India Exim Policy - Foreign Trade Policy.
The Foreign Trade
Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian Government and is regulated by the Foreign Trade Development and Regulation Act, 1992.
DGFT (Directorate General of Foreign Trade) is the main governing body in matters related to Exim Policy. The main objective of the Foreign Trade (Development and Regulation) Act is to provide the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India. Foreign Trade Act has replaced the earlier law known as the imports and Exports (Control) Act 1947.
Indian EXIM Policy contains various policy related decisions taken by the government in the sphere of Foreign Trade, i.e., with respect to imports and exports from the country and more especially
export promotion measures, policies and procedures related thereto. Trade Policy is prepared and announced by the Central Government (Ministry of Commerce). India's Export Import Policy also know as Foreign Trade Policy, in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payments position.
History of Exim Policy of India
In the year 1962, the Government of India appointed a special
Exim Policy Committee to review the government previous export import policies. The committee was later on approved by the Government of India. Mr. V. P. Singh, the then Commerce Minister and announced the Exim Policy on the 12th of April, 1985. Initially the EXIM Policy was introduced for the period of three years with main objective to boost the export business in India
Exim Policy Documents
The Exim Policy of India has been described in the following documents:
- Interim New Exim Policy 2009 - 2010
- Exim Policy: 2004- 2009
- Handbook of Procedures Volume I
- Handbook of Procedures Volume II
- ITC(HS) Classification of Export- Import Items
The major information in matters related to export and import is given in the document named "Exim Policy 2002-2007".
An exporter uses the Handbook of Procedures Volume-I to know the procedures, the agencies and the documentation required to take advantage of a certain provisions of the Indian EXIM Policy. For example, if an exporter or importer finds out that paragraph 6.6 of the
Exim Policy is important for his export business then the exporter must also check out the same paragraph in the Handbook of Procedures Volume- I for further details.
The Handbook of Procedures Volume-II provides very crucial information in matters related to the Standard Input-Output Norms (SION). Such Input output norms are applicable for the products such as electronics, engineering, chemical, food products including fish and marine products, handicraft, plastic and leather products etc. Based on SION, exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the
Duty Exemption Scheme or Duty Remission Scheme.
Export Import Policy regarding import or export of a specific item is given in the ITC- HS Codes or better known as
Indian Trade Clarification Code based on Harmonized System of Coding was adopted in India for import-export operations. Indian
Custom uses an eight digit ITC-HS Codes to suit the national trade requirements. ITC-HS codes are divided into two schedules. Schedule I describe the rules and
related to import policies where as
Export Policy Schedule II describe the rules and regulation related to export policies. Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters. The total number of chapters in the schedule I is 98. The chapters are further divided into sub-heading under which different HS codes are mentioned.
ITC(Hs) Schedule II of the code contain 97 chapters giving all the details about the
Export Import Guidelines related to the export policies.
Objectives Of The Exim Policy : -
Government control import of non-essential items through the
EXIM Policy. At the same time, all-out efforts are made to promote exports. Thus, there are two aspects of Exim Policy; the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation. The main objective of the Government's EXIM Policy is to promote exports to the maximum extent. Exports should be promoted in such a manner that the economy of the country is not affected by unregulated exportable items specially needed within the country. Export control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country. In other words, the main objective of the Exim Policy is:
- To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities.
- To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components,' consumables and capital goods required for augmenting production.
- To enhance the techno local strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness.
- To generate new employment.
- Opportunities and encourage the attainment of internationally accepted standards of quality.
- To provide quality consumer products at reasonable prices.
Governing Body of Exim Policy
The Government of India notifies the Exim Policy for a period of five years (1997-2002) under Section 5 of the Foreign Trade (Development and Regulation Act), 1992. The current
Export Import Policy covers the period 2002-2007. The Exim Policy is updated every year on the 31st of March and the modifications, improvements and new schemes became effective from 1st April of every year.
All types of changes or modifications related to the EXIM Policy is normally announced by the Union Minister of Commerce and Industry who co-ordinates with the Ministry of Finance, the
Directorate General of Foreign Trade
and network of
Exim Policy 1992 -1997
In order to
liberalize imports and boost exports, the Government of India for the first time introduced the Indian Exim Policy on April I, 1992. In order to bring stability and continuity, the Export Import Policy was made for the duration of 5 years. However, the Central Government reserves the right in public interest to make any amendments to the trade Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India.
Export Import Policy is believed to be an important step towards the economic reforms of India.
Exim Policy 1997 -2002
With time the Exim Policy 1992-1997 became old, and a
New Export Import Policy was need for the smooth functioning of the Indian export import trade. Hence, the Government of India introduced a new Exim Policy for the year 1997-2002. This policy has further simplified the procedures and educed the interface between exporters and the Director General of Foreign Trade (DGFT) by reducing the number of documents required for export by half. Import has been further liberalized and better efforts have been made to promote Indian exports in international trade.
Objectives of the Exim Policy 1997 -2002
The principal objectives of the Export Import Policy 1997 -2002 are as under:
- To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities.
- To motivate sustained economic growth by providing access to essential raw materials, intermediates, components,' consumables and capital goods required for augmenting production.
To improve the technological strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness.
- To create new employment. Opportunities and encourage the attainment of internationally accepted standards of quality.
- To give quality consumer products at practical prices.
Highlights of the Exim Policy 1997-2002
1. Period of the Exim Policy
• This policy is valid for five years instead of three years as in the case of earlier policies. It is effective from 1st April 1997 to 31st March 2002.
• A very important feature of the policy is liberalization.
• It has substantially eliminated licensing, quantitative restrictions and other regulatory and discretionary controls. All goods, except those coming under negative list, may be freely imported or exported.
3. Imports Liberalization
• Of 542 items from the restricted list 150 items have been transferred to Special Import Licence (SIL) list and remaining 392 items have been transferred to Open General Licence (OGL) List.
4. Export Promotion Capital Goods (EPCG) Scheme
• The duty on imported capital goods under
EPCG Scheme has been reduced from 15% to 10%.
• Under the zero duty EPCG Scheme, the threshold limit has been reduced from Rs. 20 crore to Rs. 5 crore for agricultural and allied Sectors
5. Advance Licence Scheme
• Under Advance License Scheme, the period for export obligation has been extended from 12 months to 18 months.
• A further extension for six months can be given on payment of 1 % of the value of unfulfilled exports.
6. Duty Entitlement Pass Book (DEPB) Scheme
• Under the DEPB
Scheme an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.
• Such credit can be can be
utilized for import of raw materials, intermediates, components, parts, packaging materials, etc. for export purpose.
Impact of Exim Policy 1997 –2002
(a) Globalization of Indian Economy:
The Exim Policy 1997-02 proposed with an aim to prepare a framework for globalizations of Indian economy. This is evident from the very first objective of the policy, which states. "To accelerate the economy from low level of economic activities to- high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities."
(b) Impact on the Indian Industry:
In the EXIM policy 1997-02, a series of reform measures have been introduced in order to give boost to India's industrial growth and generate employment opportunities in non-agricultural sector. These include the reduction of duty from 15% to 10% under EPCG scheme that enables Indian firms to import capital goods and is an important step in improving the quality and productivity of the Indian industry.
(c) Impact on Agriculture:
Many encouraging steps have been taken in the Exim Policy 1997-2002 in order to give a boost to Indian agricultural sector. These steps includes provision of additional SIL of 1 % for export of agro products, allowing EOU’s and other units in EPZs in agriculture sectors to 50% of their output in the domestic tariff area (DTA) on payment of duty.
(d) Impact on Foreign Investment.
In order to encourage foreign investment in India, the Exim Policy 1997-02 has permitted 100% foreign equity participation in the case of 100% EOUs, and units set up in EPZs.
(e) Impact on Quality up gradation:
The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2% to 5% of the FOB value of exports, which has encouraged Indian industries to undertake research and development programmers and upgrade the quality of their products.
(f) Impact on Self-Reliance:-
The Exim Policy 1997-2002 successfully fulfills one of the India’s long terms objective of Self-reliance. The Exim Policy has achieved this by encouraging domestic sourcing of raw materials, in order to build up a strong domestic production base. New incentives added in the Exim Policy have also added benefits to the exporters.
Exim Policy 2002 – 2007
The Exim Policy 2002 - 2007 deals with both the export and import of merchandise and services. It is worth mentioning here that the Exim Policy: 1997 - 2002 had accorded a status of exporter to the business firm exporting services with effect from1.4.1999. Such business firms are known as Service Providers.
Objectives of the Exim Policy: 2002 - 2007
The main objectives of the Export Import Policy 2002-2007 are as follows:
- To encourage economic growth of India by providing supply of essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services.
- To improve the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitive strength while generating new employment opportunities and encourage the attainment of internationally accepted standards of quality; and
- To provide consumers with good quality products and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers.
Main Elements of Exim Policy 2004-2009
The new Exim Policy 2004-2009 has the following main elements:
- Legal Framework
- Special Focus Initiatives
- Board Of Trade
- General Provisions Regarding Imports And Exports
- Promotional Measures
- Duty Exemption / Remission Schemes
- Export Promotion Capital Goods Scheme
- Export Oriented Units (EOUs),Electronics Hardware Technology Parks (EHTPS), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs)
- Special Economic Zones
- Free Trade & Warehousing Zones
- Deemed Exports
Permeable of Exim Policy 2004-2009: It is a speech given by the Ministry of Commerce and Industries. The speech for the Exim Policy 2004-2009 was given by Kamal Nath, on 31ST AUGUST, 2004.
Legal Framework of Exim Policy 2004-2009
The Preamble spells out the broad framework and is an integral part of the Foreign Trade Policy.
In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act), 1992 (No. 22 of 1992), the Central Government hereby notifies the Exim Policy for the period 2004-2009 incorporating the Export Import Policy for the period 2002-2007, as modified. This Policy shall come into force with effect from 1st September, 2004 and shall remain in force up to 31st March, 2009, unless as otherwise specified.
The Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India.
1.4 Transitional Arrangements
Notifications made or Public Notices issued or anything done under the previous Export / Import policies and in force immediately before the commencement of this Policy shall, in so far as they are not inconsistent with the provisions of this Policy, continue to be in force
and shall be deemed to have been made, issued or done under this Policy.
Licenses, certificates and permissions issued before the commencement of this Policy shall continue to be valid for the purpose and duration for which such licence; certificate or permission was issued unless otherwise stipulated.
1.5 Free Export Import
In case an export or import that is permitted freely under Export Import Policy is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that the shipment of the export or import is made within the original validity of an irrevocable letter of credit established before the date of imposition of such restriction.
Special Focus Initiative of Exim Policy 2004-2009
With a view to doubling our percentage share of global trade within 5 years and expanding employment opportunities, especially in semi urban and rural areas, certain special focus initiatives have been identified for agriculture, handlooms, handicraft, gems & jewellery, leather and Marine sectors.
Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time.
Board of Trade of Exim Policy 2004-2009
BOT has a clear and dynamic role in advising government on relevant issues connected with foreign trade.
- To advise Government on Policy measures for preparation and implementation of both short and long term plans for increasing exports in the light of emerging national and international economic scenarios;
- To review export performance of various sectors, identify constraints and suggest industry specific measures to optimize export earnings;
- To examine existing institutional framework for imports and exports and suggest practical measures for further streamlining to achieve desired objectives;
- To review policy instruments and procedures for imports and exports and suggest steps to rationalize and channelize such schemes for optimum use;
- To examine issues which are considered relevant for promotion of India’s foreign trade, and to strengthen international competitiveness of Indian goods and services; and
- To commission studies for furtherance of above objectives.
General Provisions Regarding Exports and Imports of Exim Policy 2004-2009
The Export Import Policy relating to the general provisions regarding exports and Imports is given in Chapter-2 of the Exim Policy.
Countries of Imports/Exports - Unless otherwise specifically provided, import/ export will be valid from/to any country. However, import/exports of arms and related material from/to Iraq shall be prohibited.
The above provisions shall, however, be subject to all conditionality, or requirement of licence, or permission, as may be required under Schedule II of ITC (HS).
Promotional Measures of Exim Policy 2004-2009
The Government of India has set up several institutions whose main functions are to help an exporter in his work. It would be advisable for an exporter to acquaint him with these institutions and the nature of help that they can provide so that he can initially contact them and have a clear picture of what help he can expect of the organized sources in his export effort. Some of these institution are as follows.
Export Promotion Councils
Marine Products Export Development Authority
Agricultural & Processed Food Products Export Development Authority
Indian Institute of Foreign Trade
India Trade Promotion Organization (ITPO)
National Centre for Trade Information (NCTI)
Export Credit Guarantee Corporation (ECGC)
Export Inspection Council
Indian Council of Arbitration
Federation of Indian Export
Department of Commercial Intelligence and Statistics
Directorate General of Shipping
Freight Investigation Bureau
Duty Exemption / Remission Schemes of Exim Policy 2004-2009
The Duty Exemption Scheme enables import of inputs required for export production. It includes the following exemptions-
Duty Drawback: - The Duty Drawback Scheme is administered by the Directorate of Drawback, Ministry of Finance. Under Duty Drawback scheme, an exporter is entitled to claim
Indian Customs Duty paid on the imported goods and Central Excise Duty paid on indigenous raw materials or components.
Excise Duty Refund: - Excise Duty is a tax imposed by the Central Government on goods manufactured in India. Excise duty is collected at source, i.e., before removal of goods from the factory premises. Export goods are totally exempted from central excise duty.
Octroi Exemption: - Octroi is a duty paid on manufactured goods, when they enter the municipal limits of a city or a town. However, export goods are exempted from Octroi.
The Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product.
DEPB: Duty Entitlement Pass Book in short DEPB
Rate is basically an export incentive scheme. The objective of DEPB Scheme is to neutralize the incidence of basic custom duty on the import content of the exported products.
Under the Duty Free Replenishment Certificate (DFRC) schemes, import incentives are given to the exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty. Duty Free Replenishment Certificate (DFRC) shall be available for exports only up to 30.04.2006 and from 01.05.2006 this scheme is being replaced by the
Duty Free Import Authorisation (DFIA).
DFIA: Effective from 1st May, 2006, Duty Free Import Authorisation or DFIA in short is issued to allow duty free import of inputs which are used in the manufacture of the export product (making normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or utilised in the course of their use to obtain the export product. Duty Free Import Authorisation is issued on the basis of inputs and export items given under Standard Input and Output Norms(SION).
Export Oriented Units (EOUs), .
The Export Import Policies relating to Export Oriented Units (EOUs)
Export Promotion Capital Goods Scheme (EPCG) of Exim Policy 2004-2009
Introduced in the EXIM policy of 1992-97,
Export Promotion Capital Goods Scheme (EPCG) enable exporters to import machinery and other capital goods for export production at concessional or no customs duties at all. This facility is subject to export obligation, i.e., the exporter is required to guarantee exports of certain minimum value, which is in multiple of total value of capital goods imported.
Capital goods imported under EPCG Scheme are subject to actual user condition and the same cannot be transferred /sold till the fulfillment of export obligation specified in the licence. In order to ensure that the capital goods imported under EPCG Scheme, the licence holder is required to produce certificate from the jurisdictional
Central Excise Authority (CEA) or Chartered Engineer (CE) confirming installation of such capital goods in the declared premises.
Special Economic Zone (SEZ)
under the Exim Policy 2004-2009
A Special Economic Zone in short SEZ is a geographically distributed area or zones where the economic laws are more liberal as compared to other parts of the country. SEZs are proposed to be specially delineated duty free enclaves for the purpose of trade, operations, duty and tariffs. SEZs are self-contained and integrated having their own infrastructure and support services.
The area under 'SEZ' covers a broad range of zone types, including Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Trade Zones (FTZ), Free Ports, Urban Enterprise Zones and others.
In Indian, at present there are eight functional Special Economic Zones located at Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida (Uttar Pradesh) in India. Further a Special Economic Zone at Indore ( Madhya Pradesh ) is also ready for operation.
Free Trade & Warehousing Zones of Exim Policy 2004-2009
Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing. The concept of FTWZ is new and has been recently introduced in the five-year foreign trade policy 2004-09. Its main objective is to provide infrastructure for growth of the economy and foreign trade. Free Trade & Warehousing Zones (FTWZ) plays an important role in achieving global standard warehousing facilities as free trade zones. Free Trade & Warehousing Zones is a widely accepted model with a history of providing Substantial encouragement to foreign trade and warehousing activity.
Deemed Exports under the Exim Policy 2004-2009
Deemed Export is a special type of transaction in the Indian Exim policy in which the payment is received before the goods are delivered. The payment can be done in Indian Rupees or in Foreign Exchange. As the deemed export is also a source of foreign exchange, so the Government of India has given the benefit duty free import of inputs.