Ambit Of Focused Export Schemes May Not Be Widened

The government is likely to turn down the industry's demand to widen the scope of focused export schemes for pushing exports in the Foreign Trade Policy (FTP) 2014-19. Instead, it is exploring other options which do not have a fiscal implication and are compliant with the World Trade Organisation (WTO) norms.

Officials said both the commerce ministry and the finance ministry are not in favour of making more additions to the Focused Market Scheme (FMS) and Focus Product Scheme (FPS) as it would have revenue implications. Besides, the government fears this kind of export promotion would not be WTO compliant.

"Most of the items are already covered in these schemes and if you keep on expanding the list by adding every small item it will lose relevance. If we include everything then it is not focused. We are looking at other alternatives to boost exports," said an official who did not wish to be identified.

Exports of a particular product or exports to a particular market get relief under these schemes. FMS includes 83 countries, while there are 29 countries in New Focus Market scheme and 41 under Special Focus Market scheme. FPS includes 548 items and another 144 items are included under Market-Linked Focus Product scheme.

A counter view is that reward schemes like FMS and FPS, which offer duty credit scrips, are the best way to promote exports and most countries resort to that.

"The countries with which we have Foreign Trade Agreements, Bilateral Investment Promotion & Protection Agreements, and Comprehensive Economic Partnership Agreement should also be brought under FMS. This will give double advantage of low tax in those countries and benefits of FMS. In FPS the commerce ministry will evaluate performance of products. We can see a few products where we have developed strength moving out and others coming in," said Ajay Sahai, CEO and Director General of Federation of Indian Export Organisations.

But officials said this year the government is planning to restructure the FTP and not focus only on giving incentives. The focus of the new policy would be on consolidating the markets, products, services and standards.

"FMS and FPS are outright reward schemes. The revenue loss is rising because of the sops given in these schemes. So non-tariff measures could be considered to boost exports," said another finance ministry official.

Though the FTP will be unveiled by the new government, the bureaucratic machinery has already started preparations on it by taking representations from the industry. A brief is being prepared for the next government.

The commerce & industry ministry is planning to roll out the FTP immediately after the Budget is presented (possibly in July beginning). As the current FTP will expire by July, the new one might be rolled out by August.

"Instead of just giving a plethora of incentives under FMS, FPS and other schemes, the focus will be more on analyzing the fiscal instruments," a top official, involved in the framing of the policy, stated.

India's exports recorded 3.15% drop in March to stand $29.58 billion. For the entire year (April-March 2014) exports stood at $312.35 billion, against $300.4 billion in 2012-13-a growth of about 4%. The government, on the other hand, had set a target of $325 billion.

Source : business-standard.com