Exim policy will cut red tape, assures minister

DELHI: Union commerce minister Kamal Nath is ready to unshackle exporters from all redundant controls and procedural delays in the forthcoming export-import (exim) policy.
He also plans to take deliberate measures to reduce their transaction costs. Sectors that will receive special attention in the policy include non-apparel textiles, handicrafts, agricultural and food products. These contribute substantially to the export basket, and are the largest employment creators with a strong small and medium enterprise (SME) base.
“The government recognises the function of exports as the engine of the country’s economic growth. We will be as flexible as possible to enable export growth by removing obstacles,� the minister said, during an interactive session with exporters organised by the Federation of Indian Export Organisations (FIEO). Upbeat about the export surge in the last few months, the commerce department plans to revise the export target upwards. The country is poised to achieve its target of 1% of global trade before the scheduled date (’07). This, despite a drop in India’s share of world trade to 0.7% in ’03 from 0.8% in ’02-03.
The minister hinted at according more income tax benefits to the exporters. He said that to achieve economies of scale and competitiveness in the global markets, exporters would have to grow in size. “We would then have a more robust base of large exporters�, he added.
The exporters presented their wish-list to the minister during the interactive session. Besides a reduction in transaction costs and, of course, the continuance of the Duty Entitlement Pass Book (DEPB) scheme, the exporters wanted full income tax exemption under Section 80 HHC to be restored. They also asked for the withdrawal of income tax on DEPB income and for easy access to cheaper dollar loans at Libor plus 75 basis points.

FIEO president M Rafeeque Ahmed said that since SMEs contributed significantly to the country’s export basket, the tax they paid should be reimbursed for making more productive investments. This way, they could achieve economies of scale. He hinted at the institutionalised corruption that existed in customs offices, and said that was the major reason for high transaction costs. Mr Ahmed said erratic pricing by shipping agents and lines for want of any regulation were other negative factors. It was pointed out that the decentralisation of the customs collection mechanism introduced last year had actually resulted in the requirement of clearances from multiple offices, adding to transaction costs.
Another important suggestion was that accounting firms capable of substantial exports of various accounting services, should be treated as export-oriented units, and be eligible for special benefits.