News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of May 2015

Export Incentives

Simpler is not always better

Federation of Indian Export Organisations (FIEO) has expressed concerns over the export incentives announced in the new Foreign Trade Policy (FTP) 2015-2020 and has urged the government to review the benefits. FIEO President S. C. Ralhan has said the incentives being given to the exports sector are less than 1% of India’s total exports, which is a ‘miniscule amount’. The FIEO chief, although appreciative of taking exporters away from subsidies, however, was of the view that the timing for the same was not correct. “There is an urgent need to review the benefits announced, in order to sustain exports growth, at a time when global economies are reeling under intense pressure,” he said. He urged the government to increase the percentages of benefits being given to exporters and if that was not possible, at least restore the benefits that were there in the earlier FTP. It’s worth noting that although the new FTP has simplified things for Indian exporters by merging several of the earlier incentive schemes under just one new scheme, MEIS, several sectors that were earlier entitled to incentives, have now been denied the same.

Vegetables

Export Ban

To leave the bitter taste behind

India has urged the European Union (EU) to lift its ban on the import of four vegetables, including bitter gourd, from India. The appeal was made by Union Agriculture Minister Radha Mohan Singh during his meeting with Phil Hogan, EU Agriculture Commissioner, on the sidelines of a G-20 Agriculture Ministers meet at Istanbul. The appeal comes months after EU lifted the ban on the import of Alphanso mangoes in January this year. It’s worth noting that in May last year, the European Commission had imposed a ban on the import of Alphanso mangoes, and followed it by banning bitter gourd and several other vegetables, citing the presence of pesticides. The move had affected exports worth millions. However, after conducting field surveys, EU had, in January this year, lifted the ban on Alphonso mangoes.

Russia

State Visit

To become friends with benefits

This news will surely bring a smile to the faces of traders exploring opportunities in the Russian market. For, President Pranab Mukherjee, during a four-day visit to Russia, has underlined huge potential to enhance commercial and investment exchanges between the two nations. While being optimistic about the future of India-Russia economic ties, Mukherjee didn’t hide is disappointment with the current state of affairs and said the total trade between India and Russia doesn’t account for even 1% of the former’s total trade. Highlighting even the lack of capital flow into India from Russia, Mukherjee said, “Since April 2000, FDI inflow into India is $46 billion, out of which only $1 billion has come from Russia.” He also emphasised on fully utilising new opportunities arising in the two economies and urged the Indian community in Russia to contribute in propelling economic ties between the two countries to a higher trajectory. It’s worth noting that despite very strong diplomatic relationship between India and Russia, trade ties between the two nations haven’t been a focus area since the fall of USSR.

MoUs

Hannover Messe

Effort showing results

It seems Prime Minister Narendra Modi’s recent visit to Germany has started to yield a rich harvest for Indian firms. For, following Modi’s visit, Indian companies, including Essel Group and HMT, have signed 11 memorandum of understandings (MoUs) with German firms at the world-renowned German trade fair Hannover Messe 2015. The MoUs, which are being projected to have strengthened the strategic ties between the two countries, are expected to increase FDI flows into India and help the growth of India’s manufacturing sector by bringing in new technology. Hailing the MoUs, Minister of State (Independent Charge) for Commerce and Industry Nirmala Sitharaman told Rajya Sabha that these pacts will create employment opportunities in India, thereby boosting the economy.

It’s worth noting that of the 11 MoUs, two of the most prominent ones are between HMT and FT Machine Tools for flow forming machines and between Essel Group and FeCon GmbH to develop 12,500 MW of solar and 4,000 MW of wind energy projects in India. The agreements are also expected to boost the government’s ‘Make in India’ initiative.

Major Ports

New Berths

For smoother sailing

In a move that could boost India’s cargo handling capacity, the government has decided to develop multi-purpose berths at various major ports in the country. The government’s decision is primarily aimed at reducing the turnaround time for commercial vessels, thereby making the ports more efficient. Informing this to the Lok Sabha, Minister of State for Road Transport and Shipping Pon Radhakrishnan said the project will also help reducing the pre-berth detention time at Indian ports. With an estimated cost of Rs.1,622.75 crore, the project will cover six major ports – Paradip, Visakhapatnam, Kamarajar (Ennore), Mangalore, Mormugao and Kandla. Of these, the development of WQ-6 berth for handling multi cargo in the inner harbour of Visakhapatnam Port on DBFOT basis is already complete.

AEZs

Database

All but forgotten

While maintaining database has never been India’s strength, the government not having any record of exports from and employment generation at any of the 60 agri-export zones (AEZs) for the last three years would surprise even the cynics. This was informed to the Lok Sabha in written reply by Minister of State (Independent Charge) for Commerce and Industry Nirmala Sitharaman. Significantly, in the absence of any progress report about these zones, no funds have been allocated to them in the past three years. It’s worth noting that AEZs were developed by the government, starting 2001. However, as on March 2012, all the 60 AEZs had completed their notified span of five years, following which state nodal agencies stopped collating information about exports from them.

New Institutions

Grievance Redressal

To make $900 billion a reality

Indian exporters/ importers have a reason to cheer as the government has proposed two institutional mechanisms for addressing their issues. These include constituting a ‘Board of Trade’ and a ‘Council for Trade Development and Promotions’ to facilitate easy and faster redressal of grievances of trade and industry. While Board of Trade will offer a platform for consultation, the latter will have representatives of the central and various state governments. A toll-free number and a dedicated email identity for resolving IEC number related issues, and a web-based complaint monitoring system for resolving EDI related grievances, are also parts of the proposal. Besides, Grievance Committees have been constituted at the DGFT headquarter and its ROs to consider individual grievances.

Sugar Imports

Duty Hike

To protect some of the sweetness

In what may come as a much needed relief for the cash-strapped sugar sector, the government has hiked the import duty on sugar to 45% from 25% and has disallowed the import of raw sugar under DFIA, which is expected to prevent the leakage of sugar made from such duty free imports into the domestic market. Experts believe the two moves will prop up falling sugar prices in the country and help cash-starved sugar mills clear their dues to farmers. Besides, the government has also decided to scrap excise duty on ethanol made from molasses. This decision is also aimed at improving domestic prices and discourage cheap imports, which might, in turn, leave more money in the hands of money-losing millers. It’s worth noting that four straight years of continued surplus sugar production has resulted in a fall in prices in the Indian market, which has badly affected the financials of millers, who, according to estimates, owe over Rs.20,000 crore to cane farmers.