A Comparative Study ofForeign Trade Policy

2004-2009 and 2009-2014

Introduction

• The Government of India announces Foreign Trade Policy every 5 years, to which amendments are made every year.

• It is a set of guidelines and instructions established by the Directorate General of Foreign Trade in matters related to the import and export of goods in India.

• The Foreign Trade Policy is regulated by The Foreign Trade Development and Regulation Act, 1992.

Foreign Trade Development and Regulation Act 1992; History and Objectives

• The Foreign Trade Development and Regulation Act, 1992 replaced the earlier law known as Imports and Exports (Control) Act, 1947.

• Its main objective is to develop and regulate foreign trade in India by facilitating imports into, and augmenting exports from India.

Foreign Trade Policy 2004-2009

• Launched on August 31, 2004.

• It broke the running EXIM Policy 2002-2007 in year 2004 due to the change of Government.

• The policy came into force on September 1, 2004 and remained effective till March 31, 2009.

• This was the first scheme to include Special Focus Initiatives for sectors like agriculture, handloom, handicrafts, gems and jewellery, leather and marine sector.

Foreign Trade Policy 2004-2009; Objectives

• To double our percentage share of global merchandize trade within 5 years and

• Use trade expansion as an effective instrument of economic growth and employment generation.

Foreign Trade Policy 2004-2009; Special Schemes

• Duty exemption/Remission schemes• Duty drawback• Excise duty refund• Octroi exemption• Duty Entitlement Passbook Scheme (DEPB)• Duty Free Replenishment Certificate (DFRC)• Duty Free Import Authorization (DFIA)• Provisions for Export Oriented Units (EOU’s), Electronic

Hardware Technology Parks (EHTP’s), Software Technology Parks (STP’s) and Bio-Technology Parks (BTP’s)

• Export Promotion Capital Goods (EPCG)• Special Economic Zones (SEZ)• Free Trade Ware Housing Zones (FTWHZ)

Foreign Trade Policy 2004-2009; Highlights

• Export of goods• Target Plus scheme launched• DEPB continued• Star Export Houses categorized ranging One Star Export

Houses to Five Star Export Houses

• Export of Services• Duty Free Credit Entitlement Certificate (DFEC) converted to

“Served From India Scheme”• Exclusive Service Export Promotion Council to be set up

Foreign Trade Policy 2004-2009; Highlights (contd.)

• Export of goods and services• Import of second hand capital goods without any age limit

• All good and services exported including DTA set free from service tax

• EOU’s to be exempted from service tax

• EOU’s to be permitted to retain 100% of export earnings in Export Earners Foreign Currency (EEFC) account

• Income Tax benefits on plant and machinery to be extended to DTA units, which convert to EOU

Foreign Trade Policy 2004-2009; Highlights (contd.)

• Export of goods and services (contd.)• Biotechnology Parks to be set up and granted all facilities of

100 per cent EOUs

• Facility of filing digitally signed applications and use of Electronic Fund Transfer Mechanism for paying application fees made available to exporters

• Validity of all licences/entitlements issued under various schemes modified to a uniform period of 24 months

Foreign Trade Policy 2004-2009; Highlights (contd.)

• Export of goods and services (contd.)• New scheme for establishment of Free Trade and

Warehousing Zone (FTWZ) having minimum outlay of INR100 crores and five lakh sq. mts. built up area introduced to create trade-related infrastructure to facilitate import and export of goods and services.

• Foreign Direct Investment (FDI) up to 100 per cent in the development and establishment of the zones and their infrastructural facilities to be allowed.

• Other benefits as applicable to units in Special Economic Zones (SEZs) to also be applicable to FTWZs

Foreign Trade Policy 2009-2014

• Launched on August 27, 2009 for a period of 5 years

• Came into action on August 27, 2009 and will be effective up to March 31, 2014

Foreign Trade Policy 2009-2014; Objectives

• To arrest and reverse declining trend of exports is the main aim of policy, aim to be reviewed after 2 years

• To double export of goods and services from India by 2014

• To double India’s share in global merchandise trade

• Simplification of the application procedure for availing various benefits

Foreign Trade Policy 2009-2014; Objectives

• To set in motion the strategies and policy measures which catalyze growth of exports

• To encourage exports through a “mix of measures”

Foreign Trade Policy 2009-2014;Aims in general

• To develop export potential, improve export performance, boost foreign trade and earning valuable foreign exchange.

• FTP assumes great significance this year as India's exports have been battered by the global recession.

• To generate new employment opportunities because a fall in exports has led to the closure of several small- and medium-scale export-oriented units, resulting in large-scale unemployment.

Foreign Trade Policy 2009-2014;Highlights

• 26 new markets added under Focus Market Scheme, 16 in Latin America and 10 in Asia-Oceania

• Incentives available under Focus Market Scheme increased to 3%

• Incentives available under Focus Product Scheme increased to 2%

Foreign Trade Policy 2009-2014;Highlights (contd.)

• A common simplified application form has been introduced for taking benefits under Focus Product Scheme, Focus Market Scheme, Market Linked Focus Product Scheme and Vishesh Krishi Gram Udyog Yojna.

Foreign Trade Policy 2009-2014;Change in Export Promotion Capital Goods Scheme• Export obligation reduced to 50% to increase the

life of existing plant and machinery

• Export obligation period was increased by 5 years

Foreign Trade Policy 2009-2014;Changes in Marine Sector

• Fisheries have been included in sectors which are exempted from maintenance of average export obligation under Export Promotion Capital Goods scheme

• Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for Status Holders has been given to Marine sector

Foreign Trade Policy 2009-2014;Changes in Gems and Jewellery Sector

• Plan of establishing “Diamond Bourses” around the country

• Import of cut and polished diamonds for certification and grading has been introduced on consignment basis

• Personal carriage limit increased• For exhibitions – US$ 5 million

• For samples – US$ 1 million

Foreign Trade Policy 2009-2014;Changes in Agriculture Sector

• To reduce transaction and handling costs, a single window system to facilitate export of perishable agricultural produce has been introduced. The system will involve creation of multi-functional nodal agencies to be accredited by APEDA.

Foreign Trade Policy 2009-2014;Changes in Leather Sector

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

• Enhancement of FPS rate to 2%, would also significantly benefit the leather sector

Foreign Trade Policy 2009-2014;Changes for Export of Tea

• Minimum value addition under advance authorization scheme for export of tea has been reduced from the existing 100% to 50%.

• DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%.

• Export of tea has been covered under VKGUY Scheme benefits.

Foreign Trade Policy 2009-2014;Changes in Pharmaceutical Sector

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

• Pharmaceutical sector extensively covered under MLFPS for countries in Africa and Latin America; some countries in Oceania and Far East.

Foreign Trade Policy 2009-2014;Changes in Handloom Sector

• To simplify claims under FPS, requirement of ‘Handloom Mark’ for availing benefits under FPS has been removed.

Foreign Trade Policy 2009-2014;Changes for Export Oriented Units

• EOU’s can sell 90% of their production in Domestic Tariff Area

• EOUs will now be allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards

Conclusion

• Conversion of Imports and Exports (Control) Act, 1947 to Foreign Trade Development and Regulation Act, 1992 was a remarkable change

• Foreign Trade Policy 2004-2009 had a good impact on India’s trade

• Focus Market Scheme in Foreign Trade Policy 2009-2014 was an important factor.

Presented byAmit Wadhwani