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INDIA DISMANTLES QRs -- ADEQUATE SAFEGUARDS IN PLACE

Another major step in this year's Exim Policy -- the last year of the 5-year policy framework (1997-2002) -- announced by Shri Maran is the market access initiative. "A plan scheme has been evolved for this purpose and we would try to pursue this initiative in a focussed manner with product and country specifications. The scheme has already been agreed to by Planning Commission", the Minister said. Under this scheme, the government would assist the industry in research & development, market research, specific market and products studies, warehousing and retail marketing infrastructure in select countries and direct market promotion activity through media advertising and buyer-seller meets. Shri Maran said that the immediate aim and challenge before the country is to accelerate export growth so as to achieve at least one per cent share of global trade by the year 2004-2005. "The total world export is expected to be around US $ 7.5 trillion in 2004 and for us to reach this one per cent, we need to export US $ 75 billion, from the currently expected level of $ 43 billion, which roughly works out to 18 per cent growth rate. This is achievable", Shri Maran observed and said he was confident of attaining the export growth target of 18 per cent for the current financial year 2001-2002.

        The Minister also announced a series of important changes in Exim Policy Schemes with a view to "making the lives of exporters easier and saving their transaction time and cost". These include (a) strengthening of the Annual Advance Licensing Scheme through increase of the entitlement for the annual advance licence from 125 per cent to 200 per cent of the FOB value of the preceding year's exports, extension of the annual advance licences facility even in cases where there are no standard input-output norms, extension of the annual advance licence facility for deemed exports and intermediate supplies, revalidation of expired advance licences where export obligation has been completed by 6 months and extension of the facility of back-to-back L/C for advance licence which is presently confined to one bank and one branch, to cover other banks and branches; (b) extension of the validity of the Duty Free Replenishment Certificates (DFRC) from 12 to 18 months; (c) allowing imports of moulds etc., upto the full CIF value of the licence instead of restricting it to 20 per cent to help plastic, leather and other sectors and (d) in respect of Special Economic Zones (SEZs), permitting foreign direct investment (FDI) under automatic route except for a small negative list; no requirement of licence for setting up units for items reserved under SSI; permission to units in SEZs to bring back their proceeds in 365 days and retain 100 per cent of proceeds in exchange earners foreign currency (EEFC) account; entitling developers to concessional duty for procurement of goods for setting up of SEZs and giving SEZ developers infrastructure status under Income Tax Act as provided in the Finance Bill 2000.

        Referring to the announcement made by him introducing electronic filing and online processing of applications so that licences at least to the known exporters like the status holders and green card holders could be issued within 24 hours, Shri Maran mentioned that 97.5 per cent licences all over the country were today being issued within these time limits. In fact, in Pune and Bangalore, licences in respect of applications received upto 12 noon are being issued the same evening, the Minister said. Recalling the scheme for assistance to States for exports, Shri Maran said that a beginning had been made and a provision of about Rs.100 crore had been allocated in the current Budget for involving the State governments in the national export effort.

        Procedures have been simplified, interface of exporters with DGFT has been cut down by reducing the number of committees from 9 to 4 and streamlining of others. Simultaneously, Shri Maran said that the Department of Revenue would take similar steps including the following: automatic customs clearances to status holders and green card holders; reduction in percentage of physical verification and random drawing of shipping bills; issuance of Receipt by Customs for ensuring accountability; expeditious verification of DEPB and DFRC; simultaneous logging of DEEC at the time of shipment; and redemption of advance/EPCG licence on the basis of No Bond issued by DGFT.

        Touching upon some of the persistent demands of exporters including the issues of easing the cost of export credit, rephasing or backloading of Section 80 HHC benefits, decongestion of ports and airports, removal of anomalies in customs and excise duty structure in respect of electronic hardware sector and the demand of the engineering sector for a residual drawback rate based on iron & steel content of the export products, Shri Maran said that he had taken up and discussed all these issues with the Finance Minister and other appropriate authorities. "The dialogue with the Ministry of Finance and Reserve Bank of India is continuing. At this moment, I can only say that I am quite optimistic about the outcome", the Minister said.

        Referring to the current discussions regarding the WTO Agreement on Agriculture and its impact on Indian economy, Shri Maran explained that it was part of the Uruguay Round Agreements which were negotiated during 1986-1993 and was signed in April 1994 at Marrakesh by 120 countries including India. The implementation of the Agreement started with effect from 1^st January, 1995 and this is the sixth year of its implementation. "The Agreement does not in any way, require us to reduce our existing subsidies for research, pest and disease control, marketing and promotion services and various infrastructural support services. It does not also in any way affect our existing PDS. India has also not taken any obligation for providing minimum market access opportunities to other trading partners", the Minister said. Stating that at the time of the signing of the Uruguay Round Agreement, it was decided that negotiations for further liberalisation would start on 1/1/2000, such mandated negotiations had already commenced in the WTO. India's proposals for these negotiations were formulated after extensive consultations with the States, farmers' representatives, political parties etc. "We are second to none in our realisation of the basic fact that if our agriculture goes wrong nothing in our economy and social fabric will go right. We will leave no stone unturned to safeguard the food security and rural employment of our people", Shri Maran said.

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PRIMACY TO PROMOTION OF AGRO EXPORTS -- EXIM POLICY 2001-2002

        Agro export efforts would be reorganised on the basis of specific products and specific geographical areas. A beginning would be made this year by focussing specially on areas where there is a convergence of these two factors and make these zones as Regional Rural Motors of Indian export economy. Shri Maran said that a beginning would be made this year in respect of apples from Himachal Pradesh and Jammu & Kashmir, the alphonso mangoes from the Konkan areas of Maharashtra (the list is not exhaustive; but only illustrative) and any other such zones that the State Governments may identify and sponsor in respect of the specific cash crops. The emphasis will be on end to end development of export specific products. Department of Commerce will supplement the efforts of State Governments in facilitating such agri exports. There are also many agriculture regions which have constraints in fully participating in international trade because of various critical gaps including information on prices, demand, quality standards, etc. It will be our endeavour to fill these gaps and play an important role of not only transmitting the international signals to the farmers but also encouraging and enabling them to respond to those signals through the States. The EXIM Policy schemes like Duty Exemption Scheme and the Export Promotion Capital Goods Scheme are being made applicable to the agro sector as well with effect from today. "If ‘Internationalisation’ of our agriculture takes place it will have several implications: The terms of trade, which have for long been in favour of industry, are expected to shift in favour of agriculture. It is estimated by some economists that every one per cent switch will divert about Rs.8500 crore additionally in favour of agriculture and that about US $20 billion (over Rs.60,000 crore) will be transferred to the agriculture sector from the non-agriculture sector in the next few years. This additional rural purchasing power will create a phenomenal effective demand. I have no doubt that our farmers will rise to the occasion and that we shall be able to make a mark in the international trade on agriculture with this farm-to-port approach in the Agri Economic Zones and the proposed agri export policy which are but small steps forward in the right direction", Shri Maran said.

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FURTHER TIME GRANTED FOR FULFILMENT OF EXPORT OBLIGATIONS -- PAST CASES OF DEFAULT

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NO OPENING OF FLOODGATES OF IMPORTS

1. The imports of items like wheat, rice, maize, petrol, diesel, ATF and urea will be permitted only through the designated State Trading Enterprises which will be functioning on commercial principles in accordance with Article XVII of GATT.
2. Import of all primary products of plant and animal origin will be subject to import permits to be issued by the Ministry of Agriculture after an import risk analysis based on Sanitary and Phyto-sanitary measures and provisions.
   
3. In addition, conditions are being prescribed for the import of new and second hand cars for ensuring road safety. Import of foreign liquor, processed food products and tea wastes are being made subject to already existing domestic regulations concerning health and hygiene.

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GLOSSARY OF TERMS -- EXIM POLICY

Exim Policy Refers to Export and Import (Exim) Policy, as amended from time to time. The present Policy has a 5-year framework (1997-2002), which is co-terminus with the Ninth Five-Year Plan. Within this 5-year policy framework, the Exim Policy as amended upto April 1, is announced every year. The Exim Policy takes effect from April 1. This is the last year of the 5-year Exim Policy 1997-2002.

DGFT Directorate General of Foreign Trade, which is headed by the Director General of Foreign Trade. The office of the DGFT is responsible for formulating and execution of Exim Policy, including licensing. Formerly (till 1991), was known as the Chief Controller of Imports & Exports (CCI&E).

EPZs/EOUs EPZ means Export Processing Zones which are special enclaves, separated from the Domestic Tariff Area (DTA), to provide an internationally competitive duty-free environment for export production. EOU means Export Oriented Units. The EOU scheme is complementary to the EPZ scheme, except that it is widely dispersed in location, unlike EPZs, which are set up at specific locations. The seven EPZs in the country are -- at Kandla, Santa Cruz, Falta, Noida, Cochin, Chennai and Visakhapatnam.

SEZs SEZ means Special Economic Zones. The two new SEZs are coming up at Nanguneri (Tamil Nadu) and Positra (Gujarat). In principle approval has also been given for setting up of SEZs (state government/private sector) at Dronagiri (Maharashtra), Paradeep (Orissa), Gopalpur (Orissa), Kulpi (West Bengal), Bhadohi (UP), Kanpur (UP), Kakinada (Andhra Pradesh) and Indore (MP). Besides these, four EPZs viz., Santa Cruz, Kandla, Cochin and Surat (in private sector) have been converted into SEZs with effect from 1^st November, 2000.

E-Commerce Refers to electronic commerce. In the context of Exim Policy, e-commerce relates to electronic filing and processing of applications etc.

EPCG EPCG refers to the Export Promotion Capital Goods (EPCG) Scheme, which gives the manufacturer facility for import of capital goods for export production at concessional rate of duty (5 per cent) against certain level of export obligation over a period of time.

Duty The Exim Policy (1997-2002) allows duty-free import

Exemption of inputs for exports under Advance Licence, Duty

Scheme/Duty Entitlement Pass Book (DEPB) and Duty Free

Free Import of Replenishment Certificate (DFRC) Scheme.

Inputs .

Advance Advance Licence is granted for import of inputs without

Licence payment of customs duties. It is issued in accordance with the Policy and procedures in force and subject to fulfilment of time-bound export obligation. Such licences can be issued for import of inputs for use in the export production as well as for replenishment of the inputs already used in the export product.

DEPB Refers to the Duty Entitlement Pass Book to neutralise the incidence of basic and special customs duty on the import content of export product. This is provided by way of grant of duty credit against the export product at specified rates. The DEPB Scheme which was notified on 1/4/1997 consisted of (a) Post-export DEPB and (b) Pre-export DEPB. The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book at a pre-determined credit on the FOB value. The DEPB allows import of any items except the items which are otherwise restricted for imports.

Input-Output The norms which define the amount of input/inputs

Norms required to manufacture a unit of output.

Replenishment Refers to Replenishment of such imports as per the

Licence input-output norms required for the purpose of export of products.

DFRC Refers to the Duty Free Replenishment Certificate Scheme which was introduced from 1/4/2000 replacing Transferable Advance Licensing Scheme. The scheme is available to merchant exporters as well as to manufacturer exporters. However, it covers only items which are covered under standard input-output norms notified by DGFT. The validity of DFRC as announced on 1/4/2000 was 12 months. Validity of DFRC has been extended from 12 months to 18 months in the Exim Policy 2001-2002 w.e.f. 1/4/2001.

SIL SIL means Special Import Licences issued under the Policy.

Deemed Refers to those transactions in which the goods

Exports supplied do not leave the country and the payment for the goods is received by the supplier in India.

FoB FoB means Free on Board -- i.e., when an exporter delivers goods "free on board", he pays all charges involved in getting them actually onto the ship.

NFE NFE refers to Net Foreign Exchange. Net Foreign Exchange earning is calculated as a percentage of exports (NFEP).

ISO-9000 Refers to international standards, laid down by the International Standards Organisation.

Manufacturer- Manufacturer-exporter means a person who exports

Exporter goods manufactured by him or intends to export such

Merchant goods. Merchant- Exporter means a person engaged in

Exporter trading activities and exporting or intending to export goods.

Export With a view to building marketing infrastructure and

House/ expertise required for export promotion, exporters

Trading with certain level of export performance are

House etc. conferred the status of Export House/Trading House/Star Trading House/Super Star Trading House.

Registration- Registration-cum-Membership Certificate (RCMC)

cum- means a certification of registration and membership

Membership granted to an exporter by an Export Promotion Council

Certificate (EPC) or other competent authority.

Value addition Value addition refers to the increment added in the process of manufacture of a particular item, which also becomes part of its price.

QRs QRs mean Quantitative Restrictions. QRs refer to specific limits imposed by countries on the quantity or value of goods that can be imported or exported. QRs are non-tariff measures which are taken to regulate or prohibit international trade. QRs specifically refer to measures such as licensing requirements for exports/imports; quotas, ceilings etc.

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RECORD EXPORT GROWTH IN 2000-2001-03-31

        Some of the contributory factors are the spectacular 5% growth of world economy – its highest in the last 16 years – and the revival of South East Asian economies. These factors, however, need not detract from the hard performance put in by our exporters in tapping new markets, bagging fresh orders and meeting delivery schedules. I would like to believe, and most exporters would agree with me, that the conducive environment created by the policy instruments of the Government has also played its due role, which cannot be undermined". The Minister also said he was confident of attaining the 18% export target for the current financial 2000-2001 despite the apprehended slow down the world's biggest economies, the US and Japan which accounted for 46% of the world output. Noting that there were supply constraints, higher transaction costs etc. which were yet to be addressed fully and satisfactorily, Shri Maran said that exports should be regarded as an integral part of development effort -- not just as a residual activity. This should help in developing greater confidence in our capabilities. But there are some dark clouds on the horizon – I mean the demand constraints beyond our control like the apprehended slowdown of the two biggest economies, the USA and Japan, which account for 46% of the world output. "Therefore, time has come for the replacement of export pessimism and anti-export bias, followed during so many years, with export consciousness immediately and export-led growth ultimately", the Minister.

        The foreign companies which bid include Cairn Energy U.K., Petrom, Romania, NIKO Resources, Canada, JTI, USA, Hardy Oil, U.K and Heramec Ltd., U.K. Indian private companies namely RIL and HOEC and PSUs namely ONGC, OIL, GAIL, IOC and Gujarat State Petroleum Corporation Ltd. (GSPC).

        Out of the 25 blocks on offer, 23 blocks (8 deep water blocks, 8 shallow water blocks and 7 onland blocks) have received bids. It is significant that in this round all the blocks on offer barring two onshore blocks have received bids. As compared to this, out of 48 blocks offered under NELP-I, only 27 blocks had received bids. Moreover, this time 12 blocks ( 6 deep water blocks, 3 shallow water blocks and 3 onland blocks) have received multiple bids. As compared to this only 12 blocks of a total of 48 had received multiple bids under NELP-I. In percentage term, 92% of the blocks received bid in NELP-II as against 56% blocks bid in NELP-I. From these statistics, it can be inferred that the response under NELP-II has been more positive as compared to NELP-I, not to speak of earlier rounds.

        Shri Naik mentioned that a total of 25 blocks were offered under NELP-II. These included 8 deep water blocks on West Coast for the first time and 8 shallow water blocks both on East (5 blocks) and West Coasts (3 blocks) and 9 onland blocks with 2 blocks each falling in the States of Gujarat, Uttar Pradesh and West Bengal and one block each in Assam, Orissa and Rajasthan. The total area covered in these 25 blocks was about 294,000 sq. kms. This is about 9.4 % of the total sedimentary area in the country.

        To promote NELP blocks effectively to attract investment in a highly competitive global scenario, where many governments have opened their doors for private investment in the upstream sector, a high level delegation led by Shri Naik held Road- Shows at Delhi, London, Houston, Tokyo and Singapore. A total of about 215 companies/organisations participated in these Road-Shows. To facilitate companies to view data, data viewing centres were opened at Delhi, London and Houston. A total of 46 companies (16 at Delhi and 15 each at London and Houston) viewed data.

        A special web-site http://www.india-nelp2.com was also launched to promote NELP-II blocks and more than 7000 visits had been made by companies/organisations, world wide.

        Over the years, there have been some concerns about prospectivity of blocks on offer in India. It is important to recall that one of the costliest unlearnt lessons in the history of oil exploration in the world is that prospectivity can change suddenly and dramatically in a basin or country with only few significant discoveries. Recent discoveries in India in Cambay offshore (4 discoveries) by Cairn Energy of U.K. and in Krishna-Godavari deep water by ONGC may be the harbingers of a major event waiting to happen that can radically change the rating of poorly explored basins in the country.

        The Government now expects to invite bids under NELP-III by the end of this year, for which preparatory activities are in progress. The third round will include both onland and offshore blocks including deep water blocks. Directorate General of Hydrocarbons (DGH) is currently getting seismic data acquired along the East Coast and along the southern offshore tip of India. This will enable carving out of new blocks in these areas with entirely new data.

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NEW INITIATIVES ON SEZs -- SUBSTANTIAL PROGRESS OF ZONES IN TAMIL NADU AND GUJARAT

        The Minister also announced several further policy initiatives in respect of SEZs namely:

• FDI permitted under automatic route for all manufacturing sectors except a small negative list.
• No licence required for setting up units for items reserved under SSI.
• Units in SEZs can bring back their proceeds in 365 days and retain 100% of proceeds in EEFC account.
• No GR waiver is required for sending sample goods for repairs, participation in exhibitions, etc.
• SEZ developers are proposed to be given infrastructure status under income tax act as provided in the Finance Bill, 2001.
• Developers will be entitled to concessional duty for procurement of goods for setting up of SEZs.

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DEPB SCHEME CONTINUES

• Provision made for claiming DEPB against advance payment.
• Validity of DEPB extended upto the last day of the month in which the same is expiring.
• Rationalisation of DEPB rates in line with changes in Customs duty on account of union budget.
• Coverage of additional ports under DEPB.
• TRA facility extended to all notified ports under DEPB scheme.

        DEPB means Duty Entitlement Pass Book to neutralise the incidence of basic and special customs duty on the import content of export product. This is provided by way of grant of duty credit against the export product at specified rates. The DEPB Scheme which was notified on 1/4/1997 consisted of (a) Post-export DEPB and (b) Pre-export DEPB. The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book at a pre-determined credit on the FOB value. The DEPB allows import of any items except the items which are otherwise restricted for imports.