Duty-free imports for farm goods exporters

NEW DELHI: Exporters of agricultural products have good reason to cheer. The foreign trade policy to be announced on Tuesday will allow them to import capital goods under zero customs duty — instead of the present 5% concessional duty — under the Export Promotion Capital Goods (EPCG) scheme.

While the concessional duty rate of 5% will remain in case of exporters from all other sectors, exporters of farm goods will get the additional incentive of total exemption from customs duty on capital goods imported under the EPCG scheme, officials said.

Though the benefit of zero duty will be restricted to the agricultural sector, the policy will remove the bar on age of CGs imported under the EPCG scheme for the benefit of all exporters. As of now, an exporter cannot import a machine more than 10 years old and then avail of the EPCG benefit.

These apart, the policy will comprise a package for the farm sector, titled ‘Visesh Krishi Upaj Yojana’. The main component of the package will be a duty-free import entitlement certificate, which will allow exporters of a host of farm products — flowers, fruits, vegetables, minor forest produce and their value-added products — to import anything under the OGL duty-free up to 5% of the FoB value of the exports.

Currently, India’s exports of agriculture and allied products (excluding tea and coffee) are estimated at over $20.2bn per annum. This includes export of fruits and vegetables worth over $1bn, which grew at a robust rate of 65% in the first quarter of ’04-05. The aim will be to substantially raise exports of agricultural products.

The policy will also announce the setting up of a separate export promotion council for the services sector, sources said. Export of services — roughly $15bn — accounts for 25% of the country’s total exports, while the perceived potential is much larger. A scheme of Free Trade Zones, meant to encourage the setting up of warehousing facilities in India and abroad for major commodities, is also on the cards.

The EPCG scheme allows import of capital goods for pre-production, production and post-production (including CKD/SKD thereof, as well as computer software systems) at 5% customs duty, subject to an export obligation equivalent to eight times that of the duty saved on capital goods imported under the scheme. The obligation is meant to be fulfilled over eight years, reckoned from the date of issuance of the licence.