NEW DELHI: The finance ministry’s reluctance to provide new incentives to exports and the political focus on taming inflation have robbed this year’s update of the Foreign Trade Policy (FTP) of the usual pomp and exporters looking for sops are in for disappointment.
Barring additions to the focus-product, focus-country, vishesh krishi & gram udyog yojna; continuation of interest subsidy, and reduction of import duty for the export promotion capital goods (EPCG) scheme, proposals for most new sops have been nixed by the finance ministry.
The farm sector and labour-intensive exports will be the focus of export promotion while import liberalisation in some sectors like capital goods is on cards to tackle inflation.
Interestingly, the unusual lack of sops this year is despite the 11% appreciation of the rupee last year which has led to decline in export of traditional goods like textiles and handicrafts.
“The focus now is on containing inflation as elections are round the corner. Moreover, this is the concluding year of the five-year policy and the government is not making too many changes as the next long-term policy is due next year,” government sources said.
On its part, the finance ministry is reluctant to pump in more resources for export promotion despite exporters’ complaints about rupee appreciation. “Finance minister P Chidambaram has cleared a handful of new schemes, but they would face implementation problems like the service tax exemption,” they added.
Setting the mood, the government has already reduced the duty entitlement pass book (DEPB) credit on several items and banned exports of several items like rice. The outgo on account of the DEPB scheme is likely to be lower despite growth in exports and details of its extension would be part of the FTP announcement.
One bright spot for exporters is the allocation of around Rs 400 crore to continue cheaper credit for exports. The export subvention scheme expired on March 31. It will be extended now with an enhanced allocation, sources said.
The commerce & industry is expected to come out with measures for procedural simplification to cut transaction costs and reduce the 5% customs duty on imports through the EPCG scheme. The 5% duty on EPCG may either be reduced to 2% or scrapped, they added.
DEPB on some more steel items may be withdrawn. This list contains intermediate products like bars and rods which do not have too much value addition. The government has already cut DEPB on several steel items.
Barring additions to the focus-product, focus-country, vishesh krishi & gram udyog yojna; continuation of interest subsidy, and reduction of import duty for the export promotion capital goods (EPCG) scheme, proposals for most new sops have been nixed by the finance ministry.
The farm sector and labour-intensive exports will be the focus of export promotion while import liberalisation in some sectors like capital goods is on cards to tackle inflation.
Interestingly, the unusual lack of sops this year is despite the 11% appreciation of the rupee last year which has led to decline in export of traditional goods like textiles and handicrafts.
“The focus now is on containing inflation as elections are round the corner. Moreover, this is the concluding year of the five-year policy and the government is not making too many changes as the next long-term policy is due next year,” government sources said.
On its part, the finance ministry is reluctant to pump in more resources for export promotion despite exporters’ complaints about rupee appreciation. “Finance minister P Chidambaram has cleared a handful of new schemes, but they would face implementation problems like the service tax exemption,” they added.
Setting the mood, the government has already reduced the duty entitlement pass book (DEPB) credit on several items and banned exports of several items like rice. The outgo on account of the DEPB scheme is likely to be lower despite growth in exports and details of its extension would be part of the FTP announcement.
One bright spot for exporters is the allocation of around Rs 400 crore to continue cheaper credit for exports. The export subvention scheme expired on March 31. It will be extended now with an enhanced allocation, sources said.
The commerce & industry is expected to come out with measures for procedural simplification to cut transaction costs and reduce the 5% customs duty on imports through the EPCG scheme. The 5% duty on EPCG may either be reduced to 2% or scrapped, they added.
DEPB on some more steel items may be withdrawn. This list contains intermediate products like bars and rods which do not have too much value addition. The government has already cut DEPB on several steel items.
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