The Hindu Business Line : `Changes in foreign trade policy will help build common market'

New Delhi March 22 The forthcoming annual modifications to the Foreign Trade Policy (FTP) to be announced early next month will lay the groundwork for developing an India Economic Common Market by 2010 by ensuring seamless connectivity to trade and industry.

Disclosing this to Business Line here in an interview, the Commerce Secretary, Mr Gopal K Pillai, said India is a monetary union but it is not a common market. Now, it has value added tax (VAT) and in another three years, there would be a GST (Goods and Services Tax) and common entry tax. Once all these things are in place, an exporter operating from Ludhiana to send his goods to Mumbai should automatically be rid of so many paper works as the despatch of goods through different channels from factory to shipment would be seamless.

Once this is realised, as much as 5-10 per cent of transaction cost to exporters could be spared which is as good as a DEPB, a sort of duty remission granted to exporters.

Trade facilitation

Apart from ensuring this type of trade facilitation measures, the modifications to FTP would also take on board the concerns and issues raised by exporters at the Grievance Redressal Committee and Policy Review Committee in the course of the current year so that exporters need not come to the authorities time and again.

There would also be efforts to simplify transaction cost by going through the extant measures.

Alongside, Mr Pillai said, moves are afoot to provide a leg-up to self-help groups (SHG) producing such items like pappad or chutney or small handicraft items. So if an exporter is willing to try and assist the SHGs in upgrading standards and export these products, the policy proposes to provide some spurs to them.

He said the purpose is to scale up incremental exports and the incentive-recipients should be linked to the SHGs and not to merchant-exporters but manufacturer-exporters who are wiling to undertake this assistance.

In a bid to bring down transaction cost to trade and industry in terms of documentations and time entailed in such works, the proposed policy might address this, he said adding that bulk of the delay takes place not in Customs as is generally alleged but in banks where the exporters have to get a letter of credit opened or do other chores.

Asked about export finance at affordable rates to exporters when lending rates have hardened in recent days, he said the RBI guideline postulates that 15 per cent of credit should be earmarked for export finance. But in no year any commercial bank has met this target, as the average is only nine per cent of total credit purported to export and that too to some big exporters. That is why he said that the Commerce Ministry has taken up with the RBI and commercial banks the need to make sure that at least 7-8 per cent is earmarked for small and medium exporters as they constitute 60-70 per cent of the aggregate exports of the country.

To a query about persisting with DEPB for a couple of years, Mr Pillai admitted that the Hoda Committee has suggested extension of DEPB for three years with a six-month phase in as and when the new scheme to replace this comes in. He hoped that if the alternate scheme does not come in six months, it would definitely come in one year.

On the contestability of DEPB in the WTO by trade partners of India, Mr Pillai said that out of the 7,200 tariff lines in all, only 60 cases have come up from the EU and the US because it is a duty entitlement rather than a drawback.

Referring to the delay in evolving an alternate scheme, he said that while the Commerce Ministry said that service tax should be included for rebate, the Finance Ministry is not in favour. " While we want some of the State levies to be covered, the Finance Ministry asks us to consult with the State governments and ask them to refund and it is difficult to negotiate with as many States as we have. But the fundamental tenet of the Commerce Ministry continues be "you export goods and services and not taxes", Mr Pillai quipped.

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