Foreign Trade Policy

For the first time, the government terminated the five-year Exim Policy, 2002-07 and replaced it with Foreign Trade Policy (FTP) for a term of five-year starting the fiscal year on the 31st August 2004. It takes an integrated view of the overall development of the country's foreign trade.

Strategy
The objective of Foreign Trade Policy is of two-fold:

1. To make India's percentage share of global merchandiser trade double by 2009; and
2. To act as an effective instrument of economic growth by giving a thrust to employment generation, especially in semi-urban and rural areas.

The key strategies are of FTP are:

1. Unshackling of controls;
2. Creating an atmosphere of trust and transparency;
3. Simplifying the procedures and bringing down transaction costs;
4. Adopting the fundamental principle that duties and levies should not be exported;
5. Identifying and nurturing different special focus areas to facilitate development of India as a global hub for manufacturing, trading and services.

Special Focus Initiatives
Those sectors which have significant export prospects abreast of potential for employment generation in the semi-urban and rural areas have been identified as the thrust sectors. For these areas, special sectoral strategies have been prepared.

Further, from time to time, sectoral initiatives in other sectors will be announced. Currently Special Focus Initiatives have been prepared for the agriculture, handicrafts, gems & jewellery, handlooms and leather & footwear sectors.

The threshold limit of designated 'Towns of Export Excellence' has been reduced to Rs. 250 crore from Rs. 1,000 crore in these thrust sectors.

Package for Agriculture
The Special Focus Initiative for Agriculture are as follows:

A new scheme, Vishesh Krishi Upaj Yojana is introduced to boost exports of fruits, vegetables, flowers, minor forest produce and the value added products of these.

Duty free import of capital goods under EPCG scheme.

The capital goods which are imported under EPCG for agriculture are permitted to be installed anywhere in the agri export zone.

ASIDE funds is to be utilized for the development for Agri Export Zones also.

The import of seeds, bulbs, tubers and planting material has been liberalised.

The export of plant portions, derivatives and extracts has been liberalised with a few to promote export of medicinal plants and herbal products.

Gems & Jewellery
The consumables for metals other than gold and platinum is allowed to be imported duty free up to 2% of FOB value of exports.

Duty free re-import entitlement for rejected jewellery is allowed up to 2% of FOB value of exports.

Duty free import of commercial samples of jewellery is increased to Rs. 1 lakh.

The import of gold of 18 carat and above shall be allowed under replenishment scheme.

Handlooms & Handicrafts
Duty free import of trimmings and embellishments for handlooms & handicrafts sectors is increased to 5% of FOB value of exports.

The import of trimmings and embellishments and samples shall be exempt from CVD.

Handicraft Export Promotion Council (HEPC) is authorised to import trimmings, embellishments and samples for small manufacturers.

A new handicraft special economic zone will be established.

Leather and Footwear
For leather industry, duty free entitlements of import trimmings, embellishments and footwear components is increased to 3% of FOB value of exports.

For specified items for leather sector, duty free import increased to 5% of FOB value of exports. The machinery and equipment for effluent treatment plants for the leather industry shall be exempt from customs duty.

Export Promotion Schemes

Target Plus :
Target Plus, a new scheme is introduced to accelerate growth of exports.

Exporters having achieved a quantum growth in exports will be entitled to a duty free credit based on incremental exports, substantially higher than the general actual export target fixed.

Based on the tiered approach, rewards will be granted. For the incremental growth of more than 20%, 25% and 100%, the duty free credits will be 5%, 10% and 15% of FOB value of incremental exports.

Vishesh Krishi Upaj Yojana :
One more new scheme, Vishesh Krishi Upaj Yojana (Special agricultural produce scheme) is introduced to boost exports of fruits, vegetables, flowers, minor forest produce and their value added products. The export of the mentioned products shall qualify for duty free credit entitlement equivalent to 5% of FOB value of exports. The entitlement is transferable freely and can be used for import of a variety of inputs and goods.

'Served from India' Scheme :
To accelerate growth in export of services in order to create a powerful and unique 'Served from India' brand which will be instantly recognised and respected the world over.

Individual service providers earning foreign exchange of at least Rs. 5 lakh, and Rs. 10 lakh for other service providers will be eligible for a duty credit entitlement of 10% of total foreign exchange earned by them.

For stand-alone restaurants and for hotels, the entitlement shall be 20% and 5% respectively.

Hotels and restaurants may use their duty credit entitlement for import of food items and alcoholic beverages.

EPCG :

1. Under EPCG scheme, additional flexibility to be given for fulfillment of export obligation so that the difficulties of exporters of goods and services are reduced.
2. The technological upgradation under this scheme has been facilitated and incentivised.
3. Transfer of capital goods is now permitted under EPCG to group companies and managed hotels.
4. For movable capital goods in service sector, requirement of installation certificate from Central Excise has been done away with.
5. The export obligation for specified projects shall be calculated based on the concessional duty which are permitted to them. This would rather improve the viability of such projects.

DFRC :
Fuel imported under DFRC entitlement shall be allowed to be transferred to the marketing agencies which are authorized by the Ministry of Petroleum and Natural Gas.

DEPB :
This scheme will continue until replaced by a new scheme to be drawn up in consultation with exporters.

New Status Holder Categorisation
A new rationalised scheme of categorization of status holders has been introduced as Star Export Houses. They are as mentioned below:

Category - Total performance over three years
One Star Export House - Rs 15 crore
Two Star Export House - Rs 100 crore
Three Star Export House - Rs 500 crore
Four Star Export House - Rs 1,500 crore
Five Star Export House - Rs 5,000 crore

This houses will be eligible for a number of privileges including fast-track clearance procedures, exemption from furnishing of bank guarantee, eligibility for consideration under the target plus scheme etc.

EOUs
Exemption of EOU from service tax in proportion to their goods and services exported.

100% retention permission to EOU of export earnings in EEFC accounts.

Income tax benefits on plant & machinery will be extended to DTA units which convert to EOUs.

Import of capital goods will be on self-certification basis for EOUs.

Up to 2% of CIF value or quantity of import shall be allowed to be disposed of for EOUs engaged in Textile & Garments manufacture leftover materials and fabrics on payment of duty on transaction value only.

To brass hardware and handmade jewellery EOUs, minimum investment criteria shall not be applied. This facility already exists for handicrafts, agriculture, floriculture, aquaculture, animal husbandry, IT and services.

Free Trade and Warehousing Zone

1. A new scheme to establish Free Trade and Warehousing Zone is introduced to create trade-related infrastructure to facilitate the import and export of goods and services with the freedom to carry out trade transactions in free currency. This is aimed to make India a global trading-hub.
   
2. Up to 100% FDI permitted in the development and establishment of the zones and their infrastructural facilities.
   
3. Each zone to have minimum outlay of Rs. 100 crores and five lakh sq. mt. built up area.
   
4. Units in the FTWZs would qualify for all other benefits as applicable for SEZ units.

Import of Second-Hand Capital Goods
The imports of second-hand capital goods to be permitted without any age restrictions.

The minimum depreciated value for plant and machinery is to be re-located.

Services Export Promotion Council
An exclusive Services Export Promotion Council is to be set up to map opportunities for key services in key markets and to develop a strategic market access programmes, including brand building, in co-ordination with sectoral players and recognised nodal bodies of the services industry.

Common Facilities Centre
Government to promote the establishment of the common facility centres for the use by home-based service providers, especially in the fields of engineering & architectural design, multi-media operations, software developers etc., in State and District-level towns, to draw in a vast multitude of home-based professionals into the services export arena.

Procedural Simplification & Rationalisation Measures
Exporters having minimum turnover of Rs. 5 crores and good track record shall be exempt from furnishing bank guarantee in any of the schemes. This is to reduce their transactional costs.

Goods and services exported (including from the DTA units) shall be exempt from service tax.

Validity of all the licences/entitlements issued under various schemes is increased to a uniform 24 months.

The numbers of returns and forms used for filing has been reduced. It will continue in consultation with Customs & Excise.

Enhanced delegation of powers to Zonal and Regional offices of DGFT for a speedy and a less cumbersome disposal of matters.

Time bound introduction of Electronic Data Interface (EDI) for export transactions. 75% of all export transactions to be on EDI within six months.

Pragati Maidan
To showcase industrial and trade prowess to its best advantage and leverage existing facilities, the Pragati Maidan will be transformed into a world-class complex. It should be state-of-the-art, environmentally-controlled, visitor friendly exhibition areas and marts. To accommodate 10,000 delegates, a huge Convention Centre with flexible hall spaces, auditoria and meeting rooms with high-tech equipment, as well as multi-level car parking for 9,000 vehicles is to be developed within Pragati Maidan's envelop.

Legal Aid
Deserving exporters will be provided with financial assistance on the recommendation of Export Promotion Councils, so that they can meet the costs of legal expenses connected with trade-related matters.

Grievance Redressal
A new mechanism for grievance redressal is formulated and put into place by a Government resolution in order to facilitate speedy redressal of grievances of trade and industry.

Quality Policy
DGFT shall be a business-driven, transparent, corporate oriented organization.

Exporters can file digitally signed applications and use Electronic Fund Transfer Mechanism for paying application fees.

All the DGFT offices shall be connected via a central server making the application processing faster. DGFT HQ has obtained ISO 9000 certification.

Biotechnology Parks
Biotechnology parks is to be set up and to be granted all facilities of 100% EOUs.

Co-Acceptance / Avalisation Introduced
It is as equivalent to the irrevocable letter of credit to provide the wider flexibility in financial instrument for export transaction.