EXIM Policy

• Export Import Policy is two fold, one within the organization and the second is the larger EXIM policy adopted for the nation

• EXIM Policy of a nation is not of recent origin but dates back to 1970

• Govt accorded exports and its due importance by formulating the policy

• Its is known as Export Policy Resolution, 1970

FEATURES OF EXPORT POLICY RESOLUTION

• Making Indian products competitive

• Modernizing machinery

• Improving quality control

• Providing marketing support

• Providing adequate and timely finance

• Providing adequate shipping facilities at reasonable freight rates

EXIM Policy• The primary objective of the EXIM Policy or FTP

is not only to regulate the exports and imports, but to spur economic growth

• The Handbook of Procedures is published as a supplement to the Import/ Export Policy of the Government

• EXIM Policy 1985-88, tenure of 3 years followed by the next policy period of 1988-199. This policy concentrated on steps to liberalize international trade

• Policy to expire by 31st March, 1991. However was revised one year earlier due to political changes.

• New EXIM Policy 1990-93 announced which was then changed to be a policy with a tenure of 5 years. Hence the New EXIM Policy 1992 -1997 was formulated and announced.

• Tremendous changes in the EXIM Policy from 1991 onwards with the issues of Devaluation, Trade Policy Reforms

OBJECTIVES OF EXIM POLICY

• To strengthen the base for export production and thereby to create sound and favorable situation for export promotion through diversification

• To facilitate technological up gradation and modernization of domestic production

• To reduce imports to conserve foreign exchange

• To simplify and streamline foreign trade procedures

• To impart stability and continuity to enable exporters to draw long term export plans and strategies

• To provide institutional support to export initiatives

• To offer different types of export incentives, concessions and facilities to encourage exporters

India’s Foreign Trade since 1951

• Increased imports since independence caused due to the demand after 2nd World War.

• Increased consumption

• Five year plans implemented

• Focused on import substitution

• Each plan period concentrated on individual sector growth.

DEVELOPMENT OF FOREIGN TRADE POLICY

• Control of foreign trade initiated after second world war

• Concentrate on restricting imports initially in the Defence

• Sep 1946, Emergency Provisions(Continuance) Ordinance Act for import control

• Replaced by Imports & Exports Control 1947• Fluctuations in the tenure of EXIM policy• Finalized in 1992(1992-1997) to have 5 year

policy• Foreign Trade (Dvpt & Regn)Act,1992

GLOBAL ECONOMY

• Inspite of the turmoil in the world capital market, the global mkt kept growing since 1997

• Growth of world trade and GDP was high in 1997 than ever in 90s

• Indicator of this economic expansion is the per capita income growth recorded by most of the developed countries

• 126, out of 153 WTO member countries, have registered increase in per capita income

• The year 2001 witnessed an unexpected decline in world trade which fell down by 1.5% ever since 1987. but this got reversed by 2001

• A good yardstick for the measurement of World economy is GDP which can be defined as “ Sum total of the value of all goods and services produced in the country”.

RESULTS OF THE DVPT IN FOREIGN TRADE

• Goods or services provided are expected to be of international quality and price

• Service sector has grown and is now 20% of the world trade

• Imports are allowed for certain Commodities

• Explosion in the visual and written media made people demand high quality goods and as per convenience

• The growth of Information technology industry has touched the life at all levels

IMPACT OF RECENT CHANGES IN THE DVPT OF FOREIGN TRADE

• Dismantling of industrial license which enabled most of the entrepreneurs to decide on the productive ventures

• Allowing foreign investment without setting limit

• Allowing NRI and FII to invest in industries

• Free flow of technology for modernizing and upgrading industries

• Removal of certain restrictions on imports with reduction in tariff rates

• Full convertibility of Indian rupee on the trade account

• Allowing the retention of forex earnings by exporters for meeting their expenses

• Allowing private ventures in the field of banking, civil aviation and telecom

• Private sector investment in Oil, Refining, exploration, marketing and in other infrastructural dvpt’s

Reasons for increase in imports

• Shortage of food grains

• Import of capital goods & technical know-how, plant & machinery.

• War with neighboring countries increased defence needs.

Reasons for slower growth of exports

• Failure of crops• Synthetic substitute• Fierce competition• Policy of protection followed by developed and

developing countries• Reduction in export prices• Reduction in exportable surplus• Increased consumption of manufactured goods• Inflation

Composition of India’s Foreign Trade

1. Import structure- capital goods- raw materials and intermediate goods- consumer goods and food grains

2. Major items of imports- food grains- machinery & transport equipments- mineral oil- metals- medicines and chemicals- fertilizers

3. Export structure- food, beverages and tobacco- raw materials- manufactured goods

4. Major export items- jute- cotton- leather- iron ores- engineering goods- handlooms and handicrafts- chemical products- fruits, vegetables, sugar, unmanufactured tobacco, mica, etc.

EXIM Policy 1992-1997• Main trust of the policy was to remove unnecessary

controls and restrictions on imports and exports

• Making the export trade procedures simple, transparent and easy to understand and administer

Policy Aims:• To accelerate country’s transition to an internationally

oriented economy with a view of securing maximum benefits from expanding global market opportunities

• To augment the productivity, modernization and competitiveness of Indian industry to enhance the potentialities and capabilities

• To stimulate India’s exports by facilitating access to required raw material, components, etc

• To encourage the attainment of internationally accepted standards of quality

• To encourage import substitution

• To minimize quantitative restrictions

• To strengthen country’s Research & development capabilities.

1992 -97 POLICY FEATURES

• Valid for 5 years and not for 3 yrs

• Linked with 8th five yr plan

• Govt has made the procedure simple, transparent and easy to administer

• Main thrust was to remove unnecessary controls and restrictions on imports and exports.

• Contains a number of new incentives for export growth

• 80% of old restrictions have been removed indicating the extent of liberalization

• Import duty on capital goods has been reduced with an increased export obligation

• Deemed exports have been accorded a special import license

• Substantially eliminates licensing and discretionary controls by introducing negative list of items, imports and exports of which is either prohibited or restricted

• Reducing negative list means encouraging exporters and importers to undertake trading activities freely in the case of large number of commodities

• Thrust of the policy is a drastic reduction in import control

• Manufacturers of export oriented goods can import machines, technology, etc. without procedural delays.

• Scope of Duty Exemption Scheme has been enlarged by introducing value based advance licence besides the quality based advance licence.

• EOUs and units under EPZs are given(i) special treatment and incentives, (ii) greater autonomy and flexibility, (iii) can install any machinery, own or leased,

(iv) allows inter unit transfer

• Deemed exports have been defined and benefits such as duty exemption schemes, duty drawback schemes and exemption from terminal excise duty have been extended to deemed exports.

• Certain categories of exports and exporters are eligible to receive special import licences

• Two windows are opened for concessional duty imports under EPCG scheme.

(i) The 1st window provides concessional customs duty of 25% with export obligation 3 times the value of CIF for a period of 4 yrs

(ii) The 2nd provides for 15 % duty with export obligation 4 times the CIF value to be met in 5 yrs

• Partial convertibility of the rupee provides that all imports, barring those of canalised items are to be funded by foreign exchange obtained at a market determined rate.

IMPLICATIONS OF EXIM POLICY 1992-97• Decline in protectionist measures

- import tariff reduction and liberalised measures

- Declining protectionist measures for domestic industry

• Emerging buying markets- entry of MNC, stiff competition- shift from sellers market to the buyer’s market- domestic marketers facing growing challenges

• Added thrust to exports providing higher efficiency on part of Indian firms.

• Globalisation of Indian Foreign trade• Technological upgradation• Implication of liberalised imports• Implication of decanalisation• International competitive import sustitutiton• Procedural simplification• Foreign investment policy• Private bonded warehouse• Implication of Zero duty under EPCG scheme• Expansion of Deemed exports

HIGHLIGHTS OF 2002-2007 POLICYObjectives• To facilitate sustained growth in exports to attain a share of at least

1% of global merchandise trade

• To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing service

• To enhance technological strength and efficiency of Indian Agriculture sector

• Improving competitive strength while generating employment opportunities

• Attain internationally accepted quality standards

• Providing consumers good quality goods and services

GENERAL PROVISIONS

i. Exports and importsShall be free unless restricted

ii. ProcedureAs per Handbook of procedures

iii. Restricted GoodsMay be traded on obtaining Special licence/ certificate/ permission

iv. State TradingCanalised items to be traded through exclusive or special privileges

v. IEC Novi. Actual user conditionvii. Second hand goodsviii. Realisation of export proceedsix. RCMC

EOU/ EHTP/STP• Eligibilty

Units undertaking to export their entire production of goods and services, expect permissible sales in DTAs

• Second hand Capital goodsImported duty free without age limit

• Sale in DTA50% of FOB value of goods can be sold on fulfilling the export obligation

• Entitlement of supplies from DTASupply from DTA to EOU/ EHTP/ STP units will be treated as Deemed Exports. Concessions to DTA units on such transfer are:i) Reimbursement of CSTii) Exemption from payment of Central Excise Duty on all goodsiii) Reimbursement of duty paid on fuels procured from domestic oil companiesiv) Eligible for grant of Replenishment licence

• Other entitlements of EOU/ EHTP/STP unitsi) Exemption from payment of Income Tax

ii) Clubbing of FOB value of export of an EOU/ EHT/ STP with FOB value of export of its parent company in the DTA or vice versa for the purpose of according Registered exporters and status

iii) 100% FDI in manufacturing sector

iv) Software units allowed to use system for training purpose but not to be installed outside the bonded premises

v) Exemption from industrial licensing for SSI sector

• Inter unit transferi) permittedii) Capital goods may be transferred or given on loan to other units on prior permission of concerned Development Commissioner

• Sub- Contractingi) Through job work to other EOU/EHTP/STP

ii) May also be permitted abroad

iii) Permission from the concerned Development Commissioner

iv) Scrap/ waste/ remnants generated through job work to be cleared from the job work premise on payment of applicable duty or destroyed in the presence of the authorities.

• Sale of unutilized Materiali) Transferred to other EOU/EHTP/STP or disposed in DTA on payment of applicable duties and submission of the licenceii) Capital goods and spares will be

allowed depreciationiii) No duty applicable for goods destroyed with customs concurrence

• Reconditioning, Repair and Re-engineeringi) Activities carried out in freely convertible

foreign currencyii) Few concessions not available to these units

• Exit from EOU schemei) Subject to payment of dutiesii) If export obligation not attained, penalty may be imposed by the competent authority

• Conversion i) Existing DTA may apply for cinversion but no concessions for plants and machineries already installedii) Can be merged

SEZ SCHEME

• Definition: Specifically delineated duty free enclave and shall be deemed to be foreign territory for the trade operations and tariffs

• Status: Goods and services going from SEZ to DTA or vice versa treated as exports or imports as the case may be

• NFEPositive NFE= A-B>0

A is the FOB value of exports of SEZ

B is the CIF value of the imported inputs, capital goods and value of payments made in foreign currency for commission, royalty, fees, dividends, interest on external borrowings, etc