Chapter 3JL XCxldLr Jli -/Wj Xv at? tLlVJLjtLl i X &

ANDEXPORT PROMOTION

MEASURES

Chapter 3

TRADE AGREEMENTS AND EXPORT PROMOTION

MEASURES

This chapter provides an overview o f India’s engagement in trade agreemenst

and regional trading blocks, changes in trade policy o f India in the context o f

latest policy measures. It also examines the specific schemes and incentives for

promotion o f export trade from North East India.

3.1 INDIA’S ENGAGEMENT IN TRADE AGREEMENTS

AND REGIONAL TRADING BLOCKS :

There has been a fast rise in the number of regional trade blocs around the globe

as a result of the willingness on part of countries to enhance and foster trade

relationship with neighbouring nations. Countries are also transcending physical

geographical borders to rapidly enter into trade relations with distant partners as

well. India’s endeavour to foster its international trade has been well

complemented by its efforts to promote regional trade. Target countries in India’s

regional trade initiatives cover various regions of the world. In Asia, India made a

foray in Regional Trade Agreements (RTAs) with a Free Trade Agreement (FTA)

with Sri Lanka in 1998. This was followed by a Comprehensive Economic

Cooperation Agreement (CECA) with Singapore; a Preferential Trade Agreement

(PTA) / FTA with South Asian Association for Regional Cooperation (SAARC)

members and with the members of Bay of Bengal Initiative for Multi-Sectoral

Technical and Economic Cooperation (BIMSTEC); a framework agreement for

FTA with Thailand and a framework agreement for CECA with Association of

South East Asian Nations (ASEAN). These initiatives form an integral part of

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India’s ‘Look-East Policy’, which took off in the early 1990s with India entering

into a sectoral dialogue partnership with the ASEAN in 1992. But, the policy has

gained substantial momentum only in recent years and has started yielding

desirable results on the economic, political and strategic fronts. India is seriously

pursuing negotiations also to establish RTAs with other developing countries

located elsewhere. It has in place a PTA with MERCOSUR and with Chile; a

framework agreement for FTA with the Gulf Cooperation Council (GCC) and a

PTA with South African Customs Union (SACU). With the establishment of Joint

Study Groups (JSGs), India has initiated negotiations with a number of countries

like Korea, China, Japan, Russia, Malaysia and Indonesia. It has established JSGs

with Mauritius and Israel too to explore possibility of FTAs. Engagement in

regional trade agreements has had a significant effect over the past decade on

India’s trade performance with its partner nations.

The following section provides an overview of India’s bilateral engagements with

a number of countries and trade blocs across the globe.

3.1.1 INDIA’S ENGAGEMENTS IN RTAs IN ASIA

3.1.1.1 India-Sri Lanka Free Trade Agreem ent:

Bilateral trade between India and Sri Lanka is regulated by the India-Sri Lanka

Free Trade Agreement (ISLFTA) entered into in December 1998, and operational

with effect from March 2000. Under this agreement, both countries are committed

to the elimination of tariffs in a phased manner. India has already completed its

commitment of reducing its duty to zero in March 2003, except for 429 items

appearing in the negative list. Sri Lanka would do the same by 2008. Both sides

are now negotiating on not only trade in goods but also on trade in services and

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economic cooperation. Negotiations are being held to expand the FTA and

broaden it into a Comprehensive Economic Partnership Agreement (CEPA).

3.1.1.2 Comprehensive Economic Cooperation Agreement

(CECA) between India and Singapore :

After establishment of the JSG in 2002, the CECA between India and Singapore

was signed on June, 29, 2005, and has become operational with effect from

August 1, 2005. The objectives of the agreement are to strengthen and enhance

the economic, trade and investment cooperation, to liberalise and promote trade in

goods and services, to enhance competitiveness in manufacturing and service

sectors, explore new areas of economic cooperation and facilitate and enhance

regional economic cooperation and integration.

3.1.1.3 Comprehensive Economic Cooperation between

ASEAN and India :

India’s engagement with Association of South East Asian Nations (ASEAN)

began with its ‘Look-East Policy’ in the early 1990s. India became a Sectoral

Dialogue Partner of ASEAN in 1992 and Full Dialogue Partner in 1996. In

November 2001, the ASEAN-India relationship was upgraded to the summit

level. The first ASEAN Economic Ministers (AEM) - India Consultations were

held in 2002, where it was decided to establish an ASEAN-India Economic

Linkages Task Force (AIELTF) to prepare a draft Framework Agreement to

enhance the ASEAN-India trade and economic cooperation. During the first

ASEAN-India Summit held in November 2002, India agreed to extend special and

differential trade treatment to ASEAN countries, based on their levels of

development to improve their market access to India and enter into a free trade

agreement with ASEAN.

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In October 2003, a framework agreement on Comprehensive Economic

Cooperation between ASEAN and India, covering FTA in goods, services and

investment, as well as areas of economic cooperation was signed during the

second ASEAN - India Summit in Indonesia. The objectives of the agreement

were to be fulfilled through progressive liberalization focused in developing

appropriate measures for closer economic cooperation in new areas, facilitating

effective economic integration of the new ASEAN Member States and bridging

the development gap among the parties. The agreement also provided for an Early

Harvest Programme (EHP), that covers areas of economic cooperation and a

common list of items for exchange under tariff concessions as a confidence

building measure.

The ASEAN-India Trade Negotiating Committee (TNC) is undertaking

negotiations for a CECA to establish an ASEAN-India Regional Trade and

Investment Area (RTIA), which includes a free trade area in goods, services and

investment. However, due to difference of opinion on Rules of Origin, the EHP,

agreed under the Framework Agreement on goods could not be implemented. A

new time frame for FTA in goods has been agreed. Agreement has been reached

on the Rules of Origin. The TNC is now negotiating the sensitive lists, modalities

for tariff reduction and elimination. It was also agreed that, India shall continue to

accord Most-Favoured Nation (MFN) Treatment consistent with World Trade

Organisation (WTO) rules and disciplines to all the non-WTO ASEAN Member

States on signing of this agreement.

3.1.1.4 Framework Agreement for Establishing FTA between

India and Thailand:

A Framework Agreement for establishing a FTA between India and Thailand was

signed on October 9, 2003, in Bangkok, Thailand. It covers FTA in goods,

services and investment and areas of economic cooperation. The Framework

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Agreement also provides for an Early Harvest Scheme (EHS) under which 82

common items of export which are of interest to both sides have been agreed for

elimination of tariffs on a fast track basis.

India-Thailand TNC has been constituted and discussions are being held on the

text of FTA, Rules of Origin, Dispute Settlement Mechanism and Sensitive List.

There have been a number of rounds of negotiations for FTA in goods so far; but

due to difference of opinion on certain issues, the deadline prescribed in

framework agreement for FTA in goods, of March 2005, could not be met.

Negotiations for FTA in services and investment have also begun. A meet on the

India-Thailand TNC was held in Chiang Mai in January 2006. While negotiations

on goods are at an advanced stage, talks on services are at initial phases.

However, due to some persisting differences over the range of goods to be

covered, the deadline could not be met. In recent negotiations, Thailand has been

insisting on completing talks on goods and then move on to services and

investments, contrary to India’s stand to negotiate all the three areas at the same

time resulting delay in negotiations.

3.1.1.5 Agreement on India-Bhutan Trade and Commerce :

The basic framework of India - Bhutan bilateral relation is the Treaty of

Friendship and Cooperation of 1949 between the two countries. Bilateral political

relations with Bhutan have matured over the years and are characterised by close

trust, understanding and extensive cooperation in the field of economic

development. The Indo-Bhutan Trade and Commerce Agreement that was

concluded in 1972 is periodically renewed, incorporating mutually agreed

modifications. The current agreement on Trade, Commerce and Transit was

renewed on 28th July 2006 for a period of 10 years. A free trade regime exists

between India and Bhutan. Currently, the major items of imports from Bhutan to

India are electricity (from Chukha and Kurichu Hydroelectric Project), cement,

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timber, wood products, minerals, cardamom, fruit products, potatoes, oranges,

apples, raw silk and alcoholic beverages. Major exports from India to Bhutan are

petroleum products, rice, automobiles & spares, machinery and fabrics. The

Agreement on Trade and Commerce also provides for duty free transit of

Bhutanese merchandise for trade with third world nations.

3.1.1.6 Trade Agreement between India and Bangladesh :

Agreement on Indo-Bangladesh trade was first signed on 28th March 1972 and

subsequently renewed thereafter with amendments intended for enlarging the

areas of mutual co-operation and to strengthen the economic relation between the

two countries. India had also entered into a bilateral agreement with Bangladesh

in 1980 for a period of three years, which was periodically renewed by mutual

consent. An amended Trade Agreement was signed in March 2006 that is valid till

March 2009. This agreement primarily focuses on expansion of trade and

economic cooperation, building a mutually beneficial arrangement for the use of

waterways, railways and roadways, exchange of business and trade delegations

and consultation to review working of the agreement at least once a year. The

bilateral trade between India and Bangladesh is carried out as per Indo-

Bangladesh Trade Agreement that provides for the MEN treatment accorded to

goods and services of both the countries.

3.1.1.7 Trade Agreement between India and Myanmar :

Way back in 1970, India signed a trade agreement with Myanmar that provided

for MFN Status to each other. The present Indo - Myanmar Border Trade

Agreement was signed on 21st January 1994 for having a congenial trade practice

between the two countries. Unlike other land border, as per the Indo-Myanmar

Trade Agreements a three-tier system of trade was introduced. These are

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(i) Traditional exchange of locally produced items up to US $ 1000

between indigenous people residing up to 40 km on either side of the

border under simplified documentation without GR (Guaranteed

Receipt) formalities;

(ii) Barter trade of 22 agreed upon exchangeable items up to US $ 20,000

with GR formalities as per DGFT Import Export Code (IEC) allotted.

The 22 items that can be traded are locally produced commodities

mainly agricultural produce and minor forest products as mustard /

rape seed, pulses and beans, fresh vegetables, fruits, garlic, onion,

chilies, spice (excluding nutmeg, cloves, mace, cassia and cinnamon),

bamboo, minor forest products (excluding teak), betel nuts and leaves,

food items for local consumption, tobacco, tomato, reed broom,

sesame, resin, coriander seeds, soyabean, roasted sunflower seeds,

katha and ginger;

(iii) Normal trade under the Letter of Credit as per Foreign Policy

guidelines.

The major official imports from Myanmar now consists of pulses, wood and

wood products, fruits and nuts. In return India primarly exports cement, glass and

glassware, cycle, drugs and pharmaceuticals, auto parts and accessories, iron and

steel bars, primary and semi-finished iron and steel and cotton yam. In short,

Myanmar mainly exports agro-forest based products and imports manufacturing

goods. In spite of having long trade relations, India had failed to create any

sizeable market for her exportable in Myanmar. In fact, India is having persistent

deficit trade balance with Myanmar in most of the years since Independence. The

usual explanation is that the restrictive import policy of Myanmar Government

has been the prime cause of India’s poor export performance.

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3.1.1.8 India-Nepal Treaty of Trade :

India-Nepal bilateral treaty of trade was in force for a period of five years with\

effect from March 2002. With expiry of the treaty in March 2007 after a five-year

period of agreement, both Governments of Nepal and India further extended the

Treaty. The current Treaty was renewed in January 2006 and would be in force

for a period of seven years up to 2013. This Treaty provides for free movement of

traffic-in-transit across territories of each other through mutually agreed routes for

trade with third countries subject to taking measures to ensure that this does not

infringe legitimate interests/ security interests of each other. Traffic in transit is

exempted from customs/ all transit duties. India has allowed 15 transit routes to

Nepal but so far not availed of this facility from Nepal.

India and Nepal have also signed an Agreement of Cooperation to Control

Unauthorized Trade. Its main objective is to check illegal trade (smuggling)

between the two countries. This agreement has been renewed in 2007 in its

present form. Both countries have also established a forum known as Inter-

Govemmental Committee to address the problems relating to bilateral trade,

transit facilities and prevention of unauthorized trade.

3.1.1.9 India-Afghanistan Preferential Trade Agreement:

The bilateral trade between India and Afghanistan is regulated by the India-

Afghanistan Preferential Trade Agreement signed between India and Afghanistan

on March 6, 2003 in New Delhi, which promotes harmonious development of

economic relations and free movement of goods through reduction of tariffs

between the two nations. By this agreement, preferential tariff is granted by the

Government of Afghanistan to 8 items from India including tea, medicines,

refined sugar, cement clinkers and white cement. India has granted preferential

tariff to 38 products from Afghanistan including raisins, dry fruit, fresh fruits and

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spices. The agreement would remain in force till either party wishes to terminate

it through notification.

3.1.1.10 South Asian Association for Regional Cooperation

(SAARC) :

The South Asian Association for Regional Cooperation (SAARC) was established

when its Charter was formally adopted on 8 December 1985 by the Government

of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and SriLanka. The

Association provides a platform for die people of South Asia to work together in a

spirit of friendship, trust and understanding. It aims to promote welfare of the

people and to improve their quality of life through accelerated economic growth,

social progress and cultural development in the region. Regional cooperation is

seen as a complement to the bilateral and multilateral relations of SAARC

Member States.

3.1.1.11 South Asian Preferential Trade Arrangement

(SAPTA) :

The Sixth Summit held in Colombo in December 1991, members of SAARC

countries approved the establishment of an Inter-Governmental Group (IGG) to

formulate an agreement to establish a South Asian Preferential Arrangement

(SAPTA) by 1997. Given the consensus within SAARC, the Agreement was

signed on 11 April 1993 and entered into force on 7 December 1995 well in

advance of the date stipulated by the Colombo Summit. It reflected desire of the

Member States to promote and sustain mutual trade and economic cooperation

within the SAARC region through the exchange of concessions. This agreement

was the first step in establishment of an economic union. Under SAPTA, member

countries extended concessions on tariff, para-tariff and non-tariff measures in

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successive stages. They were free to liberalize trade at their own. SAPTA expired

on 31st December 2003.

3.1.1.12 Agreement on South Asian Free Trade Area (SAFTA) :

The agreement on South Asian Free Trade Area (SAFTA) was signed by all the

member states of SAARC, namely, India, Bangladesh, Bhutan, Maldives, Nepal,

Pakistan and Sri Lanka, during the Twelfth SAARC Summit held in Islamabad in

January, 2004. After ratification by the Member States, the SAFTA has come into

force from January 1,2006.

The SAFTA envisages a phased tariff liberalisation programme under which non-

Least Developed Countries (LDCs) viz. India, Pakistan and Sri Lanka will bring

down tariffs to 20% in two years, while LDC members (viz. Bangladesh, Bhutan,

Maldives and Nepal) will bring them down to 30%. Further, the non-LDC

members will reduce tariffs from 20% to 0-5% in 5 years (Sri Lanka in 6 years),

while LDC members will do so in 8 years. Moreover, non-LDC members will

reduce their tariffs for LDC members’ products to 0-5% in 3 years.

3.1.1.13 Bay of Bengal Initiative for Multi-Sectoral Technical

and Economic Cooperation (BIMSTEC) :

The initiative to originally establish Bangladesh-India-Sri Lanka-Thailand

Economic Cooperation (BISTEC) was taken by Thailand in 1994 to explore

economic cooperation on a sub-regional basis involving neighbouring countries of

South and South-East Asia grouped around the Bay of Bengal. With the inclusion

of Myanmar in December, 1997 the initiative was renamed as BIMSTEC. In July

2004, the initiative was renamed as the Bay of Bengal Initiative for Multi Sectoral

Technical and Economic Co-operation (BIMSTEC) with the admission of Bhutan

and Nepal as members to the group. The initiative involves five members of

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SAARC (India, Bangladesh, Bhutan, Nepal and Sri Lanka) and 2 members of

ASEAN (Thailand and Myanmar), and therefore, is visualized as a ‘bridging link’

between two major regional groupings i.e., ASEAN and SAARC. BIMSTEC is an

important element in India’s ‘Look-East’ strategy and adds a new dimension to

India’s economic cooperation with South Asian and South East Asian countries.

The first meeting of the Economic/ Trade Ministers of BIMSTEC that was held in

Bangkok in August, 1998, agreed that BIMSTEC should aim and strive to

develop into a Free Trade Area, and should focus on activities, which facilitate

trade, increase investment & promote technical cooperation among member

countries. Six areas were identified for cooperation in BIMSTEC, namely, trade

and investment, technology, transportation and communication, energy, tourism

and fisheries. In the fourth BIMSTEC Trade & Economic Ministers meeting held

in Colombo on March 7, 2003, it was decided to constitute a Group of Experts

(GoE) for drafting the Framework Agreement on BIMSTEC Free Trade Area.

Subsequently, the Framework Agreement on BIMSTEC FTA was signed on

February 8, 2004 in Phuket, Thailand by Bhutan, India, Myanmar, Nepal, Sri

Lanka and Thailand during the Fifth BIMSTEC Economic Ministers’ Meeting.

Bangladesh, however, did not sign the BIMSTEC FTA Agreement in February

2004, but nevertheless has acceded by signing a Protocol to this effect in June

2004. The Framework Agreement includes provisions for negotiations on FTA in

goods, services and investment. A TNC has been constituted to carry forward the

programme of negotiations.

3.1.1.14 South Asia Growth Quadrangle (SAGQ) :

The South Asia Growth Quadrangle (SAGQ) was launched in April 1997 by the

Foreign Ministers of Bangladesh, Bhutan, India, and Nepal (BBIN). The Ninth

Summit of the South Asian Association for Regional Cooperation (SAARC) on

May 1997 in Male, Maldives endorsed SAGQ as a subregional initiative under

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SAARC. Projects relevant to BBIN are encouraged within the framework of

SAARC. SAGQ aims to accelerate sustainable economic development among the

member countries. The targeted sectors are multimodal transportation and

communication, energy, trade and investment facilitation and promotion, tourism,

optimal utilization of natural resource endowments, and environment as well.

3.1.1.15 Asia Pacific Trade Agreement (APTA) :

The Bangkok Agreement renamed as Asia Pacific Trade Agreement (APTA) was

signed in November 2005 in Beijing and came into force with effect from July 1,

2006. The original agreement signed in 1975 was an initiative under the

Economic and Social Commission for Asia and Pacific (ESCAP) for trade

expansion through exchange of tariff concessions among developing countries of

the ESCAP region. The agreement is operational among five nations namely,

Bangladesh, China, India, Republic of Korea and Sri Lanka.

3.1.1.16 Joint Study Group between India and Korea :

It was agreed to establish a JSG between India and Korea (South Korea) in 2004

to take a comprehensive view of bilateral economic linkages between the two

nations. The JSG analysed the feasibility of a comprehensive economic

partnership agreement (CEPA) between the two countries. The report of the JSG,

which was signed in January 2006, recommended that the Korea-India CEPA

covers trade in goods and services, measures for trade facilitations and promotion,

facilitation and liberalisation of investment flows, measures for promoting

bilateral economic cooperation in identified sectors and other areas to be explored

for furthering bilateral partnership. In pursuance to the recommendation of the

JSG, a Joint Task Force composed of Government officials has been constituted

and negotiations are taking place regularly.

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3.1.1.17 Joint Study Group between India and China :

An India-China JSG was constituted in June 2003 to examine the possibility of

expanding trade and economic cooperation. The final report of the India-China

JSG was submitted in March 2005. As per the recommendations of the JSG, a

Joint Task Force was set up which met thrice till July 2007 to work towards

expanding trade and bilateral cooperation.

3.1.1.18 Joint Study Group between India and Japan :

India and Japan, in November 2004, agreed to constitute a JSG, focusing on

measures required for a comprehensive expansion between the two countries. The

recommendations of the report, submitted in 2006, covered trade in goods and

services investment flows, role of Japan in promoting economic partnership and

other areas of economic cooperation. It also recommended that India and Japan

launch inter-governmental negotiations to develop an Economic Partnership

Agreement (EPA) or Comprehensive Economic Partnership Agreement (CEPA),

within a reasonable period of time. It was decided to launch immediate

negotiations for the conclusion of a bilateral Economic Partnership Agreement/

Comprehensive Economic Partnership Agreement (EPA/CEPA) on the basis of

the recommendations submitted by the JSG. The first round of negotiation on the

India-Japan (Comprehensive) Economic Partnership Agreement was held in

February 2007 in New Delhi.

3.1.1.19 Joint Study Group between India and Russia :

A Memorandum of Understanding (MoU) on Cooperation between India and

Russia was signed in February 2006. The MoU provides for setting up of a JSG

between India-Russia with the objective of enhancing bilateral trade between the

two countries to a level of US$10 billion by 2010 and to study the feasibility to

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consider the possibility of signing Comprehensive Economic Cooperation

Agreement between India and Russia.

3.1.1.20 Joint Study Group between India and Malaysia :

A Joint Study Group (JSG) to explore the feasibility of Comprehensive Economic

Cooperation Agreement (CECA) between India and Malaysia was constituted in

March 2005.

3.1.1.21 Joint Study Group between India and Indonesia :

In August 2005, it was mutually agreed between India and Indonesia to examine

the possibility of entering into a bilateral comprehensive economic cooperation

arrangement in the long term. The setting up a JSG on CECA comprising of

senior government officials is in progress after the signing of the Memorandum of

Understanding (MoU) between the two nations in November 2005.

3.1.2 INDIA’S ENGAGEMENTS IN RTAs IN LATIN

AMERICA

3.1.2.1 India - MERCOSUR PTA:

A Framework Agreement was signed between India and MERCOSUR on June

17, 2003 at Asuncion, Paraguay. The Southern Common Market, best known by

its Spanish acronym MERCOSUR is the largest of regional groupings. It was

established in 1991 with member nations as-Argentina, Brazil, Paraguay and

Uruguay and associate members as Chile and Bolivia. The aim of this Framework

Agreement is primarily to create conditions and mechanisms for negotiations, by

granting reciprocal tariff preferences and, to negotiate a free trade area between

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two parties in conformity with the rules of WTO. As a follow up to the

Framework Agreement, a PTA was signed in New Delhi on January 25, 2004.

Under the PTA, India and MERCOSUR have agreed to give tariff concession,

ranging from 10% to 100% to the other side on 450 and 452 tariff lines,

respectively. It was mutually agreed that India-MERCOSUR PTA would be

expanded by increasing the number of products covered and increasing the tariff

concessions agreed by either side.

3.1.2.2 PTA between India and Chile:

India has negotiated a PTA with Chile. The Framework Agreement to Promote

Economic Cooperation, signed between India and Chile on January 20, 2005,

provided for a JSG to identify the potential for cooperation between the two sides

in goods and services, investments and other areas of economic cooperation. The

PTA relates to the list of products on which the two sides agreed to give fixed

tariff preferences to each other, Rules of Origin, Preferential Safeguard Measures

and Dispute Settlement Procedures that have been finalized during four rounds of

negotiations.

3.1.3 INDIA’S ENGAGEMENTS IN RTAs IN EUROPE

3.1.3.1 India-Euporean Union (EU) High Level Trade Group :

Agreement of cooperation signed between EU and India in 1994 took bilateral

relations beyond merely trade and economic cooperation. The first India-EU

Summit in Lisbon in June 2000 proved pivotal in evolution of this relationship.

There have been eight Summit-level interactions between India and EU so far.

During the 6th India - EU Summit, it was decided to launch India EU Joint

Action Plan for Strategic Partnership. Within the Joint Action Plan, a High Level

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Trade Group (HLTG) was set up to enhance economic cooperation and to explore

ways and means to deepen and widen bilateral trade and investment relationship.

The two sides also agreed to establish a Technical Barriers to Trade (TBT ) /

Sanitary and Phytosanitary (SPS) Issues Working Group to deepen the dialogue

on TBT and SPS issues to facilitate bilateral trade and increasing market access.

3.1.4 INDIA’S ENGAGEMENTS IN RTAs IN WEST ASIA

3.1.4.1 FTA Between India and Gulf Cooperation Council (GCC)

India is in the process of negotiating a Free Trade Agreement with Gulf

Cooperation Council (GCC) and the first round of negotiations in this regard was

held in March 2006. The Gulf Co-operation Council (GCC) is a custom union

comprising of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab

Emirates. The GCC members are major trading partners for India, accounting for

around 13% of India’s global exports and around 16% of India’s global imports in

2006-07. The FTA proposes to include Trade in Services and Investment

Cooperation as well as General Economic Cooperation.

3.1.4.2 Joint Study Group between India and Israel:

India and Israel have constituted a JSG to examine ways and means of promoting

bilateral economic relations and to consider a Bilateral Economic Partnership

Agreement. The JSG report released in November, 2005 recommended an India-

Israel Action Plan for Comprehensive Economic Cooperation between the two

countries. The JSG focused on implementation of recommendations like PTA,

Customs Cooperation, early utilization of R&D funds, liberalisation of trade in

services, negotiations on bilateral shipping agreement etc.

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3.1.5 INDIA’S ENGAGEMENT IN RTAs IN AFRICA

3.1.5.1 PTA between India and SACU :

The South Africa Customs Union (SACU), with a common Custom Tariff Policy,

comprises of South Africa, Lesotho, Swaziland, Botswana and Namibia. In

September 2004, the draft Framework Agreement for a PTA between India and

SACU countries was finalised, by a Joint Working Group (JWG) consisting of

Government representatives from both ends. The sixth session of the India-South

Africa Joint Ministerial Commission Meeting was held in New Delhi in

December 2005. Both sides concluded a comprehensive Free Trade Agreement

within a reasonable time frame.

3.1.5.2 PTA /Comprehensive Economic Cooperation and Partnership

Agreement (CECPA) between India and Mauritius :

A JSG constituted in November 2003 identified investment, trade in goods and

services and general economic cooperation for developing modalities of CECPA.

During 2005, India accepted the report by the JSG on CECPA and it was decided

to set up a high-powered negotiating team for processing and finalizing the

recommendations of this report within a year. The negotiations on PTA / CECPA

are in progress.

Encompass an overview of India’s bilateral engagements with a number of

countries and trade blocs across the globe, the present researcher now carry on to

present different initiative taken from time to time by the Government for

promotion of export trade.

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3.2 EXPORT PROMOTION MEASURES :

The Commerce Ministry of the Government of India announces Export Import

(EXIM) Policy every five years, which governs laws related to export and import

of items within that period. The focus of trade policy reforms in India has been on

liberalization, openness and globalization with a basic thrust on outward oriented

export promotion activity, removal of quantitative restrictions and improving

competitiveness of Indian industry to meet global market requirements. Although

trade policy of India is primarily a 5 year policy, the Commerce Ministry

announces appropriate amendments every year keeping in mind the latest national

and international developments. This is usually done on 31st March every year. It

is also worth mentioning that the Government has changed the name of EXIM

Policy to “Foreign Trade Policy’. The researcher makes an attempt to highlight

the salient features of EXIM Policy / Foreign Trade Policy changes made in the

recent years taking into account the important sectors.

3.2.1 EXIM Policy 1992-97 :

When the Eighth Plan commenced, the three-year Import-Export policy (1990-

93), valid until March 1993 was in operation. With a view to reinforcing the trade

policy reforms and complementing the fiscal, industrial and investment measures,

the new five-year Export-Import Policy (1992-97) was introduced with effect

from April 1992. For the first time, the policy was given an export bias. Earlier,

this policy was known as Import- Export policy; the new policy was titled as

Export-Import policy (EXIM Policy). Several schemes were introduced or

modified to eliminate regulatory measures and discretionary controls impinging

on free trade. Major schemes are enumerated below:

The Export Promotion Capital Goods (EPCG) scheme was introduced to boost

exports. It is a scheme to liberalise capital goods imports. EPCG scheme allows

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exporters to import machinery both new and second-hand duty free or at

concessional duty if the importer agrees to achieve a fixed export target within a

specified period of time. Under the scheme, the duty on import of capital goods

was reduced from 25 per cent to 15 per cent subject to an export obligation of 3

times the CIF (Cost Insurance Freight) value of imports and the period of

achievement was increased from 4 years to 5 years. The scheme was very popular

when customs duty on capital goods was on a higher side. Exemptions are

available for certain sectors like agriculture and garments even if the minimum

floor limit is not met. If a computer system is imported under this scheme,

supporting manufacturers and service providers are also eligible to import capital

goods.

The other major schemes are as follows: Duty Exemption Scheme (DES), Export

Oriented Units (EOU) and Export Processing Zones (EPZ) and many other

schemes.

Under Duty Exemption Scheme (DES) scheme, import of raw materials,

intermediates, components, consumables, parts, accessories, packing materials

and computer software required for direct use in the export product is permitted

duty free for processing and export by the competent authority under the

categories of advance licences, advanced intermediate licence, special imprest

licence, licences under export production programme, advance customs clearance

permit and advance release orders.

The export oriented unit (EOU) and export promotion zone (EPZ) schemes were

liberalised. 100 per cent foreign equity participation in EOU / EPZ units was

allowed.

The EXIM Policy 1992-97 was modified in March 1993 giving a new thrust on

export of agricultural and allied sectors, and services in which the country has a

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comparative advantage. The EXIM Policy was further modified in 1995 to boost

agricultural exports. The highlights were (a) in the category of agricultural and

food exports only beef and tallow were in the negative list during 1995-96 and (b)

horticulture and floriculture exports were encouraged by providing various

supports to farmers like air-freight subsidy. As such, fruits, vegetables and

flowers emerged as export products.

3.2.2 EXIM Policy 1997-2002 :

The Government of India announced the EXIM Policy 1997-2002 on 1-4-1997

for a period of five years. The policy was further revised on 13-4-1998, 1-4-1999,

31-3-2000 and again on 31-3-2001. In the policy, attempts have been made to

make it more exporters friendly. Some of the major policy changes include

1. the threshold limit for EPCG zero duty scheme was brought down to Rs.

10 million (for agricultural and allied sectors from Rs,50 million and for

electrical, textiles, leather, gems and jewellery, sport goods and food

processing from Rs.200 million) and to Rs. 1 million in case of the

software sector;

2. DEPB scheme was modified to neutralise not only the basic customs duty

but also the special custom duty which was introduced as a temporary

measure in 1998;

3. Exports of oilseeds for consumption purpose and vegetables were made

free without any quantitative and licensing requirements (Ministry of

Commerce).

4. Double weightage on export of fruits/vegetables/floriculture and

horticulture products, project exports and goods manufactured in N.E.

States,

77

Several modifications to the earlier schemes were done mainly to boost service

trade, particularly IT exports. For example, the export promotion capital goods

(EPCG) scheme for services sector has been introduced. Under this scheme,

capital goods are allowed to be imported for rendering services for which

payments are received in a freely convertible currency. The scheme is applicable

to professionals and other providers of services such as architects, consultants,

economists, charted accountants, engineers and tour operators. Exemption was

given to exports under all export promotion schemes from the applicability of the

special additional duty of 4 per cent introduced in 1998 -99 budget. Promotional

measures and procedural changes that were made in 1998 include facilities such

as extension of holiday for EOU/EPZ to 10 years, sub-contracting facility for

Domestic Tariff Area (DTA) and permission to set up private software technology

parks.

In order to promote trade among SAARC countries, India unilaterally removed all

QRs on imports of 2300 items with effect from August 1, 1998. On December 28,

1998, a free trade agreement was concluded between India and Sri Lanka which

would result in zero import tariff for most commodities on both sides by 2007.

Following the third round of negotiations held under SAARC Preferential Tariff

Agreement (SAPTA), the Revenue Department notified on August 11, 1999

concessional customs duties ranging from 25 per cent to 60 per cent for LDCs

(Bangladesh, Maldives, Nepal and Bhutan) and 10 per cent to 50 per cent for

other three countries - covering items in 1800 tariff lines which account for 60 per

cent of imports.

On 31st March 1999, in order to boost service exports, the setting up of Special

Economic Zones (SEZs) was announced with a view to providing an

internationally competitive and hassle free environment. Again with a view to

make export a national effort; a scheme has been evolved for granting assistance

to the states on the basis of their export performance for development of related

78

)

infrastructure. To facilitate an equitable allocation of resources, this amount will

be distributed on the basis of absolute performance as well as on the basis of

incremental one. There would be subsequent annual allocation for this Fund. The

amount would be utilised by the states for complementary export related

infrastructure like roads connecting the production centers with Ports, research

and development of state specific ethnic products, development of cold chains for

agro exports, development of minor ports, creation of new export promotion

industrial parks, human resource development and for the purpose of developing

marketing infrastructure.

On 31st March 2000, 2000-2001 annual EXIM Policy was announced with the

following measures:

1. Re-introduction of Duty Free Replenishment License schemes to over

5000 products and abolition of pre- export DEPB scheme;

2. Special package schemes for gems and jewelry, bio-technology,

pharmaceuticals, silk industry etc.

3. EPCG scheme was extended to all sectors at only 5% import duty.

4. Imports of second - hand capital goods of not more than 10 years allowed

without a license.

5. Removal of Quantitative Restrictions on 714 items, out of total 1429

items.

6. Deemed export benefits extended to core infrastructural sectors.

7. SEZs are to be setup, which would be free from plethora of rules and

regulation governing import and export.

8. Priority to be given on procedural simplification norms

9. Rs. 250 crores export fund created for states (for creating infrastructure)

and

10. Special import license to be abolished by April, 2001.

79

T h e c e n t r a l g o v e r n m e n t h a d i n s i s t e d o n 3 1 s t M a r c h 2 0 0 1 t h r o u g h t h e r e v i s e d

E X I M p o l i c y o f 1 9 9 7 - 2 0 0 2 t h a t t h e s t a t e g o v e r n m e n t s s h o u l d i d e n t i f y a n d

d e v e l o p p r o d u c t - s p e c i f i c a g r i c u l t u r a l e x p o r t z o n e s ( A E Z ) . T h e s c h e m e w a s

i n t r o d u c e d w i t h a v i e w t o p r o v i d e r e m u n e r a t i v e r e t u r n s t o t h e f a r m i n g c o m m u n i t y

i n a s u s t a i n e d m a n n e r a n d t o p r o v i d e i m p r o v e d a c c e s s t o t h e p r o d u c e / p r o d u c t s o f

a g r i c u l t u r e a n d a l l i e d s e c t o r s i n i n t e r n a t i o n a l m a r k e t . U n d e r s u c h z o n e s , s e r v i c e s

i n c l u d e p r o v i s i o n o f p r e / p o s t h a r v e s t t r e a t m e n t a n d o p e r a t i o n s , p l a n t p r o t e c t i o n ,

p r o c e s s i n g , p a c k a g i n g , s t o r a g e a n d r e l a t e d r e s e a r c h & d e v e l o p m e n t .

A g r i e x p o r t e r s s h a l l b e e n t i t l e d f o r r e c o g n i t i o n a s E x p o r t H o u s e / T r a d i n g

H o u s e / S t a r T r a d i n g H o u s e / S u p e r S t a r T r a d i n g H o u s e o n a c h i e v i n g l / 3 rd o f t h e

t h r e s h o l d l i m i t p r e s c r i b e d f o r e x p o r t e r s o f g o o d s .

T h e p r o c e s s o f r e m o v a l o f i m p o r t r e s t r i c t i o n s t h a t b e g a n i n 1 9 9 1 h a s b e e n

c o m p l e t e d i n a p h a s e d m a n n e r t h i s y e a r w i t h r e m o v a l o f r e s t r i c t i o n s o n r e m a i n i n g

7 1 5 i t e m s . O u t o f t h e s e 7 1 5 , 3 4 2 a r e t e x t i l e p r o d u c t s , 1 4 7 a r e a g r i c u l t u r a l p r o d u c t s

i n c l u d i n g a l c o h o l i c b e v e r a g e s a n d 2 2 6 a r e o t h e r m a n u f a c t u r e d p r o d u c t s i n c l u d i n g

a u t o m o b i l e s .

I n o r d e r t o p r o m o t e t r a d e t h e r e w e r e o t h e r m a j o r c h a n g e s a n d i n c e n t i v e s r e l a t e d t o

S E Z s , M a r k e t a c c e s s i n i t i a t i v e , E x p o r t p r o m o t i o n c a p i t a l g o o d s s c h e m e , A n n u a l

a d v a n c e l i c e n c e , D u t y f r e e r e p l e n i s h m e n t c e r t i f i c a t e s c h e m e , a n d D u t y

e n t i t l e m e n t p a s s b o o k s c h e m e t o n a m e a f e w .

T h e G o v e r n m e n t o f I n d i a a l s o a n n o u n c e d c e r t a i n o t h e r F i s c a l I n c e n t i v e s t o

e n c o u r a g e e x p o r t e r s f r o m o u r c o u n t r y . T h e m a j o r s u c h i n c e n t i v e s a r e :

1 . D u t y D r a w b a c k : U n d e r t h e d u t y d r a w b a c k s c h e m e , t h e e x p o r t p r o d u c t s g e t

r e l i e f i n r e s p e c t o f C u s t o m s a n d E x c i s e d u t i e s p a i d o n r a w m a t e r i a l s a n d

c o m p o n e n t s u s e d i n t h e i r p r o d u c t i o n .

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2. Income Tax Exemptions & Deductions : The following exemptions and

deductions are available to the exporters and other foreign exchange earners

under the Income Tax Act, 1961.

i) Deduction in respect of profits and gains from projects outside India (Sec.

80HHB)

ii) Deduction in respect of export turnover (Sec. 80HHC).

iii) Deduction in respect of earnings in convertible foreign exchange (Sec.

80HHD).

iv) Deduction in respect of export of Computer Software (Sec. 80 HHE).

v) Deduction for Consultancy Exports (Sec. 80-0).

vi) Five Year Tax Holidays in respect of Newly Established Industrial

undertaking in Free Trade Zones, Electronic Hardware Technology

Parks and Software Technology Parks (Sec. 10 A)

vii) Fire year Tax Holiday in respect of Newly Established 100 % Export

Orientated Undertakings (Sec. 10B).

3. Sales Tax Exemptions: By virtue of section 5 of Central Sales Tax Act, any

dealer can avail of exemption from sales tax in respect of his sales made in

the course of exports. The exporter may also buy the goods from dealer /

manufacturer for the purpose of export trade without payment of sales tax by

issuing Form H (where the selling dealer is in another state), to the selling

dealer from whom he purchased goods for export. The basic condition to

avail of the sales tax exemption is that the exporter should be registered

with the Sales Tax Department.

4. Reimbursement of Central Sales Tax to units in Export Processing Zones

(EPZs)/ Free Trade Zones (FTZs) : Unit in Free Trade Zones / Export

Processing Zones are entitled to full reimbursement of Central Sales Tax paid

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by them on purchases made by them from Domestic Tariff Area (DTA)

for utilization in the production of goods for export.

3.2.3 EXIM POLICY 2002-07

The EXIM POLICY 2002-07 was described as pro-growth and positive with

certain concrete measures. Some of the important features of this policy are

indicated here under:

1. The most welcome initiative is the removal of quantitative restrictions on

agricultural exports and setting up of 20 Agri-export Zones in 12 different

states, a concept that was introduced in 2001.

2. The policy also aims at making the SEZs more attractive for the units located

in them by providing them with income tax benefits and by allowing off-shore

banking units to be setup in these zones.

3. Approval has been given to 13 more SEZs and four existing EPZs were

converted into SEZs.

4. The continuation of EPCG scheme with further simplification.

5. The continuation with the advance licence, DEPB schemes and ECGC scheme

with further improvements.

The highlights from the amendment on EXIM policy made on 31st March, 2003

are given in the following form:

1. Duty free import facility for service sector having a minimum foreign

exchange earning of Rs.10 lakhs. The duty free entitlement shall be 10% of

the average foreign exchange earned in the preceding three licensing years.

However, for hotels, the same shall be 5% of the average foreign exchange

earned in the preceding three licensing years. This entitlement can be used

for import of office equipments, professional equipments, spares and

consumables.

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2. Corporate sector with proven credential will be encouraged to sponsor Agri

Export Zone for boosting agro exports. The corporate to provide services such

as provision of pre/post harvest treatment and operations, plant protection,

processing, packaging, storage and related R&D.

3. Duty-free import entitlement for status holders having incremental growth of

more than 25% in FOB value of exports (in free foreign exchange). This

facility shall however be available to status holders having a minimum export

turnover of Rs.25 crores (in free foreign exchange).

4. To promote growth of exports in embedded software, hardware shall be

admissible for duty free import for testing and development purposes.

5. Up gradation of infrastructure in existing clusters/industrial locations under

the Department of Industrial Policy & Promotion (DIPP) scheme to increase

overall competitiveness of the export clusters.

6. Import of 69 items covering animal products, vegetables and spices,

antibiotics and films removed from restricted list. Export of 5 items namely

paddy except basmati, cotton linters, rare earth, silk cocoons, family planning

devices except condoms removed from restricted list.

7. Agriculture/Horticulture processing EOUs / SEZ units will now be allowed to

provide inputs and equipments to contract farmers in DTA to promote

production of goods as per the requirement of importing countries. This is

expected to integrate the production and processing and help in promoting

agro exports.

8. The EPCG scheme shall now allow import of capital goods for pre-production

and post-production facilities also.

8 3

9. Facility for provisional DEPB rate introduced to encourage diversification and

promote export of new products.

10. Duty Free Replenishment Certificate scheme extended to deemed exports to

provide a boost to domestic manufacturer.

3.2.4 Foreign Trade Policy 2004-2009 :

In exercise of the powers conferred under Section 5 of The Foreign Trade

(Development and Regulation Act), 1992 (No. 22 of 1992), the Central

Government hereby notifies the Foreign Trade Policy for the period 2004-2009

incorporating the Export and Import Policy for the period 2002-2007, as

modified. This Policy came into being with effect from 1st September, 2004 and

shall remain in force up to 31st March, 2009, unless as otherwise specified.

1. A new scheme called the Vishesh Krishi Upaj Yojana (special agricultural

produce scheme) for promoting export of fruits, flowers, minor forest produce

and their value added products has been introduced.

2. Capital goods imported under EPCG shall be permitted to be installed

anywhere in the AEZ.

3. Special funds would be earmarked under Market Access Initiative scheme for

promoting handloom exports.

4. New handicraft SEZs shall be established which would produce items from

the cottage sector and do the finishing for exports.

5. To create modem infrastructure in retail sector, concessional duty benefits

under EPCG scheme shall be extended for import of capital goods required by

retailers having a minimum covered shopping area of 1000 sq metres.

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6. To enable the service providers to upgrade infrastructure in their associate

companies, the goods imported under the 'Served from India' Scheme shall be

transferable within the group companies and managed hotels subject to actual

user condition.

7. To encourage the existing mechanized vessels and deep sea trawlers to adopt

modem technology for scientific exploitation of our marine resources in an

eco-friendly manner and boost marine sector exports, it is proposed to allow

import of monofilament long line system for tuna fishing at a concessional

rate of duty.

8. List of Sensitive Items has been pruned down to nine items. Brass scrap,

Additives, Paper/Paper Board and Dye Stuffs shall be removed from the list

prescribed for import of items under Duty Free Replenishment Certificate

(DFRC).

9. DGFT shall strive to move towards an automated electronic environment for

filing, retrieval and authentication of documents based on agreed protocols

and message exchanged with other community trade partners including

Customs and Banks. Increased use of information technology for interacting

with the trade through video conferencing, doing away with manual filing of

documents by using digital signature and introducing a Special Purpose

Vehicle for electronic license utilization and transfer mechanism is also

envisaged. In addition, online web based information shall be made available

for all Export and Import related policies and procedures on DGFT website to

enable the international trading community to access information from a

single source.

10. Facility of issuing online Import Export Code number (IEC) is being provided

by linking the DGFT database with the Income Tax PAN database. To add

transparency in the system, other e-govemance initiatives are also being

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planned to provide delivery of services to the user community without any

human interface with DGFT offices.

11. Government has decided to develop a trademark for Handloom on lines

similar to 'Woolmark' and 'Silkmark'. This will enable handloom products to

develop a niche market with a distinct identity.

12. In order to maintain quality and retain the brand equity of Indian teas, the

Government has issued a new Tea (Distribution and Export) Control Order,

2005 which prescribes strict norms for tea.

Annual Supplement 2005-06 of the Foreign Trade Policy 2004-09 was presented

on 8th April’ 2005 to put the followings in target:

1. Measures to enhance competitiveness of India’s manufacturing sector and

employment generation.

2. Removal of export cess on agri and plantation commodities proposed.

3. Additional EPCG benefits for agriculture and SSIs EPCG for retail sector

operationalised.

4. Marine sector gets special attention in the wake of tsunami.

5 q e p b to continue replacement scheme under finalisation.

6. Setting up of inter-state trade council proposed.

7. Government is committed to resolve all outstanding problems and disputes

pertaining to the past policy periods through the Grievance Redressal

Committee set up

Highlights of Annual Supplement 2007 to Foreign Trade Policy (2004-09) include

the following major initiatives

1. Encouragement to agro exports in the agriculture sector. New initiative for

infrastructure development namely cold storage units, pack houses, reefer

vans / containers, etc., for agro sector, is being launched. In line with the

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government objective of having all inclusive growth, Vishesh Krishi and

Gram Udyog Yojana scheme expanded further to include forest based and

agricultural products.

2. A new scheme to give impetus to export of high tech product is being

launched. Exports of specified high tech products are proposed to be

rewarded. Long standing major grievance of trade is being addressed by

providing service tax exemption / remission on services rendered in India and

utilised by exporters. This should bring cheers to the exporting fraternity.

3. Employment, manufacturing and value additions in the EOU scheme to be

encouraged further by extending the benefit of focus products, focus market,

and Vishesh Krishi and Gram Udyog Yojana scheme. Major simplification

attempted through fine tuning of existing procedures under various schemes

for transparency, accountability and reducing transaction time.

In addition to the above mentioned export promotion measures, the Government

of India and the respective State Governments in NEI have also announced

specific policy level incentives for the region / state in particular. All such policy

level incentives, which have been announced for NEI are summarized below.

3.3 STATE WISE POLICY LEVEL INCENTIVES :

The Government of India had announced a separate Industrial policy for the NEI.

This policy with its synergetic package of incentives was specially designed to

stimulate development of industries so that the region overcomes its continuing

backwardness. A number of notifications have been issued by the concerned

Ministries of Government of India regarding major incentives and significant

windfalls to industrialists and entrepreneurs wishing to invest in NEI. These

87

notifications are like watershed in the path to industrialization. The other

significant notifications operationalising the policy are those pertaining to

transport subsidy, capital investment subsidy and subsidy on interest on working

capital loan.

3.3.1 ARUNACHAL PRADESH:

Industrial Policy:

To give a boost in industrial endeavor, the Government of Arunachal Pradesh

announced its first Industrial Policy on April 1, 1994. The major incentives given

by the State Industrial Policy are

1. Allotment of Land on Lease to new units for a period of 40 years,

2. Allotment of factory sheds on monthly rent basis at a concessional rate,

3. Grant of State Capital Investment subsidy upto 75 %,

4. State Transport subsidy on transportation of raw materials & finished

products between any location in NEI and the location of industrial units in

Arunachal Pradesh by surface transport,

5. Interest Subsidy @ 4% for a period of 5 years,

6. Power Subsidy for a period of 3 years,

7. Upgradation of Manpower skill subsidy upto 50%

8. 50% subsidy for the cost of feasibility study & project report etc. The State

Government has already set up 1 Growth Center, 13 Industrial Estates, 2

Rural Industries Centre, 1 R & D Centre, 1 Handloom Development Centre

in the state.

Export Promotion Industrial Park:

To give a boost to export from the state, the state government is planning to set-up\

an Export Promotion Industrial Park (EPIP) at Pasighat with 100% grant from the

Government of India.

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Border Area Development Programme

The Department of Trade & Commerce, Government of Arunachal Pradesh has

already started a special programme called Border Area Development Programme

to remove the critical gaps in physical and social infrastructure need and to

strengthen the economic conditions and raise the standard o f living amongst the

inhabitants of the remote border areas of the state.

3.3.2 ASSAM:

Industrial Policy :

For the development of industry and trade, the Government of Assam announced

its Industrial Policy in the year 1997. The policy includes a number of incentive

schemes for the units’ set-up within the state. Some of them are :

1. Power subsidy from 20 % to 50 % for a period of 5 years

2. Interest subsidy @ 5 % to SSI units for 3 years

3. Exemption of Sales Tax up to 7 years (3 years in case of sick units)

4. Subsidy on generating set

5. Capital Investment subsidy @ 30 % on land, building and plant & machinery

6. Equity participation

7. Contribution towards the expenses of feasibility study

8. Special incentives to Pioneer units, Export Oriented Units, Women

Entrepreneurs etc.

Special incentives for export oriented units:

Special incentives for 100% Export Oriented Units (EOUs) will be granted as

below:

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1. Additional State Capital Investment subsidy of 10 % subject to a ceiling of

Rs. 10 Lakhs.

2. Additional 20% subsidy on purchase of testing equipments for obtaining

ISO 9000/BIS-14000 series registration, subject to a ceiling of Rs. 2 lakhs.

Special incentives for units other than 100% EOUs with an export effort of a

minimum of 25 % of the value of the turnover will be as below :

1. Subsidy on purchase of testing equipments for obtaining ISO 9000/BIS-

14000 series registration @ 30 % of the cost of the equipments subject to a

ceiling of Rs. 5 lakhs. This is proposed to support quality improvement

efforts.

2. In addition to the incentives mentioned above, the Government of Assam

has created the following facilities for boosting up of export.

Export Promotion Industrial Park:

The State Government with the assistance from Government of India has set-up

an Export Promotion Industrial park (EPIP) at Amingaon (Guwahati) . The park is

built on an area of 68.10 acres with 168 separate plots. The park offers facilities

like wide approach road, uninterrupted power supply, water supply, modem

means of communication, central effluent treatment plant etc. There are also

facilities like customs and central excise offices, banks etc.

Software Technology Park:

The State Government has set-up a Software Technology Park near Lokpriya

Gopinath Bordoloi International (LGBI) Airport at Borjhar (Guwahati).

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Inland Container Depot (ICD) :

An Inland Container Depot has been set-up at Amingaon, Guwahati. The ICD

mainly handle the export of tea and few other items to different destinations of the

world.

Land Customs Station (LCS) ;

The Customs Department has set-up 11 LCSs in the state. Such LCS helps the

exporters of NEI to export various commodities to Bangladesh, Bhutan and

Myanmar.

Export House Status to Assam Industrial Development Corporation Limited

(AIDC):

With a view to encourage participation of slate government in export promotion,

AJDDC has been given the status of Export House, even though the criterion for

giving the recognisation as an Export House is not yet full filled.

Up gradation of Director General of Foreign Trade (DGFT) Office :

The Ministry of Commerce, Government of India has upgraded the Deputy

Director General of Foreign Trade, Guwahati office to the level of Joint Director

General of Foreign Trade. This would help in taking prompt decisions for benefit

of the local exporters.

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3.3.3 M A N IPU R :

Industrial Policy:

The Government of Manipur announced the latest Industrial Policy in the year

1996. Some of the major policy incentives are :

1. Subsidy on allotment of land and developed plots @ 15 % to 30 %

depending on type of units for a period of 30 years.

2. Subsidy on allotment of sheds on monthly rent basis

3. Capital investment subsidy @ 15% to 20% to priority sector and export

oriented units

4. Transport subsidy

5. Power Subsidy @ 50% to 55%

6. Interest subsidy @ 5% to 7%

7. Subsidies on preparation of Project Report, Manpower Development,

Quality Testing.

8. Reimbursement of sales tax on purchase of raw materials @ 4 % and

Exemption of Sales Tax etc.

Export Promotion Industrial Park:

The State Government is planning to set-up an Export Promotion Industrial Park

at Khunuta Chingjin which will provide the necessary incentives and facilities for

setting up of export oriented units.

Trade Centre:

The Government of India has also sanctioned two plans for setting up of trade

centers, one at Imphal and another at Moreh. Both the centers will provide show

rooms -cum-sales counters to local entrepreneurs/ traders who are desirous of

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export and import with telecommunication facilities, information center,

conference room etc.

Land Customs Station (LCS):

The state has already started exporting and importing of goods with Myanmar

through land customs station at Moreh. Trade through Moreh started with an

agreement signed by the Government of India and Union of Myanmar on 12

April, 1995.

3.3.4 MEGHALAYA:

Industrial Policy:

In Meghalaya, the State Industrial Policy was announced in the year 1977. The

policy provides the following major incentives to small, medium and large scale

industries of the state. These are :

1. Development subsidy @ 10% on the fixed capital investment subject to a

ceiling of Rs. 1.5 lakhs.

2. State Capital Investment subsidy on cost of land, building and plant and

machinery @ 15% of the fixed capital subject to ceiling of Rs. 3.5 lakhs.

3. Subsidy @ 4 % on term loans for a period of 5 years subject to a maximum of

Rs. 10,000 per month

4. Subsidy on power @ 25-30% subject to a maximum of Rs. 2 lakhs per year

and up to a period of 5 years

5. Sales Tax exemption on sale of finished products for a period of 9 years from

the date of commercial production.

6. Lower rate of Meghalaya Finance Tax for the SSI sector from 12% to 4%

93

7. Subsidy on cost incurred on quality control and pollution measures, feasibility

study/ project report cost etc.

Special incentives for export oriented units :

Special incentives for 100% Export Oriented Units (EOUs) will be granted as

below

1. An additional 5 % capital investment subsidy subject to a maximum of Rs. 5

lakhs.

2. Sales Tax exemption for an additional period of one year.

Other units with an export commitment of 25 % and above of the total turn over

will be entitled for an additional 5% capital investment subsidy subject to a

maximum of Rs. 5 lakhs.

Export Promotion Industrial Park:

To promote export from the state, an Export Promotion Industrial Park (EPIP) has

been set-up at Bumihat. The EPIP has a total area of 250 acres. The park offers

facilities like all weather roads, water supply, captive power station etc. There are

5 units at present including one 100% Export Oriented U nit.

Export House Status to Meghalaya Industrial Development Corporation

Limited (MIDC):

With a view to encourage export, the government has given the Export House

Status to MIDC without any export performance which entitles them Special

Import licence for export made by them.

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Land Custom Stations (LCSs):

The Customs Department has set-up 9 LCSs through which a number of products

like coal, limestone, stones, boulders, fresh fruits, etc. have been exported to

Bangladesh.

3.3.5 MIZORAM:

Industrial Policy:

The Industrial policy of Mizoram was announced in 1989. The policy includes a

package of incentives to attract prospective entrepreneurs which are of the

following types:

1. Subsidy on land up to 25% for SSI units.

2. Subsidy on factory sheds to SSI units up to 50% for a period of 5 years.

3. Subsidy on power @ 30% to 60%

4. Subsidy on drawal of power lines up to 50% subject to a ceiling of Rs.

50,000.

5. Subsidy on power generating set @ 50% subject to a maximum of 3 lakhs.

6. Transport subsidy up to 50%.

7. Exemption from payment of Sales Tax (for a period of 5 years.), Stamp duty

and Registration fee

8. Equity participation in the assisted sector etc.

Other Export Facilities:

To promote export from the state, the State Government has taken steps to create

the following facilities;

1. Export Promotion Industrial park at Tlabung.

2. Construction of a border township at Tiau;

95

3. Export Intensive Area at Champai, Marpara and Tlabung.

4. Export Processing Zone (under Falta Export Processing Zone) at

Khawnuam, Tlabung and Kahnmum ;

5. Quality Control Laboratories at Aizwal, Champai and Tlabung.

3.3.6 NAGALAND

Industrial Policy:

The Government of Nagaland announced its Industrial Policy in 1995. The major

features of the policy are

1. Identifying Industrial Zones for entrepreneurs, within the provisions of

existing law with regard to transfer of land.

2. Development of Industrial Infrastructure like extension of railway lines,

roads, power and water supply for such industrial zones.

3. Transport subsidy up to 50% for transportation of agricultural produce

from the place of harvest to the location of processing unit within the state.

4. Power subsidy up to 30% for a period of 5 years and 30% subsidy for

buying of generating set.

5. Subsidy on preparation of Proj ect Report Cost.

6. Exemption of Sales Tax for a period of five years.

Export Promotion Industrial Park:

An Export Promotion Industrial Park has been planned at Ganeshnagar (Near

Dimapur) which will provide facilities like power, water, roads, sewerage &

drainage, telecommunication, mini market complex, community centers, banks,

business center etc. The State Government has already acquired 100 acres of land.

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International Border Trade Centre:

To develop international trade between Nagaland and ASEAN countries, three

locations - Pangsha, Pungro and Longwa have been identified as international

border trade centers.

3.3.7 SIKKIM:

In view of the priority attached by the government for speedy industrial

development and to tap the export opportunities, a comprehensive industrial

policy and incentives for Sikkim has been formulated. The new Industrial Policy

has provided several concessions and incentives designed to attract investors.

These subsidies are made available to export oriented units. Some of the

incentives are

1. Subsidy on state capital investment

2. Subsidized interest on working capital

3. Subsidy on capital power generating sets

4. Subsidy on power consumption

5. Subsidy on cost incurred on quality control measures

6. Subsidy on consultancy service

7. Subsidy on study tour and in-plant training

8. Subsidy on registration fee of promotion councils

9. Subsidy on state transport

10. Subsidy for technical know-how

11. Price preference

12. Special incentives to the Pioneer Unit

13. Special incentives for Agro and Food Processing Industries.

14. Special incentives for women entrepreneurs

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The government also has been adopting certain special measures for promotion of

exports in our country which are:

1. Exemption from income-tax on profit realized by export.

2. A five year tax holiday for 100% export-oriented units.

3. Import duty concessions on goods imported.

4. Free trade zones have been created in India where apart from other

facilities raw material without payment of excise duty is available.

5. Finance is made available for exporters.

6. Insurance cover is provided to safe-guard against various risks.

7. National awards for outstanding export performance are provided.

Establishing industrial estate:

The government has encouraged the setting up of self contained industrial estates

and growth centers to facilitate an integrated approach towards optimization of

available resources and infrastructure.

Creation of one stop service:

The Department of Industries offers one stop facility through a Green Channel

Committee relating to setting up of any trade or business.

Development of Marketing Support System:

Marketing and Export Promotion Council (MEPC) will be set up operation for

marketing and export of local products, provide guidelines for establishment of

marketing infrastructure, roadways, warehouse etc., provide up-to-date market

trends on various goods and provide directions for efficient functioning of the

marketing agencies. It will undertake quality testing measures on a regular basis

and blacklist those units that supply products not conforming to the prescribed

quality and specifications norms.

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3.3.8 TRIPURA

Industrial Policy:

The Industrial Policy of Tripura was announced in 1995. The policy extends a

package of incentives to attract and encourage industrial ventures in the state.

These incentives include:

1. Capital Investment Subsidy @ 30% on fixed capital investment subject to

a ceiling of Rs 25 lakhs in each case. Unit in sole proprietorship by SC /

ST / backward classes, women entrepreneurs, thrust sectors, export

oriented units etc. are eligible for additional subsidies @ 5% on fixed

capital investment.

2. Export oriented units and units identified under thrust sectors shall be

entitled to additional subsidy @5% on fixed capital investment.

3. Partial reimbursement of interest paid to financial institutions @ 4% on

capital loans, subject to a ceiling of Rs 20,000 per year per unit.

4. Sale Tax exemption for a period of 5 years.

5. Exemptions from earnest money deposit.

6. Price preference up to 15% etc.

7. Full reimbursement of fees / charges on account of obtaining a standard

certification subject to a ceiling of Rs 50,000 per unit.

In the year 2000, the state government has also announced an IT policy for the

state. Some of the major features under the policy are setting up of IT Park and

Software Technology Park, Single Window Clearance for software industry,

Exemption of Software Industry from local regulations etc.

In order to accelerate export from the state, the government has been taking a

number of export promotional measures, which are of the following types:

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Export Promotion Industrial Park:

The State Government is setting-up an Export Promotion Industrial Park near

Agartala. In the EPIP, facilities like land, road, power, water supply will be made

available to the exporters.

Food Processing Park:

The State Government is proposed to set-up a Food Processing Park in the same

location of EPIP.

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