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Trade policy likely to hike incentives under export promotion schemes

06 June 2014

The foreign trade policy 2014-19 is likely to announce an increase in incentives for exporters of both goods and services and make promotion schemes more effective in order to lift sagging exports.

The new five-year foreign trade policy, likely to be announced after the budget, in July, will offer greater incentives to services exports while refocusing schemes for merchandise export, according to commerce department sources.

Commerce ministry officials said the department of commerce is expected to expand the scope of the 'Serve for India Scheme' (SFIS) in the new policy by making duty credit scrips tradable. This will also ensure that all service exporters, including those who do not import any inputs and are hence not able to use the scrips, benefit from the scheme, they point out.

The SFIS, which allows exporters with foreign exchange earnings of at least Rs10 lakh import duty exemption scrips worth 10 per cent of exported value, would be much more effective if the scrips could be used to pay service taxes or be traded, said FIEO director-general Ajay Sahai.

''At present, only the hotel industry is using the scrips as it imports liquor and vehicles. For most others, the scheme is not of much use,'' Sahai pointed out.

The commerce ministry is working on making the existing Focus Product Scheme, which gives sops to identified labour-intensive products, more specific by covering fewer items and increasing the amount.

Indian exporters currently face an 8 to 10 per cent cost disadvantage and an incentive of 2-5 per cent may not help much, say officials.

The Focus Products Scheme covers over 1,000 products and the focus markets scheme covers 150 countries mainly across Africa, Latin America and large parts of Oceania.

Last year, the government had included 158 hi-tech products from sectors like engineering and electronics in the list, entitled to a two per cent duty credit scrip.

The Focus Products Scheme seeks to offset infrastructural inefficiencies and other associated costs involved in the marketing of these products.

Focus market scheme helps offset high freight costs and other externalities to select international markets to enhance India's export competitiveness

The commerce ministry will discuss the proposed framework with the finance ministry before finalizing the annual Foreign Trade Policy.

India missed its export target of $325 billion for 2013-14 with shipments during the year rising by a meager 3.98 per cent at $312.35 billion.

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