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Market access fund likely for exporters

G. Srinivasan

NEW DELHI, March 25

THE 2001-02 Export-Import (Exim) Policy, to be unveiled on the last day of this month, is likely to be more in tune with WTO-compatibility by consolidating the process of rationalisation of the plethora of export promotion schemes, besides giving a decis ive push to reducing the high transaction costs.

Sources in the Government told Business Line here that a proposal to introduce a market access fund of substantial amount to help exporters find a niche abroad through brand promotion and holding of trade fairs and buyer-seller meets is also on the cards with the Plan panel favourably viewing this. Of late, incentives and other promotional measures for enhancing exports in the country are by and large export-friendly and compatible with the WTO framework. In the current year's Exim Policy announced on M arch 31, 2000, reduction in transaction cost through decentralisation, simplification of procedures, setting up of special economic zones (SEZs) were announced.

The various export promotion schemes in vogue aim at giving duty-free access to international quality raw materials, intermediates, components, consumables and capital goods required for export production.

The Duty Exemption Scheme allows duty-free import of inputs through the mechanism of advance licences. Those exporters who source their raw materials from the domestic market are given the facility of either duty drawback in cash or the facility to reple nish these inputs through imports under the Duty Entitlement Pass Book (DEPB) scheme and the Duty-Free Replenishment scheme.

The Export Promotion Capital Goods (EPCG) scheme permits import of capital goods at a concessional duty of 5 per cent for export production. Besides, there are special schemes for the gem and jewellery sector as also for the export-oriented units, the ex port processing zones and the SEZs.

The sources said all these schemes remain essential because of the restrictions on imports and the relatively high interest rate and customs and excise duty incidence in the country. It is to be noted that these schemes have made notable contribution to the promotion of exports with 80 per cent of the exports being routed through the duty exemption schemes for neutralisation of customs duty on imported raw materials.

Alternative schemes: Since the remaining import restrictions on 715 items are being removed from April 1, 2001, the sources said, the Government is seriously considering alternative export promotion schemes that would not be challenged by trading partner s in the WTO since blatantly subsidised export promotion schemes would be frowned upon. Hence, the forthcoming Exim Policy will try to consolidate the beginning already made in the current year's Exim Policy in this direction.

Though speculations were rife that the Government might also unveil a medium-term export strategy, it is stated that the existing five-year Exim Policy would be allowed to run its last year which is 2001-02.

However, some strategic steps towards unfurling a medium-term export policy to be effective from 2002-07 to be coterminus with the Tenth Plan would be announced, the sources hinted at. This would encompass examination of the import basket of India's majo r trading partners and commodity and country specificities for making a focussed foray abroad.

Import curbs: Asked about the outright removal of the lingering import curbs or quantitative restrictions on 715 items, the sources maintained that except for a specific group of items that have a bearing on safety and defence considerations, most of the items currently under QRs would be freed.

However, officials in the Department of Commerce aver that alongside the phased removal of import curbs, the Government has been implementing a conscious policy of adjustments in customs duties to give requisite protection to the domestic units.

``If the situation so demands, the Government would avail of the mechanism of raising the applied tariffs within the bound rates, if such a gap exists and take adequate measures such as anti-dumping action, imposition of counter-vailing duties and safegu ard actions which are all permissible under the WTO agreement'', the sources said.

DGFT role: To a specific query whether the Directorate General of Foreign Trade (DGFT) would be wound up with the removal of QRs and full freedom of import to domestic units, the sources said that the DGFT would not be discharging any licensing work but would be increasingly focussing on trade facilitation measures to ease exporters' hassles and whittle down their transaction costs.

These include, among others, progressive use of automated system to replace paper-based procedures, better coordination of controls between different government agencies, creation of more transparent, accessible data of members' import and export require ments for ease of trade.