EXIM POLICY 2010-2011

Exim Policy

• The foreign trade of India is guided by the Export-Import policy of the Government of India

• Exim policy contain various policy decisions with respect to import and exports from the country

• Exim Policy is prepared and announced by the central government• Exim Policy of India aims to developing export potential, improving

export performance, encouraging foreign trade and creating favorable balance of payment position

EXIM Policy of India 2009-2014

Hon. Shri Kamal Nath minister for commerce and industry has announced on 31st Aug 2004, India’s first Exim policy.

The duration of the policy from 1st Sept. 2004 to 31st March 2009. It takes an integrated view of the overall development of India’s

foreign trade.Aim of the policy is to double the global merchandise trade within

the policy time period of 5 years Anand Sharma is the current minister for commerce and

inustry who is assisted by Minister of State for Commerce & Industry Jyotiraditya Madhavrao Scindia

Two Major Objectives

Objectives

To double our percentage of

share of global merchandise

trade within the five year

To act as an

effective instrument

of economic

growth by giving

a thrust to employment

generation

General Objectives of Exim Policy

• To establish the framework for globalization.• To promote the productivity competitiveness of Indian

Industry.• To Encourage the attainment of high and internationally

accepted standards of quality.• To augment export by facilitating access to raw material,

intermediate, components, consumables and capital goods from the international market.

• To promote internationally competitive import substitution and self-reliance.

Key Strategies to achieve these objectives

• Unshackling of controls• Simplifying Procedures• Neutralizing Incidence• Facilitating development of India• Identifying special focus areas• Facilitating technological upgradation

Key Strategies cont….

• Facilitating technological upgradation• Avoiding inverted duty structure• Upgrading the Infrastructure• Revitalizing the Board of Trade• Activating Indian Embassies

Special Focus Initiative

a) Sectors with significant export prospectsb) Further sectoral initiativesc) The threshold limit of Towns of Export Excellence is reduced

Provisions of Exim Policy 2010-11

Agriculture and Plantation

Agriculture has the potential to bring prosperity in rural areas, and also has the largest potential for promoting employment. Some special provisions for the agricultural sector under the EXIM policy are as follows:

a) Vishesh Krishi Upaj Yojana b) Import of Capital Goods c) Agri Export Zones d) Import of seeds

Agriculture and Plantation

• Instant Tea and CSNL Cardinol included for benefits under VKGUY @ 5% of FOB value of exports.

• Oil Meals (Cotton, rape seed, groundnut), Castor Oil derivatives, Packed Coconut Water and Coconut Shell worked items shall be entitled for benefits @ 2% of FOB value of exports to all markets under FPS.

Gems and Jewellery SECTOR

To provide employment among artisans and to develop their skills, special package has been announced for this sector. Some of them are:

a) Duty Free Importb) Commercial Samplesc) Import of gold

Gems & Jewellery sector

• The list of items allowed for duty free import by Gems &Jewellery sector has been expanded by Inclusion of additional items such as Tags and labels, Security censor on card, Staple wire, Poly bag. This will reduce the cost of the product to some extent.

Handloom and Handicraft Sector

Increased exports from this sector will benefit the workers at grass root level.

a) Handicraft Export Promotion Councilb) Leather and footwear industryc) Towns of Export Excellenced) Status holder exportere) Vishesh Krishi Upaj and Gram Udyog Yojana

Handloom and Handicraft Sector

• Duty free import of specified trimmings, embellishments etc. shall be available on Handloom made-ups exports @ 5% of FOB value of exports.

• Additional 2% bonus benefits over and above the existing benefits under Focus Product Scheme would significantly benefit the Handloom Sector

Leather & Footwear

• Duty free entitlements of import trimmings, embellishments and footwear components for leather industry increased to 3% of FOB value of exports.

• Duty free import of specified items for leather sector increased to 5% of FOB value of exports.

• Finished Leather export shall be entitled for Duty Credit Scrip @ 2% under FPS

• Machinery and equipment for Effluent Treatment Plants for leather industry shall be exempt from Customs Duty.

• Additional 2% bonus benefits over and above the existing benefits under Focus Product Scheme would significantly benefit the Leather Sector.

Textiles sector:

Duty free import of specified trimmings, embellishment etc shall be available @ 3% on exports of polyester made-ups in line with the facility available to sectors like Textiles & Leather. It will promote export of products such as micro cloth, which has become popular in home textiles.

Readymade Garment sector granted enhanced support under MLFPS for a period of further 6 months from October, 2010 to March, 2011 for exports to 27 EU countries

Service sector:

• Scrips issued under Served From India Scheme (SFIS) can now be used for payment of duty on import of Vehicles, which are in the nature of professional equipment.

Engineering and Electronics

• Additional 2% bonus benefits over and above the existing benefits under Focus Product Scheme will significantly benefit Bicycle parts and Grinding Media Balls exporters.

Additional items of Engineering Namely Pipes & Tubes, Electric Generating Sets, Cast Articles of Iron & Steel, Ferro

Manganese and Ferro Silicon shall now be entitled for benefit @ 2% under FPS.

A number of Engineering items namely, Machine Tools, Compressors, Iron & Steel Structures including Transmission Towers and Scaffolding, LPG Cylinders, Ductile Tubes & Pipes shall now be entitled for benefits @ 2% of FOB value of exports to all markets under FPS instead of their exports to specific markets under MLFPS earlier.

Telecom Equipments, Color TVs, Audio Systems, Optical Media, Semi-conductors, Capacitors, Resistors, PCBs, LEDs, Conductors, Desktops and Notebooks shall now be entitled for benefits @ 2% of FOB value of exports to all markets under FPS instead of their exports to limited market under MLFPS earlier.

Toys and Sports goods

• Additional 2% bonus benefits over and above the existing benefits under Focus Product Scheme will significantly benefit the Toys and Sports Goods Sector.

• Benefits under Zero duty EPCG and SHIS schemes will significantly promote technological up-gradation of Toys and Sports Goods sector

Export Promotion Schemes:Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park Scheme or Bio-Technology Park Scheme to operate under duty-free regime for import/procurement of all types of goods including capital goods without payment of duty for manufacture of goods for export.

A new scheme to accelerate growth of exports called “Target plus” has been introduced. Under the scheme exporters who exceed the annual export target were to be rewarded under the Target Plus scheme. This reward was in terms entitlement to duty-free credit based on incremental export earnings.

Export oriented units (EOUs):

(a) EOUs shall be exempted from Service Tax in proportion to their exported goods and services.

(b) EOUs shall be permitted to retain 100% of export earnings in EEFC accounts.

(c) Income Tax benefits on plant and machinery shall be extended to DTA units which convert to

EOUs.(d) Import of capital goods shall be on self-certification basis

for EOUs.

Special Schemes for EOU

• Vishesh Krishi Upaj and Gram Udyog Yojna• Target Plus• ‘Focus Product’ and ‘Focus Market’ Scheme• Served from India• Duty-Entitlement Pass Book Scheme• Duty-Free Import Authorisation Scheme

SEZ (Special economic zone):

Special Economic Zone is a specifically delinked duty free enclave and is deemed to be foreign territory for the purposes of Trade Operations and duties and tariffs wherein these units can import/procure from the DTA all types of goods and services without payment of duty.

A scheme for setting up special economic zones(Sezs)in the country to promote exports was announced by the government in the export and Import Policy on March 31st , 2000. During 2006-07, exports from functioning Sezs were Rs. 34,615 crores.

Main Objectives of SEZs Act:

• Generation of additional economic activity• Promotion of exports of goods and services• Promotion of investments from Domestic and

Foreign sources• Creation of employment opportunities and• Development of infrastructure facilities

Star Export Houses:

A Star Export House was entitled to get license, certificate, permission and customs clearances for both import and exports on self declaration basis. The FTP announced a new categorization of status holders. Under new scheme, Export House were divided into five categories depending upon their export performance in three years:

The categories were:

• One Star (export of Rs 15 crores)• Two Star (export of Rs 100 crores)• Three Star (exportof Rs 500 crores)• Four Star (export of Rs.1500 crores)• Five Star (export of Rs 5000 crores)

Free Trade & Warehousing Zones (FTWZ):

Objective:• The objective is to create trade-related infrastructure to facilitate the import and

export of goods and services with freedom to carry out trade transactions in free currency. The scheme envisages creation of world-class infrastructure for warehousing of various products, state-of-the-art equipment, transportation, handling facilities etc.

• The Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing

Functioning:• The scheme envisages duty free import of all goods• Such goods shall be permitted to be re-sold.• Payment of duty will become due only when goods are sold.• Packing or re-packing without processing and labelling as per customer or

marketing requirements could be undertaken within the FTWZ.• The maximum period that goods shall be permitted to be warehoused within the

FTWZ will be two years.

Procedural Simplification

• Bank Gurantee• Second-hand-capital goods• Validity of all lincences• No. of Returns and forms has been simplified• Redressal of grievances• Physical examination of export cargo

Board of Trade:

• The role is to advising government on relevant issues connected with Foreign Trade Policy. The Board of Trade shall be revamped and given a clear and dynamic role.

• An eminent person or expert on trade policy shall be nominated as President of the Board of Trade, which shall have a Secretariat and separate Budget Head, and will be serviced by the Department of Commerce.

Annual Supplement to Foreign Trade Policy 2010-11

Mr. Anand Sharma, Minister for Commerce & industry, Government of India announced Annual Supplement 2010, to the Foreign Trade Policy 2010-11

Objectives of EXIM Policy

• Means to boost economic growth• Employment-Generation• Towns of Export-Excellence• Export of services• Setting up of Free Trade and Warehousing Zones• Import of Second-hand Capital Goods

MERITS

Objectives Cont…..

• Setting up of Special Economic Zones-SEZs• Procedural Simplification• Boost for Small, Cottage and Handicraft

Industries• Boost for Agriculture Sector• More Incentives for Higher Growth Rate in

Exports• Diversification of Exports

Objectives Cont….

• Liberal Imports• Encouragement to Gems and Jewellery• Setting up of Bio-Tech-Parks• Income tax concessions and exemptions.

cons

• Burden of export promotion schemes• Danger of circular trading• Risk of importing outdated machinery• Policy fails to take a holistic view of trade

DEMERITS

Negative List Cont…

• Prohibited Items : Which items completely banned from the exports. – All forms of wild animals including their parts and products.– Special Chemicals as notified by the DGFT.– Exotic birds as notified by the DGFT.– Beef.– Sea Shells, as specified– Human Skeleton.– Peacock Tail– Red sanders wood in any form.

Negative list cont…

• Restricted Items : which items allowed for exports under special license issued by the DGFT.– Dress materials, ready-made garments, fabrics or textile items

with imprints of excerpts or verses of the Holy Quran.– Horses – Kathiawadi, Marwari, and Manipuri breeds.– Fresh and frozen silver prom frets of weight less than 300gm.– Paddy (Rice in husk).– Seaweeds of all types.– Chemical Fertilizer all types.

Conclusion:

The EXIM Policy 2010-2011 is one of the most ambitious policies of the government to

liberalise the Indian economy and the government has also come a long way in achieving the same. However the current policy also has its flaws which are not only because lack of radical thinking by the government but also because of the global scenario. Some of the flaws are as follows:

i) No concrete solution or reduce delays and transaction costs.ii) Software Technology Parks of India not given income tax exemption.iii) Poor export in growth, in rupee terms, and in volume terms, ignored.iv) The rising crude oil prices and inflationary pressures in the economy.v) Due to global economic slowdown and recession in the USA economy, India’s largest

trading partner, uncertainty of the rupee-dollar exchange rate continues which in turn affects the economy.

References:

• http://www.eximkey.com• http://www.eximinfo.com• http://www.eximbankindia.in/• http://dgft.gov.in• http://finmin.nic.in/