End of ‘Made in India’ leaves many bleeding

the friendly disposition of exim policy 2002 to exports has yielded much goodwill for commerce minister murasoli maran and dgft l n lakhanpal. in the euphoria over liberalisation of procedures and the sez package, the exporters have forgiven the dgft for the wide cuts in the depb rates. the demise of the ‘made in india’ scheme for indian brands too has passed off without comment. the affected units with substantial investments in brand promotion are stuck with value caps and must consider cutting down budgets and substituting the swadeshi labels with labels easily acceptable to consumers abroad. a special analysis at the academy of business studies shows that in eight out of 10 cases, the depb rates were slashed by a minimum of 2 per cent and a maximum of 5 per cent in the exim policy. as many as 1,550 entries in a total of 1,900 are faced with severe cuts in the entitlements. calculations show that the share of raw material cost in the final product fob value must be at least 40 per cent on the basis of 5 per cent cuts in basic duty of customs to justify the level of cuts. this is hardly the case as indian goods export basket consists largely of labour intensive goods. apparently, the department of revenue is quite pleased as a slash in the depb rate affects both low value and high value goods. dgft denies there is any cut in the depb rates in real terms, the ten sectoral committees which went into the extent of the duty cuts were asked to reduce only to the extent of the reduction in basic duty of customs and not a point more. fortunately, the textile sector has escaped the slashing spree. only three out of every ten entries have been affected with 55 of the 82 entries intact. in the case of fabrics, the rates have actually gone up in the case of blended fabrics. the cuts are generally 1 per cent or so in the garment sector but the value caps have not been revised downwards. in the meanwhile, the dgft has released the notification by which agri products get minimum 3 per cent depb. the scope covers both raw agri products as well as processed products. this is a boon to farmers as well as processors as the special cost of export packing will be met by the depb itself. the dgft should define the scope of the term agriculture in the notification itself as term includes animal and forestry products also. however, there is a condition that pack size should not exceed one kg. the exporter must also put a label declaring the date of packing and the ‘best before’ date. exporters must now pack their goods first in consumer packs and then place them in bulk packs like cartons and containers. this will give the right signals to exporters and the administrators. made in india: the ‘made in india’ scheme to promote india with special depb benefits is dead now. paras 14.4 and 14.7 in the earlier exim policy have been dropped in the new policy. the value caps in depb will now apply even where the final product bears the ‘made in india’ label. for example, titan watches, eagle flasks and raymonds trousers are well known names which sell well in the gulf in the face of competition from multinational brands and chinese goods. all these products must now live with the value caps as well as reduction in the main depb rate! the heroes of yesterday are now zeroes. the way out is to bring the scheme back to restore the credibility of the government in maintaining the basic structure of the exim policy. the brand rate scheme was one the more successful initiatives of the dgft which has caught the fancy of well established manufacturers who form the backbone of any exporting effort. if this is not possible then the value cap should be removed at least for items where there is scope for ‘made in india’ branding. in any case, the dgft has dropped the value principle for more than 400 items, there is no reason why it should continue for segments like plastic products, electronics and garments. dfrc sensitive list: the dgft has released a list of 23 sensitive items under the dfrc (duty free replenishment certificate) scheme where the exporter is required to give a declaration on technical characteristics, quality and specifications in the shipping bill itself. the shopping list in the dfrc licence will give the specification of the exact input which has gone into the export product for the sensitive items. broad banding of the shopping list as envisaged in the original input output norm will be dropped in these cases. the list includes alloy steel, synthetic rubber, brass scrap, paper, varnishes and dyestuff, plastic films, fabrics and marble. the notification is a blow to the dfrc scheme which is struggling to survive given the popularity of depb and drawback scheme. the basic idea of replenishment is to improve the broad supply position of the relevant input to the industry as a whole. micro management has multiplied problems at the operational level and also burdens the policy book with unworkable schemes. countervailing duty raised to 16%: the tax research unit in the department of revenue has managed to slap the stiff standard duty of 16 per cent countervailing on goods which are levied a lower duty in the excise dispensation. the case of medical equipment illustrates the working of the mind of the tru bureaucrats. the excise duty on medical equipment in the recent budget was raised to 4 per cent from nil with the condition that modvat credit should not be availed by the manufacturer. in case the manufacturer takes the credit, a duty of 16 per cent applies. the importer or the foreign manufacturer cannot take the modvat credit but a bill of entry for 4 per cent countervailing excise duty is rejected on the ground that this duty is subject to the condition of non-availability of domestic modvat credit. the 4 per cent duty is only for domestic manufacturers hence the exemption will not apply and the standard 16 per cent duty must be paid. imported toys too are suffering in the same way. textiles too face the same fate as medical equipment and toys. the standard 16 per cent countervailing excise applies even when domestic manufacturers pay 12 per cent. domestic manufacturers pay 16 per cent if actual modvat credit is taken, otherwise the duty is 12 per cent. the tariff barriers and distortions in the trade field are largely man-made. no wonder, the aluminium products industry is once again up in arms against the department of revenue with front page advertisements in national newspapers alleging corruption in high places. the trade alleges that the department is closed for discussions, representations are disposed in a perfunctory manner. this is quite a contrast to the open house approach of the dgft. transfers: o p hisaria, the man from iima who was behind the itemwise import policy and the new generation measures like bis standards and labelling and marking restrictions, has moved to the ministry of agriculture where he will work as deputy secretary of the trade and seeds divisions. he will be replaced by mr alok sinha who is an iit engineer by training.