Exim Policy India

The major points of Exim Policy India is discussed as hereunder for

each and every export sectors and schemes -

Service
 Duty free import facility for service sector having a minimum foreign
exchange earning of Rs.10 lakhs.
 The duty free entitlement shall be 10% of the average foreign
exchange earned in the preceding 3 licensing years.

Agro

Corporate sector with proven credential will be encouraged to sponsor

Agri Export Zone and to provide services such as provision of pre/post
harvest treatment and operations, plant protection, processing,
packaging, storage and related R&D.

Status Holders

 Duty-free import entitlement for status holders having incremental

growth of more than 25% in FOB value of exports.
 It shall be 10% of the incremental growth in exports and can be used
for import of capital goods, office equipment and inputs.

Hardware & Software

 To promote growth of exports in embedded software, hardware duty

free import for testing and development purposes allowed.
 Hardware upto a value of US$ 10,000 shall be allowed to be disposed
off. 100% depreciation to be available for 3 years.

Gem & Jewelery Sector

 Diamond & Jewelery Dollar Account for exporters dealing in

purchase/sale of diamonds and diamond studded jewelery.
 Gem & Jewelery units in SEZ and EOUs can receive precious metal i.e
Gold/silver/platinum prior to exports or post exports equivalent to value
of jewelery exported.

Export Clusters

Upgradation of infrastructure in existing clusters/industrial locations

under the Department of Industrial Policy & Promotion (DIPP) scheme to
increased.
Rehabilitation of Sick Units

Steps for for revival of sick units and extension of export has been
modified.

Removal of Quantitative Restrictions

Import of 69 items covering animal products, vegetables and spices,

antibiotics and films removed from restricted list.

Special Economic Zones

 Sales from Domestic Tariff Area (DTA) to SEZs to be treated as

export. Foreign bound passengers will now be allowed to take goods from
SEZs to promote trade, tourism and exports.
 Export/import of all products through post parcel/courier by SEZ units
will now be allowed.
 SEZ units will now be allowed to sell all products including gems and
jewelery through exhibitions and duty free shops or shops set up abroad.

EOU of Exim Policy India

 Agriculture/Horticulture processing EOUs will now be allowed to

provide inputs and equipments to contract farmers in DTA.
 Period of utilization of raw materials prescribed for EOUs increased
from 1 year to 3 years.
 Export/import of all products through post parcel/courier by EOUs will
now be allowed.
 EOUs will now be allowed to sell all products including gems and
jewelery through exhibitions and duty free shops or shops set up abroad.

EPCG of Exim Policy India

 Shall allow import of capital goods for pre-production and post-

production facilities also.
 To facilitate upgradation of existing plant and machinery, import of
spares shall also be allowed.
 To facilitate diversification into the software sector.

DEPB of Exim Policy India

Facility for provisional DEPB rate introduced to encourage diversification

and promote export of new products.

DFRC of Exim Policy India

Duty Free Replenishment Certificate scheme extended to deemed exports

 to provide a boost to domestic manufacturer. Value addition under DFRC
scheme reduced from 33% to 25%.

Advance License

Standard Input Output Norms for 403 new products notified in Exim
Policy India. Anti-dumping and safeguard duty exemption to advance
license for deemed exports for supplies to EOU/SEZ/EHTP/STP.

Transaction Cost Reduction

Applications filed online shall have a 50% lower processing fee as

compared to manual applications is notified in Exim Policy India.

Other benefits extended by new Exim Policy India are -

 Actual user condition for import of second hand capital goods upto 10
years old dispensed with.
 Reduction in penal interest rate from 24% to 15% for all old cases of
default under Exim Policy.
 Export of free of cost goods for export promotion @ 2% of average
annual exports in preceding three years subject to ceiling of Rs.5 lakh
permitted.

So what is the Exim Policy all about?

Flip through any of the key financial newspapers or publications or quick surf across
electronic channels towards the close of the financial year in March and you would find
that the government has announced its Exim (Export and Import) policy. Now what role
does it actually play alongside the Union Budget? How relevant is the Exim Policy?

Let us take a closer look at key features of an Exim Policy.

The annual revision of the Export-Import Policy, scheduled for March 31 each year has
assumed a lot of importance.

Who actually announces the Exim Policy?

The policy is usually announced by the Union Minister of Commerce and Industry who
co-ordinates with the Ministry of Finance, the Directorate General of Foreign Trade and
its network of regional offices.

Whom does it apply to?

The regulations and restrictions apply to those involved in commercial trade through the
export and import of items. This becomes particularly important in a country like India,
where the import and export of items does play a crucial role not just in balancing
budgetary targets, but also from an economy developmental viewpoint.

By announcing a separate policy what is the government attempting to achieve?

The main aim is to accelerate the country's transition to a vibrant economy and a leading
global player with a view to derive maximum benefits from any expanding global market
opportunity.

Thus providing access to essential raw materials, intermediates, components, consumable

items and capital goods required to aid manufacture/production of items to boost
economic growth will be encouraged.

Attention will also be paid towards improving the state of various key sectors like
agriculture, industry and manufacturing sectors, making them competitive strength and
generating new employment opportunities. This is done with the final aim to provide the
Indian consumer with good quality products at reasonable prices.

All this sounds fine on paper. But then haven't things gone awry with India's
policies over the years?

That has less to do with policies and more with prevailing circumstances. There have
been several factors responsible for the previously disheartening performance of Indian
exports. Over the past two years, large developed economies have witnessed a general
slowdown in the manufacturing, trade and consumer-spending front.

We cannot, however, blame the performance on global factors alone. Our exports share
of approximately 0.7 per cent as a percentage of global trade is due to internal problems
rather than external factors. Some of these factors include high interest on export credit,
uncertainty in export policy and infrastructure constraints.

Paradoxically, these very low exports helped India beat the economic recession facing the
entire world as it was less dependent on external factors.
In the period April 2001-March 2002, the Indian government - prompted by a ruling of
the World Trade Organisation's dispute settlement panel - decided to phase out
quantitative restrictions on imports of remaining agricultural, textile and industrial
products from April 1, 2001 onwards.

The lifting of QRs on the rest of the 715 items on schedule was an important step for
India and all its trading partners.

What were the import restrictions?

The Exim Policy prohibits import of certain categories of products, provides for
conditional import of certain items while a majority of goods are now freely importable.
A process called canalisation exists for some categories - which means these can be
imported only by designated agencies.

What is the canalised list?

A number of items like urea are canalised. This means they can be imported only by
designated agencies like MMTC and STC, the government's trading arms. An item like
gold, in bulk, can be imported only by specified banks like SBI and some foreign banks
or designated agencies.

Earlier, items like sugar, edible oil, wheat and rice used to be imported by the
government through canalising agencies to meet domestic demand. However, ongoing
liberalisation has led to many of these items becoming freely importable.

The items which are freely importable fall under the open general licence category. The
OGL is also called the free list of imports - which means anybody is allowed to bring in
items listed under this category.

There are various kinds of restrictions on imports. The banned or prohibited list contains
sensitive items like explosives which are banned for security reasons. Then there are
items which are banned for environment and pollution-related aspects.

Several items like wildlife and its related products are not permitted to be imported
following international agreements. These items can only be imported for specific
purpose with prior permission.

So which are the items which can be imported?

There are a large number of non-sensitive items - mostly consumer goods - which are
currently allowed only if the importer gets a licence. This would relate to food and
beverages products which hotels can import with a specific licence.
What are the current export promotion schemes?

The government had devised a number of schemes to provide incentives to exporters and
encourage them to compete in the global market.

Allowing them to import raw materials free of any duty ensured this. Advance licence,
Export Promotion Capital Goods (EPCG) scheme, SIL and the duty exemption pass book
(DEPB) are among the incentive schemes.

These schemes were attractive when the customs duty levels were high, but these are
losing their importance in view of the continuous reduction in import duty.

What is the SIL product?

There are products which could be imported against an instrument called SIL (Special
Import Licence). This was awarded to exporters on the basis of their annual turnover.
Exporters sell SIL in the market for a premium to improve their profits.

This category has been reduced substantially in the past few years as more items have
moved to the OGL category. Over the past year, the SIL list has virtually ceased to exist,
leaving only the prohibited list in the negative list category.

The prohibited list would thus consist of sensitive items like arms and ammunition, toxic
waste and environmentally sensitive items.

In earlier years, since the items on the SIL list were not freely importable, one had to buy
SIL and surrender it to the Directorate General of Foreign Trade (DGFT) to get
permission to import these items.

So what will be the focus in coming years?

The Exim policies in coming years will focus on the need to allow exporters to
concentrate on the manufacture and marketing of their products globally with very few
discretionary controls and procedural delays.

The policy should enable the industry to enhance its competitiveness in the global
markets and achieve its full potential in the areas of its strength.