CHAPTER - I FOREIGN TRADE POLICY: AN OVERALL APPRAISAL

Transcription

1 CHAPTER - I FOREIGN TRADE POLICY: AN OVERALL APPRAISAL

2 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL FOREIGN TRADE POLICY: AN OVERALL APPRAISAL 1.1 A comprehensive Foreign Trade Policy (FTP) for was announced on 31 st August, 2004 and its Annual Supplement for the year was released on 11 th April, Stability of Foreign Trade Policy regime (2004 onwards) and building confidence in trade and industry during the hours of difficulties in exports, have yielded very positive results. The basic objectives of the policy of doubling India s percentage share of Global merchandise exports and to use trade expansion as an effective instrument of economic growth and employment generation could be achieved within the last 4½ years itself. This accomplishment was despite the difficulties on exports due to depreciation of rupee in 2007 and hardship due to global financial crisis and economic slowdown since second half of Added to this difficulty, some of the inflationary measures undertaken also resulted in high cost of capital, ban / restriction on exports of certain products, withdrawal of duty neutralization and incentive scheme on these products etc also resulted to the hardship. A number of policy initiatives were taken in the Foreign Trade Policy (FTP) RE primarily to boost employment generation, particularly, in semi-urban and rural areas by way of incentivising export of employment oriented products, deepening the quantum of incentives for certain products, simplification of procedures and trade facilitation by way of enlarging the scope of e-commerce, thereby reducing transaction cost and time. In addition, Government has announced a number of rejuvenation packages in terms of making available liquidity at reduced interest rates, additional funds for incentivising the various sectors effected due to global slowdown, procedural simplification relating to financing and refund mechanism, clearance of backlog of refunds etc. These initiatives would definitely help in partially arresting the decline in exports. a) Focus Market Scheme: For offsetting high freight cost and other disabilities faced by Indian products in accessing international markets, a new Scheme, namely Focus Market Scheme had been launched w.e.f The Scheme ANNUAL REPORT

3 DIRECTORATE GENERAL OF FOREIGN TRADE allows exporters to get an incentive in the form of freely transferable duty credit 2.5% of the annual FOB value of exports of notified products, being exported to notified linked markets. The initiative aims at enhancing India s competitiveness for export to these identified focus markets (countries). In order to give further boost to this Scheme, 10 new markets have been notified in Appendix 37C of HBP Vol. I w.e.f and consequently made eligible for availing benefits under the Scheme. Thus, a total of 83 countries have been identified as Focus Markets. The short terms impact of the Scheme is evident from the increase in volume of exports to these notified countries. During the period April 2008 February 2009 a total of 3829 authorisations having CIF value of Rs.313/- crores and FOB value of Rs.16322/- crores have been issued under the scheme. b) Focus Product Scheme: Products originating from rural and semi-urban areas have high employment potential. These products, however, suffer from high inherent infrastructural bottlenecks and other associated costs involved in marketing of such products. To offset a portion of this unwarranted cost, a new Scheme, namely, Focus Product Scheme has been introduced w.e.f The Scheme allows exporters to get an incentive in the form of freely transferable duty credit of the annual FOB value of exports of notified products. Products/items identified so far for benefits under the Scheme are value added leather products and leather footwear; sports goods, fire works and stationery items; handicrafts items; handloom products; value added fish products and value added coir products. Further, to widen the product base under the Scheme, w.e.f , New Additional Focus Products, viz., Diesel engines upto 20 HP, nuts and bolts, parts of sewing machines, staples in strips and vacuum glass inners have been notified and made eligible for export of the annual FOB value of exports. In addition, to give boost to the export of high value added manufactured goods, additional export incentive in the form of duty credit scrip equivalent to 2.5% of FOB value of exports has been introduced for such products w.e.f So far, seven such products including bullet proof glass, crank shafts for engines, instruments and appliances used in medical, surgical, dental or veterinary sciences 2 ANNUAL REPORT

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5 DIRECTORATE GENERAL OF FOREIGN TRADE including scientigraphic apparatus, optical fibres, optical bundles and cables etc. have been notified for benefits w.e.f Moreover, in order to give further boost to the Scheme, toys and sports goods have been made entitled to higher duty credit scrip equivalent to 6.25% of FOB value, for exports made w.e.f. 1 st April, During the period April 2008 February 2009 a total of 5942 authorisations having CIF value of Rs.198 crores and FOB value of Rs crores have been issued under the scheme. c) Market Linked Focus Products: To give significant boost to market penetration of specific product in specified markets, a new variant of Focus Product Scheme called Market Linked Focus Products has been introduced from Presently, Auto components, Motor cars/motor cycles/ Chassis, Bicycles and their parts to specified markets have been notified for 1.25% of FOB value of exports. However, Special Products in this category, being exported to their linked markets, will be eligible for 2.5% of FOB value of exports. So far, apparels and clothing accessories being exported to Australia, Japan and Brazil have been notified as special products for benefits w.e.f d) High Tech Products Export Promotion Scheme: For boosting export of high technology product from India, a new Scheme, namely, High Tech Products Export Promotion Scheme has been introduced w.e.f Notified products are entitled for Duty Credit Scrip equivalent to 1.25% of FOB value of exports or 5% of incremental growth in FOB value of exports of notified products for current year over the previous year. So far, twelve such products like SIM cards, Memory cards, 3G standard cellular phones, Videophones, Hybrid integrated circuits, Solar/ Voltaic cells, etc. have been notified. e) Vishesh Krishi and Gram Udyog Yojna (Special Agriculture and Village Industry Scheme): Keeping in view the objective of Foreign Trade Policy to promote employment generation in rural and semi urban areas, Vishesh Krishi Upaj Yojna has been expanded to include export of Gram Udyog products, i.e., village and cottage industry products w.e.f The Scheme provides an incentive upon exports of identified products in the form of freely transferable duty credit 5% of FOB value of exports. To ensure that the products manufactured/processed out of domestic inputs are incentivised at a higher rate 4 ANNUAL REPORT

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8 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL in comparison to the imported inputs, duty credit has been reduced to 3.5% of the FOB value of exports in cases where the exporter avails the benefit under Duty Free import of Agriculture Inputs (other than catalysts, consumable and packing materials). In order to boost exports of flowers, fruits and vegetables etc. (as listed in Table 13 of Appendix 37A), these products shall be entitled to an additional duty credit scrip equivalent to 2.5% of FOB value of exports, over and above the 5%/3.5% VKGUY entitlement with effect from 1 st April, The list of Products eligible for benefits under this scheme is given in Appendix 37A. Under Focus Market Scheme, Focus Product Scheme, High Tech Products Export Promotion Scheme and Vishesh Krishi and Gram Udyog Yojna, the duty credit scrip can be used for import of all freely importable items (except items listed in Appendix 37B). Also, an exporter can avail of the benefit of only one of these four Schemes, under Chapter-3. During the period April 2008 February 2009 a total of authorisations having CIF value of Rs.2268/- crores and FOB value of Rs.62207/- crores have been issued under the scheme. f) Service Tax on Exports: Altogether 19 services linked to exports have been notified so far by Department of Revenue for refund in line with the announcement made by the Government. Certain clarification and amendment of the existing notifications, basically in the nature of correction/rectification related to refund have also been issued by Department of Revenue to facilitate quick refund. The Department of Commerce is concerned at the slow pace of refund and have been urging Department of Revenue(DOR) to expedite the refunds. 1.2 Package for Marine Sector: Marine Sector is treated as a thrust sector in Foreign Trade Policy under special focus initiatives. The facilities extended to Marine Sector are; Duty free import of specified specialized inputs/chemicals and flavouring oils is allowed to the extent of 1% of FOB value of preceding financial year s export To allow import of monofilament longline system for tune fishing at a concessional rate of duty and Bait fish for tune fishing at nil duty A self removal procedure for clearance of seafood waste is applicable subject to prescribed wastage norms. ANNUAL REPORT

9 DIRECTORATE GENERAL OF FOREIGN TRADE Specific marine products are considered for VKGUY scheme. 1.3 Package for Gems & Jewellery Sector: To make available the precious metal for Gems & Jewellery sector at any place in India even for small quantity, new agencies have been added in the list of nominated agencies for the purpose of direct import of precious metal. Additional nominated agencies are STCL Limited, Diamond India limited, MSTC Limited, Gems & Jewellery Export Promotion Council and Star Trading Houses (Only for Gems & Jewellery Sector) The facility of export on consignment basis has been extended to the export of coloured gemstones Surat Hira Bourse recognized as port of export for jewellery in addition to the existing facility for export of diamonds from the Bourse The time period for reimport of branded jewellery remaining unsold, has been extended to 180 days to 360 days Value of jewellery parcels through Foreign Post Offices, raised from US$ to US$ Import restrictions on work corals have been removed for the promotion of value added jewellery Value addition for Gems & Jewellery items reduced in line with the international trend of prices, to facilitate exports. 1.4 Duty Neutralisation Schemes: Developers and Codevelopers of Special Economic Zone have been allowed the benefit of DEPB even against payment in Indian Rupees for supplies received from DTA unit. 1.5 Advance Authorization : This Scheme has been one of the most popular and exporter friendly scheme. Parameters of this scheme have been modified as a matter of procedural simplification resulting into smooth operation of the scheme. A number of measures have been initiated during the current financial year Export Obligation Period, in general, has been extended from existing 24 months to 36 months without payment of composition fee in view of the difficulties being faced by exporters on account of global economic slowdown. 8 ANNUAL REPORT

10 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL Supply of an intermediate product by domestic supplier directly from their factory to the port against advance intermediate authorisation, for export by ultimate exporter, has been allowed In case of advance authorization for Annual Requirement where Standard Input Output Norms are not fixed, the provisions of in Customs Notification have been aligned with the Foreign Trade Policy Electronic Message Transfer facility for advance authorization would be available for shipments from EDI ports with effect from , thereby dispensing there requirement of submission of hardcopy of shipping bills for evidencing fulfillment of Export Obligation To facilitate export under Export Promotion Scheme from Additional ports, a few new ports have been included The Adhoc norms fixed so far by the different norms committee have been hosted at one place in DGFT web site for easy access to the exporters The procedure for closure of Quantity Based Advance Licences issued prior to streamlined. 1.6 Duty Free Import Authorisation Scheme(DFIA) : Availment of CENVAT facility and exemption from CVD from DFIA issues from to have been streamlined Revalidation of DFIAs allowed beyond the prescribed time limit in view of the delay in clearance at the port offices thereby facilitating its utilization by the exporters. 1.7 Duty Entitlement Pass Book Scheme (DEPB) : The availment of DEPB has been made easy by allowing the benefit under the scheme without waiting for realisation of export proceeds DEPB scheme shall continue to be operational till The DEPB rates for a large number of items which were reduced in November 2008 have been restored, thereby giving a relief to the exporters at the time of global slowdown and economical recession world over. ANNUAL REPORT

11 DIRECTORATE GENERAL OF FOREIGN TRADE DEPB scrips can now be utilized for payment of duty for clearance of import consignment of restricted items also. 1.8 Served from India Scheme: The objective of the Scheme is to accelerate the growth in export of services so as to create a powerful and unique Served from India brand, instantly recognized and respected the world over. During the period April February 2009 a total of 733 authorisations having CIF value of Rs.702/- crores have been issued under the scheme. 1.9 Export Promotion Capital Goods(EPCG) Scheme : The Scheme was initially introduced in the Import Export Policy with import facility of Capital Goods at a concessional rate of Customs 25%. The Scheme has since undergone many changes and presently provides a facility for import of capital goods, including spares now at a concessional duty of 3% Salient features of the (EPCG) Scheme : (i) (ii) (iii) (iv) (v) (vi) Import of Capital Goods for pre-production, production and post production including import of spares at 3% customs duty. An export obligation equivalent to 8 times of duty saved amount, with an export obligation period of 8 years. In case of Agro Units, the export obligation is equivalent to 6 times of duty saved on imported Capital Goods within a period of 12 years. In case of SSI Units, the E.O. is equivalent to 6 times duty saved over a period of 8 years provided the CIF of such Capital Goods does not exceed Rs.50 Lakhs and total investment in Plant and Machinery does not exceed the SSI limits. EPCG authorizations with a duty saved amount of Rs.100 crores or more, the export obligation is 12 years. Import of second hand capital goods is allowed without any age restrictions. (vii) Import of motor cars/sports utility vehicles/all purpose vehicles shall be 10 ANNUAL REPORT

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14 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL allowed only to hotels, travel agents, tour operators or to transport operators and companies owning/operating golf resorts whose total foreign exchange from their respective sectors in the current and preceding 3 licensing years is Rs.1.5 crores or more. (viii) Vehicles imported under EPCG Scheme is to be so registered that the vehicles is used for tourist purpose only. Parts of cars such as chassis cannot be imported under EPCG Scheme. (ix) An EPCG Authorization can also be issued for import of capital goods under the scheme for Project Imports notified by the Central Board of Excise and Customs under S.No. 441 of Customs Exemption Notification No. 21/2002 dated Export Obligation for such EPCG Authorization would be 8 times of duty saved. Duty saved would be difference between the effective duty under aforesaid Customs Notifications and concessional duty under the EPCG Scheme. (x) (xi) Common service providers designated/certified by DGFT in town of export excellence covered under EPCG Scheme. A person holding an EPCG License may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying CG to EPCG authorization holder shall be eligible for deemed export benefits under Para 8.3 of the Policy. (xii) EPCG Authorization may be issued to retail sector for import of capital goods required by the retailer having minimum area of 1000sq.m. to create modern infrastructure in the retail sector Board of Trade Board of Trade has a clear and dynamic role in advising the Government on issue connected with foreign trade. The Board has representation from various Export Promotion Councils and Commodity Boards including leading industrialists as members. The Board of Trade has since met four times and the last meeting was held in the month of March ANNUAL REPORT

15 DIRECTORATE GENERAL OF FOREIGN TRADE 1.11 Inter State Trade Council The Inter State Trade Council has been set up to ensure a continuous dialogue with State Government and union Territories in matters relating to Trade Facilitation. The Council inter alia advises the Government on measures for providing an international trade enabling environment in the States and to create a framework for making states partners in India s export efforts to achieve the objective of boosting India s Export. No meetings of the Inter State Trade Council have been held so far Export Oriented Units (EOUs)/Electronic Hardware Technology Park (EHTP)/Software Technology Park (STP)/ Biotechnology Park The EOU Scheme introduced in 1981, is complementary to the erstwhile EPZ scheme. It adopts the same production regime but offers a wider option in location with reference to factors like source of the raw materials, port of export, hinterland facilities, availability of technological skills, existence of industrial base, and the need for a larger area of land for the project. Under this scheme, the units undertaking to export their entire production of goods are allowed to be set up, except permissible sales in DTA as per Foreign Trade Policy. These units may be engaged in manufacture, services, development of software, agriculture including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisiculture, viticulture, poultry, and sericulture. No trading units are permitted under this scheme. Scheme extended till 31/03/ EOUs have been given a liberal package of incentives which includes the following fiscal benefits:- (a) (b) (c) (d) Duty free import of capital goods, raw material & components and consumables. Exemption from Central Excise duty and other levies on local purchase. Deemed export benefits for supplies from DTA. Reimbursement of Central Sales Tax paid on purchase of goods. (e) Income Tax holiday upto (Assessment year ) Cap on DTA sale of instant tea has been enhanced from 20% of FOB value of exports to 30%. 14 ANNUAL REPORT

16 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL BOA empowered to extend the block period of five years for calculation of NFE suitably, whenever due to prohibition/restriction, unit is unable to export and thus achieve positive NFE In case of import of spices (other than pepper, cardamon and chillies) for manufacture of spice oils and oleoresins, export obligation period of 12 months has been stipulated By amending Appendix 14-I-I, EOUs have been made eligible for reimbursement of CST paid on purchase from DTA irrespective of whether such goods are used for production of goods/services for export or used for goods sold in DTA The validity period of the notional rate certificate prescribed in Para of HBP v1 for export of jewellery has been increased from 3 working days to 7 working days For the EOU to continue under the Scheme on completion of approval period, it has to given an option within six months of expiry of approval period. Para of HBP v 1 has been amended to provide that when units exercise option to continue in the scheme belatedly, approval regarding extension will be given by BOA Deemed Exports Deemed Exports refer to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian Rupee or in free foreign exchange. Under the categories of deemed exports, supplies of goods manufactured in India are made to advance authorization holders, and holders of authorization under EPCG Scheme as also supplies to EOUs, Software/Hardware Technology Parks, Biotechnology Parks, large projects financed by multilateral/bilateral agencies/funds as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding procedures, supply of goods to any project where Ministry of Finance permits the import of such goods at zero-customs duty, supply of goods to fertilizer plants, power projects through competitive bidding, supply of marine freight containers by 100% EOUs and supply to projects funded by UN agencies, subject to eligibility criteria laid down in Foreign Trade Policy. ANNUAL REPORT

17 DIRECTORATE GENERAL OF FOREIGN TRADE The supplies under deemed exports are eligible for benefits of Advance Authorization, Deemed Export Duty Drawback, Refund of Terminal Excise Duty The Scheme of deemed exports provides an opportunity to indigenous manufacturers to supply their goods to projects and schemes at competitive price due to refunds of TED and Drawback. The Scheme is beneficial both to the indigenous manufacturers as well as the projects and agencies receiving goods manufactured in India ANF 8 has been modified to stipulate that excise attested invoices are necessary for refund of TED/duty drawback An alternative Bank Certificate has been added at the end of Appendix 22 B for EOUs for claiming deemed export benefits based on disclaimer certificate. This certificate which has to be produced along with domestic supplier certificate, provides for certification by EOU s bank as against the stipulation for DTA units of certification by Suppliers bank The time limit for claiming deemed export benefits has been enhanced from 6 months to 12 months from the date of payment. These claims can be filed invalidation Letter/ARO wise, against individual licenses, within the time limit as specified above. 100% TED refund will be allowed after 100% supply has been made physically and payment received upto 90%. Provision has been made in the current Foreign Trade Policy and Procedure that simple 6% per annum is payable in the case of delayed refund of Duty Drawback and TED under deemed export if the claim is not settled within 30 days after submission of complete application During the year (up to Jan 2009), a sum of Rs Cr has been released to various regional offices of DGFT for disbursement of Duty Drawback claims/ted Refunds The scheme has served the projects and agencies well and it has also helped enhance the manufacturing capacity of indigenous industry Trade Facilitation Measures: Duty free import of samples upto Rs. 100,000/- (Presently Rs. 75,000/-) has been allowed for all exporters. 16 ANNUAL REPORT

18 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL Requirement of double verification at customs dispensed with under EPCG and Advance Authorization scheme to reduce transaction time and cost. Now onwards, if required, random verification will be resorted to Application forms have been down-sized thereby reducing transaction time The word manufacturing is being clearly defined in the new Income Tax Code to ensure greater predictability and stability in determining direct tax liability of domestic manufacturers EDI Initiatives: Directorate General of Foreign Trade is also committed to simplify procedures relating to International Trade and to put in place an exporter friendly regime for obtaining import authorizations under various Export Promotion Schemes administered by it. The following EDI initiatives are being taken: Bring all the community partners dealing with international trade on an EDI enabled platform to reduce transaction costs Extend the online web enabled application procedure for issue of authorization to all categories of authorization Consolidate the message exchange system with Customs and extend its scope to cover all shipping Bills relating to different export promotion schemes Doing away with the manual double verification of the authorization system by way of online validation with the Customs Authority, initially at least for the ports having EDI facility Help Desk of DGFT has been in operation since August,2007 acting as an interface between the DGFT and the Trading Community. The Help Desk facilitates quick response to the queries raised by the Trading Community and attends to the resolution of technical difficulties in filing online applications as well as payments AMENDMENTS/CHANGES MADE IN ITEMWISE EXPORT POLICY DURING THE YEAR (AFTER ) (i) Edible Oil (a) Export of edible oils prohibited w. e. f ANNUAL REPORT

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20 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL (b) Export of edible oil from Domestic Tariff Area (DTA) to Special Economic Zone (SEZ) to be consumed by the SEZ units for manufacture of processed food products was allowed w. e. f. 19 th August, (c) With effect from 20 th November, 2008, export of edible oils is permitted in branded consumer packs of up to 5 Kgs, subject to a limit of 10,000 tons during the next one year up to 31 st October, 2009: Such exports shall be allowed only from Customs EDI Ports. Export of fish oil was also made freely exportable with effect from 20 th November, (ii) Rice (a) The export of non-basmati rice was completely prohibited vide Notification No.93 dated 1 st April, However, export of PUSA-1121 variety of non-basmati rice was allowed w. e. f With effect from 5 th November, 2008, PUSA-1121 variety of non-basmati rice was categorized as Basmati rice and it became exportable as basmati rice subject to MEP of US $ 1200 or Rs.54,000/- per ton FOB and other conditions. MEP of Basmati rice has been revised to US $ 1100 or Rs. 49,500/- per ton FOB vide Notification No. 83 dated Export of Basmati rice is allowed from six select ports only. (b) With effect from 19 th August, 2008, rice of seed quality, chemically treated and not fit for human consumption, was made freely exportable, subject to certain conditions. (iii) Pulses Export of pluses except Kabuli Channa prohibited till The ban has now been extended till 31/03/2010. (iv) Cement Export of cement was prohibited w. e. f , except exports to Nepal and exports through Gujarat ports. However, vide Notification No. 73 dated 19 th December, 2008, prohibition on export of cement has been lifted. (v) Maize (a) Export of maize was prohibited w. e. f till (b) With effect from 19 th August, 2008, maize of seed quality, chemically treated and not fit for human consumption, was also made freely exportable, subject to certain conditions. ANNUAL REPORT

21 DIRECTORATE GENERAL OF FOREIGN TRADE (vi) Wheat (a) Export of wheat and wheat products is prohibited. (b) Export of Durum wheat of seed quality, wheat of seed quality and Meslin of seed quality, chemically treated and not fit for human consumption, were made freely exportable, subject to certain conditions, with effect from AMENDMENTS/CHANGES MADE IN ITEMWISE IMPORT POLICY DURING THE YEAR (AFTER ) 1. The import of Betel nuts under Exim Code No (whole), (Split), (Ground), (other) have been allowed free provided cif vaue is Rs.35/- per kilogram and above.(notification No.15, dated ) The port restriction posed on the item vide Notification No. 49 dated have been withdrawn. 2. Import Licensing Note no.(2) inserted at the end of Chapter 25 vide Notification No.17, dated as amended from time to time has been amended to read as Import of marble will be subject to the conditions laid down in Policy Circular No. 12 dated , Policy Circular No.13, dated , Policy Circular No.20, dated , Policy Circular No.25, dated and Policy Circular No.28, dated (Notification No.35, dated ). 3. The import of items under Exim codes (Tiles, cubes, powder), (Marble blocks/tiles), (Marble monumental block), ( marble, Travertine & Alabaster) have been freely permitted provided cif value is US $ 50 and above per square metre except in the case of import of the product from Nepal. However, this exemption has been made applicable only on such imports, which have been processed/ manufactured out of marble mined in Nepal. This facility has not been made available on products which have been manufactured/processed in Nepal using imported marble.(notification No. 50, dated ). 4. The policy conditions of the items under Exim Codes viz (other), (other calcareous stone), ( marble, Travertine & Alabaster) and 6802, 9200 (other calcareous stone) have been amended allowing free import provided cif value is US $ 50 and above per square metre.(notification No.18, dated 30 th June,2008). 20 ANNUAL REPORT

22 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL 5. The import of rough diamond(hs Code , and ) from/to Venezuela has been prohibited in view of voluntary withdrawal of Venezuela from the Kimberley Process Certification Scheme(KPCS). No Kimberley Process Certificate shall be accepted/endorsed/issued for import and export of rough diamonds from/to Venezuela.(Notification No.65, dated ). 6. Import of rough/unprocessed blocks and slabs of agglomerated artificial stones have been restricted. Import of processed tiles/slabs of agglomerated/artificial stones have been permitted freely provided cif value is US $ 50 and above per square meter.(notification No. 77, dated ). Their import has been allowed subject to the conditions laid down in Policy Circular No. 34, dated and Policy Circular No.35, dated (Notification NO. 47, dated ). 7. The import from China of Dairy Products including milk and milk products under Chapter 4 of Schedule-I of ITC(HS) Classifications of Export and Import items has been prohibited upto with immediate effect and until further orders without allowing transitional arrangements to the importers.(notification No. 46, dated and Notification No. 67, dated ). 8. Import of Security Printing Paper has been allowed without a licence by India Security Press, Nasik and Security Paper Press, Hyderabad subject to actual user condition on specific letter of approval from Ministry of Finance(Deptt. of Economic Affairs). ( Notification NO. 49, dated ). 9. The existing Import Licensing Note (7) of Chapter 87 has been amended to read as Import of new vehicles having an FOB value of US $ 40,000 or more and engine capacity of more than 3000cc for petrol run vehicle and more than 2500cc for diesel run vehicles have been exempted from policy provision of Import Licensing Note No. 2(II)(a)(iv) under Chapter 87 which stipulates that vehicle shall be imported from the country of manufacture. The import of new vehicles have been permitted only through the Customs port at Nhava Sheva, Kolkata, Chennai, Cochine, ICD-Tughlakabad and Delhi Air Cargo, Mumbai Port( Notification No. 74, dated ). 10. Import of Hot Rolled Coils under 4 digit Exim Code 7208 has been restricted (instead of free ). Import policy for the items covered under ANNUAL REPORT

23 DIRECTORATE GENERAL OF FOREIGN TRADE Exim Codes No has been restricted ( instead of free ).(Notification No. 63, dated ). 11. The import policy for the items covered under Exim Code No have been restricted (instead of Free).(Notification No.64, dated ) 12. The import of chocolates and chocolate products and candies/ confectionary/food preparations with milk or milk solids as an ingredient has been prohibited from China for six months with immediate effect and until further orders without allowing transitional arrangements (Notification No. 67, dated ). 13. Import of Toys from China appearing under ITC Codes 9501, 9501, 9503 of Schedule-I of ITC(HS) Classifications of Export and Import Items have been prohibited for six months with immediate effect and until further orders.(notification No. 82, dated ). Subsequently, Import of Chinese Toys which meet specifications as specified have been allowed vide Notification No. 91 dated 02/03/ Trends of authorisations issued under Export Promotion & Duty Neutralization Schemes of Foreign Trade Policy during the period.april - February 2009 In order to promote exports, various exports promotion schemes such as Duty Exemption / Remission Schemes, Export Promotion Capital Goods Schemes, etc. are being offered by the Government to the exporters and to be competitive in the international market, as it is important to have technologically developed capital goods, internationally competitive inputs, etc., to ensure attaining all these objectives within the given time frame, Directorate General of Foreign Trade (DGFT) issue various types of authorizations under various export promotion schemes through its 35 regional offices across India. The growth and performances of various schemes are being described in the ensuing sections in greater detail All India Scenario: To understand the performances of export promotion schemes, Directorate General of Foreign Trade (DGFT) brings out annually a publication viz; Abstract 22 ANNUAL REPORT

24 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL of approvals depicting trends on authorization issued under various export promotion and duty neutralization schemes under Foreign Trade Policy by different Port Offices. During the period April-February,2009, a total of 1,72,603 import authorizations valuing Rs. 1,41,214 Crores(CIF) were issued. Of these 1,02,143 authorisations valuing Rs. 6,915 Crores as duty credit were issued under DEPB scheme and the remaining 70,460 authorisations valuing Rs. 1,34,299 Crores as CIF were issued under schemes other than DEPB. During the same period of last year, a total of 1,40,829 import authorizations valuing Rs. 1,61,065 Crores (CIF) were issued, of which 83,424 authorisations valuing Rs. 4,861 Crores as duty credit were issued under DEPB Scheme and the remaining 57,405 authorisations valuing Rs. 1,56,204 Crores as CIF were issued under schemes other than DEPB. This represents an increase of 23 percent in numbers and decline of 12 percent in the value during April-February, 2009 over the same period of last year. (Ref. Appendix-I) Office- wise licensing activities: Office-wise licensing statistics for the period April-February,2009 indicate that ten major offices namely Mumbai, CLA New Delhi, Chennai, Kolkata, Ahmedabad, Ludhiana, Bangalore, Coimbatore, Pune and Hyderabad issued 1,33,112 authorizations valuing Rs. 1,10,623 Crores as CIF/duty credit; thereby accounting for a contribution to the extent of 77 per cent in numbers and 78 per cent in terms of value. These offices issued a total of 83,896 DEPB authorizations having duty credit of Rs. 5,549 Crores. In terms of number of DEPB and duty credit, their share amounted to 82 and 80 per cent respectively during April -February Mumbai alone issued 50,514 authorizations valuing Rs. 49,748 Crores as CIF and remained at the top of all Port Offices in terms of issuance. Mumbai, also attained the top position amongst all Port Offices by issuing 34,158 DEPB authorisations having duty credit of Rs. 2,209 Crores. CLA, New Delhi by issuing a total of 22,909 authorisations having CIF value of Rs 25,678 Crores remained at the second position. (Ref. Appendix-IX) ANNUAL REPORT

25 DIRECTORATE GENERAL OF FOREIGN TRADE Category wise licensing scenario: i) Advance Authorisation: An Advance authorization granted to the exporter entitles him to import required inputs for export production without payment of customs duty subject to export obligation to be completed within prescribed time. This scheme reduces the burden of customs duties on the inputs and thereby facilitates cost-competitiveness. Advance authorizations are issued on the basis of the inputs and export items given under SION. During April-February 2009, Advance authorizations numbering 17,816 and valuing Rs.1,00,251 Crores (CIF) and Rs. 1,27,202 Crores as Export Obligation(FOB) were issued by different port offices of DGFT. On comparing with the previous year s statistics, there is a negative growth of 20 percent in number and 20 percent in the CIF value. ii) Duty Entitlement Pass Book Scheme (DEPB): DEPB is towards neutralization of basic customs duty on the inputs. DEPB, per se, is duty credit instrument and therefore allows import of any permissible input irrespective of the fact whether the same input has been utilized in the export product or not. DEPB is, therefore, more flexible in nature. DEPB is a transferable instrument and easy to operate which makes it more popular among the exporters, which is evident from the fact that about 59 percent of total authorization issued are from this category. During the period April-February,2009, 1, DEPB authorisations having duty credit of Rs. 6,915 Crore were issued which registered a growth of 22 percent in number and 42 percent in duty credit. iii) Duty Free Replenishment Certificate (DFRC): DFRC is one of the subcategories of Duty Remission Scheme. DFRC offers imports of inputs already consumed in exports by way of replenishment without payment of basic customs duty. However, such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import. During the period under reference, only 67 authorisations valuing Rs. 26 Crores were issued for which an Export obligation of Rs.38 Crores was fixed. Whereas, during the same period of last year, 748 authorizations having Rs. 255 crores as CIF and Rs. 386 crores as export obligation were 24 ANNUAL REPORT

26 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL issued. The decline in issuance as well as in value is due to the fact that the scheme has been withdrawn w.e.f and a new scheme namely; DFIA, has been launched in its place. iv) EPCG Authorization: The scheme allows import of capital goods for pre-production, production and post-production at 3% customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of authorization. The main purpose of this scheme is to help modernization of the industry by offering duty concessions and binding the exporter to earn foreign exchange by way of fulfillment of export obligation on the authorization. During the period, 18,304 EPCG authorizations were issued for a value of Rs. 15,855 Crores (CIF) and Rs. 1,28,841 Crores as export obligation. An increase of 3 per cent in numbers and 9 per cent in terms of value is found when compared with the corresponding period of last year. v) Duty free Import Authorisation: This scheme was launched from May, 2006, which offers the facility of duty free imports for exports and allows the facility of transferability of scrip or the imported inputs once the export obligation is complete. This has resulted in flexibility to the exporters to use or dispose off the inputs, thereby getting back the duty component incurred on them. The scheme has been an instant success amongst the exporters. During the period, 3,583 authorisations having CIF value of Rs. 7,471 crores and FOB value of Rs. 10,064 Crores were issued under the Scheme. vi) Served from India Scheme (SFIS): The objective of the scheme is to accelerate the growth in export of services so as to create a powerful and unique served from India brand, instantly recognized and respected world over. This is also one of the sub-categories of Duty Remission Scheme. During the period under reference, 733 authorisations valuing Rs. 702 Crores were issued under this scheme. vii) Diamond, Gem & Jewellery Export Promotion Scheme: Exporters of gems and jewellery can import/procure duty free inputs required for manufacturing of gems and jewellery items under this scheme. ANNUAL REPORT

27 DIRECTORATE GENERAL OF FOREIGN TRADE During the period, only 50 authorisation valuing Rs. 11 Crores and export obligation to the tune of Rs 226 Crores were issued. When compared with the previous year, there is a decline of 24 percent in numbers and 41 percent in value. viii) Negative list of import items: During the reference period, 1,031 authorisations for negative lists of import items valuing Rs. 6,634 Crores were issued, which represents an increase of 34 percent in numbers and 40 percent in terms of value respectively over the corresponding period of last year. ix) Target plus scheme: The objective of the scheme is to accelerate growth in exports by rewarding star export houses who have achieved a quantum growth in exports, substantially higher than the general annual export target fixed. During the reference period a total of 461 authorisations having CIF value of Rs.322 Crores were issued, while during same period of last year1,180 authorisations having CIF value of Rs. 777 were issued. x) Vishesh Krishi and Gram Udyog Yojna : The objective of the scheme is to promote export of fruits, vegetables, flowers, minor forest products, dairy, poultry and their value added products, by giving incentives to exporters of such products. Under the scheme, 18,541 authorisations having CIF value of Rs. 2,268 Crores were issued during the reference period, whereas 7,971 authorisations having CIF value of Rs. 494 crores were issued during the corresponding period of last year. (Ref. Appendix-I) Product wise licensing scenario: The product wise trends of import authorizations issued under different Export Promotion schemes for the period April-February, 2008 & 2009 are reflected in Appendices-IV & VI respectively. Out of the total 1,72,603 import authorizations, 39,526 authorizations (23 percent share) were pertaining to Engineering products followed by Chemical & allied products 35,250 (20 percent share), Textiles General - 24,078 (14 percent share), Miscellaneous products -17,866 (10 percent share) and Plastics - 8,872 (5 percent share). 26 ANNUAL REPORT

28 FOREIGN TRADE POLICY: AN OVERALL APPRAISAL Out of the total CIF/duty credit of Rs.1,41,214 crores, Rs.62,259 crores pertained to Engineering products followed by Chemical & allied products (Rs.45,614 crores), Plastics (Rs.9,038 crores) and Textiles General (Rs.5,148 crores). The export obligation/fob against all import authorisations was fixed as Rs. 5,10,550 Crores during the period under reference. Of which Rs. 1,89,685 crores pertained to Engineering products followed by Chemical & allied products (Rs.96,244 crores), Textiles General (Rs. 30,288 crores) and Plastics (Rs.16,874 crores). The following charts depict a visually comprehensible licensing scenario during the period under reference: 1 Comparative picture of Authorisations issued during April-February, 2008 & April-February, Comparative picture of value of Authorisations issued during April- February, 2008 & April-February, Percentage share of Authorisations issued by category during April- February, Percentage share of value of Authorisations issued by category during April-February, Percentage share of Authorisations issued by Top Ten RLAs during April- February, Percentage share of value of Authorisations issued by Top Ten RA s during April-February, ANNUAL REPORT

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46 CHAPTER - II WORLD ECONOMIC & TRADE OUTLOOK AND INDIA s TRADE PERFORMANCE

47 WORLD ECONOMIC & TRADE OUTLOOK AND INDIA'S TRADE PERFORMANCE WORLD ECONOMIC & TRADE OUTLOOK AND INDIA's TRADE PERFORMANCE 2.1Global Scenario: International Monetary Fund (IMF) in its latest report of World Economic Outlook Update January 2009, stated that the world economy is now entering a major downturn in the face of the dangerous shock in nature financial markets since the 1930s. Against an exceptionally uncertain background, global growth projections for 2009 have been marked down to 0.5 percent, the slowest pace since World War II, and the outlook is subject to considerable downside risks. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. A sustained economic recovery will not be possible until the financial sector s functionality is restored and credit markets are unclogged. ANNUAL REPORT

48 DIRECTORATE GENERAL OF FOREIGN TRADE Global Economic Environment: Global growth in 2009 is expected to fall to ½ percent when measured in terms of purchasing power parity and to turn negative when measured in terms of market exchange rates. This represents a downward revision of about 1¾ percentage point from the November 2008 WEO Update. Helped by continued efforts to ease credit strains as well as expansionary fiscal and monetary policies, the global economy is projected to experience a gradual recovery in 2010, with growth picking up to 3 percent. However, the outlook is highly uncertain, and the timing and pace of the recovery depend critically on strong policy actions Advanced economies will suffer deep recessions in G-7 economies are expected to experience the sharpest contraction for these countries as a group in the post-war period by a significant margin. With negative momentum, and the limited effect of policy actions to lift uncertainty or address financial strains to date, the adverse macro-financial loops have intensified, and prospects for recovery before mid-2010 are receding In the United States, the contraction in activity in 2009 is expected to push up the output gap to levels not seen since the early 1980s. Assuming that financial market conditions improve relatively rapidly in the second half of 2009, based on the implementation of a detailed and convincing plan for rehabilitating the financial sector, as well as continued policy support to bolster domestic demand, growth is expected to turn positive in the course of the third quarter of In the euro area, the decline in activity in 2009 reflects a sharp collapse in external demand, the impact of housing market corrections in some member states (which began later than in the U.S.), and an intensification of financing constraints. The impact of falling external demand has been larger and policy stimulus more moderate than in the United States, though automatic stabilizers are somewhat larger in the euro area In Japan, the sharp fall in output reflects plunging net exports and business investment and faltering private consumption. The financial sector - though not at the epicenter of the crisis - is also suffering ill effects, weighing upon growth prospects In emerging and developing economies, as well as in low-income economies, growth will continue to be impeded by financing constraints, lower commodity 46 ANNUAL REPORT

49 WORLD ECONOMIC & TRADE OUTLOOK AND INDIA'S TRADE PERFORMANCE prices, weak external demand, and associated spillovers to domestic demand. Activity is expected to expand only weakly in 2009 before recovering gradually in Some economic will suffer serious setbacks Central and Eastern Europe (CEE) and the Commonwealth of Independent States are being the most adversely affected. The global financial disruptions have severely affected the CEE region in particular, given the region s large current account deficits. Several countries are facing a sharp contraction in capital inflows, with those suffering the greatest damage having sizeable fiscal or external deficits (Baltic countries, Hungary, Croatia, Romania and Bulgaria) In Latin America, tight financial conditions and weaker external demand are a drag on growth in the region, with growth in Brazil decelerating sharply and Mexico projected to enter a recession Emerging Asia is being hurt through its reliance on manufacturing exports. The region s manufacturing activity has been particularly hurt by collapsing IT exports. Growth in China is also slowing, albeit from a high rate (13 percent in 2007), and domestic demand is being supported by strong policy stimulus In Africa and the Middle East, growth is also projected to slow, but more modestly than in other regions. In Africa, growth is expected to moderate particularly in commodity exporting countries, and several countries are experiencing reduced demand for their exports, lower remittances, and foreign direct investment (FDI), while aid flows are under threat. In the Middle East, the effects of the financial crisis have been more limited so far. Despite the sharp drop in oil prices, government spending is largely being sustained to cushion the toll on economic activity Notwithstanding a significant downward revision to the forecast, downside risks continue to dominate. The overarching risk is that further delays in implementing policies to stabilise financial conditions will inevitably lead to an intensification of the negative feedback loops between the real economy and the financial system. A further deterioration in the financial strength of banks in advanced economies due to mounting losses could propel a deeper and longer downturn, producing a more severe credit crunch affecting real ANNUAL REPORT