Lok Sabha Question No. 116 (STARRED), answered on 2015-12-07
Subject: Foreign Trade Policy
Ministry: COMMERCE AND INDUSTRY
Asked by: R.K. BHARATHI MOHAN

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY (DEPARTMENT OF COMMERCE)

## LOK SABHA STARRED QUESTION NO. 116 TO BE ANSWERED ON 7 TH  DECEMBER, 2015

## FOREIGN TRADE POLICY

## *116. SHRI BHARATHI MOHAN R.K.:

Will the Minister of COMMERCE & INDUSTRY ( वाणिज्य एवं उद्योग मंत्री ) be pleased to state:

- a) whether the Government has announced a new Foreign Trade Policy (FTP) aiming to boost India's exports;
- b) if so, the details thereof along with the main highlights of the new FTP;
- c) whether the Government has identified certain constraints/issues concerning the said policy;
- d) if so, the details thereof; and
- e) the steps taken or being taken by the Government to address these constraints/issues?

## ANSWER

वाणिज् य एवं उद्योग राज् य मंत्री )णीमीी स मलमा नीीारमि((स्वींत्र प्रभार ) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE AND INDUSTRY (INDEPENDENT CHARGE) (SMT. NIRMALA SITHARAMAN)

- a) to  e): A Statement is laid on the Table of the House.

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## STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (e) OF LOK SABHA STARRED QUESTION NO. 116 FOR ANSWER ON 7 TH  DECEMBER, 2015 REGARDING 'FOREIGN TRADE POLICY'

(a)&(b): The Government  of  India  has announced  a new  Foreign Trade Policy for the   period   2015-2020 on  1 st  April,  2015.  Details  of  the  Foreign Trade Policy 2015-2020 are available at the website of the Directorate General of Foreign Trade  at  http://dgft@gov.in. The highlights  of  the  New Foreign trade Policy are as under :

-  Earlier there were 5 different schemes for rewarding merchandise exports  with  different  kinds  of  duty  scrips  with  varying  conditions attached to their use. Now all these schemes have been merged into a single scheme, namely Merchandise Exports from India Scheme (MEIS). Further, e-Commerce exports of certain specified employment creating sectors,  made  through  courier  or  foreign  post  offices,  have  been supported under MEIS.
-  Served from India Scheme has been replaced with Service Exports from India Scheme (SEIS) which would be available to notified services.
-  Government has recognized two new towns, namely Visakhapatnam and Bhimavaram as ' towns of Export Excellence'.
-  The new Foreign Trade Policy 2015-2020 is supportive of  'Make in India' and 'Digital India' programmes through steps like:

(i) Specific  Export  Obligation  under  Export  Promotion  Capital  Goods (EPCG)  scheme,  in  case  capital  goods  are  procured  from  indigenous manufacturers, has  been  reduced  to  75%  of  the normal  export obligation. This may help indigenous manufacturing industry of capital goods.

(ii) Under  Merchandise  Exports  from  India  Scheme  (MEIS),  export items  with  high  domestic  content  and  value  addition  have  generally been provided higher level of   rewards.

(iii) All  duty  credit  scrips  issued  under  MEIS    &  SEIS    and  the  goods imported against these scrips are fully transferable.

(IV) For reward schemes and duty exemption schemes, hard copies of applications    and  specified  documents  which  were    required  to  be submitted earlier have now been dispensed with.

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(iv) Landing  documents  of  export  consignment  as  proof    of  notified market, can now be digitally uploaded as specified.

(v) There  will  be  no  need  to  submit  copies  of  permanent  records/ documents  repeatedly with each application, once the same are uploaded in Exporter/Importer Profile.

(vi) For  faster  and  paperless  communication  with  various  committees of  DGFT,  dedicated  e-mail addresses have been provided for various Committees, e.g. Norms Committees, Exim Facilitation Committee, etc.

-  The benefits of MEIS  & SEIS  have been extended to SEZs as well, which would give a new impetus to the development and growth of SEZs and exports.

(c)to(e) : Yes.   The Government has identified certain constraints/issues related to the export  sector and has taken necessary steps. The details  are as under :

(i) Widening     the    scope    of   MEIS   by   including    more products,  enhancing   the   reward   rates,   country  coverage on  the  certain export products

In the light of the major challenges being faced by Indian exporters in the backdrop of the global economic slowdown, Department of Commerce has announced increased support for export of various products and included some additional items under the Merchandise  Exports  from  India  Scheme(MEIS).  This  has  been introduced  through  Public  Notice  No.  27  dated  14  th  July  2015, Public Notice  No. 28 dated 15th July 2015 and Public Notice  No. 44 dated 29 th  October, 2015 issued  by the Directorate General of Foreign  Trade.  The  revision  made  through  public  notice  No.  44, introduces  110  new  tariff  lines  and  increases  rates  or  country coverage  or  both  for  2228  existing  tariff  lines.  The  envisaged revenue outgo under this scheme has accordingly increased from Rs. 18000 crore to Rs. 21000 crore.

## (ii)         High transaction cost of exports

-  To reduce the transaction cost of exports, number  of mandatory documents required for exports and imports have been reduced to three (3) each for export and import. Earlier 7 documents were required for exports and 10 for imports. The  saving  in  terms  of  cost  and  time  associated  with  the dispensed documents would improve Ease of Doing Business in India.

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-  A number of IT initiatives have been introduced for providing secured  online services to the exporters.  These  include facility for Online filing of documents/ applications, a simplified  system  for  issuance  of  Importer  Exporter  Code (IEC) online and setting up of a Complaint Resolution System for  resolution  of  EDI  related  issues.  In  addition,  an  online system has been put in place to resolve complaints received through public grievances portal of Department of Administrative Reforms & Public Grievances

## (iii) High cost of export credit

The  issue  of  high  cost  of  credit  to  exporters  was  raised  by stakeholders  including  Export  Promotion  Councils.  Cabinet Committee  on    Economic      Affairs  has  approved  Interest Equalisation  Scheme  @  3%  per  annum  on  Pre    Shipment Rupee    Export    Credit    and    Post    Shipment  Rupee  Export Credit w.e.f. 01.04.2015.

3. Bio Data of MP who has raised the question
2.  R K Bharathi Mohan (born 1951) is an Indian politician and Member of Parliament  elected  from  Tamil  Nadu.  He  is  elected  to  the  Lok    Sabha
3. from Mayiladuturai constituency as an Anna Dravida Munnetra Kazhagam candidate in 2014 election.
4.  He is  member of Tamil Nadu Assembly from  Thiruvidamarudur (State Assembly Constituency) during 2006-2011.
4. What is the Export -Import data of 'Goods' and 'Services' in the last three years ?
6.  The  Export -Import data of 'Goods' and 'Services' is as under:

## Export-Import Data

(Amount in US$ Billions)

## Merchandise Goods

|   S.NO. | Year                  |   Export |   Import | Net      |
|---------|-----------------------|----------|----------|----------|
|       1 | 2012-13               |    300.4 |    490.7 | (-)190.3 |
|       2 | 2013-14               |    312.6 |    450.1 | (-)137.5 |
|       3 | 2014-15               |    310.3 |    448   | (-)137.7 |
|       4 | 2015-16(till October) |    154.3 |    232.1 | (-) 77.8 |

## Services

(Amount in US$ Billions)

|   S.NO. | Year    |   Export |   Import |   Net |
|---------|---------|----------|----------|-------|
|       1 | 2012-13 |    145.7 |     80.8 |  64.9 |
|       2 | 2013-14 |    151.5 |     78.5 |  73   |
|       3 | 2014-15 |    155.4 |     79.8 |  75.7 |

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## Goods & Services

(Amount in US$ Billions)

|   S.NO. | Year    |   Export |   Import | Net       |
|---------|---------|----------|----------|-----------|
|       1 | 2012-13 |    446.1 |    571.5 | (-) 125.4 |
|       2 | 2013-14 |    464.1 |    528.6 | (-) 64.5  |
|       3 | 2014-15 |    465.7 |    527.8 | (-) 62.0  |

## 5. What is the layout of FTP?

It is divided in 9 chapters .Chapter-wise summary of Foreign Trade Policy is as under:

| Chapters   | Particulars                                                                                                                               |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------|
| Chapter-1  | Legal Framework and Trade Facilitation                                                                                                    |
| Chapter-2  | General Provisions Regarding Imports &Exports                                                                                             |
| Chapter-3  | Exports From India Schemes                                                                                                                |
| Chapter-4  | Duty Exemption/Remission Schemes                                                                                                          |
| Chapter-5  | Export Promotion Capital Goods(EPCG) Scheme                                                                                               |
| Chapter-6  | Export oriented units(EOUs), Electronics Hardware Technology Parks(EHTPs), Software Technology Parks(STPs) and Bio-Technology Parks(BTPs) |
| Chapter-7  | Deemed exports                                                                                                                            |
| Chapter-8  | Quality Complaints and Trade Disputes                                                                                                     |
| Chapter-9  | Definitions                                                                                                                               |

6. What are the major features of the FTP 2015-2020?
1. SIMPLIFICATION &  MERGER OF  REWARD SCHEMES

## Export from India Schemes :

- i. Merchandise  Exports  from  India  Scheme (MEIS)

Merchandise Exports from India Scheme has replaced 5 different schemes of  earlier  FTP  (Focus  Product  Scheme,  Market  Linked  Focus  Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) for rewarding merchandise exports which had varying conditions (sector specific or actual

-6- user only) attached to their use.  Now  all    these    schemes    have    been merged  into  a  single  scheme,  namely  Merchandise  Export  from  India Scheme  (MEIS)  and  there  would  be  no  conditionality  attached  to  the scrips  issued  under  the  scheme.  Notified  goods  exported  to  notified markets would be rewarded on realised FOB value of exports.

## Country Groups:

Category A : Traditional Markets  - European Union , USA, Canada.

Category   B:

Emerging   &   Focus   Markets

Africa , Latin America and Mexico, CIS countries , Turkey and West Asian countries, ASEAN countries , Japan, South Korea, China, Taiwan,

## Category C : Other Markets

- ii. Products supported under MEIS Level of Support:

Higher  rewards  have  been  granted  for  the following category of products:

-  Agricultural  and  Village  industry  products,  presently  covered  under VKGUY.
-  Value added and packaged products.
-  Eco-friendly and green  products that  create wealth  out  of  waste  from agricultural  and other waste  products that generate additional   income for   the   farmers,   while improving the environment.
-  Labour    intensive    Products    with    large  employment  potential  and Products with large     number     of     producers     and     /or exporters.
-  Industrial Products from potential winning sectors.
-  Hi-tech  products  with  high  export  earning potential.
- iii. Markets Supported
-  Most     Agricultural     products     supported across the Globe.
-  Industrial and  other products supported in Traditional and/or Emerging markets.
- iv. Global  support  has  been  granted  to  the following category:
-  Fruits, Flowers, vegetables
-  Tea Coffee, Spices
-  Cereals preparation, shellac, Essential oils
-  Processed foods,
-  Eco Friendly products that add value to waste
-  Marine Products
-  Handloom,    Coir,    Jute,    products    and  Technical  Textiles,  Carpets Handmade. Other Textile and Readymade garments have been supported for European Union, USA, Canada and Japan.
-  Handicraft, Sports Goods
-  Furniture, wood articles
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- v. Support to major markets have been given to the following product categories
-  Pharmaceuticals, Herbals, Surgicals
-  Industrial   Machinery,   IC   Engine,   Machine tools, Parts, Auto Components/Parts
-  Hand Tools, Pumps of All Types
-  Automobiles,  Two  wheelers,  Bicycles,  Ships, Planes
-  Chemicals, Plastics
-  Rubber, Ceramic and Glass
-  Leather garments, saddlery items, footwear
-  Steel furniture, Prefabs, Lighters
-  Wood , Paper, Stationary
-  iron, steel,  and base metals, products
- vi. Rewards      for      export      of      notified      goods      to  notified  markets  under 'Merchandise

Exports from India Scheme (MEIS) are payable as percentage of realized FOB value (in free foreign exchange). The debits towards basic customs duty in the transferable reward duty credit scrips would also be allowed adjustment   as duty   drawback.

- vii. e-Commerce Exports

Goods    falling    in    the    category    of    handloom  products,  books  / periodicals,  leather  footwear,  toys  and  customized  fashion  garments, having  FOB  value  up  to  Rs.25000 per  consignment  (finalized  using  eCommerce platform) are eligible  for benefits under FTP. Such goods can be exported in     manual  mode  through  Foreign Post Offices at New Delhi, Mumbai and Chennai.

Export of such goods under Courier Regulations shall be allowed manually on pilot basis through Airports at Delhi, Mumbai and Chennai as per appropriate amendments  in  regulations  to  be  made  by Department of   Revenue.   Department   of Revenue shall  fast  track  the implementation of EDI  mode at courier terminals.

2. Service Exports from India Scheme (SEIS)
2.  Served From India Scheme (SFIS) has been  replaced  with  Service Exports from India Scheme (SEIS). SEIS shall apply to 'Service Providers located in India' instead of 'Indian Service Providers'. Thus SEIS provides for  rewards  to  all Service  providers  of notified  services,  who  are providing services from India, regardless of the constitution or profile of the  service  provider.
3.  The   rate    of    reward    under    SEIS    are  based  on  net  foreign  exchange earned. The reward issued as duty credit scrip, would no longer be with actual  user  condition  and  will  no  longer  be  restricted  to  usage  for specified types of goods but be freely transferable and usable  for all  types of  goods  and  service  tax  debits  on  procurement  of  services  /  goods. Debits are eligible for CENVAT credit or drawback.

3.          Incentives (MEIS & SEIS) to be available for SEZs

Incentives (MEIS  & SEIS) are available   to  units  located in SEZs also.

- 4 . Duty credit scrips are freely transferable and usable for payment of custom duty, excise duty and service tax.
-  All  scrips  issued  under  MEIS  and  SEIS  and  the  goods  imported against these scrips fully transferable.
-  Scrips    issued    under    Exports    from    India Schemes can be used for the following:-

(i) Payment of customs duty for import of inputs / goods including capital goods, except items listed in Appendix 3A.

(ii)  Payment  of  excise  duty  on  domestic procurement of inputs or goods, including capital goods as per DoR notification.

(iii)   Payment    of    service    tax    on procurement of services as per DoR notification.

-  Basic  Customs  Duty  paid  in  cash  or  through  debit  under  Duty Credit Scrip can be taken back as Duty Drawback as per DoR Rules, if inputs so imported are used for exports.
5. Status Holders

(a) Business    leaders    who    have    excelled    in international trade and have  successfully  contributed  to  country's  foreign  trade  are    recognized as Status  Holders and given special treatment and privileges to  facilitate their      trade transactions, in order to reduce their transaction costs and time.

(b)  The   nomenclature   of   Export   House,   Star Export House, Trading House, Star  Trading House, Premier Trading House certificate is changed to One, Two, Three, Four, Five Star Export House.

(c)    The criteria for export performance for recognition of  status  holder have been changed from Rupees to US dollar earnings. The new criteria is as under:-

| Status category       |   Export Performance FOB / FOR (as converted) Value (in US $ million) during |
|-----------------------|------------------------------------------------------------------------------|
| One Star Export House |                                                                            3 |

| Two Star Export House   |   25 |
|-------------------------|------|
| Three Star Export House |  100 |
| Four Star Export House  |  500 |
| Five Star Export House  | 2000 |

## 7. What steps are taken to boost to "make in india" in the FTP

##  BOOST TO "MAKE IN INDIA"

Reduced  Export  Obligation  (EO)  for  domestic  procurement under  EPCG scheme:

-  Specific  Export  Obligation  under  EPCG  scheme,  in  case  capital goods  are  procured  from  indigenous  manufacturers,    is  reduced to      75%,      in      order      to  promote  domestic  capital  goods manufacturing industry.
-  Higher   level   of   rewards   under   MEIS   for export items with high domestic content and value addition.
-  Higher  level  of  rewards  is  given  to  products  with  high  domestic content  and  value  addition,  as  compared  to  products  with  high import content and less value addition.

## 8. What steps are taken  for trade  facilitation  &  ease  of  doing business

##  TRADE  FACILITATION  &  EASE  OF  DOING BUSINESS

## Online    filing    of    documents/    applications  and  Paperless  trade  in 24x7 environment:

-  DGFT  already  provides  facility  of  Online  filing  of  various  applications under FTP by the exporters/importers. However, certain documents like Certificates  issued  by  Chartered  Accountants/  Company  Secretary/Cost Accountant etc. have to be filed in physical forms only. In order to move further  towards  paperless  processing  of  reward  schemes,  it  has  been decided  to develop  an  online procedure  to upload digitally signed documents by Chartered Accountant / Company Secretary / Cost Accountant.  In  the  new  system,  it  will  be  possible  to  upload  online documents like annexure attached to ANF 3B, ANF 3C and ANF 3D
-  Hard copies  of  applications  and specified  documents  are not required to be  submitted  to  RA,  saving  paper  as  well  as  cost  and  time  for  the exporters.  To  start  with,  applications  under  Chapter  3  &  4  of  FTP  are being  covered  (which  account  for  nearly  70%  of  total    applications  in DGFT).
-  As    a    measure    of    ease    of    doing    business,  landing  documents  of export consignment  as  proofs  for  notified  market  can  be digitally uploaded in the following manner:-
- (i) Any exporter may upload the scanned copy of  Bill  of  Entry  under his digital signature.
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- (ii) Status  holders  falling  in  the  category of Three Star, Four Star or Five Star Export House may upload scanned copies of documents.
9. What steps have been taken for Simplification of procedures/processes, digitisation and e-governance
-  Simplification of procedures/processes, digitisation and egovernance

i. Under  EPCG  scheme,  obtaining  and  submitting  a  certificate  from  an independent Chartered Engineer, confirming the use of spares, tools, refractory    and  catalysts  imported for final redemption of  EPCG authorizations   has  been  dispensed with.

ii. EPCG Authorization Holders shall be required to  maintain  records for  a period of two years only. Government's endeavour is to gradually phase out this requirement as the relevant records  such   as   Shipping  Bills,   e-BRC  are likely  to  be  available in electronic mode  which  can  be  archived  and retrieved whenever required.

iii. Exporter Importer Profile: Facility has been created to upload documents  in  Exporter/Importer  Profile.  There  will  be  no  need  to  submit copies  of  permanent  records/  documents  (e.g.  IEC,  Manufacturing  licence, RCMC, PAN, etc.) repeatedly     with  each application, once uploaded.

iv. Communication with Exporters/Importers: Certain information, like mobile    number, e-mail address etc. has been added as mandatory fields, in IEC  data  base.  This  information  once  provided  by  exporters,  would  help  in better communication  with exporters. SMS/ email would be sent to exporters to  inform  them  about  issuance  of  authorisations    or    status    of    their applications.

- v. Online   message   exchange   with   CBDT   and MCA: It is decided to have on line  message  exchange with CBDT for PAN  data  and  with  Ministry  of Corporate  Affairs  for  CIN  and  DIN  data.  This  integration  would  obviate  the need for seeking information from IEC holders for subsequent amendments/ updation of data in IEC data base.

vi. Communication  with  Committees  of  DGFT:  For  faster  and  paperless communication  with  various  committees    of    DGFT,    dedicated    e-  mail addresses have been provided to each Norms Committee, Import Committee and Pre-Shipment Inspection Agency for faster communication.

vii. Online  applications  for  refunds:  Online  filing of application for refund of TED is  being introduced  for  which  a  new  ANF  has  been created.

10. What steps are taken  to resolve Quality complaints and Trade Disputes
2.  Quality complaints and Trade Disputes

i. In      an      endeavour      to      resolve      quality complaints and trade disputes, between exporters and importers, a new chapter, namely, Chapter on Quality   Complaints     and Trade  Disputes  has  been  incorporated in  the Foreign Trade Policy.

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ii. For  resolving  such  disputes  at  a  faster  pace,  a  Committee  on  Quality Complaints  and  Trade  Disputes  (CQCTD)  is  in  22  offices      and  would  have members from EPCs/FIEOs/APEDA/EICs.

## 11.        What are the measures taken by Government to boost the falling exports from India ?

-  The details of measures taken by Government to boost the falling exports from India are:
- (i) New  Foreign  Trade  Policy  (2015-20)  launched  on  1 st   April,  2015  with  a focus on supporting both manufacturing and services exports and improving the 'Ease of Doing Business'.    The policy has introduced two new schemes, namely, 'Merchandise Exports from India Scheme'(MEIS) for incentivising  export  of  specified  goods  to  specified  markets  and  'Service Exports  from  India  Scheme'  (SEIS)  for  increasing  exports  of  notified services from India, by consolidating earlier schemes.
- (ii) By  way  of  trade  facilitation  and  enhancing  the  ease  of  doing  business, Government  reduced  the  number  of  mandatory  documents  required  for exports and imports to three each, which is comparable with international benchmarks. The trade community can file applications online for various

trade related schemes.  Online payment of application fees through Credit/Debit Cards and electronic fund transfer from 53 Banks has been put in place.

- (iii) The Government has also expanded the coverage of Merchandise Exports from India scheme on 29 th  October, 2015 by  adding 110 new items.  The reward rates/country coverage of 2228 items were enhanced.
- Consequently the envisaged revenue outgo under the scheme was increased from Rs. 18,000/- crore earlier to Rs. 21,000/- crore per annum.
- (iv) Government has infused additional Corpus (Capital) to the tune of Rs. 375/crore into the National Export Insurance Account (NEIA), raising the corpus to  over  Rs.  2,100/-  crore,  and  strengthen  the  capacity  to  augment  Project exports from the country.  The equity capital of ECGC Ltd.  has also been raised  by  Rs.  50  crore  to  Rs.  1,300  crore,  enabling  higher  underwriting capacity to support exporters to expand their business and support banks for adequate lending to exporters.
- (v) Recently, the Government has approved the proposal for implementing the Interest Equalization Scheme on Pre & Post shipment Rupee Export Credit w.e.f.  1 st   April,  2015  for  5  years,  incorporating  an  interest  equalization element  of  3%  per  annum.    This  scheme  will  facilitate    access  to  export credit  at  competitive  rate  of  interest,  given  the  lower  interest  rate  level prevailing for exporters in other countries. .
- (vi) The  State  Governments  have  been  requested  to  develop  their  export strategy, appoint export commissioners, address infrastructure constraints restricting movement of goods, facilitate refund of VAT/Octroi/State level cess, and address other issues relating to various clearances etc. and build capacity of new exporters, in order to promote exports.

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