When it comes to Indian exporters, a bulk of the exemptions, incentives and remissions they avail are covered under the ambit of duty exemption and remission schemes. Although they have been immensely successful in helping the growth of Indian exports, they have, without a doubt, their own issues which needs to addressed on an urgent basis

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Duty exemption and remission schemes can be broadly categorised under two heads. One, duty exemption schemes that enable duty free import of inputs required for producing goods that are exported. Two, duty remission schemes that enable post-export replenishment/remission of duty on inputs used in an export product. The first category can be further broken down into two – Advance Authorisation that saw a duty credit of Rs.1,28,146 crore just in the first eight months of FY2013, thus making it, by a country mile, the most popular and Duty Free Import Authorisation (DFIA). In the second category, after the death of the once very popular but complicated Duty Entitlement Passbook Scheme in FY2012, we have the Duty Drawback (DBK) scheme which provides duty drawbacks of specified percentages to various exported goods. The duty drawback can vary from 0% as is the case with most dairy products to as high as 11.7% as is the case with bicycles.

Numero Uno

The reason the Advance Authorisation scheme is extremely popular with the exporting community is the fact that it leads to a lot of savings in terms of working capital needs. For, not having to pay duty when an exporter is importing input components that will be used in the final product is always more welcome than the same duty getting remitted after the product is exported. The scheme is also popular because supply of goods to SEZs are also included under it. Advance Authorisation necessitates exports with a minimum value addition of 15% (20% in case of DFIA) to ensure that duty free imports are not exported away in ‘as it is’ form. For every penny of Advance Authorisation availed, an exporter is given an export obligation that has to be achieved within a specified timeframe.

The More the Better

The post-export Duty Drawback Scheme provides drawbacks after goods are exported and hence, although not as preferred as pre-export schemes, make exporters more accountable and are very simple to monitor. But what has been a cause of concern for various industries is the fact that drawback rates are tinkered with almost every year, thereby making decision making difficult for several businesses. Let’s take the case of motorcycles. The duty drawback on motorcycles has consistently come down in the last three years – from 5.5% in FY2012 to 2% in FY2013 and just 1.7% in FY2014. What this has meant for India’s top motorcycle exporter, Bajaj Auto, is that its export incentives have fallen by close Rs.220 crore in the same period, from Rs.564.24 crore in FY2012 to Rs.335.94 crore in FY2014, despite a 25% jump in exports! And it’s anybody’s guess what such kind of big policy-induced fluctuations can do to smaller companies, without the financial muscle of a Bajaj Auto.

"Rescind notification no.31, dated August 1, 2013"

Gurmeet Singh, CEO, Bonn Food Industries

"Allow import of groundnut for export by way of Self-Declared Authorisation"

In order to export value-added processed groundnuts, many-a-time exporters are required to import groundnuts. Since the Standard Input Output Norms (SION) for groundnut are not fixed, imports is not allowed for the purpose of re-export of processed groundnuts. Advance Authorisation is issued, where SION are not fixed, based on self-declaration, with an undertaking that final adjustment as per Adhoc norms or norms fixed by NC (Norms Committee). However, import of oilseeds under Chapter 12 is excluded from the scheme as mentioned in Para 4.7 of Hand Book of Procedures. Since the SION are not fixed for groundnut, the exporters are not able to import based on Self-Declared Authorisation. Thus, import of groundnut under Self-Declared Norms should be allowed under the Advance Authorisation Scheme.
Similarly, exports of sesame seed were earlier given benefits under VKGUY, which were stopped since introduction of Annual Supplement on Foreign Trade policy on the 5th of June 2012. Our competing origins from African countries enjoy duty free access to the sesame seed world market. In order to provide a level-playing field and effectively compete in world markets, it is necessary to support sesame seed exports by way of restoring the VKGUY benefits.
Worldwide, there is a huge potential for blanched peanuts. India has not been able to focus on export of this value added product due to huge incentives offered by our competitors. For example, China encourages its exporters with an export incentive of 15% on blanched peanuts. As a result, China commands a major share in the world blanched peanut market. Argentina, on the other hand, being a net exporter of peanuts, has benefited by offering their produce at lower prices. There is a big international market for blanched peanuts, which has been steadily growing. This product also has over 30% value addition in comparison to raw peanuts, which means it will fetch higher export realisation for the same quantity. At present only 5% VKGUY benefit is available on export of blanched peanuts, which does not provide a level playing field to Indian exporters. In order to support this value added segment of peanut exports, we want the government to consider giving additional incentives on export of value added blanched peanuts. On the other hand, the export of edible oils is permitted in branded consumer packs of up to 5 kg, subject to a minimum export price (MEP) of $1,100 /tonne. The mandatory requirement of maximum 5 kg retail packing size for export, increases the cost both for exporters and importers. The importers largely prefer packing in bulk. This clause is a big impediment in increasing exports of oil, and should be done away with.