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CONTENTS

1. Introduction

2. Foreign trade policy 2009-14

3. Review of FTP in Jan 2010

4. Critical evaluation of FTP

5. Bibliography

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FOREIGN TRADE POLICY

27th AUGUST, 2009- 31st MARCH, 2014.

Introduction

In India, the main legislation concerning foreign trade is the Foreign Trade (Development and

Regulation) Act, 1992. The Act provides for the development and regulation of foreign trade byfacilitating imports into, and augmenting exports from, India and for matters connected

therewith or incidental thereto. Accordingly, the Ministry of Commerce and Industry has been

set up as the most important organ concerned with the promotion and regulation of foreign

trade in India. In exercise of the powers conferred by the Act, the Ministry notifies a trade policy

on a regular basis with certain underlined objectives. The earlier trade policies were based on the

objectives of self-reliance and self-sufficiency. While, the later policies were driven by factors

like export led growth, improving efficiency and competitiveness of the Indian industries, etc.

In accordance with the provisions of the Act, a "Directorate General of Foreign Trade (DGFT)"

has been set up as an attached office of the Ministry of Commerce and Industry. It is headed by the'Director General of Foreign Trade' and is responsible for formulating and executing the Foreign

Trade Policy/Exim Policy with the main objective ofpromoting Indian exports.

The Government of India, Ministry of Commerce and Industry announced New Foreign Trade

Policy on 27th August 2009 for the period 2009-2014, earlier this policy was known as Export

Import (Exim) Policy. Afterfive years foreign trade policy needs amendments in general, aims at

developing export potential, improving export performance, encouraging foreign trade and creating

favorable balance of payments position. The Export Import Policy (EXIM Policy) orForeign

Trade Policy is updated every year on the 31st of March and the modifications, improvements

and new schemes becomes effective from April month of each year

WHY FTP 2009-2014 IS IMPORTANT?

The Foreign Trade Policy announcement came at a challenging time, when the world was

facing an economic slowdown. The year 2009 witnessed one of the most severe global recessions

in the post-war period. Countries across the world have been affected in varying degrees and all

http://business.gov.in/outerwin.php?id=http://dgft.delhi.nic.in/http://business.gov.in/outerwin.php?id=http://dgft.delhi.nic.in/

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major economic indicators of industrial production, trade, capital flows, unemployment, per

capita investment and consumption have taken a hit.

The World Trade Organization (WTO) has estimated that the global trade in the year 2009 was

likely to decline by 9 per cent in volume terms. The IMF has projected a decline of over 11 per

cent. The countrys merchandise exports had suffered a decline in the Sept 2008 to Aug 2009,largely due to contraction in demand in the traditional export markets.

EXPORTS HIT BY RECESSION

India's exports fell for the ninth consecutive month in June 2009 to $12.81 billion.

Exports in June saw a fall of27.7 per cent than $17.73 billion a year ago.

Exports have seen a steady decline from October 2008 at an average rate of around 30

percent.

Imports during June 2009 were valued at Rs 90,657 crore ($18,977 million),representing a decrease of 29.3 per cent in dollar terms (21.2 per cent in rupee terms)

over the level of imports valued at Rs 1,14,995 crore ($26,855 million) in June 2008.

The trade deficit for April-June, 2009 was estimated at

$ 15,504 million which was lower than the deficit of$28,642 million during April-

June, 2008.

OBJECTIVES OF THE FOREIGN TRADE POLICY

The short-term objective is to arrest and reverse the declining trend of exports and toprovide additional support to sectors hit badly by recession in the developed world

The policy aims to achieve an annual export growth of 15%, with an annual export target

of US$ 200 billion by March 2011; silent on export target for this year.

The commerce ministry hopes the country would return to a high export growth path of

around 25% per annum, and double exports of goods and services, by 2014 .

The long term policy objective for the government is to double Indias share in global

trade by 2020, which stood at 1.64% in 2008.

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FTP 2009-14

IMPORTANT CHANGES UNDER THE FOREIGN TRADE POLICY

DIRECTORATE OF TRADE REMEDY MEASURES

To enable support to Indian industry and exporters, especially the MSMEs, in availing

their rights through trade remedy instruments, a Directorate of Trade Remedy

Measures shall be set up.

The proposed Directorate of Trade Remedy Measures outlined in the foreign trade policy

(FTP) is not just an adjunct for extending trade defense measures but is an omnibus body

to address the concerns of small and medium exporters on dumping, import surge and

countervailing actions of overseas competitors.

MARKET LINKED FOCUS PRODUCT SCHEME (MLFPS)

Market Linked Focus Product Scheme is an Export Promotion Scheme Which Deals

with Export of Products or Sectors of High Export Intensity or Employment Potential

(Which Are Not Covered under Present FPS List).

Market Linked Focus Product Scheme (MLFPS) has been greatly expanded by

inclusion of other products. Some major products include; Pharmaceuticals, Synthetic

textile fabrics, value added rubber products, value added plastic goods, textile made-

up, knitted and crocheted fabrics, glass products, certain iron and steel products and

certain articles of aluminum among others.

Benefits to these products will be provided, if exports are made to 13 identified

markets (Algeria, Egypt, Kenya, Nigeria, South Africa, Tanzania, Brazil, Mexico,

Ukraine, Vietnam, Cambodia, Australia and New Zealand).

MLFPS benefits also extended for export to additional new markets for certain

products. These products include auto components, motor cars, bicycle and its parts,

and apparels among others.

FOCUS PRODUCT SCHEME

The objective of the Focus Product Scheme is to incentivize export of such products

which have high employment intensity in rural and semi urban areas so as to offset the

inherent infrastructure inefficiencies and other associated costs involved in marketing of

these products.

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A large number of products from various sectors have been included for benefits under

FPS.

These include, Engineering products (agricultural machinery, parts of trailers, sewing

machines, hand tools, garden tools, musical instruments, clocks and watches, railway

locomotives etc.), Plastic (value added products), Jute and Sisal products, Technical

Textiles, Green Technology products (wind mills, wind turbines, electric operated vehicles

etc.), Project goods, vegetable textiles and certain Electronic items.

The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to

2%.

FOCUS MARKET SCHEME

The objective of the Focus Market Scheme is to offset the high freight cost and other

disabilities to select international markets with a view to enhance our export

competitiveness to these countries.

The incentive available underFocus Market Scheme (FMS) has been raised from 2.5%

to 3%.

EXPORT PROMOTION CAPITAL GOODS SCHEME ( EPCG) SCHEME

The EPCG scheme allows import of capital goods for pre production, production and post

production at 3% Customs duty subject to an export obligation equivalent to 8 times of

duty saved on capital goods imported to be fulfilled over a period of 8 years reckoned from

the date of issuance of the authorization.

SOPS FOR TEA & AGRICULTURE

Minimum value addition under advance authorization scheme for export of tea has been

reduced from the existing 100% to 50%.

To reduce transaction and handling costs in agriculture, a single-window system to

facilitate export of perishable agricultural produce has been introduced.

SOPS FOR GEMS & JEWELLERY SECTOR

The foreign trade policy with an intension to neutralize duty incidence on gold jewellery

exports, allows duty drawbackon these. In the scheme, small manufacturers who buy gold

from local markets would be entitled to refund of custom duty for the inputs used for

exports.

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To make India a diamond international trading hub, it is planned to establish Diamond

Bourses, The first one has come up in Mumbai. And since 80% of the worlds

diamond cutting is done in Surat, Gujarat; next Diamond Bourse is planned for Surat.

A new facility to allow import on consignment basis of cut & polished diamonds for the

purpose of grading/ certification purposes has been introduced.

To participate in overseas exhibitions, exporters may carry merchandise worth $5 million

with them, against $2 million allowed now. The limit of personal carriage, as samples, for

export promotion tours, has also been increased to $1 million.

SOPS FOR THE LEATHER SECTOR

In the Foreign Trade Policy 2009-2014 Leather sector will be allowed re-export of

unsold imported raw hides and skins and semi-finished leather from public bonded

warehouses, subject to payment of50% of export duty.

Enhancement ofFPS rate to 2% would also benefit the sector.

SOPS FOR PHARMACEUTICALS

Export obligation period for advance authorizations issued with 6-APA as input has been

increased from 6 months to 36 months.

Sector has extensively been covered underMLFPS for countries in Africa and Latin

America, Oceania and the Far East.

SOPS FOR NEW MARKETS

Even if the recovery takes place in the traditional markets, it would take time for them to

reach the pre- recession level and exporters, in the meanwhile, could explore and engage

in the new markets to stay and sustain their activities.

Incentive schemes have been expanded by way ofaddition of new products and markets.

Twenty six new markets have been added under Focus Market Scheme. These include

16 new markets in Latin America and 10 in Asia-Oceania

TECHNOLOGICAL UPGRADATION

To aid technological upgradation of our export sector, EPCG Scheme at Zero Duty has

been introduced for engineering & electronic products, basic chemicals &

pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and

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leather & leather products (subject to exclusions of current beneficiaries under

Technological Upgradation Fund Schemes (TUFS), administered by Ministry of

Textiles and beneficiaries of Status Holder Incentive Scheme in that particular year).

The scheme shall be in operation till 31.3.2011.

Jaipur, Srinagar and Anantnag have been recognized as Towns of Export Excellence

for handicrafts; Kanpur, Dewas and Ambur have been recognized as Towns of Export

Excellence for leather products; and Malihabad forhorticultural products.

EPCG Scheme Relaxations

To increase the life of existing plant and machinery, export obligation on import of

spares, moulds etc. under EPCG Scheme has been reduced to 50% of the normal specificexport obligation.

Taking into account the decline in exports, the facility of Re-fixation of Annual Average

Export Obligation for a particular financial year in which there is decline in exports

from the country, has been extended for the 5 year Policy period 2009-14.

SUPPORT OF GREEN PRODUCTS & PRODUCTS FROM NORTH EAST

Focus Product Scheme benefit extended for export of green products; and for

exports of some products originating from the North East.

STATUS HOLDERS

To accelerate exports and encourage technological upgradation, additional Duty CreditScrips shall be given to Status Holders @ 1% of the FOB value of past exports.

The duty credit scrips can be used for procurement of capital goods with Actual

User condition. This facility shall be available for sectors of leather (excluding finished

leather), textiles and jute, handicrafts, engineering (excluding Iron & steel & non-

ferrous metals in primary and intermediate form, automobiles & two wheelers, nuclear

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reactors & parts, and ships, boats and footing structures), plastics and basic chemicals

(excluding pharma products) [subject to exclusions of current beneficiaries under

Technological Upgradation Fund Schemes (TUFS)]. This facility shall be available up to

31.3.2011.

Transferability for the Duty Credit scrips being issued to Status Holders under

paragraph 3.8.6 of FTP under VKGUY Scheme has been permitted. This is subject to the

condition that transfer would be only to Status Holders and Scrips would be utilized for the

procurement of Cold Chain equipment(s) only.

Stability/ continuity of the Foreign Trade Policy

To impart stability to the Policy regime, Duty Entitlement Passbook (DEPB) Scheme is

extended beyond 31-12-2009 till 31.12.2010.

Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of

Income Tax Act, has been extended for the financial year 2010-11 in the Budget 2009-

10.

The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC

cover at 95%, to the adversely affected sectors, is continued till March, 2010.

EOUs

EOUs have been allowed to sell products manufactured by them in DTA up to a limit of

90% instead of existing 75%, without changing the criteria of similar goods within

the overall entitlement of 50% for DTA sale.

EOUs will now be allowed to procure finished good for consolidation along with their

manufactured goods subject to certain safeguards.

During this period of downturn, Board of Approval(BOA) to consider, extension of

block period by one year for calculation of Net Foreign Exchange earnings of EOUs.

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EOUs will now be allowed CENVAT Credit facility for the component of SAD and

Education Cess on DTA sale.

THRUST TO VALUE ADDED MANUFACTURING

To encourage Value Added Manufactured export, a minimum 15% value addition

on imported inputs under Advance Authorization Scheme has now been prescribed.

FLEXIBILITY TO EXPORTERS

Payment of customs duty for Export Obligation (EO) shortfall under Advance

Authorization / DFIA / EPCG Authorization has been allowed by way ofdebit of Duty

Credit scrips. Earlier the payment was allowed in cash only.

Import of restricted items, as replenishment, shall now be allowed against transferred

DFIAs, in line with the erstwhile DFRC scheme.

Time limit of 60 days for re-import of exported gems and jewellery items, for participation

in exhibitions has been extended to 90 days in case of USA.

Transit loss claims received from private approved insurance companies in India will

now be allowed for the purpose of EO fulfillment under Export Promotion schemes.

SIMPLIFICATION OF PROCEDURES

To facilitate duty free import of samples by exporters, number of samples/pieces has

been increased from the existing 15 to 50. Customs clearance of such samples shallbe based on declarations given by the importers with regard to the limit of value and

quantity of samples.

Greater flexibility has been permitted to allow conversion of Shipping Bills from one

Export Promotion scheme to other scheme. Customs shall now permit this conversion

within three months, instead of the present limited period of only one month.

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To reduce transaction costs, dispatch of imported goods directly from the Port to the site

has been allowed under Advance Authorization scheme for deemed supplies. At present,

the duty free imported goods could be taken only to the manufacturing unit of the

authorization holder or its supporting manufacturer.

Disposal of manufacturing wastes / scrap will now be allowed after payment ofapplicable excise duty, even before fulfillment of export obligation under

AdvanceAuthorisation and EPCG Scheme.

Regional Authorities have now been authorized to issue licences for import of sports

weapons by renowned shooters, on the basis of NOC from the Ministry of Sports

& Youth Affairs. Now there will be no need to approach DGFT(Hqrs.) in such cases.

The procedure for issue of Free Sale Certificate has been simplifed and the validity of

the Certificate has been increased from 1 year to 2 years. This will solve the

problems faced by the medical devices industry.

Automobile industry, having their own R&D establishment, would be allowed free

import of reference fuels (petrol and diesel), up to a maximum of 5 KL perannum, which

are not manufactured in India.

REDUCTION OF TRANSACTION COSTS

No fee shall now be charged for grant of incentives under the Schemes in Chapter 3 of

FTP. Further, for all other Authorizations/ license applications, maximum applicable fee is

being reduced to Rs. 100,000 from the existing Rs 1,50,000 (for manual applications) and

Rs. 50,000 from the existing Rs.75,000 (for EDI applications).

To further EDI initiatives, Export Promotion Councils/Commodity Boards have been

advised to issue RCMC through a web based online system. It is expected that issuance

of RCMC would become EDI enabled before the end of 2009.

Electronic Message Exchange between Customs and DGFT in respect of incentive

schemes under Chapter 3 will become operational by 31.12.2009. This will obviate the

need for verification of scrips by Customs facilitating faster clearances.

An Inter Ministerial Committee will be formed to redress/resolve problems/issues of

exporters.

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Review of the FTP on Jan 29, 2010:

112 new products eligible for benefit under FPS including rubber, plastic, chemicals.

113 new products eligible for benefit of 5 % under special FPS , include pumps, nuts and

bolts, agricultural tools etc.

Timor Leste added as new FMS country and 2 new markets , China and Japan added

under Market Linked Focus Product Scheme.

Sesame seeds and coconut products added under Vishesh Krishi and Gram Udyog Yojana.

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REFERENCES:

1. business.gov.in Trade - Cached - Similar

2. www.ganatragroup.net/foreigntrade.html - Cached - Similar

3. www.thehindubusinessline.com/2009/08/.../2009082851751500.htm -Cached

4. www.eworldtradefair.com/indian-foreign-trade-policy-2009-2014:-a-purview-a71.html -

5. www.business-standard.com Home The Smart Investor - Cached

6. www.infodriveindia.com/Exim/DGFT/...Policy/.../Default.aspx - Cached- Similar

7. www.articlesbase.com Law - Cached Similar

8. EXIM Times, vol. Jan 16- 31.

9. www.thehindubusinessline.com/2009/09/09/stories/2009090950540900.htm

10. https://dgftcom.nic.in/

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