Export Assistance And IncentivesIntroductionExportincentivesareincentivesprovided by governments to increase the amount of exports that take place in a country. Theseincentivescould come in the form of direct payments or they could come in the form of reduced taxes. Regardless of the type of incentive, the purpose of theseexportincentivesis to make domestic products more affordable and competitive in the international market. In some cases, this type of incentive has led to disputes between countries because of differing opinions as to how much a country should help its products in the marketplace.Investopedia explains 'Export Incentives'Export incentives make domestic exports competitive by providing a sort of kickback to the exporter. The government collects less tax in order to deflate the exported good's price, so the increased competitiveness of the product in the global market ensures that domestic goods have a wider reach. This level of government involvement can also lead to international disputes that may be settled by the World Trade Organization (WTO).

Many governments have offeredexportincentivesover the years. A level of theseincentives has varied from one situation to the next. In some cases, theincentiveshave amounted to huge subsidies by a federal government.The most common form ofexportincentivesis a lowering of taxes. In this situation, the government will lower the amount of taxes due from the exporter. This allows the exporter of a product to lower the price of these goods and still make the same amount of profit. When this happens, the goods from that country sell quicker and, in turn, it increases the overall sales of the goods. By doing this, the government is hoping to make the product more competitive on the world marketplace.Some countries are set up better than others to produce certain goods. When a government is at a disadvantage in producing a product, it may try to make up for it in other ways.Export incentivesis one way the country can make up for being at a natural disadvantage to another country.When a government decides to issueexportincentives, it can often lead to controversy between countries. One country might feel that another country helped out a little too much with its exports. In many cases, a smaller, developing country may not be able to compete with the subsidies provided by a larger nation. This puts the smaller country at a disadvantage and makes it more difficult for it to make its products competitive in the marketplace.When a dispute like this arises, it is often taken to theThe World Trade organization.The World Trade Organization will step in and hear the arguments from both countries. If it is determined that one of the countries is in the wrong, the World Trade Organization can issue suggestions or orders to that country.

Promotion of export has been a major thrust area of the Ministry of Commerce and Industry for the last three decades. Apart from this. many other Central / State Ministries have also been involved in the promotion of Indias exports. Many ExportPromotion Councils, Public Sector Undertakings, Chambers of Commerce, IndustriesAssociations and Services Organisations are also contributing towards the promotion of Indian exports.The facilities and incentives presently available to the Indian exporters include theExport IncentivesThe Government of India provides various incentives & facilities to the exporter. Theseexport incentives and facilities are as follow.* Duty Drawback (DBK)* Duty Entitlement Passbook Scheme (DEPB)* Focus Market Scheme (FMS)* Focus Product Scheme (FPS).* Duty Exemption Scheme* Vishesh Krishi and Gram Udyog Yojna (VKGUY)* Marketing Development Assistance (MDA)* Export Promotion Capital Goods Scheme* Served from India Scheme* Exchange earner Foreign CurrencyAccount (EEFC A/C)

Duty DrawbackThe duty drawback refers to therefund in respect of central Excise & Custom duties paid by manufacturer and/or exporter in relation to the inputs used for manufacturing of the products. Duty ABDUL GHORI drawback is not applicable in the respect of a product if(a)- No excise/custom duties were paid for its manufacturer and/or exporter.(b)- Amount of the drawback is less then 1% of FOB value.(except where theamount of drawback is more than Rs 500 per shipment)(c) - manufacturer and/or exporter is by 100%EOU/EPZ/SEZ Units.(d)- If manufacturer and/or exporter apply for duty entitlementpass book scheme.Duty Drawback RatesThe government of India announces every year on 31 may,the rates of Duty drawback in respect ofscheduled items. All such rates are called all industry rates. The ratesindicated custom & excise duty allocation. These rates are generally made effective for one year from 1 June. In case duty draw back rates are not announced for a product, thenyou can submit an application in the prescribed form ford e termination of specific rate of duty drawback for the particles product. Such a rateis known as Brand rate. If the rate of duty drawback is less then 80 % ofthe duties paid then the exportercan apply for its upwards revision in prescribes form.Duty Drawback Under EDI SystemIn all custom station where EDI system has been introduced forprocessing of shipping documents, the exporter are notrequired to file duty drawback claims, such claims are processed simultaneously with shipping documents. For receiving this amount you have to be maintain a bank account with a bank, which is link withcustomhouse.Duty Entitlement Pass Book (DEPB)Under the Duty Entitlement Pass Book (DEPB) scheme, exporter is eligible to claim credit as specified percentage of FOB value if exports madein freely convertible currency. The rate of Duty Entitlement Pass Book (DEPB) is announced by DGFT. The rates of DutyEntitlement Pass Book (DEPB) are decided by DGFT after every 5 years but they have right to change the rates at nay time.Vishesh krishi And Gram Udyog YojnaThe objective of this scheme is to prompt theexport of fruits, vegetables,flower, minor forest product and their value added product. Export of agricultural product shall be entitled for duty credit scrip equivalent to 5 % of FOB value of exports for each licensing year.

Advantages Of Export Assistance And Incentives-1.Export assistance and incentives makes the business financially attractive.2.It helps to increase the profit in business.3.It enables exporters to expand and diversify the business.4.It makes avaliable expertise in field of export marketing.5.It improves competitive ability of exporters.6.It facilitates repayment of loans including debt-servicing.7.It removes the deficit in balance of payments.8.It makes optimum use of avaliable resources between domestic and overseas markets.9.It compensates for higher domestic cost of production.10.It helps to earn goodwill for the country.

Case study1

Indias tea exports rose to 46.74 million kg. during the first quarter of the current financial year from 35.47 million kg. in the previous comparable period. Export earnings from this iten aggregated Rs.81.61 cr during April-June,1981 against Rs.68.03 cr in corresponding period last year. Thus although in terms of quantity our tea exports have looped up this year, the unit value realisation dropped from Rs. 19.8 per kg to Rs. 17.46 per kg. The drop in the unit value realisation is attributed to the slackness in the international tea market due to the global over-supply in this commodity . Since 1975,world tea production has gone up by 41% while increase in tea consumers was not more than 9%. Naturally, the prospects of a revival in international tea prices are dim, at least in the immediate future. The National meet on tea, organised by Union Commerce Ministry, as held in 1st week og august to take at various problems confronting the tea industry. The meeting which was attended by the representatives of Central govt., tea producing states, has been recommended a package of fiscal reliefsboth at central and state levels. The package includes, among other things, a substantial reduction in excise duty of tea, refund of indirect taxes paid on tea exports, simplification of drawback procedures, substantial reduction or removal of excise duty on packet tea until further review, suspension of sales tax on auction teas.According to avaliable information these recommendations are being considered by the centre and states concerned for implementation. The basic problem that confronts the tea industry in international sphere is one of depressed prices. More and more black tea is coming into the international markets from several new producing exporting countries leading to over-supply and low price.And so these tea producing countries realised that without their mutual- co-operation theyll not get better price for their produce. Viewed against this backgroung, it is doubtful that the massive reliefs being sought on tea exports will really be helpful. Excise duty drawbacks on export, if granted, may compound to decline in unit values.This is a temporary solution for this problem but it lead to further slackening of internal consumption.Which has already been affected by the high prices of sugar and milk. Yet another factor needs consideration before attempting to set up the quantum of exports by making tea cheaper through concessions. This is the discouraging trend in production at 173.7 million kg is down by as much as 27.4 million kg over same period of last year. If this trend countinous in the remaining months of the year, the resultant lower the output itself may push up internal tea prices to some extent. Moreover, the tea growers who do not export directly and who deserve govt. help the most, are unlikely to benefit from excise rebate or fiscal concessions to tea exports. Instead these would benefit the FERA companies who export their produce for sale in the London auction beneficiares would be exporters of blended tea and foreign players purchasing tea from public auctions in India.What is needed, therefore, is a selective and judicious approach towards the whole issue of fiscal incentives for tea exports. Because of lower production cost some of our competitors have an edge over us in export markets and incentives may be necessary to an extent for offsetting this price disadvantage. Similarly assisstance of exportsof non-traditional items such as tea and packet teas would be advantageous for establishing markets for these high value added items whose share inan overall tea exports is small at exports.Case study 2

Export Fraud:One of the export incentives provided by govt. of India relates to allowing companies to import raw materials duty-free provided they export finished goods. Brilliant Rexine is a Mumbai based business doing exports. It also runs a sister organisation called Radical Imports. Brilliant Rexine imported raw materials by availing exemption from duty and exported cheaper quality of PVC leather cloth. This was re imported by Radical Imports and again exported to show artificial discharge of export obligation.The customs officials examined Brilliant Rexines exports cosignments and found difference in weight of PVC leather cloth. Additional Commissioner of Customs punished Brilliant Rexine with heavy fines. It is also reprimanded the chartered account for issuing certificates confirming export figures which were not genuine.

Questions:1.Export incentives are boon to Indian exporters. Explain?Ans. Ofcourse its a boon to Indian exporters. Its an open ticket to enter Global market with rebates.It can be helpful to exporters in :-1.Export assistance and incentives makes the business financially attractive.2.It helps to increase the profit in business.3.It enables exporters to expand and diversify the business.4.It makes avaliable expertise in field of export marketing.5.It improves competitive ability of exporters.6.It facilitates repayment of loans including debt-servicing.7.It removes the deficit in balance of payments.8.It makes optimum use of avaliable resources between domestic and overseas markets.9.It compensates for higher domestic cost of production.10.It helps to earn goodwill for the country. 2.Do you feel more stringent laws are required to deal with export fraud??Ans. Yes, more strict and stringent laws are required to deal with export fraud :-Presently Indian Government has made a number of such acts and policies available for the growth of the economy. These are :1. Imports and Exports (Control) Act, 1947 which has been taken over by the Foreign Trade (Development and Regulation) Act, 19922. Foreign Trade (Development and Regulation) Act, 19923. Import-Export (EXIM) Policy 1997-2002

These acts and policies have empowered the Indian Government for :

1. Enactment of the provisions pertaining to regulation and the development of trades in the national and the international markets2. Limitation and regulation of all types of exports and imports and declaration of tariff exemption by reaching to special needs.3. Announcement of EXIM policy and the amendment of the same in intervals in notification.4. Authorization of the concerned officials for issuing 'IEC Number to both the exporters and importers.But still there is failure in application of these laws due to which scams like Vadra-DLF, Coal scam , Satyam Scam are occurred. Lokpal Bill, Jan Lokpal are solutions for this but not big enough to stop them. So theres a need for more such sort of bills and laws against such frauds in India.

Recent Case:

India has offered incentives for exports to Iran, the trade ministry announced, a step industry officials said on Tuesday could double the country's sales to sanctions-hit Tehran to $6 billion in the current fiscal year that began in April.Indian traders will now be allowed to turn around imports and sell them to Iran, as long as they have added at least 15 percent in value to the goods, the Directorate General of Foreign Trade, an arm of India's trade ministry, said on its Website."Accordingly, exports of such goods to Iran which have been imported against payment in freely convertible currency would be permitted against payment in Indian Rupees also, subject to at least 15 percent value addition," the notification said.India is a major importer of Iranian oil but United States and European Union sanctions, meant to discourage Tehran from pursuing its nuclear programme, aim to curb Iran's oil revenues and have made payments for the oil difficult.Tehran now has to keep New Delhi's payments in tightly-restricted rupees in an India-based account which can only be used to buy certain goods from India.New Delhi primarily exports rice, cereals, pharmaceutical products, machine tools, automobile parts and steel to Tehran, all of which are permitted under sanctions. The latest order widens the scope of potential exports.The increase in exports could make India a net exporter to Iran, which used to be its second-largest supplier of crude at a cost of over $12 billion a year before sanctions came in place."The move will benefit Indian exports and we can look forward for sizeable growth in India's exports to Iran in the current fiscal," M Rafeeque Ahmed, president of the Federation of Indian Export Organisations (FIEO), said in a statement.Ajai Sahai, FIEO's chief executive, said the incentives could double exports to Iran to $6 billion in 2013/14 from a year earlier.India's move comes within a week of the United States renewing six-month waivers on sanctions for India, China and seven other economies in exchange for their agreement to reduce purchases of oil from Iran.India shipped in about 266,000 barrels per day (bpd) of oil from Iran in the contract year ending March 31, 2013, down 26.5 percent from a year ago.