Market Development Assistance (MDA) - The reason for falling exports? March 2018 issue

Market Development Assistance (MDA) - The reason for falling exports?

The main takeaway from Modi government’s new FTP was its focus on simplification by merging different incentive schemes for Indian exporters. What was conspicuous in the much-delayed final document, though, was the omission of export promotion schemes like Market Development Assistance (MDA), which was an integral part of the earlier FTPs. Is that the reason for the slowdown in exports that the country is currently grappling with? Sisir Pradhan | August 2015 Issue | The Dollar Business Convergence-India-2014-TheDollarBusiness The UPA government’s FTP had clear stated objectives for the utilisation of funds allocated under Market Development Assistance (MDA). They were (a) assisting exporters in their participation in approved EPC/Trade Promotion Organisation-led export promotion events abroad; (b) assisting EPCs to undertake export promotion activities for their products and commodities; (c) assisting approved organisation/trade bodies in undertaking exclusive non-recurring innovative activities connected with export promotion efforts for their members; (d) assisting focus export promotion programmes in specific regions abroad; and (e) assisting in residual essential activities connected with marketing promotion efforts abroad. Drop in the ocean But given the big list of assistances MDA promised, one would expect a massive sum of money allocated under it, isn’t it? But what was the reality? An average of just Rs.49.7 crore or less than $10 million per annum! Some industry insiders think even this princely sum was mostly wasted on irrelevant events or hijacked by large exporters. “The closing of the MDA scheme will not have much effect, because if a survey is done, then it will be found that this was (mostly) used by established exporters,” Atul Kumar, President, Indian Importers Association, tells The Dollar Business. What Kumar is essentially referring to is an amendment UPA II had brought about in the MDA scheme in May, 2013. Cosy club On the pretext that falling exports and exploring new markets like Latin America need the big boys to step in, the government had removed the upper ceiling for MDA assistance and also doubled the eligibility for it from Rs.15 crore worth of exports in the preceding year to Rs.30 crore. What this amendment essentially did was destroy the only lifeline new and upcoming exporters had and made it a tool for big exporters, who have no dearth of funds to explore markets on their own, to go on government sponsored holiday tours. And the industry was/is clearly not happy with this constant tinkering. “The MDA scheme had been diluted over a period of time. The scheme was to primarily support the MSME sector. The phasing out of the scheme means the government has failed to understand the circumstances in which the MSME sector operate. Exports dropping for five straight months means that it’s high time the government realised that more market development support is needed,” Rakesh Shah, Ex-Chairman and Working Committee Member, Engineering Export Promotion Council of India (EEPC), tells The Dollar Business. Criticising the government’s move to do away with the MDA scheme, though for a slightly different reason, S. Kannan, Director, Spices Board of India, says “Since MEIS is not encouraging processed/manufactured spices, withdrawing of MDA grant may seriously affect exporters of processed/value added spice.”  
"During UPA’s 2nd tenure, Rs.49.7 crore was allotted under MDA per annum"
  On similar lines, in a letter to Minister of State for Commerce and Industry Nirmala Sitharaman, a copy of which is with The Dollar Business, Satish Gupta, Vice-Chairman, ISEPC, shows his disappointment with the abolition of the MDA scheme and demands, “MDA to Indian silk exporters through ISEPC be restored retrospectively and enhanced so that the trade could achieve ambitious target by penetrating into markets like Japan, Hong Kong, USA, Europe, Middle East and UK for which ISEPC has already formulated Action Plan and submitted for support under MDA during FY2016.” In fact, in his letter, Gupta didn’t just demand the restoration of the MDA scheme but also special funds. “Special fund to the extent of Rs.100 lakh be provided under MDA to the ISEPC for participating in every important international fair in the world for launching Generic Promotion of Indian Silk and to continue for next five years,” the letter reads. Flip flop MDA allocation during UPA II What’s ironical about the abolition of the MDA scheme in the new FTP is also the fact that just four weeks before it was unveiled, replying to a question by Rajya Sabha member Ambeth Rajan, who was concerned about falling leather exports from the country, Sitharaman, on the floor of the House had said, among other things, “Assistance is also being provided to the leather sector under Indian Leather Development Programme (ILDP), Market Access Initiative (MAI) and Market Development Assistance (MDA) schemes of Ministry of Commerce and Industry.” Now, technically, what she said was correct, but isn’t it absurd that a scheme that she highlighted was a form of assistance on March 4, 2015, was missing from the new FTP that was released on April 1, 2015? Surprising, isn’t it? Need for more An important question that needs to be answered before giving a verdict on the effects of the MDA scheme’s untimely death is if it indeed used to play a role in helping small and new Indian exporters, before the tinkering began. Sanjana Raorane, Export Manager, Mapro Foods, says, “MDA’s advantage was that it helped exporters participate in trade fairs and exhibitions internationally and present their products in the international market, which helped them get an idea of the demand, supply, price, quality and competition they have to deal with. This used to help them modify their products, if required, and meet international standards and tastes.” While Raorane is all praise for the MDA scheme, while it was in its original avatar, she also feels it had never been properly utilised. “Most exporters have no knowledge of such schemes. EPCs have their prepared list of exhibitions and trade fairs, only which an exporter can participate and the procedures to claim grant under the scheme were also complicated and lengthy,” she tells The Dollar Business. A twist... Thanks to regular flip-flops, the MDA scheme had already lost its direction. Instead of helping budding exporters, it had become a puppet in the hands of EPCs and large exporters. The way the Modi government should have dealt with it is amend it for the better, not abolish it. For, even if it wasn’t achieving what it was supposed to, it wasn’t hurting. the tail Interestingly, while working on this article, some exporters and EPCs The Dollar Business spoke to claimed the the MDA scheme hasn’t been altogether abolished, but has just not been mentioned in the new FTP! To figure out what the issue really is, we got in touch with the DGFT. To our utter surprise, we got an email for Ajay Srivastava, Joint DGFT, which simply reads, “It (MDA) has not been withdrawn.” The question then is why such ambiguity for a scheme that was anyway not doing much? In fact, the bigger question is if the government has learnt a lesson from seven consecutive months of declining exports? If yes, is it willing to promote MDA in a bigger & more powerful ‘market conquering’ avatar?