Govt announces '1,050 cr of incentives to push exports: Ministry opts for focused intervention.

Keeping in mind the uncertain recovery in developed economies, commerce and industry minister Anand Sharma on Monday announced incentives amounting to '1,050 crore for ailing labour-intensive export sectors to help them tide over slackening demand.

However, the additional cost to the exchequer is essentially revenue foregone to the government and the finance ministry is not required to derive any approval from Parliament for this.

"The recovery so far has been fragile and the economies around the world are still emerging out of the shadows of a grim recessionary period," Sharma said while releasing the annual supplement for 2010-11 to the foreign trade policy, 2009-14. "The uncertainty surrounding exporters' prospects, therefore, continues to linger. We are not yet out of the woods."

Sharma had announced the five-year trade policy in August last year, at a time when merchandize shipments were in the negative zone. He announced additional support to the ailing exporters in January and March.

Despite those measures, some sectors continue to face difficulties, Sharma said.

"Moreover, there is still a shroud of uncertainty over the fragile nature of global economic recovery," he said. "Even as global economic rebalancing is proceeding apace, it is not going to be an easy patch for our exporters."

Director general of foreign trade (DGFT) P.K. Chaudhery said the ministry has opted for focused intervention, maintaining overall policy stability.

Asked how the ministry will provide incentives once the goods and services tax is put in place, a commerce ministry official, who spoke on condition of anonymity, said these could still be provided through duty drawback schemes rather than the present duty neutralisation schemes.

Sharma said he has obtained an extension of the duty entitlement passbook (DEPB) scheme one last time from the finance ministry for a period of six months until 30 June. The DEPB scheme is aimed at neutralizing basic and special customs duty on the import content of export products levied by the destination countries. This is expected to help exporters remain competitive in foreign markets.

The ministry has also provided the additional benefit of 2% bonus under the focus product scheme for 135 products that have suffered due to demand contraction in developed economies.

The zero duty export promotion capital goods (EPCG) scheme, which encourages technological upgradation, has also been extended by one more year until 31 March 2012, including more product categories such as rubber, marine products, sports goods and toys, as well as certain chemicals and engineering products.

Source : istockanalyst.com