The Hindu : Export restrictions lifted

Online edition of India's National Newspaper
Monday, Apr 01, 2002

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Export restrictions lifted

By Our Special Correspondent

NEW DELHI, MARCH 31. The Government today withdrew most of the export restrictions as it outlined a new export-oriented Export-Import Policy for 2002-07, with the focus on agricultural products, small-scale sector and the newly-created Special Export Zones (SEZs). A host of incentives have been provided for SEZs, including overseas banking units (OBUs) for Indian and foreign banks registered in this country. Income tax incentives are also on the way.

Unveiling a comprehensive package to pep up the sagging rate of export growth, the Commerce Minister, Murasoli Maran, said that due to the global slowdown following the events of September 11, export growth might not even achieve the 3 per cent target this year. A revival was possible next year but it was difficult to make any forecast at this stage. "We will be happy if growth is not negative,'' he said.

The new policy marks a shift from the import liberalisation phase of the past to a purely

export-oriented one. Quantitative restrictions on exports have been withdrawn except on a few items relating to national security. Among the major items on which export restraints have been lifted are butter, wheat and wheat products, coarse grains, groundnut oil and cashew. Besides, transport assistance will be provided for exporting agricultural products as part of a bid to liquidate the "mountains'' of rice and wheat stocks lying with the Food Corporation of India (FCI).

Addressing a press conference, Mr. Maran said the policy was geared to increase the present exports of $46 billion to $80 billion over the Tenth Plan period envisaging a compound annual growth rate of 11.9 per cent in exports. This was expected to enable India to attain a 1 per cent share in world exports by that time.

The policy especially focuses on cottage sector and handicrafts and special incentives are being given to the small-scale sector. Industrial cluster towns, which have become globally renowned, and manufacturing bases will now be eligible for special benefits.

These include the hosiery centre, Tirupur, and the woollens centre, Ludhiana. A new Focus Africa programme is also being launched to raise trade with sub-Saharan Africa.

Responding to exporters' demands, it has been decided to continue with the existing duty neutralising scheme such as the DEPB (duty entitlement pass book). Some sector-specific packages have been included such as the reduction of customs duty on rough diamond exports from 5 to zero per cent, abolition of the licence regime for rough diamonds and reduction of value addition norms for the export of plain jewellery. There is also an incentive package for electronic hardware exports to enable the industry to meet the coming zero-duty regime.

A series of procedural simplifications have been announced covering the DGFT, Customs and banks. These include the adoption of a new commodity classification for imports and exports by the Customs which will eliminate controversy between the Commerce Ministry and Revenue authorities.

On the SEZs, Mr. Maran said an agreement had been reached with the Finance Minister, Yashwant Sinha, on income tax concessions for units in these zones. But these would be announced in Parliament during the debate on the Finance Bill. Another major concession for SEZs included allowing OBUs for the first time.

These would be virtually foreign branches but located within India. They would be exempt from CRR (cash reserve ratio) and SLR (statutory liquidity ratio) norms and would give access to credit at international rates for the units in the SEZs.

The Commerce Secretary, Dipak Chatterjee, clarified that foreign banks registered within the country were also eligible to set up such OBUs.

He said the withdrawal of export restrictions meant that high-value products such as groundnut oil could be exported while the country continued to import cheaper palm oil to meet domestic demand.

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