Time to break free but controls still very strong

The foreign trade policy announced by commerce minister Kamal Nath has failed to come up to hopes of a new beginning in the liberalisation of trade regime. A look at the table shows that seven groups in the top 100 import headings, accounting for nearly half of all imports, continue under DGFT import restrictions. Various committees, including the Kelkar panel, had recommended the removal of controls on crude petroleum, petro products, gold and silver. But the administrative ministries dominated by producers have not loosened their hold on the lucrative items. Besides, a count at the database in the Academy shows that as many as 770 (7.6% of the total) of the 10,202 lines in the ITC(HS) classification of export and import items are under import restrictions under the new FTP. Under the WTO and RTA regime, the Customs duties are coming down and recourse to Non Tariff Barriers remains the main protective shield. Apart from the commerce ministry barriers, other new generation post-WTO barriers like agri permit, sanitary permit, BIS licence, packaging and labelling, drug licence, environment clearance, and PFA have entered the scene. These restrictions are dealt by the related administrative ministries, like department of agriculture and not by the commerce ministry whose FTP does not deal with new NTBs. DFCE application form released: The highlight of the policy is that many pre-announced schemes, which were stuck in courts or in the finance ministry, have been notified or will be released shortly. The application forms for the schemes to reward export houses for growth with duty-free licences was announced by a public notice issued on April 7. The essential features of the scheme, known variously as DFCE or Target Plus, have been maintained in forms but buying of turnover from other exporters to show growth is not allowed. Shipping documents, which contain the name of other parties except that of the applicant, will be rejected for turnover growth calculations. However, the turnovers of supporting, associate manufacturer and job workers can be included. But it has to be shown separately. Export product categories have been banded to major groups like engineering, chemicals, handicrafts, textiles. The proposed item must bear a broad nexus to the export group. Thus exporters of textiles cannot ask for duty free import of tea which has no relation to textiles. There is also an actual user condition, which allows only inhouse use and sale to third parties is not allowed. The broad banding of the DFCE scheme to make it attractive for exporters is welcome, the DGFT has still not fully come to terms with the working of the markets. The actual user condition yields only corruption and does not account for the efficiencies of markets in clearing goods, determining price and effecting payments. An export house is a trader by definition and to expect him to work as a manufacturer in all cases is not realistic. Nonetheless, manufacturer exporters are happy that at long last they will get relief and recover some of their lost earnings on past shipments. (This is notwithstanding the actions of Department of Revenue, who may well turn around tomorrow to say that the duty foregone on DFCE licences will be taxed as income. The matter may go to PMs advisory council.) (Academy of Business Studies)

Time to break free but controls still very strong

The foreign trade policy announced by commerce minister Kamal Nath has failed to come up to hopes of a new beginning in the liberalisation of trade regime.

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