the scope and coverage of
the Focus Market Scheme which now covers 112 markets across the world. This has
clearly yielded results as last year, India’s exports to Asia, Africa and Latin
America put together totaled US$188 billion which constitutes 62% of India’s
total export basket which is a significant development. Another redeeming
feature of our export performance last year was substantial increase in value
added exports, engineering exports touched US$ 60 billion, gems and jewellery
crossed US$ 46 billion, and textiles exports crossed US$ 14 billion and
pharmaceutical exports stood at US$ 13 billion.
Free Trade Agreements (FTAs) are an important element of India’s trade
strategy and through FTAs, we have sought to enhance our presence in new and
emerging markets to increase our market share. We also view these agreements as
vehicles for ensuring raw-material and intermediate products for our domestic
industry at competitive prices. In the last 3 years, we have signed Trade in
Goods Agreement with ASEAN, Comprehensive Economic Partnership Agreements with
Republic of Korea, Japan, and Malaysia and are now negotiating similar
Agreements with New Zealand, Australia, Canada. We are at an advanced stage of
concluding an ambitious Broad based Trade and Investment agreement with EU. We
expect that as a result of these agreements, Indian exports will be able to gain
significant market access in newer territories.
Now, I would like to share with you the measures which we are taking this
year for giving a boost to exports. As I mentioned earlier that a stable policy
regime has been a key ingredient of our Foreign Trade Policy and the schemes
which were put in place earlier have served us well and we intend to continue
with these schemes in this Annual Supplement as well with suitable
modifications.
The underlined philosophy of this year’s Supplement is based on seven broad
principles:
- Give a focused thrust to employment intensive industry because we
view exports not only in terms of their economic contribution but as a means
of generating gainful employment
- Encourage domestic manufacturing for inputs to export industry and
reduce the dependence on imports
- Promote technological upgradation of exports to retain a competitive
edge in global markets
- Persist with a strong market diversification strategy to hedge the risks
against global uncertainty
- Encourage exports from the North Eastern Region given its special place
in India’s economy
- Provide incentives for manufacturing of green goods recognising the
imperative of building capacities for environmental sustainability
- Endeavour to reduce transaction cost through procedural simplification
and reduction of human interface
Last year FM had agreed to create a special dispensation for labour intensive
industry by extending the facility of 2% interest subvention for Handlooms,
Handicrafts, Carpets and SMEs. We have now decided to extend the scheme for
another year till 31st March 2013 and expand its coverage to include other
labour intensive sectors namely Toys, Sports Goods, Processed Agricultural
Products and Ready-Made Garments.
One of the key objectives of our Foreign Trade Policy has been to give a
thrust to technology upgradation of exports in order to enhance global
competitiveness of our products. The Zero Duty EPCG Scheme which was operational
till 31st March 2012 has been a key policy instrument to achieve this objective
and we have taken a decision now to extend it upto 31st March 2013 . We have
also decided to enlarge the scope of the Scheme. Presently, benefits under the
Scheme are not available to units which are availing benefits under Technology
Upgradation Fund Scheme (TUFS) and Status Holder Incentive Scheme (SHIS).
However, now benefits under the Zero Duty EPCG Scheme will be allowed to be
taken by companies for another line of business for which TUFS benefits have not
been availed. Alternately, if benefits under TUFS or SHIS have been availed and
were subsequently surrendered or remain unused, the facility of Zero Duty EPCG
Scheme will be available.
We are now introducing a new post-export EPCG scheme. This scheme provides
flexibility to exporters for importing capital goods on payment of duty, based
on which an Export Obligation at a level of 85% to the original shall be
stipulated. Thereafter, the exporter will be entitled to obtain Duty Free Scrips
in proportion to the actual exports effected, thereby doing away with the
requirement of monitoring the Export Obligation, thus reducing the transaction
cost. In order to give a thrust to labour intensive exports, we are doing away
with the condition of maintaining average level of exports for labour intensive
sectors like carpets, coir, jute in addition to already notified
sectors-handicraft, handloom, cottage, sericulture etc. To facilitate setting up
of Common Service Centres located in the town of excellence, a Common Service
Provider under EPCG Scheme will be permitted to give a single Bank Guarantee
(BG). Three new towns are being declared as towns of export excellence-
Ahmedabad (Textiles), Kolhapur (Textiles), and Saharanpur (Handicrafts)
In order to promote manufactured exports of green technology products, export
obligation under EPCG scheme is being reduced to 75% of the normal export
obligation for 16 identified products like solar cells, wind turbines, water
treatment plants, electrically operated vehicles etc.
We recognize the need of promoting manufacturing activity and generating
employment in the North Eastern States. We have taken a decision to reduce the
Export Obligation under the EPCG Scheme to 25% of the normal export obligation
and this facility will be applicable to North Eastern States and Sikkim.
We are also going to provide additional incentive of 1% of FOB value of
exports for specified products through all Land Customs Stations of North
Eastern Region.
The Foreign Trade Policy allows duty free scrips under different Schemes of
Chapter-3 of our Foreign Trade Policy – FPS, FMS, VKYGUY, SHIS, MLFPS, SFIS and
Agri-infrastructure Incentive Schemes – for utilization of duty free import of
goods as per conditions stipulated under these Schemes. Now, in a major
decision, we will be permitting utilization of these scrips for procurement of
goods from domestic market for payment of excise duty. This decision has been
taken to promote domestic manufacturing and value addition and employment and
will be a significant measure of import substitution.
Recognizing the efficacy of the market diversification scheme, this year we
are adding 7 new markets to Focus Market Scheme (FMS). These countries are
Aruba, Austria, Cambodia, Myanmar, Netherland Antilles, and Ukraine
7 new markets are being added to the Special Focus Market Scheme (Spl FMS)-
Belize, Chile, El Salvador, Guatemala, Honduras, Morocco, and Uruguay.
46 new items are being added to Market Linked Focus Product Scheme (MLFPS).
This would have the effect of including 12 new markets for the first time.
Market linked focus product scheme is being extended till 31st March 2013 for
export to USA and EU in respect of the apparel sector.
100 new items are being added to the Focus Product Scheme (FPS) list.
Roasted cashew kernel, and protein concentrates & textured protein substances
are being made eligible for benefits under VKGUY.
The Agri-infrastructure Incentive Scrips were envisaged to promote
agricultural exports and strengthen and upgrade infrastructure including
establishment of cold storages, pack house etc. Recognising that these scrips
have not been used so far, we have now made them eligible for 14 specified
equipments which will have a beneficial impact in strengthening agri export
infrastructure.
The Status Holder Incentive Scrips (SHIS) allow import of capital goods for
technology upgradation in specified sectors. Now, 10% of the value of these
scrips will be allowed to be utilized for import of components, spare parts of
these capital goods as well. The SHIS scrips are so far subject to Actual User
condition and transferability of the scrips is not permissible. It has now been
decided that SHIS scrips holder may transfer the scrips to another SHIS holder
who has a manufacturing facility.
It was brought to my attention that small exporters of hand-made woolen
carpet very often suffer on account of ignorance of adversely loaded terms of
export. In order to protect their interest, it has been decided that these
exports will be suitably regulated to ensure secured payments.
In order to reduce transaction cost and ensure faster clearance of import
consignment, we have decided that once an Advance Authorization is registered at
any port, it will be permitted for utilization at all EDI Ports.
Visakhapatnam Airport has been identified as a new Port for the purpose of
benefits under export promotion schemes.
The nature of world trade has changed considerably and today a large quantity
of exports are being made by post, courier as well as through E-commerce. We
have now decided that exports shipped through Courier and E-Commerce platform
will be eligible for export benefits if shipments are effected from Delhi and
Mumbai. An Inter-Ministerial Task Force constituted by the Ministry of Finance
would expeditiously look into various aspects of e-Commerce to enable shipments
through designated posts.
The SEZs have been a key instrumentality for providing robust infrastructure
for export promotion. Today, these Zones provide direct employment to over 8.45
lakh people and last year contributed to exports of Rs. 3.65 lakh crores. They
have received investment of over Rs. 2.02 lakh crores which is a significant
achievement. However, after imposition of MAT and DDT, there has been a visible
slowdown in growth of exports from SEZs. We have undertaken a comprehensive
assessment of the SEZ Scheme to re-visit certain aspects of the policy and
operational framework and after concluding the inter-ministerial consultation,
we will be able to come out with new guidelines to make the operation of the SEZ
policy more buoyant.
The 100% EOU Scheme has also been reviewed, to assess its remodeling after
withdrawal of Income Tax exemption under section 10(B) of the Income Tax Act. A
Committee was constituted for this purpose, which has now submitted its report
and over the next few months, we shall be making an announcement of the revamped
100% EOU Scheme.
Deemed Exports Scheme which provides benefit of exemption and remission of
duty for supplies to specified projects, to domestic manufacturers. This scheme
is also undergoing comprehensive review and after concluding inter-ministerial
consultations, we shall be announcing changes in this Scheme as well.
Electronic Data Interchange (EDI) is a core driver for facilitating
international trade and one of the key initiatives this year is electronic
transmission of foreign exchange realization details on exports by banks on a
daily basis under the “e-BRC” (Electronic Bank Realization Certificate)
initiative. Exporters will not be required to make any request to banks for
issuance of Bank Export and Realization Certificate and this scheme will ensure
seamless connectivity amongst DGFT, Customs, Banks and exporters for settlement
and release of export benefits. This has been done with the objective of
ensuring minimum human interface and reducing transaction cost.
The Foreign Trade Policy document has been comprehensively reviewed and
edited, made more user friendly and an effort has been made to remove all
ambiguities and incorporate subsume all clarifications in a single document.
The guidelines for the Scheme for assistance to States for development of
infrastructure and allied activities (ASIDE) to strengthen export related
infrastructure has been re-formulated. The new guidelines will ensure that
States should take up relatively larger projects which would have a visible
impact for boosting exports.
In order to provide facility to Indian exporters to reach out to new markets,
we administer another scheme MAI (Market Access Initiative) under which
assistance is provided to exporters to organize buyer-seller meets, exhibitions
abroad following an approach on specific focused products and focused countries.
13 India Shows have been planned for this financial year which will be held in
different parts of the world to showcase the best of Indian industry and
manufactured products and promote Brand India.
I hope that these measures will infuse necessary confidence in the exporting
community and provide required dynamism even in this gloomy time. It is our
expectation that with these measures and with the tenacity of our exporting
community, we shall be able to sustain an annual export growth of 20% this
fiscal as well. We shall be watching the global economic developments closely
and shall intervene effectively to ensure that Indian exports stay well on
course for achieving the targets.
Thank you.