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Foreign Trade Policy in India

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Foreign Trade Policy in India

The Foreign Trade Policy for 2009-14 has been announced amid the economic slowdown. The world is witnessing one of the most severe global recessions in the post-war period.

WTO estimates a decrease in global trade this year by 9%, while the IMF has projected a decline of over 11%. This global recession will lead 53 million more people fall into the poverty net this year. But fortunately India has not been much affected by this and has a quite stable economy in spite of decline in exports.

Important highlights of Policy are mentioned below:

Market and Production Diversification
  1. Focus Market Scheme added 26 new markets, which include 16 new markets in Latin America and 10 in Asia-Oceania.
  2. Incentives available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%.
  3. Incentives available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%.
  4. Market Linked Focus Product Scheme (MLFPS) has been expanded by including synthetic textile fabrics, textile made-ups, knitted and crocheted fabrics, auto components, motor cars, bicycle and its parts, and apparels.
  5. Engineering products, agricultural machinery, sewing machines, garden tools, musical instruments, clocks and watches, railway locomotives, Plastic, Jute and Sisal products, Technical Textiles, wind mills, wind turbines, electric operated vehicles, Project goods, vegetable textiles and certain Electronic items have been included for benefits under FPS.
  6. A common simplified application form has been introduced for taking benefits under FPS, FMS, MLFPS and VKGUY.
  7.  Higher allocation for Market Development Assistance (MDA) and Market Access Initiative (MAI) schemes is being provided.

Technological Up gradation

Export Promotion Capital Goods Scheme (EPCG) at Zero Duty has been introduced. This Scheme will be available only for apparel and textiles sector (subject to exclusions of current beneficiaries under Technological Upgradation Fund Scheme (TUFS) and beneficiaries of Status Holder Incentive Scheme in that particular year). The Scheme will continue till March 31, 2011.


EPCG Scheme
  1. Export obligation on import of spares, molds etc. under EPCG Scheme has been reduced to 50% of the normal specific export obligation to increase the life of existing plant and machinery.

  2. The re-fixation of Annual Average Export Obligation for a particular financial year has been extended to the 5 year Policy period 2009-14.

Status Holders

To accelerate exports and encourage technological upgradation, additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports for procurement of crude leather, textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals, automobiles & two wheelers, nuclear reactors & parts, and ships, boats, plastics and basic chemicals (excluding pharma products).  This facility will be available up to 31 March 2011.


DEPB/ECGC Cover
  1. Duty Entitlement Pass Book (DEPB) has been extended beyond till 31st December 2010 instead of 31st December 2009.
  2. DEPB rate will also include factoring of Customs Duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norms.
  3. The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95% to the adversely affected sectors, is continued till March 2010.

Marine sector
  •  Exemption of Fisheries from maintenance of average EO under EPCG Scheme would give boost to the marine sector.
  •  Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders has been given to Marine sector.

Gems & Jewelery Sector
  • Duty Drawback has been allowed to neutralize export duty incidence on gold Jewelery exports.
  • To make India a diamond international trading hub “Diamond Bourse (s)” has to be established.
  • Grading/ certification has been introduced to allow import on consignment basis of cut & polished diamonds.
  • To promote export of Gems & Jewelery products, the value limits of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage for export promotion tours, has also been increased from US$ 0.1 million to US$ 1 million.

Agriculture Sector
  •  A single window system has been introduced to facilitate export of perishable agricultural produce. The system will create multi-functional nodal agencies to be accredited by Arunachal Pradesh Energy Development Agency.

Leather Sector
  • Leather sector shall re-export of unsold imported raw hides and skins and semi finished leather from public bonded ware houses, on payment of 50% of the applicable export duty.

Tea
  • Minimum value addition under advance authorization scheme for export of tea has been reduced from the existing 100% to 50%.
  • Deferred tax assets (DTA) sale limit of instant tea by Export Oriented Units (EOU) units has been increased from the existing 30% to 50%.

Pharmaceutical Sector
  • Export Obligation Period for advance authorizations issued with 6-APA as input has been increased from the existing 6 months to 36 months, as is available for other products.

Handloom Sector
  • The requirement of ‘Handloom Mark’ has been removed for availing benefits under FPS.

EOUs

EOUs have been allowed to sell products manufactured by them in DTA up to a limit of 90% with the pre-existing criteria of similar goods, within the overall entitlement of 50% for DTA sale. EOUs can now acquire finished goods for integration with their manufactured goods.

Board of Approvals (BOA) will consider the extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs. EOUs will get CENVAT credit facility for the component of SAD and Education Cess on DTA sales.

Value Added Manufacturing

In order to encourage Value Added Manufactured export, 15% of value addition on imported inputs under Advance Authorization Scheme has been prescribed.

Waivers

Waiver of Incentives Recovery, on RBI specific Write off allowed. In cases, where RBI specifically writes off the export proceeds realization, the incentives under the FTP shall now not be recovered from the exporters subject to certain conditions.
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