MAIN RELEASE

---

ARUN JAITLEY UNVEILS NEW LOOK EXIM POLICY TO BUILD ON AREAS OF INDIA’S CORE COMPETENCE

MASSIVE THRUST TO EXPORT OF SERVICES -- MAJOR BOOST TO HEALTH CARE, ENTERTAINMENT, PROFESSIONAL SERVICES AND TOURISM

MOVE TO FACILITATE CORPORATE INVESTMENT TO BOOST AGRO EXPORTS AND BENEFIT FARMERS – DEPB RATES FOR AGRO PRODUCTS TO FACTOR IN INPUT COSTS

FURTHER CONSOLIDATION OF AGRI EXPORT ZONES

SIMULTANEOUS NOTIFICATIONS BY DGFT AND CBEC FOR THE FIRST TIME

EPCG SCHEME MADE MORE FLEXIBLE AND ATTRACTIVE TO ENABLE EXPANSION OF MANUFACTURING BASE – SMALL SECTOR TO BENEFIT

SPECIAL FOCUS ON POTENTIAL HIGH GROWTH SECTORS – TEXTILES, AUTO COMPONENTS, GEMS & JEWELLERY, DRUGS & PHARMACEUTICALS, ELECTRONICS HARDWARE

REMOVAL OF RESTRICTIONS ON EXPORTS – EXPORT OF

FIVE ITEMS MADE FREE

INCENTIVES FOR FAST-GROWING STATUS HOLDERS

CODIFICATION OF SEZ RULES TO FACILITATE INVESTMENT

DEVELOPMENT OF EXPORT CLUSTERS – 10 NEW CLUSTERS WITH SIZEABLE EXPORT POTENTIAL TO BE COVERED

SIMPLIFIED PROCEDURES TO DRASTICALLY REDUCE TRANSACTION COSTS -- ANNUAL ADVANCE LICENCE FOR STATUS HOLDERS INTRODUCED

DIVERSIFICATION OF EXPORT MARKETS -- FOCUS: CIS FROM APRIL 1 – FOCUS: AFRICA ENLARGED TO COVER 24 COUNTRIES

INDIA’s MERCHANDISE EXPORTS SET TO CROSS

US $ 50 BILLION MARK IN 2002-2003

EXIM POLICY 2003-04 ANNOUNCED

New Delhi: March 31, 2003

Shri Arun Jaitley, Union Minister of Commerce & Industry and Law & Justice, today announced a comprehensive new Export & Import (EXIM) Policy within the parameters of the 5-year Policy, seeking to consolidate and accelerate India’s export growth by capitalising on the areas of its core competence and giving a massive thrust to services and agro exports, which have been identified as the important engines of growth. The Policy contains major boost to non-traditional service areas such as health care, entertainment and professional services as well as traditional areas like tourism; major initiatives on agro-exports with the basic aim of reaching the benefits of globalisation to farmers and rural sectors including facilitating association of corporates in the implementation of Agri Export Zones (AEZs); a more flexible and attractive Export Promotion Capital Goods (EPCG) Scheme in order to expand the manufacturing base for India’s exports including the small scale sector; incentives to status holders with premium on high growth; removal of restrictions on exports; measures to facilitate investments in Special Economic Zones (SEZs); reoriented export cluster development scheme and procedural simplification aimed at drastic reduction of transaction costs in order to make India globally competitive. The DEPB (Duty Entitlement Pass Book) Scheme is being continued and a facility for provisional DEPB rate has been introduced to encourage diversification and promote exports of new products.

Along with the policy announcement made by Shri Jaitley, notifications by the Director General of Foreign Trade and the Central Board of Excise & Customs (CBEC) are being issued simultaneously, for the first time. Shri Rajiv Pratap Rudy and Shri Vidyasagar Rao, Ministers of State for Commerce & industry, Shri Dipak Chatterjee, Commerce Secretary and Shri L. Mansingh, Director General of Foreign Trade (DGFT) were present on the occasion.

Referring to the export performance, Shri Jaitley said it was now almost certain that India’s merchandise exports would cross the US $ 50 billion (approximately Rs. 2,42,300 crore) milestone this year (2002-03). "We shall strive to sustain the present rate of growth and to accelerate it through the initiatives and strategy in the Exim Policy 2003-04", the Minister said. Provisional figures for the period April-February 2002-03 indicate that India’s exports have grown by as much as 16.76% in dollar terms (and 18.8% in rupee terms) over the same period of last year.

Announcing a major package for export of services, Shri Jaitley said apart from software, a host of other services now provided unprecedented opportunities in global trade and with abundant skilled manpower, India was uniquely placed to take full advantage of the growing opportunities of services exports which was clearly an important engine of growth for the economy. "We are, therefore, taking a bold initiative in not only recognising the importance of service exports but also introducing a scheme for the promotion of export of services… We have to recognise the fact that with the possible exceptions of the software sector, we have not even made a beginning". Keeping this mind and in order to facilitate and promote export of services from other sectors, Shri Jaitley announced that import of consumables, office and professional equipments, spares etc., would be allowed up to 10% of the average foreign exchange export earnings in the previous three years. Since many of the sectors had not even made a beginning in the direction of exports, the facility would be extended to new comers also against bank guarantee to the extent of to the revenue sacrificed, subject to actual condition. "We expect that this would particularly help the health sector for which the Finance Minister has already given a strong signal for India to emerge as a major destination for health services", Shri Jaitley said.

In the tourism sector, while noting that "we are nowhere near realising the full potential the country offers", Shri Jaitley announced the extension to the tourism sector the benefits of the advance licence scheme by allowing recognised hotels of three-star category and above and other registered service providers in this sector duty-free import of consumables and spares up to 5% of their average foreign exchange earnings of the previous three years, subject to actual user condition. (However, imports of agricultural and dairy products would not be allowed for imports against this entitlement). The tourism sector already enjoys the benefit of the EPCG Scheme

Announcing a package for the entertainment industry, Shri Jaitley said that for entertainment services, which was singularly handicapped by lack of investment but had tremendous opportunities for exports, government would promote investment in Venture Capital Fund for the entertainment industry through suitable tax incentives in consultation with the Ministry of Finance. He also announced that sector-specific Working Groups would be set up with representatives of the Ministry of Finance, the administrative Ministries concerned, state governments, financial institutions and the industry to work towards a common goal by framing Action Plans to be implemented within specified time frame. Noting that a system for collecting reliable statistics for export of services was yet to be put in place, Shri Jaitley said that a Group consisting of representatives of the Department of Commerce, Central Statistical Organisation, RBI, DGFT and DGCI&S would consider all aspects of this issue and recommend to the government a system for collection of data relating to services exports.

Underlining the paramount importance of agriculture and allied products as an area of India’s core competence, Shri Jaitley announced that the corporate sector with proven credentials would be encouraged to sponsor Agri Export Zones (AEZs) for boosting agro exports. Appropriate incentives, the Minister said, were being planned in consultation with the Ministry of Finance, to enable investments by these corporates in infrastructure, processing, packaging, storage, R&D, agricultural extension and other facilities relating to exports in the approved AEZs. "There has been an enthusiastic response to the AEZ scheme from the states and the rural community. As many as 45 AEZs have been notified so far in different parts of the country. We want to further accelerate this process", Shri Jaitley said.

In another major initiative to boost agri and allied products exports, Shri Jaitley said that fixation of DEPB rates for selected agro products would factor in the cost of inputs such as fertilisers, pesticides and seeds. This would help the farmers to use the required inputs in a scientific manner to boost productivity and quality.

The Policy has also removed quantitative restrictions on export of five items, namely, paddy (except basmati), cotton linters, rare earth, silk cocoons, etc.

Shri Jaitley said along with promotion of agro and service exports, special focus would be given to certain sectors having potential for accelerated export growth, such as textiles (especially garments), auto components, gems & jewellery, chemicals, drugs & pharmaceuticals and electronic hardware. In this context, he announced certain sector-specific initiatives such as Diamond & Jewellery Account for exporters dealing in purchase/sale of diamonds and diamond studded jewellery and a package to boost electronic hardware/software sector.

Stating that in order to be a significant player in world trade, the country’s manufacturing base would have to be built up quickly in order to sustain a high rate of export growth and that the EPCG scheme had contributed significant to exports by facilitating expansion of the country’s manufacturing base at a comparatively lower capital investment, Shri Jaitley announced a series of steps to make the EPCG scheme more flexible and attractive so that even the small scale sector could set up and expand its manufacturing base for exports. These include allowing import of capital goods for pre-production and post-production facilities also; rationalisation of export obligation by linking it to the duty saved. (Export obligation would now be 8 times the duty saved); allowing import of spares to facilitate upgradation of existing plant and machinery; dispensing with the existing condition of imposing an additional export obligation of 50% for products in the higher value chain; greater flexibility for fulfilment of export obligation under the scheme by allowing export of any other product manufactured by the exporter, thereby taking care of the dynamics of the international market; allowing capital goods up to 10 years old also under this scheme; and counting royalty payments received from abroad etc., for discharge of export obligation under the EPCG scheme.

Outlining a package of incentives for fast growing status holders, Shri Jaitley underlined that the status holders would continue to play a significant role in boosting exports especially from the small scale sector, as most of the small units were not in a position to directly access the international market. A duty-free entitlement would be given to them for import of capital goods, spares, office equipments and consumables. This would be available to the status holders achieving a growth rate of 25% or more in the current year with a minimum export performance of Rs. 25 crore. They would also be given duty-free entitlement of 10% of the incremental growth in exports during the current year subject to the actual user condition.

In recognition of the importance of the SEZ Scheme in the country, strategy for accelerated export growth and the contribution of 100% Export Oriented Units (EOUs), Shri Jaitley said that a major step was being taken for the simplification and codification of rules, regulations and procedures applicable to SEZ and EOU units and all these rules and regulations were being put in one place which would greatly facilitate both potential investors as well as the existing units. Sales from Domestic Tariff Area (DTA) to SEZs would be treated as exports and this would now entitle domestic suppliers to drawback/DEPB benefits etc. Further, agriculture/horticulture processing SEZ units would be allowed to provide inputs and equipments to contract farmers in DTA to promote production of goods as per the requirement of importing countries, which would help in promoting SEZs specialising in agro exports. Additionally, special steps were being taken to promote exports of gems & jewellery and electronic hardware from the SEZs and a comprehensive legislation on SEZs was on the anvil. Simultaneously, to enable exporters access to funds at international rates, a suitable fiscal package for offshore banking units set up in SEZs was being worked out. The Minister said that though notified greenfield SEZ projects were yet to get off the ground due to delay in land acquisition, the first new SEZ at Indore was ready for operation. 18 SEZs have been approved and Greater NOIDA and Navi Mumbai SEZ were under active consideration.

Highlighting the potential of export clusters in increasing the overall competitiveness of selected industrial locations which were predominantly export oriented, the Minister said that formulation of an industrial infrastructure upgradation scheme under the Department of Industrial Policy & Promotion was in the final stage of approval and efforts under the scheme would be supplemented by the Assistance to States for Infrastructure Development of Exports (ASIDE) and other schemes. To begin with, 10 such clusters with high-growth potential would be supported to bridge the technology and productivity gaps.

Announcing procedural simplifications measures, Shri Jaitley said that his Department was gearing itself to provide online approvals to exporters where exports had been effected from 23 EDI ports in the country. DGFT had already achieved a high degree of computerisation, he said. Further, as part of the effort to reduce transaction cost, Shri Jaitley announced the introduction of annual advance licence facility for status holders so that they could plan for imports of raw materials and components on an annual basis and take advantage of bulk purchases.

In another initiative relating to the diversification of export markets, Shri Jaitley said that in addition to the 7 countries already included in "Focus: Africa", the programme would now be extended to the remaining 11 countries of the sub-Saharan region where India had diplomatic missions namely, Angola, Botswana, Ivory-Coast, Zambia, Zimbabwe and six countries of North Africa namely, Egypt, Sudan, Algeria, Libya, Morocco and Tunisia. Further, Shri Jaitley observed that while the "Focus: CIS" programme took a little while in getting sanctioned, it would be launched from 1^st April, 2003.

The Minister concluded by saying that "our Approach would be to relentlessly pursue the goal of making India a significant player in the world market by leveraging India’s undoubted strengths viz. intelligence, innovation and entrepreneurship of every Indian. This will be our national objective. We in the Ministry of Commerce and Industry shall play the lead role in co-ordinating with other Ministries of Government of India and the State Governments as well as the exporters to succeed in this national endeavour".