Lecture 19 export- import policy of india

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Export Import Policy of India

• Introduction• Meaning• General Objectives.

Export-Import Policy 1997-2000

• Objective.• Highlights.• Implications.

Export-Import Policy 2002-2007• Objective.• Highlights.• Implications.

IntroductionTrade policy governs exports from and imports into a country.It is one of the various policy instruments used by a country toattain her goals of economic develop-ment. This policy is thus,formulated keeping in view, the national priorities for economicdevelopment and the international commitments made by thecountry. It is essential that the entrepreneurs and the exportmanagers understand the trade policy as it provides the vitalinputs for the formulation of their business growth strategies.In India, the trade policy Le., export-import policy is formu-lated by the Ministry of Commerce, Government of India interms of section 5 of the Foreign Trade (Development andRegulation) Act,1992Besides, the Government of India alsoannounced on January 30,2002 a Medium Term Exportstrategy, to guide the formulation the Export-Import Policy:2002 - 07 with the, objective of achieving a share of 1 % inworld trade by the end of 2006 - 07 from the present I share of0.6% (2000 - 01). The text of this strategy is given as AppendixVII at the end of the book. The present Export - Import Policywas announced on 31.3.2002 for a period of 5 years with effectfrom 1.4.2002 to 31.3.2007 co-terminus with Tenth Five YearPlan. It covers both the trade in merchandise and services. Thepresent chapter explains legal framework affecting foreign tradeof India particularly with reference to Export-Import Policy;2002 - 2007. It also discusses the preferential trading arrange-ments affecting exports and imports of India.

MeaningThe foreign trade of India is guided by the Export-Import(Exim) Policy of the government of India arid is regulated bythe Foreign Trade (Development and Regulation) Act, 1992.Exim Policy contains various policy decisions taken by thegovernment in the sphere of foreign trade, i.e., with respect toimports and exports from the country and more especiallyexport promotion measures, policies and procedures relatedthereto. It is prepared and announced by the Central Govern-

LESSON 19:EXPORT- IMPORT POLICY OF INDIA

ment (Ministry of Commerce). India’s EXIM policy, in general,aims at developing export potential, improving export perfor-mance, encouraging foreign trade and creating favourablebalance of payments position.

Legal Framework for Foreign Trade of IndiaIn India, the legal framework for the regulation of foreign tradeis mainly provided by the Foreign Trade (Development andRegulation) Act, 1992, Garments Export Entitle-ment Policy:2000-2004, Export (Quality Control and Inspection) Act, 1963,Customs and Central Excise Duties Drawback Rules, 1995,Foreign Exchange Management Act, 1999 --and the Customsand Central Excise Regulations.The main objective of the Foreign Trade (Development andRegulation) Act is to provide for the development and regula-tion of foreign trade by facilitating imports into, andaugmenting exports from India. This Act has replaced theearlier law namely, the imports and Exports (Control) Act1947.A comparison of the nomenclature of the two Acts makes itvery dear that there is a shift in the focus of the law fromcontrol to development of foreign trade. This shift in the focusis the outcome of the emphasis on liberalisation andglobalisation as a part of the process of economic reformsinitiated in India since June 1991.The application of the provisions of the Foreign Trade(Development & Regulation) Act 1992 has been exempted forcertain trade transactions vide Foreign Trade (Exemption fromapplication of Rules in certain cases) Order 1993

General Objectives of the Exim PolicyGovernment control import of non-essential items through animport policy. At the same time, all-out efforts are made topromote exports. Thus, there are two aspects of trade policy;the import policy which is concerned with regulation andmanagement of imports and the export policy which isconcerned with exports not only promotion but also regula-tion. The main objective of the Government policy is topromote exports to the maximum extent. Exports should bepromoted in such a manner that the economy of the country isnot affected by unregulated exports of items specially neededwithin the country. Export control is, therefore, exercised inrespect of a limited number of items whose supply positiondemands that their exports should be regulated in the largerinterests of the country. In other words, the policy Aims at(i) Promoting exports and augmenting foreign exchange

earnings; and(ii) Regulating exports wherever it is necessary for the purposes

of either avoiding competition among the Indianexporters or ensuring domestic availability of essentialitems of mass consumption at reasonable prices.

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The government of India announced sweeping changes in thetrade policy during the year 1991. As a result, the new Export-Import policy came into force from April I, 1992. This was animportant step towards the economic reforms of India. Inorder to bring stability and continuity, the policy was made forthe duration of 5 years. In this policy import was liberalised andexport promotion measures were strengthened. The steps werealso taken to boost the domestic industrial production. Themore aspects of the export-import policy(1992-97) include: introduction of the duty-free ExportPromotion Capital Goods (Epcg) scheme, strengthening of theAdvance Licensing System, waiving of the condition on exportproceeds realisation, rationalisation of schemes related toExport Oriented Units and units in the Export ProcessingZones. The thrust area of this policy was to liberalise importsand boost exports.The need for further liberalisation of imports and promotionof exports was felt and the Government of India announcedthe new Export-Import Policy (1997, 2002). This policy hasfurther simplified the procedures and reduced the interfacebetween exporters and the Director General of foreign Trade(Dgft) by reducing the number of documents required forexport by half. Import has been further liberalised and effortshave been made to promote exports.The new Exim Policy 1997-2002 aims at consolidating the gainsmade so far, restructuring the schemes to achieve furtherliberalisation and increased transparency in the changed tradingenvironment. It focusses on the strengthening the domesticindustrial growth and exports and enabling higher level ofemployment with due recognition of the key role played by theSSI sector. It recognises the fact that there is no substitute forgrowth, which creates jobs and generates income. Such tradeactivities also help in stimulating expansion and diversificationof production in the country. The policy has focussed on theneed to let exporters concentrate on the manufacturing andmarketing of their products globally and operate in a hassle freeenvironment. The effort has been made to simplify andstreamline the procedure.The objectives will be achieved through the coordinated effortsof all the departments of the government in general and thety1inistry of Commerce and the Directorate General of ForeignTrade and its network of Regional Offices in particular. Furtherit will be achieved with a shared vision and commitment and inthe, best spirit of facilitation in the interest of export.“

Objectives of the Exim Policy 1997-2002

The principal objectives of the EXIM Policy 1997 -2002 are asunder: -a. To accelerate the economy from low level of economic

activities to high level of economic activities by making ita globally oriented vibrant economy and to derivemaximum benefits fro~ expanding global marketopportunities.

b. To stimulate sustained economic growth by providingaccess to essential raw materials, intermediates,components,’ consumables and capital goods required foraugmenting production.

c. To enhance the technoloca1 strength and efficiency ofIndian agriculture, industry and services, thereby,improving their competitiveness.

d. To generate new employment. Opportunities andencourage the attainment of internationally acceptedstandards of quality.

e. To provide quality consumer products at reasonable prices.

Highlights of the Exim Policy 1997-2002

a. Period of the Policy• This policy is valid for five years instead of t}:1ree

years as in the case of earlier policies. It is effective from1st April 1997 to.31st March 2002.

b. Liberalisation• A very important feature of the policy is liberalisation.• It has substantially eliminated licensing, quantitative

restrictions and other regulatory and discretionarycontrols. All goods, except those coming undernegative list, may be freely imported or exported.

c. Imports Liberalisation• Of 542 items from the restricted list 150 items have

been transferred to Special Import Licence (SIL) list andremaining 392 items have been transferred to OpenGeneral Licence (OGL) List.

d. Export Promotion Capital Goods (EPCG) Scheme• The duty on imported capital goods under EPCG

scheme has been reduced from 15% to 10%.• Under the zero duty EPCG Scheme, the threshold

limit has been reduced from Rs. 20 crore to Rs. 5 crorefor agricultural and allied! Sectors

e. Advance Licence Scheme• Under Advance License Scheme, the period for export

obligation has been extended from 12 months to 18months.

• A further extension for six months can be given onpayment of 1 % of the- value of unfulfilled exports.

f. Duty Entitlement Pass Book (DEPB) Scheme• Under the DEPB, an exporter may apply for credit, as a

specified percentage of FOB value of exports, made infreely convertible currency.

• Such credit can be can be utilised for import of rawmaterials, intermediates, components, parts, packagingmaterials, etc. for export purpose.

g. Special Import Licence (SIL) :-• 150 items from the restricted list have been transferred

to SIL.• SIL on exports from SSIs has been increased from 1 %

to 2%.• Export houses and all forms of trading houses are

eligible for additional SIL of 1 % on exports ofproducts from SSIs from North Eastern States.


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E• Additional SIL has been declared for exploration of

new markets and for export of agro products.• The SIL entitlement of exporters holding ISO 9000

certification has been? Increased from 2% to 5% of theFOB value of exports.

h. Export Houses and Trading Houses

The criteria for recognition of export houses and all forms oftrading houses has been modified.(i) Deemed Exports .

• Deemed exports facilities have been extended to oiland gas sectors in addition to power sector.

(j) Software• Software units can undertake exports using data

communication links or through courier service.• Import of computer systems has been brought under

the purview of EPCG scheme. .(k) Computerisation of DGFT Offices

• By 1998, most DGFT transactions will be on line so asreduce paper work and avoid delay in disposal ofapplications.

(l) SSI Units• SIL on exports from ‘SSls has been increased from

1 % to 2%.• ‘ Export houses and all forms of trading houses are

eligible for additional SIL of• 1 % on exports of products from SSls from North

eastern States.• Reduction of threshold level to Rs. 5 crore from Rs.

20 crore under EPCG scheme will benefit SSls.(m) Agriculture Sector

• Double weightage ‘will be given for agro exports incalculating the eligibility for export houses and allforms of trading houses.

• Additional SIL of 1 % has been declared for export ofagro products.

• EOUs and units in EPZs in agriculture and alliedsectors can sell 50% of their output in thedomestic tariff area (DT1) on payment of duty.

• Under the zero duty EPCG Scheme, the threshold levelhas been reduced from Rs. 20 crore to Rs. 5 crore foragriculture and allied sectors.

Implications of the Exim Policy 1997 - 2002The major implications of the EXIM Policy 1997-2002 are :-(a) Globalisation of Indian Economy :-

• The EXIM policy 1997-02proposed to prepare a frameworkfor globalisation of Indianeconomy.

• This is evident from the very firstobjective of the policy, which states “To accelerate the economy fromlow level of economic activities to-high level of economic activities bymaking it a globally orientedvibrant economy and to derivemaximum benefits from expandingglobal market opportunities.”

• The Indian economy has beenexposed to more foreigncompetition. The regime of highprotection is gradually’ vanishing.

• It means, in order to survive, Indiancompanies will have to pay due attention tocost reduction, improvement in quality,delivery schedules and after sales service.

• At the same time, Indian industry’s have also beengiven an opportunity to globalise their business byallowing them to import machineries and raw materialsfrom abroad on liberal terms.

(a) Impact on the Indian Industry :-• In the EXIM policy 1997-02, a series of reform

measures have been introduced in order to give boostto India’s industrial growth and generate employmentopportunities in non-agricultural sector.

• The reduction of duty from 15% to 10% under EPCGscheme will enable Indian firms to import capitalgoods. This will improve the quality andproductivity of the Indian industry.

• However, liberalisation of imports by transferring 542'items from restricted list to OGL and SIL list wouldadversely affect the growth of, consumer goodsindustry in India, as most of .these items areconsumer goods items.

(b) Impact on Agriculture Many encouraging steps have beentaken in order to give a boost to Indian agricultural sector.• Double weightage for agro exports while calculating the

eligibility for export houses and all forms of tradinghouses.

• Additional SIL of 1 % for export of agro products.• EOUs’ and units in EPZs in agriculture and allied

sectors can sell 50% of their output in the domestictariff area (DTA) on payment of duty.

(Amount In Rs. Crores) For 2000-01 Period

Fob Criterion Nfe Criterion

Annual Average FOB value of export made during preceding 3

licensing

FOB value of export

made during

preceding licensing

years

Annual Average FOB value of export made during preceding 3

licensing years

FOB value of export

made during

preceding licensing

years

Eh 15 22 12 18

Th 75 112 62 90

Sth 375 560 312 450

Ssth 1125 1680 937 1350


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• Under .the zero duty EPCG Scheme, the thresholdlevel has been reduced from Rs. 20 crore to Rs.. 5 crorefor agriculture and allied sectors.

(c) Impact on. Foreign Investment .:.• In order to encourage foreign investment in India, the

EXIM policy 1997-02 has permitted 100% foreignequity participation in the case of 100% EOUs, andunits set up in EPZs.

• Due to liberalisation of procedural formalities, foreigncompanies may bee attracted to set up manufacturingunits in India.

• Full Convertibility of Indian Rupee on revenueaccount would also give a fillip to foreign investmentin India.

(d) Impact on Quality Upgradation• The SIL entitlement of exporters holding ISO 9000

certification has been increased from 2% to 5% of theFOB value of exports.

• This would encourage Indian industries to undertakeresearch and development programmers and upgradethe quality of their products.

• Liberalisation of EPCG scheme would encourageIndian industries to import capital goods and improvequality and increase productivity of goods.

(e) Impact on Self-reliance• One of the long-term objectives of the Indian

planning is to become self- reliant. This objective iswell reflected in the EXIM Policy 1997-02.

• The policy aims at encouraging domestic sourcing ofraw materials, so as to build up a strong domesticproduction base.

• In order to achieve this the policy has also extended thebenefits given to exporters to deemed exporters. Thiswould lead to import substitution.

• Oil, power and natural gas sectors have also beenbrought under the purview of deemed exports.

However, the globalisation policy of the government may harmthe interests of SSls and cottage industries, as they may not beable to compete with MNCs.

Export- Import Policy 2002 - 2007The Export- Import Policy: 2002 - 2007 deals with both theexport and import of merchandise and services. It is worthmentioning here that the Export -Import Policy: 1997 - 2002had accorded a status of exporter to the business firm export-ing services with effect from1.4.1999. Such business firms areknown as Service Providers.The Export- Import Policy has been described in the followingdocuments:

• Export- Import Policy: 2002- 2007• Handbook of Procedures Volume I• Handbook of Procedures Volume II• ITC(HS) Classification of Export- Import Items

The main policy provisions are given in the policy documententitled “Export -Import Policy 2002-2007”. An exporter willhave to refer to the Handbook of Procedures Volume-I toknow the procedures, the agencies and the documentationrequired to take advantage of a certain provision of the policy.There is a para-by-para correspondence between the Policy andthe Handbook of Procedures Volume-I. Thus, if an exporterfinds that para 6.2 of the policy is relevant for his businessenterprise then he should also refer to the corresponding paraof the Handbook of Procedures Volume- I to know preciselywhat is to be done t01ake advantage of the policy provision.The Handbook of Proce-dures Volume-II provides a very vitalinformation as regards the standard input-output norms inregard to items of export from India. Based on these norms,exporters are provided the facility to make duty-free import ofinputs required for manufacture of export products under theDuty Exemption Scheme/Duty Remission Scheme. The policyregarding import or export of a specific item is given in thedocument entitled “ITC (HS) Classifications of Export -Import Items”.In addition to these policy documents, an export enterpriseshould also refer to the various policy circulars and trade noticesissued by various regulatory authorities deal-ing with differentaspects of foreign trade. One can refer to these notices either byvisiting the relevant web site of the authority concerned or byreferring to various trade magazines which circulate them.

Objectives of The Export- Import Policy 2002 - 2007The export-import policy 1997-2002 carried forward the processof liberalization and globalization set in motion by the processof economic reforms initiated since June, 1991. These reformshad aimed at restructuring the Indian economy to increase theproductivity and competitiveness of foreign trade enterprises inorder to achieve a higher rate of growth in exports. It alsoenabled the foreign trade grow in an environment of liberaliza-tion from licensing procedures, quantitative restrictions,discretionary bureau-cratic controls and cumbersome documen-tation procedures. The present Export-Import-Policy:2002-2007 aims at facilitating the growth in exports to attain ashare of at least 1 % of global merchandise trade by the end of2006-07. Specifically, main objectives of the present policy are asfollows:1). To stimulate sustained economic growth by providing

access to essential raw materials,intermediates,components, consumables and capital goods required foraugmenting production and providing services.

2). To enhance the technological strength and efficiency ofIndian agriculture, indus-try and services, therebyimproving their competitive strength while generating newemployment opportunities and encourage the attainmentof internationally accepted standards of quality; and

3). To provide consumers with good quality products andservices at internationally competitive prices while at thesame time creating a level playing field for the domesticproducers


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EFeatures of Exim PolicyUnion Commerce and Industry Minister Mr. Murasoli Maranannounced the Exim policy for the 5 year period (2002-07) onMarch 31, 2002. The main thrust of the policy is to push India’sexports aggressively by undertaking several measures aimed ataugmenting exports of farm goods, the small scale sector,textiles, gems and jewellery, electronic hardware etc. Besidesthese, the policy aims to reduce transaction cost to tradethrough a number of measures to bring about proceduralsimplifications. In addition, the Exim policy removes quantita-tive restrictions (QRs) on exports, except a few sensitive items.1. Special Economic Zones (SEZs)(a) Offshore Banking Units (OBUs) shall be permitted in

Special Economic Zones(SEZs).

(b) Units in SEZ would be permitted to undertake hedging ofcommodity price- risks, provided such transactions areundertaken by the units ‘on stand- alone basis.

(c) Units in SEZ shall be permitted External CommercialBorrowings (ECBs) for a tenure of less than three years.

(d) Four existing EPZs have been converted into SEZs and 13New SEZs have

already been given approval.2. Employment Oriented Measures:- Exim (2002-07) policy

initiated a number of measures which would helpemployment orientation. Among them were the following:

(a) Agriculture• Removal of quantitative and packaging restrictions on

wheat and its products,• Butter, pulses, grain and flour of barley, maize, bajra,

ragi and jowar.• Removal of restrictions on export of all cultivated

(other than wild) varieties of seed, except jute andonion.

• 20 Agricultural Export Zones have been notified.• Transport subsidy for export of fruits, vegetables,

floriculture, poultry and dairy products.• 3% special DEPB rate for primary and processed foods

exported in retail packaging of 1 kg. or less.(b) Cottage Sector and Handicrafts :-

• An amount of Rs. 5 crore under Market AccessInitiative (MAl) has been earmarked for promotingcottage sector exports coming under the Khadi andVillage Industries Commission (KVIC).

• Market Access Initiative (MAI) scheme for thedevelopment of website for virtual exhibition ofproducts from the handicrafts sector. ,

• Entitlement for Export House Status at Rs. 5 croreinstead of Rs.15 crore for others.

• Entitlement to duty free imports of an enlarged list ofitems as embellishments upto3% of FOB value ofexports.

(c) Small Scale IndustryWith a view to encouraging further development of centres ofeconomic and export excellence such as Tirpur for hosiery,woollen blankets in Panipat, woollen knitear in Ludhiana,following benefits would be available to small-scale sector.

• EPCG facility for the common service providers inthese areas.

• Market Access Initiative (MAl) for creating focusedtechnological services and marketing abroad to therecognised associations of units in SSI.


(d) LeatherDuty free imports upto 3% of f.o.b. value combined to leathergarments has been extended to all leather products.(e) Textiles

• Sample fabrics permitted duty free within the 3% limitfor trimmings and embellishments.

• Additional items such as zip fasteners, inlay cards,eyelets, rivets, toggles, Velcro tape, cord and cordstopper included in input output norms.

• Duty Entitlement Passbook (DEPB) rates for all kindsof blended fabrics permitted.

(f) Gem and Jewellery :-• Import of rough diamonds is allowed freely at 0%

customs duty.• Licensing regime for rough diamond is being

abolished.• Value addition norms for export of plain jewellery

reduced to 7% and for all merchandised unstuddedjewellery to 3%.

• Personal carriage of jewellery allowed throughHyderabad and Jaipur airport as well.

Technology Oriented

(a) Electronic Hardware• Conversion of the Electronic Hardware Technology

Park (Ehtp) into zero duty regime under the ITA(Information Technology Agreement)-I

• Net Foreign Exchange as Percentage of Exports(Neep) to be made positive in 5 years.

• No other export obligation for units in Ehtp.(b) Chemicals and Pharmaceuticals :-

• 65% of DEPB rate for pesticides formulations.• No limit on export of samples. .• Reimbursement of 50% of registration fees on

registration of drugs.(c) Projects:

• Free import of equipment and other goods usedabroad for more than one year.


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Growth Oriented

(a) Strategic Package for Status Holders:• Licence, certificate, permissions. and customs clearances for

both imports and exports on self-declaration basis.• Priority finance for medium and long term capital

requirement as per conditions notified by the RBI.• Exemption from compulsory negotiation of documents

through banks, However, the remittance would continueto be received through banking channels.

• 100% retention of foreign exchange in Exchange Earner’sForeign Currency 1EEFC) account.

• Enhancement in normal repatriation period from 180 daysto 360 days,

(b) Diversification of Markets :-• Setting up of “Business Centre” in Indian missions

abroad for visiting Indian exporters/businessmen..• ITPO portal to host a permanent virtual exhibition of

Indian export products.• Focus Latin American Countries (LAC) has been

extended upto March 2003.• Focus Africa has been launched for developing trade

relations with the Sub-Saharan African region. Theexporters exporting to these markets shall be givenExport House Status. on export of Rs. 5 crore.

• Links with the Commonwealth of Independent States(CIS) countries to be revived.

(c) North Eastern States, Sikkim and Jammu and Kashmir :-• Transport subsidy for exports to be given to units

located in North East, Sikkim and-Jammu andKashmir so as to offset the disadvantage of being farfrom ports.

(d) Neutralising High Fuel Cost:-• Fuel costs to be rebated for all export products. This

would enhance the cost competitiveness of our exportproducts.

Procedural Reforms(a) Dgft

• The new 8 digit commodity classification for importsintroduced by the Director General of Foreign Trade(DGFT) would also be adopted by the Customs andDirector: General of Commercial Intelligence andStatistics (DGCI&S) shortly. This will eliminate theclassification disputes and hence reduce transactioncosts and time.

• The maximum fee limit for electronic application undervarious schemes has been reduced from Rs. 1.5 lakh toRs. 1.00 lakh.

• Same day licensing introduced in all regional offices.(b) Customs

• Adoption and harmonisation of the 8 digit IndianTrade Classification (ITC) Harmonised System (HS)code.

• The percentage of physical examination of exportcargo has already been reduced to less than 10%except for a few sensitive destinations.

• Fixation of special brand rate of drawback within 15days.

(c) Banks• Direct negotiation of export documents to be

permitted.• 100% retention in Exchange Earners Foreign Currency

(EEFC) accounts.• Enhancement in normal repatriation period from 180

days to 360 days.’

Trust Based

(a) Import and export of samples to be liberalised forencouraging product up gradation

(b) Penal interest rate for bonafide defaults to be broughtdown from 24% to 15%.

(c) No penalty for non-realisation of export proceeds inrespect of cases covered. by ECGC insurance package.

(d) No seizure of stock in trade so as to disrupt themanufacturing process affecting delivery

schedule of exporters.(e) Foreign Inward Remittance Certificate (FIRC) to be

accepted in lieu of Bank RealisationCertificate for documents negotiated directly.

(f) Optional facility to convert from one scheme to anotherscheme. In case the exporter is denied the benefit underone scheme, he shall be entitled to claim benefit undersome other scheme.

(g) Newcomers. to be entitled for licences without anyverification against execution of Bank Guarantee.

Duty Neutralisation Instruments

(a) Advance Licence• Duty Exemption Entitlement Certificate (DEEC)

book to be abolished. Redemption on the basis ofShipping Bill and Bank Realisation Certificate.

• Withdrawal of Advance Licence for AnnualRequirement (AAL) scheme. The exporters can availAdvance Licence for any value.

(b) Duty Entitlement Passbook (DEPB) Scheme :-• Value cap exemption granted on 429 items to continue.• DEPB rates slashed on 8 out of 10 items.• Reduction in rates only after due notice.• No Present Market Value (PMV) verification except on

specific intelligence’• Same DEPB rate for exports whether as CBUs or in

CKD/SKD form. .• DEPB for transport vehicles to Nepal in free foreign

exchange.


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E(c) Export Promotion Capital Goods (EPCG):-

• EPCG licences ‘of Rs. 100 crore or more to have 12year export obligation period with 5 year moratoriumperiod.

• Export obligation fulfillment period extended from 8years to 12 years in respect of units in AgriculturalExport Zones and in respect of companies under therevival plan of BIFR. .

• Supplies under Deemed Exports to be eligible forexport obligation fulfilment along with deemed exportbenefit

Implications of The Exim Policy 2002- 07The implications of the EXIM Policy 2002-07 are as follows :-(a) All-round Development of Indian Economy:. The Exim

2002-07emphasises all-round development of Indianeconomy by giving due weightage to different sectors ofthe economy. That is why. the policy has been described as• Employment Oriented.• Technology Oriented.• Growth Oriented. .• This has also been reflected in its objectives :-• To facilitate sustained growth in exports.• To stimulate sustained economic growth.• To enhance the technological strength and efficiency of

Indian agriculture, industry and services.• To generate new employment opportunities• To attain internationally accepted standards of quality.• To provide consumers with good quality goods and

services at internationally competitive prices.(b) Implications on Agricultural Sector :- Agriculture being the

backbone of Indian economy, the EXIM policy hasinitiated a series of measures for its growth anddevelopment, especially for promotion of exports fromagricultural sector.• Removal ‘of quantitative and packaging restrictions on

certain agricultural products and on export of allcultivated varieties of seed would give a major boost tothe export of these items.

• Identification of 20 “Agricultural Export Zones wouldhelp in development

• Of specific geographical areas for export of specificproducts.

• Extension of export obligation fulfilment period from8 years to 12 years in respect of units in AgriculturalExport Zones.

• Other measures such as transport subsidy, 3% specialDEPB rate, would definitely give a fillip to exportsfrom agricultural sector.

(c) Implications on Development of Cottage Industries :. Thesmall scale sector, alongwith the cottage and handicraftsector, has been contributing to more than half of thetotal exports of the country. In recognition of the exportperformance of these sectors and to further increase their

competitiveness, the following facilities have been extendedto this sector :-• Incentives such as Market Access Initiative (MAl), duty

free imports upto 3% of FOB value of exports,EPCG facility, etc.

• Entitlement for Export House Status at Rs. 5 croreinstead of Rs.15crore for others. These steps wouldencourage units in cottage industries to develop theirexport potentiality.

(d) Implications on Small Scale Industry :- With a view toencourage further development of centres of economic andexport excellence as Tripura for hosiery, woollen blankets inPanipat, woollen knitwear in Ludhiana, the followingbenefits have been made available to the small scale sector :-• Common service providers in these areas shall be

entitled for facility of EPGC Scheme. .• Availability of Market Access Initiative Scheme for

creating focused technological services and marketingabroad.


These steps would lead to development of new centres ofeconomic and export excellence.(e) Implications on Gem and Jewellery Industry :. Having

already achieved leadership position in diamonds, theExim. Policy 2002-07 aims at achieving a quantum jumpon jewellery exports as well. In order to achieve this, thefollowing steps have been taken in the new Exim Policy• Import of rough diamonds is allowed freely at 0%

custom duty.• Abolition of licensing regime for rough diamonds

would help the country emerge as a major internationalcentre for diamonds.

• Value addition norms for export of plain jewelleryreduced to 7% and for all merchandised unstuddedjewellery to 3%

• Personal carriage of jewellery allowed throughHyderabad and Jaipur airports as well.

(f) Implications on Industrial Sector• Liberalisation of EPCG scheme would help Indian

industries to promote. quality up gradation and wouldalso enable sick units to revive.

• Extension of repatriation period for realisation ofexport proceeds from180 days to 360' days -would helpIndian industries to be more competitive in offeringliberal payment terms to foreign importers.

• Licence, certificate, permissions and customs clearancesfor both imports and exports on self-declaration basis,priority finance for medium and long term capital’requirement and 100% retention of foreign exchangein Exchange Earner’s Foreign Currency (EEFC)account would definitely benefit Indian industries andwould encourage Indian producers to enter the exportfield.


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• Exemption from compulsory negotiation ofdocuments through banks would help exporters tosave bank charges.

• Transport subsidy for exports from units located inNorth East, Sikkim and Jammu and Kashmir wouldoffset the disadvantage of being far from ports.

(g) Diversification of Indian Industrial Sector :- In order topromote Indian industries to diversify their business andmarkets, the following measures have been taken in theExim Policy 2002-07• Setting up of “Business Centre” in Indian missions

abroad would enable India exporters and businessmento visit abroad.

• Launching of Focus LAC (Latin American Countries)in Novernber 1997 has greatly accelerated Indian tradewith Latin American countries. Extension of thisprogramme upto March 2003 would enable Indianexporters to consolidate the gains of this programme.

• There is a tremendous potential for trade with the Sub-Saharan African region. Launching of Focus Africaprogramme would help exporters to diversify theirexports to these markets. .

• Permission granted to External. CommercialBorrowings (ECBs) for tenure of less than three yearsin SEZs would provide opportunities for accessingworking capital loan for these units at internationallycompetitive rates.

(h) Implications on Technology Upgradation :-• Conversion of Electronic Hardware Technology Park

(Ehtp) into zero duty regime under the ITA(Information Technology Agreement)- I would giveencouragement to setting up of more units in EHTP.

• Liberalisation of import and export of samples wouldencourage product upgradation.

• Liberalisation of EPCG scheme would encourageIndian industries to import capital goods and improvequality and increase productivity of goods.

• This would also encourage Indian industries toundertake research and development programmes andupgrade the quality of their products.

(i) Implications on Procedural Formalities :- Variousprocedural simplifications would reduce transaction costsand save time. Some of such steps include :-• Adoption of a new 8 digit commodity classification for

imports by Customs and Director General ofCommercial Intelligence and Statistics (DGCI&S)would eliminate the classification disputes and hencereduce transaction costs and time.

• Reduction of the maximum fee limit for electronicapplication under various schemes from Rs. 1.51akh toRs. 1.00 lakh.

• Foreign Inward Remittance Certificate (FIRC) to beaccepted in lieu of Bank Realisation Certificate fordocuments negotiated directly.

• Fixation of special brand rate of drawback within 15days.

• Reduction. in percentage of physical examination ofexport cargo to 10%.

• Penal interest rate for bonafide defaults to be broughtdown to 15%.

• No penalty for default where payment is covered byECGC policy.

• No seizure of stock in trade. .• Same day licensing introduced in all regional offices.• Newcomers to be entitled for ljcences against execution

of Bank Guarantee.• Optional facility to convert from one scheme to

another scheme.

Questions BankQ.1. What is an EXIM Policy? What are its objectives?Q.2. What are the objectives of EXIM policy 1997-02 ?Q.3. Explain the major highlights of EXIM policy 1997-02.Q.4. Explain the effect of EXIM Policy 1992-97 on the

following:-(i) Foreign Exchange. (ii) Technology Upgradation. (iii)Export Promotion.

Q;5. What are the objectives of EXIM policy 2002-07 ? ..Q.6. Explain the major highlights of EXIM policy 2002-07.Q.7. Explain the implications of the EXIM Policy 2002-07.Terms Used in EXIM Policy

Notes.

• Special Economic zones (SEZs)• Agriculture Export zones. (AEZs)• Negative List for Exports.• Open general Licence.• Export Obligations.• Counter Trade.

Note on Special Economic Zones (Sezs)Special Economic Zones (SEZs) Scheme in India was conceivedby the Commerce and Industries Minister Murosoli Maranduring a visit to Special Economic Zones in China in 1999. Thescheme was announced at the time of annual review of EXIMPolicy effective from 1.4.2000. The basic idea is to establish thezones as areas where export production could take place freefrom all roles and regulations governing imports and exportsand to give them operational flexibility.Special Economic Zone (SEZ) is a specifically delineated dutyfree enclave, which shall be deemed to be a foreign territory forthe purposes of trade operations and duties and tariffs. .

Features of Special Economic Zones (Sezs)

(a) Goods going into the SEZ area from DTA shall be treatedas. deemed exports and the domestic suppliers are. eligiblefor deemed export benefits. Similarly, goods coming fromthe SEZ area into DTA shall be treated as if the goods arebeing imported.


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E(b) SEZ units may be set up (or manufacture of goods and

rendering of services, production, processing,c:l.8sembling, trading, repair, remaking, reconditioning, re-engineering including making of gold, silver or platinumjewellery and articles thereof.

(c) Foreign Direct Investment (FDI) upto 100% is allowedthrough automatic I route for all manufacturing activitiesexcept arms and ammunition, items of defenseequipments, narcotic. And psychotropic substances,hazardous chemicals, brewing of alcoholic drinks, cigarettesand tobacco.

(d) Procurement of raw materials and exports of finishedproducts are exempted from central levies

(e) The entire production of the units in the SEZs must be.exported and DTA sales is permitted

only on the payment of full applicable customs duties.(e) SEZ units are eligible for a corporate tax holiday upto

2010, under the I . provisions of section 10A of theIncome Tax Act.

(f) SEZ units can retain 100% of their exports proceeds inExchange Earner’s Foreign Currency (EEFC) account.

(g) Realisation of exports proceeds extended to 12 monthsfrom the date of export.

(h) State Trading Enterprises Policy will not apply to SEZmanufacturing units.

(i) Creating special windows under existing rules andregulations of the Central Govt. and State Govt. for SEZis developing a framework

(j) State Government have a lead role in the setting up ofSEZ.

Special Package’s for Sezs in The Exim Policy 2002-07

(a) Offshore Banking Units (OBUs) shall be per1Ilitted inSpecial Economic Zones (SEZs).

(b) Units in SEZ would be permitted to undertake hedging ofcommodity price-risks, provided such transactions areundertaken by the units on stand- alone basis..

(c) Units in SEZ shall be permitted External CommercialBorrowings (ECBs) for a tenure of less than three years.

(d) Four existing EPZs namely, Kandla, Santacruz, Kochinand Surat have been converted SEZs and 13 New SEZshave already been given approval.

Export Performance Of The Four Functional Sez

Export performance of the four functional SEZ are as givenbelow

Special Economic Zones- Legal Prospective

Eligibility

(a) Special Economic Zone (SEZ) is a specifically delineatedduty free enclave and shall be deemed to be foreign territoryfor the purposes of trade operations and duties and tariffs

(b) Goods and services going into the SEZ area from DTAshall be treated as exports and goods coming from theSEZ area into DTA shall be treated as if these are beingimported

(c) SEZ units may be set up for manufacture of goods andrendering of services

Export and Import of Goods

(a) SEZ units may export goods and services including agro-products, partly processed goods, sub-assemblies andcomponents except prohibited items of exports in ITC(HS). The units may also export by-products, rejects, wastescrap arising out of the production process. Export ofSpecial Chemicals, Organisms, Materials, Equipment andTechnologies (SCOMET) shall be subject to fulfillment ofthe conditions indicated in the ITC (HS) Classification ofExport and Import Items. SEZ units, other than trading/service unit, may also export to Russian Federation inIndian Rupees against repayment of State Credit/EscrowRupee Account of the buyer, subject to RBI clearance, ifany.

(b) SEZ unit may import/procure from the DTA withoutpayment of duty all types of goods and services, includingcapital goods, whether new or second hand, required by itfor its activities or in connection therewith, provided theyare not prohibited items of imports in the ITC(HS).However, any permission required for import under anyother law shall be applicable. Goods shall include rawmaterial for making capital goods for use within the unit.The units shall also be permitted to import goods requiredfor the approved activity, including capital goods, free ofcost or on loan from clients.

(c) Sez units may procure goods required by it withoutpayment of duty, from bonded warehouses in the DTA

Zone 2000-2001 (Rs millions)

2001-2002 (Rs millions)

2002-2003 (Rs. millions)

Kandla SEZ 5278.90 4759.80 7292.90

SEEPZ, SEZ 51937.00 52256.00 60830.20

Cochin SEZ 3043.00 2585.00 2704.20

Surat SEZ 622.80 3118.60 2807.10

Noida SEZ 10342.00 9804.10 10011.70

Madras SEZ 6908.40 7625.90 8191

Vishakhapatnam

SEZ 2190.80 2530.20 3572.7

Faltz SEZ 5199.70 9236.30 5123.90

Total : 85523.00 91895.50 100533.70


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set up under the Policy and/or under Section 65 of theCustoms Act and from International Exhibitions held inIndia.

(d) Sez units, may import/procure from Dta, withoutpayment of duty, all types of goods for creating a centralfacility for use by units in SEZ. The Central facility forsoftware development can also be accessed by units in theDta for export of software

(e Gem & Jewellery units may also source gold/ silver/platinum through the nominated agencies

(f) Sez units may import/procure goods and services fromDta without payment of duty for setting up, operation andmaintenance of units in the Zone

Leasing of Capital Goods

(a) Sez unit may, on the basis of a firm contract between theparties, source the capital goods from a domestic/foreignleasing company. In such a case the SEZ unit and thedomestic/ foreign leasing company shall jointly file thedocuments to enable import/ procurement of the capitalgoods without payment of duty.

Net Foreign Exchange Earning (Nfe)SEZ unit shall be a positive Net Foreign exchange Earner. NetForeign Exchange Earning (NFE) shall be calculated cumula-tively for a period of five years from the commencement ofproduction according to the formula given in Appendix -14-IIof the Handbook (Vol-I)

Monitoring of Performance

(a) The performance of SEZ units shall be monitored by theUnit Approval Committee

(b) The performance of SEZ units shall be monitored as perthe guidelines given in Appendix 14-II of Handbook(VolI).

Legal UndertakingThe unit shall execute a legal undertaking with the Develop-ment Commissioner concerned and in the event of failure toachieve positive foreign exchange earning it shall be liable topenalty in terms of the legal undertaking or under any other lawfor the time being in force.

Approvals and Applications(a) Applications for setting up a unit in SEZ other than

proposals for setting up of unit in the services sector(except software and IT enabled services, trading or anyother service activity as may be delegated by the BOA), shallbe approved or rejected by the Units Approval Committeewithin 15 days as per procedure indicated in Annexure toAppendix 14-II of Handbook (Vol-I) . In other casesapproval may be granted by the Board of Approval.

(b) Proposals for setting up units in SEZ requiring IndustrialLicence may be granted approval by the DevelopmentCommissioner after clearance of the proposal by the SEZBoard of Approval and Department of Industrial Policyand Promotion within 45 days on merits.

Dta Sales and Supplies

(a) Sez unit may sell goods, including by-products, andservices in DTA in accordance with the import policy inforce, on payment of applicable duty.

(b) Dta sale by service/trading unit shall be subject toachievement of positive NFE cumulatively. Similarly forunits undertaking manufacturing and services/ tradingactivities against a single LOP, DTA sale shall be subject toachievement of NFE cumulatively.

(c) The following supplies effected in DTA by SEZ units willbe counted for the purpose of fulfilment of positive NFE:

(i) Supplies made to bonded warehouses set up under thePolicy and/or under Section 65 of the Customs Act.

(ii) Supplies to other EOU/SEZ/ EHTP/ STP unitsprovided that such goods are permissible for procurementby units

(iii) Supplies against special entitlement of duty free import ofgoods.

(iv) Supplies of goods and services to such organizationswhich are entitled for duty free import of such items interms of general exemption notification issued by theMinistry of Finance.

(v) Supply of services (by services units) relating to exportspaid for in free foreign exchange or for such servicesrendered in Indian Rupees which are otherwise consideredas having been paid for in free foreign exchange by RBI.

(vi) Supplies of Information Technology Agreement (ITA-1)items and notified zero duty telecom/electronic itemsindicated in the Appendix 14-II of Handbook.

Export through Status HolderSEZ unit may also export goods manufactured/softwaredeveloped by it through a merchant exporter/ status holderrecognized under this Policy or any other EOU/SEZ/ EHTP/STP unit.

Inter-unit Transfer

(a) SEZ units may transfer manufactured goods, includingpartly processed/semi-finished goods and services fromone SEZ unit to another SEZ/EOU/ EHTP/STP unit.

(b) Goods imported/procured by a SEZ unit may betransferred or given on loan to another unit within thesame SEZ which shall be duly accounted for, but notcounted towards discharge of export performance

(c) Capital goods imported/procured may be transferred orgiven on loan to another SEZ/EOU/ EHTP/ STP unitwith prior permission of the Development Commissionerand Customs authorities concerned.

(d) Transfer of goods in terms of sub-paras (a) and (b) abovewithin the same SEZ shall not require any permission butthe units shall maintain proper accounts of the transaction.

Sub- Contracting

(a) Sez unit, may subcontract a part of their production orproduction process through units in the DTA or throughother SEZ/EOU/ EHTP/ STP, with the annual


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Epermission of Customs authorities. Subcontracting ofpart of production process may also be permitted abroadwith the approval of the Development Commissioner.

(b) Sub-contracting by SEZ gems and jewellery units throughother SEZ units or EOUs or units in DTA shall be subjectto following conditions.

(i) Goods, finished or semi finished, including studdedjewellery, taken outside the zone for subcontracting shallbe brought back to the unit within 30 days. No cut andpolished diamonds, precious and semi-precious stones(except precious and semi precious stone having zero duty)shall be allowed to be taken outside the zone for sub-contracting.

(ii) Receive plain gold/silver/platinum jewellery from DTA inexchange of equivalent quantity of gold/silver/ platinum,as the case may be, contained in the said jewellery.

(iii) SEZ units shall be eligible for wastage as applicable forsub-contracting and against exchange

(iv) The DTA unit undertaking job work or supplying jewelleryagainst exchange of gold/silver/platinum shall not beentitled to export benefits.

(c) All units, including gem and jewellery, may sub-contractpart of the production or production process throughother units in the same SEZ without permission of

Customs authorities subject to records being maintained byboth the supplying and receiving units.(a) Sez units other than gems and jewellery units may be

allowed to undertake job-work for export, on behalf ofDta exporter, provided the finished goods are exporteddirectly from SEZ units. For such exports, the DTA unitswill be entitled for refund of duty paid on the inputs byway of Brand Rate of duty drawback.

(b) Scrap/waste/remnants generated through job work mayeither be cleared from the job worker’s premises onpayment of applicable duty or returned to the unit.

(c) SEZ units engaged in production/processing ofagriculture/horticulture products, may on the basis ofannual permission from the Customs authorities take outinputs and equipments to the DTA farm subject to theprocedure indicated in

Appendix 14-II of The Handbook (Vol-I)

Exit From Sez Scheme

(a) SEZ unit may opt out of the scheme with the approval ofthe Development Commissioner. Such exit from thescheme shall be subject to payment of applicable Customsand Excise duties on the imported and indigenous capitalgoods, raw materials etc. and finished goods in stock. Incase the unit has not achieved positive NFE, the exit shallbe subject to penalty, that may be imposed by theadjudicating authority under Foreign Trade (Developmentand Regulation) Act, 1992.

(b) SEZ unit may also be permitted by the DevelopmentCommissioner, as one time option, to exit from SEZscheme on payment of duty on capital goods under theprevailing EPCG Scheme, subject to the unit satisfying the

eligibility criteria of that Scheme and standard conditionsfor exit indicated in Appendix 14-II of Handbook (Vol-I).

Export Through Exhibitions/ Export Promotion Tours/Export Through Show Rooms Abroad /Duty Free Shops:-

Sez, Units May

(a) Export goods for holding/ participating in exhibitionsabroad with the permission of DevelopmentCommissioner.

(b) Personal carriage of gold/ silver/ platinum jewellery,precious, semi-precious stones, beads and articles.

(c) Export of jewellery is also permitted for display/ sale inthe permitted shops set up abroad

(d) Display/sell in the permitted shops set up abroad or in theshow rooms of their distributors/agents

(e) Set up show rooms/retail outlets at the InternationalAirports.

Personal Carriage of Export/ Import ParcelImport/ export through personal carriage of gem and jewelleryitems may be under-taken as per the procedure prescribed byCustoms. Import/export through personal carriage for units,other than gem and jewellery unit , shall be allowed providedthe goods are not in commercial quantity.

Export /Import by Post/ CourierGoods including free samples, may be exported/imported byairfreight or through Foreign Post Office or through courier,subject to the procedure prescribed by Customs.

Disposal of Rejects/Scrap/ Waste/ RemnantsRejects/scrap/waste/remnants arising out of productionprocess or in connection therewith may be sold in the DTA onpayment of applicable duty. No duty shall be payable in casescrap/waste/ remnants/ rejects are destroyed within the Zoneafter intimation to the Custom authorities or destroyed outsidethe SEZ with the permission of Custom authorities. Destruc-tion as stated above shall not apply to gold, silver, platinum,diamond, and precious and semi precious stones.

Replacement/ Repair of Goods

(a) The general provisions of Policy relating to export ofreplacement/ repaired goods shall apply equally to SEZunits, save that, cases not covered by these provisions shallbe considered on merits by the DevelopmentCommissioner.

(b) The goods sold in the DTA and found to be defective maybe brought back for repair/ replacement under intimationto Development Commissioner.

(c) Goods or parts thereof, including gem stones and preciousmetal components for jewellery making, on beingimported/ indigenously procured and found defective orotherwise unfit for use or which have been damaged orbecome defective after import/ procurement may bereturned and replacement obtained or destroyed. In theevent of replacement, the goods may be brought backfrom the foreign suppliers or their authorised agents inIndia or the indigenous suppliers. Destruction shallhowever not apply to gem stones and precious metals.


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(d) Goods may be transferred to DTA/abroad for repair/replacement, testing or calibration, quality testing and R &D purpose under intimation to Customs authorities andsubject to maintenance of records.

Management of Sez

(a) SEZ will be under the administrative control of theDevelopment Commissioner.

(b) All activities of SEZ units within the Zone, unlessotherwise specified, including export and re-import ofgoods shall be through self certification procedure

Setting up of SEZ in Private/Joint/ State SectorA SEZ may be set up in the public, private, joint sector or bystate Government as per details indicated in Appendix 14-II ofthe Handbook(Vol-I).Samples:-SEZ units may, on the basis of records maintained bythem, and on prior intimation to Customs authorities:-(a) Supply or sell samples in the DTA for display/ market

promotion on payment of applicable duties;(b) Remove samples without payment of duty, on furnishing

a suitable undertaking to Customs authorities for bringingthe goods back within a stipulated period

(c) Export free samples, without any limit, including samplesmade in wax moulds, silver mould and rubber mouldsthrough all permissible mode of export including throughcouriers agencies/post

Sale of Un-Utilised Material/ Obsolete Goods

(a) In case an SEZ unit is unable, for valid reasons, to utilizethe goods, including capital goods and spares, it maydispose them in the DTA in accordance with the importpolicy in force and on payment of applicable duties orexport them

(b) Capital goods and spares that have become obsolete/surplus may either be exported or disposed of in the DTAon payment of applicable duties. The benefit ofdepreciation, as applicable, will be available in case ofdisposal in DTA.

(c) No duty shall be payable in case capital goods, raw material,consumables, spares, goods manufactured, processed orpackaged and scrap/waste/ remnants/rejects are destroyedwithin the Zone after intimation to the Custom authoritiesor destroyed outside the Zone with the permission ofCustom authorities. However destruction shall not applyto precious and semi precious and precious metals

(d) SEZ unit may be allowed by Customs authoritiesconcerned to donate imported/ indigenously procuredcomputer and computer peripherals without payment ofduty, two years after their import/procurement and use bythe units, to recognized non-commercial educationalinstitutions, registered charitable hospitals etc as per thedetails given in Appendix 14-II in Handbook (Vol-I)

Entitlement for SEZ Developer: - For development, operationand maintenance of infrastructure facilities in SEZs, thedeveloper shall be eligible for the following entitlements(a) Income tax exemption as per 80 IA of the Income Tax Act.

(b) Import/ procure goods without payment of Customs/Excise duty

(c) Exemption from Service tax(d) Exemption from CST.

Difference Between Sezs and EpzsThe main difference between the SEZ and the EPZ is that theSEZ is an integrated township with fully developed infrastruc-ture on international standards whereas EPZ is just anindustrial part. In fact, all existing EPZs have been asked toconvert themselves into SEZs. However, some units are notinterested in the conversion on account of the sale into DTA atconcessional rate of duty is not available in SEZs. The Govern-ment has asked such units to move out to the Domestic TariffArea (Dta).

A Note Agriculture Export Zones (Aezs)Agricultural. Export Zones (AEZs) have been set up by. theMinistry of Commerce, GOI, with a view to promote agricul-tural exports from the country and provide remunerativereturns to the farming community in a substantial manner.Further, with the intention to give primacy to promotion ofagricultural exports, it has been decided to identify productspecific Agricultural Export Zone from geographically contigu-ous area.State Governments may identify product specific Agri exportzone for end to end development for export of specificproducts from a geographically contiguous area. State Govern-ment may evolve a comprehensive package of services providedby all State Government Agencies, State Agricultural Universitiesand all institutions and agencies of the Union Government forintensive delivery in these zonesSuch services which would bemanaged and co-ordinated by State Government would includeprovision of pre/post harvest treatment and operations, plantprotection, processing, packaging, storage and related research &development, etc. APEDA will supplement, within itsschemes and provisions, efforts of State Governments forfacilitating such exports.

ObjectiveIn a fast changing international trade environment and with aview to providing remunerative returns to the farming commu-nity in a sustained manner, efforts will be made to provideimproved access to the produce/ products of the Agricultureand Allied sectors in the international market.

Epcg SchemeAgriculture exporters shall be eligible for the facility of EPCGscheme as described in Chapter-6 of the Policy. The exportobligation shall be determined in accordance with paragraph 6.2of the Policy but the licence holder shall not be required tomaintain the average level of exports as specified in subparagraph 6.5(v) of the Policy.Such exporter shall have the facility to move or to shift thecapital goods within the zone provided he maintains accuraterecord of such movements. However such equipments shallnot be sold or leased by the licence holder. This facility shall alsobe available to service providers, setting up commoninfrastructural facilities such as sorting, grading, polishing,


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Epackaging, cold storage, transport equipment/ refrigerated vans,vapour treatment heat treatment plant, X-ray screening facilityetc.The units setup in the notified Agriculture Export Zone shallbe entitled to the benefits available under the scheme. A serviceprovider in the Agriculture Export Zone may import equip-ment under the EPCG scheme for supplying services toagriculture exports. The export obligation may be offset by theservice provider by earning foreign exchange in lieu of servicesrendered.

Duty Exemption/Remission Scheme

(a) The agriculture exporter shall be entitled to the facility forimport of inputs like fertilizers, pesticides, insecticides,packing material etc. under Advance Licence/DFRC/DEPBscheme as given in Chapter-7 of the Policy subject to theeligibility criteria and conditions enumerated under thescheme.

(b) The agriculture exporter shall be eligible for recognition asExport House/Trading House/Star Trading House/Super Star Trading House on achieving the performancelevel as mentioned below.

In addition to the double weightage available under paragraph12.7, the double weightage on FOB or NFE on the export ofagriculture product for recognition as status holders shall beavailable.

Information RequirementsA database on agricultural products and markets includingaspects of commercial intelligence relevant to exports will beestablished. Assistance shall be provided to the exporters,growers’ organisations, trade association for conductingsurveys/ feasibility studies, market studies etc.

Some Important Agricultural Export Zones

Location Name of product (s)

Location Name of Product (s)

West Bengal

Pineapple Maharashtra Grapes & Grape Wine

Karnataka Gherkins Tripura Pineapple Uttaranchal Lychee Uttar

Pradesh Mangoes

Punjab Vegetables Maharashtra Mangoes Uttar Pradesh

Potatoes Jammu &Kashmir

Apple

Punjab Potatoes Tamil Nadu Flowers Andhra pradesh

Mangopulp & Fresh Vegetables

Madhya Pradesh

Potatoes, Onions & Garlic

AEZ would be identified by the State Government, who mayevolve a comprehensive ‘package of services provided by allState Government agencies, State agricultural universities and. allinstitutions and agencies of the Union Government forintensive delivery in these zones.

Such services, which would be managed and co-ordinated by the State Government, would includeprovision of pre-harvest and post-harvest treatmentand operations; plant protection, processing, packag-ing, storage and related research and development, etc.Agricultural and Processed Food Products ExportDevelopment Authority (APEDA) will supplement,within its schemes and provisions, efforts of the StateGovernments for facilitating such exports.

Facilities for Units Located In Aezs

(a) The agriculture .exporters are entitled toimport of capital goods under EPCGScheme...

(b) The agricultural exporters are entitled toimports of inputs like, fertilizers, pesticides,insecticides; packing materials, etc., underAdvance Licence, Duty Free ReplenishmentCertificate (DFRC) and Duty entitlementPassbook (DEPB) Schemes.

A Note on Negative List of Exports 2002-07:-The negative list consists of goods the import orexport of which is either .prohibited, restrictedthrough licensing or otherwise to be canalised through

a designated government agency. The negative list of exports, asper the Exim Policy 2002-07, contains the following fourcategories of export items(a) Prohibited Items :- The prohibited items are completely

banned from exports. The following categories of. itemsare banned from exports :-• All forms of wild animals including their parts and

products.• Special chemicals as notified by the DGFT.• Exotic birds as notified by the DGFT.

Category Average FOB Value

During The

Preceding Three

Licensing Years, In Rupees

FOB Value During

The Preceding Licensing Year, In Rupees

Average NFE

Earnings Made During

The Preceding

Three Licensing Years, In Rupees

NFE Earned During

The Preceding Licensing Year, In Rupees

(1) (2) (3) (4) (5) Export House

4 Crores 6 Crores 3 Crores 5 Crores

Trading House


Star Trading House


Super Star Trading House



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• Beef.• Sea shells, as specified.• Human skeleton.• Peacock tail feathers including handicrafts and articles

made there of.• Manufactured articles and shavings of Shed Antlers of

Chital and Sambhar.• All items of plants as specified by the DGFT.• Tallow, fat and/or oils of any animal origin excluding

fish oil.• Sandalwood items as notified by the DGFT.• Red sanders wood in any form.• ..• “,”

(b) Restricted Items :- The restricted items are allowed forexports under special licence issued by the DGFT. Some ofrestricted export items are as follows:-• Dress materials, ready-made garments, fables or textile

it’s wit imprints of excerpts or verses of the HolyQuran.

• Horses - Kathiawadi, Marwari and Manipuri breeds. ,• Fresh and frozen silver prom frets of weight less than

300 gms.• Paddy (Rice in husk). ‘• Seaweeds of all types. ,• Fodder including wheat and rice straw.• Chemical fertilizer of all types.• Whole human blood and all products derived from it.• Silkworm, silkworm seeds and silkworm cocoons.• Deoiled groundnut cakes containing more than 1% oil.

(c) Canalised Items :- The canalised items can be, exportedwithout an export licence through designated State’Trading Enterprises (STEs). Some of the canalised itemsare

(d) Freely Exportable Items :- The freely exportable items, canbe exported without an export licence or permission fromthe DGFT. However, export of such items is subject tocertain procedures or conditions.

Item Description Procedures or Conditions

Military stores as notified by DGFT

'No objection certificate from the Department of Defence Production and supplies.

Exotic birds, Such as bangali finches, White finches and Zebra finches.

Subject to Pre-shipment inspection;

Bones and bone products Subject to a certificate from Chemicals and Allied Products' Export ,Promotion Council

Basmati Rice Subject to registration of contracts with the Agricultural and processed Food products export Development Authority (APEDA)

A Note on Open General Licence (Ogl) ListOpen General Licence (OGL) list contains those items, whichcan be exported without any restrictions or licensing formalitiesto all permitted destinations. The following four OGLs are inoperation :-

Items Canalising Agency Onions (Except Banglore Rose

onion and

Krishnapuram onion)

Export permitted through Specified STEs

Niger Seeds Tribal Cooperative Marketing Federation of India(TRIFED),

NEW Delhi.

National Agriculture Coopertive Marketing Federation Of India (NAFED)

Gum Karaya Tribal Coopertives Marketing Federation of India (TRIFED), New Delhi.

Iron ore, manganese ore, and Chrome ore.

Metals and Minerals Trading Corporation (MMTC)

Crude oil Indian oil Corporation Limited.


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E(a) OGL No.1 :- Applies to export by land to any country

adjacent to India and having no sea port of its own.(b) OGL No.2 :- Applies to export of bonafide samples.(c) OGL No.3 :- Applies to the items that can be exported on

fulfilment of the conditions against each of the items.I(d) OOL No.4:. Applies to items that can be exported directly

by the canalising agency mentioned against each items.

A Note on Export ObligationExport obligation means the obligatioI1 of the importer toundertake export of product or products in term of quantity,value or both, as may be prescribed or specified by the licensingor competent authority in order to compensate for the importsundertaken.

Objectives of Export Ob1igation

(al The main objective of export obligation is to compensatefor the outflow of foreign currency due to importsundertaken under certain schemes such as EPCG scheme.

(b) The EPCG scheme enables the Indian exporters to importcapital goods at 5% customs duty subject to exportobligation.

Advantages of Export Obligations

(a) Accessibility to imported raw materials and capital goodssubject to export obligation would enhance thecompetitiveness of Indian exporters in terms of quality upgradation.

(b) Due to, export obligation, importers will be required toexport compulsorily. This would increase exports andwould generate foreign exchange for the economy.

A Note on Counter TradeCounter trade is a form of international trade in which certainexport and import transactions are directly linked with eachother and in which import of goods are paid for by export ofgoods, instead of money payments;In the modern economies, most transactions involve monetarypayments and receipts, either immediate or deferred. As againstthis, counter trade refers to a variety of unconventionalinternational trade practices which link exchange of goods,directly or indirectly, in an attempt to dispense -with currencytransactions.The Philippine International Trade Corporation (PITC) istasked with countertrade, an international transaction premisedon some form of reciprocity. It is used to leverage governmentimportation with trade and investments to be provided byforeign suppliers.Counter trade helps government offices or other local institu-tions by facilitating the introduction of investments, technologytransfer, research and development, donations, specializedtraining/skills and related activities without additional cost tothe government.

Forms of Counter Trade

(a) Barter: Barter refers to direct exchange of goods againstgoods of equalvalue, with no money and no third partyinvolved in it.

(b) Compensation Deal: Under this arrangement, the sellerreceives a part of the payment in cash and the .rest inproducts.

(c) Buy Back: Under the buy back agreement, the supplier ofplant, equipment or technology agrees to purchase goodsmanufactured with that equipment or technology.

(d) Counter purchase : Under the counter purchase agreement,the seller receives the full payment in cash but agrees tospend an equivalent amount of money in that countrywithin a specified period.

(d) Trade-for-Debt or Debt-for-Goods. A loan or creditobtained by the government is paid for (fully or partially)in goods or services of the debtor country.

(e) Offset. Foreign suppliers commit to introduceinvestments, technology transfer, training and skillsupgrade, research and development, donation or othersimilar products that will promote the industrial andeconomic growth of the country as well as provideemployment opportunities, support social and civicprograms, generate/save foreign exchange, and fund andsupport environmental projects for sustainable growth.

Checklist for Counter-TradeCounter-trade and barter are trading techniques used bycountries with a limited supply of foreign currency, but whichneed to import goods. Instead of paying in precious hardcurrency, the customer asks to pay in goods. In many cases thesewill not be goods for which there are already established tradingpatterns, rather they will be goods that would not otherwise beexported. This will mean that there is unlikely to be a means ofpricing them (as there would be, for example, for a fixed gradeof a mineral).• Use a lawyer to write the agreements• Use a counter-trade specialist (e.g a commodity trader with

counter-trade expertise)• Insure the risk of the trader’s insolvency• Arrange payment for sales of the customer’s (exported)

product before you lose control of your goods• Use an escrow account for receipts, and export goods to the

value of the amount of hard currency in escrow (foreignexchange permission for the escrow account may be neededfrom the buyer’s country)

• Ask the customer to provide a government guarantee forany shortfall of the amounts expected from the proceedsof sale counter-traded goods, especially if you arecommitting resources to make goods to order

• Insure the risk of non-honoring of the governmentguarantee

• Obtain political risk cover on the buyers country in relationto the risk of frustration of your export contract and onthe frustration of the import contract .


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Question BankQ.1 Write a note on the Negative List of Export.Q.2 Write a brief note on canalisation of exports.Q.3 Explain Niche Marketing as an export strategy.Q.4 Write note on the Open General Licence (OGL).Q.5 Write note on the Special Economic Zones.Q.6 Write note on the Agriculture Export Zones.

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Lecture 19 export- import policy of india