| Date: |
17-04-2015 |
| Subject: |
Foreign trade policy effect: JICA removed from list of multilateral lenders |
|
NEW DELHI: The new five-year foreign trade policy unveiled earlier this month and aimed at boosting India's goods and services exports may not be good for the Japanese-funded industrial and freight corridors planned by the government.
The Japan International Cooperation Agency has been removed from a list of multilateral lenders under the trade policy, denying incentives known as deemed export benefits to projects funded by the agency.
According to an industry estimate, this would result in a material cost escalation in the Delhi-Mumbai Industrial Corridor project. Deemed exports benefits are tax concessions extended to goods manufactured in India and not shipped out of the country.
The foreign trade policy was framed by the Department of Commerce while the industrial corridor projects are under the Department of Industrial Policy & Promotion, both wings of the Ministry of Commerce & Industry.
JICA has so far invested close to Rs 14,000 crore in the over Rs 60,000 crore DMIC project and plans to invest in the Chennai-Bengaluru Industrial Corridor. Japan has invested $4.5 billion in the first stage of the DMIC through JICA and the Japan Bank for International Cooperation, which together hold 26 per cent equity in the project.
"Removing JICA from the list of multilateral lenders will definitely have implications on the industrial corridors and freight corridors," said Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations. "It is a kind of setback as if we take into account the excise duty and the duty drawback rate, the supply cost will go up by over 20 per cent, resulting in project cost escalation."
The Western Freight Corridor, a 1,483 km stretch connecting Delhi and Mumbai that is being fully funded by JICA, will also see costs going up.
The Organization for Economic Co-operation and Development, International Fund for Agricultural Development and Swedish International Development Cooperation have also been removed from the list.
The Department of Commerce blamed the removals on a communication gap between the Department of Revenue and the Department of Economic Affairs under the Ministry of Finance.
"We give deemed export benefit where basic customs duty is waived by the Department of Revenue. If they include JICA under notification 12 of the Customs Act, we will also incorporate that in the foreign trade policy," a Department of Commerce official said.
"It is ultimately a call to be taken by the Ministry of Finance. We do not want to get into this." The government has identified eight industrial zones in the 2,700 km DMIC in Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh, Gujarat and Maharashtra.
The government now aims to increase the share of manufacturing to 25 per cent of the gross domestic product from 17 per cent at present by setting up five industrial corridors.
Source : economictimes.indiatimes.com
|