“Export or perish”: This was a slogan given by Pandit Nehru, when the balance of payment position was very precarious. A similar situation exists now also when the deficit has ballooned to an all time high. The authorities must sit up and take notice of the hurdles in the path of exports and work towards reducing the transaction cost, drawing up meaningful schemes and implementing the ones already announced in the proper letter and spirit. The Director General of Foreign Trade (DGFT), Customs and Excise authorities and the State Governments should put in their best efforts to act as facilitators in view of the European crisis and the American volatility.
The rubber industry can rise to the challenge and the present 25% compounded growth achieved over the last 15 years can be translated to 40-50% as the Indian rubber products have been known for their quality and timely deliveries in any market.
Export growth declining
The export growth in November 2011 was the lowest for the last 2 years. As per data released by the Indian Commerce Ministry, exports in November, 2011 grew by only 3.85% to $22.3 billion compared to $21.49 billion in November, 2010. Exports in December 2011 showed an overall growth of only 6.35%. The deficit has widened.
It is expected that exports for the current fiscal would be around $280 billion against the target of $300 billion for 2011-12 and trade deficit will widen to $160 - $175 billion. This is definitely a cause for worry. We are giving few suggestions which, if implemented, will boost exports.
A. EXIM POLICY
1) Interest subvention scheme
Considering the recession in global economy, particularly in Europe, and high interest rates in India, the interest subvention should not be restricted to select sectors only.
2) Focus market & focus product scheme
The DEPB scheme is withdrawn and in its place draw back system is introduced whereby the amount is directly credited to exporters account. However, for Focus Product Scheme (FPS) and Focus Market Scheme (FMS), the scrips are still being issued. We suggest that, instead of issuing duty credit paper scrips, the amount due to exporters should directly be credited to their account electronically. This will do away with the payment of VAT at the time of sale of scrips.
3) Installation certificate in case of EPCG authorisation
Para 5.3.1 of Handbook of Procedures 2009-2014 Vol.1 states that authorisation holder shall produce to the Regional Authority concerned a certificate from the Jurisdictional Central Excise Authority, confirming installation of capital goods at factory of authorisation holder within six months from the date of completion of imports.
We do not know what the purpose is of insisting on producing installation certificate. Instead of insisting on producing installation certificate in each and every case, the exporters may be asked to forward a copy of the Bill of Entry along with the declaration to the jurisdictional Central Excise Authority that the machinery is installed in the factory premises mentioned in the Authorisation on a particular date.
The copy of this declaration duly acknowledged by the Jurisdictional Excise Authority may be forwarded to the Regional Authority of DGFT at the time of redemption. Bond/LUT may be redeemed based on this declaration, apart from application in ANF 5B and documents prescribed therein.
In case the machinery is not found to be installed, penal action can be taken under FT (D&R) Act, 1992, Orders and Rules made there under provision of Foreign Trade Policy and Customs Act 1962 as mentioned in para 5.17 of Handbook of Procedures 2009-2014 Volume 1.
Thus the real culprits could be punished. In other words, we should follow the principle of management by exception rather the rule. In any case, as long as the export obligation is satisfied, the matter should be treated as closed.
4) Contradiction in conditions attached to EPCG authorisation
As per condition 2 (1) attached to EPCG Licence it is stated that the export obligation should be discharged from the date of issue of authorisation. However, in the same condition it is also stated that the export obligation shall be fulfilled by the use of the imported capital goods. These two conditions are contradictory. If the export obligation is to be fulfilled by use of imported capital goods mentioned in the EPCG Licence, the same cannot be done from the date of issue of the Licence. After issue of the Licence, it will take some time to import the machinery, clear from the Customs and install in the factory.
Hence our request is that the words “Export Obligation shall be fulfilled by the use of imported capital goods” mentioned in Condition 2 (1) of the Condition Sheet may kindly be deleted.
5) Continuation of benefit of New Market-linked Focus Products Table 6 of Appendix 37 D
As per S. No.103 of Table 6 of Appendix 37 D, the benefit of New Market-linked Focus Products was extended to item ‘Other Articles of Vulcanised Rubber Other Than Hard Rubber” ITC (HS) Code No.4016 for exports to the Netherlands, Portugal, Romania, Slovakia Rep., Slovenia, Spain, Sweden and the U.K. However, this benefit was restricted for exports made up to March 31, 2011 only.
Since the European Financial crisis is still continuing, the benefits should be continued till the end of the policy period; i.e., till March 31, 2014. This benefit will also offset the disadvantages the Indian exporters suffer due to high interest rates, infrastructural bottleneck and high transaction cost.
6) Classification of rubber compounded sheets
As per Public Notice No.2, dated 23.8.2010, Item “Other Articles of Vulcanised Rubber Other Than Hard Rubber” was added in Appendix 37 D, Table No.6 – New Market-linked Focus Products at S. No.103. However, the ITC (HS) Code for this is mentioned as 4016. The Item Rubber Compounded Sheets/Rings/Gaskets fall under the above ITC (HS) code. This item is also shown under ITC (HS) code 4008. Certain exporters have taken Advance Authorisation for this item under ITC (HS) code 4008 and have also exported the item showing ITC (HS) code 4008.
As the ITC (HS) code shown in Shipping Bill is 4008 and as the ITC (HS) code mentioned in Appendix 37 D, Table 6, S. No.103 is 4016, the Zonal Jt. DGFT, Mumbai, may not accept the shipping bills with ITC (HS) code 4008 for benefit under Market-linked Focus Product under para 3.15.3 of Foreign Trade Policy. We, therefore, request to kindly
issue clarification that, for the product Rubber Compounded Sheets/Rings/Gaskets, etc. indicating ITC (HS) code 4008, may also be accepted under S. No.103 of Table 6 Appendix 37 and benefit as per para 3.15.3 should also be allowed to them.
7) Recovery of DEPB granted on export of rubber mat/door mat
A Policy Circular No. 18/2009-2014, dated 8.12.2009, was issued by the Office of the DGFT, New Delhi, wherein it was clarified that the captioned product was not classifiable under nomenclature of “Rubber Compounded Sheets/Ring/Gasket” for the purpose of claiming DEPB under S. No. 507 (previous 547). By virtue of this circular, the authority concerned has started recovery of DEPB with retrospective effect! However, it is noticed from the said Policy Circular that the clarification for DEPB on Rubber mats/Door mats was issued on 8.12.2009 vide above policy circular; hence it should be applicable for exports made on or after 8.12.2009 and not for previous years.
Moreover, till the issuance of the above policy circular, the shipping bills were passed, goods were examined and even DEPB scrips were issued for such shipments for last 5 - 6 years by the authorities concerned and it showed that even the authorities concerned had already accepted the above products under nomenclature of “Rubber Compounded Sheets/Rings/Gasket.”
Further, due to cut-throat competition in the international market, the Indian exporters have to literally struggle to keep going in this global scenario. In such a critical situation, the sudden withdrawal with retrospective effect of the DEPB given by Government, (which is actually the refund of the taxes paid by the exporting community on inputs), shall have significant adverse impact on the exports.
Earlier, the exporting community was able to take the refund/compensation through cash compensatory mechanism which has been now done away with and hence, the exporters are deprived of compensation of the taxes, duties and cess which they have paid to ultimately execute their export orders which range almost between 8 to 9%. Due to high rate of interest and other factors, even the transaction cost is quite high; i.e., almost 7 to 8%. Under these circumstances, we urge the authority concerned to withdraw all recovery notes which have been issued with retrospective effect.
8) Reclaim rubber
Reclaim rubber is an important power-intensive industry segment and requires heavy machinery and capital goods. This should be treated on a par with other rubber products and drawback rate of at least 5% should be fixed instead of 2% as at present.
9) Delay in transmission of licenses & port congestion.
The delay results in an increase in the transaction cost and delay in shipments.
Import congestion surcharges are being levied at a rate of $ 150% per 20’ TEU. Since the authorities are responsible for creating this congestion, they should pay this surcharge.
10) The EPC concerned should be taken into confidence by the Government authorities before taking any action which affects the international trade.
11) Zero duty EPCG scheme
a) As per para 5.1 of Foreign Trade Policy 2009-14, the zero duty EPCG scheme will be in operation till 31.3.2012. Since capital goods are tailor-made items and at times take a very long time to manufacture, we suggest that this scheme should be extended.
b) As per para 3.16 of Foreign Trade policy 2009-14, status holders of certain sectors are allowed status holder incentive @ 1% of FOB value of exports made during 2009-10, 2010-11 and 2011-12 in the form of duty credit.
Further as per para 5.1 of FTP 2009-14 zero duty EPCG scheme is introduced where by capital goods can be imported at zero Customs duty.
However, as per para 5.1 of the Handbook of Procedures 2009-14 Vol.1, this zero duty EPCG scheme is not available to applicants who avail of in that year the benefit of status holder incentive scheme as per para 3.16 of FTP. Thus, the exporters who apply for status holder incentive scheme cannot get the benefit of zero duty EPCG in that year.
A small exporter who exports goods worth Rs.100 million and becomes an export house based on the double weightage as per para 3.10.3 of FTP 2009-14 can get capital goods at zero per cent duty only up to Rs.1,000,000 under status holder incentive scrip. He cannot get benefit of zero duty capital goods under para 5.1 of FTP 2009-14 during that year..
Considering the present cost of machinery, it is hardly possible to get any latest machinery within Rs.1,000,000.
The benefit under SHI scheme should be increased to 5% from 1%. Alternatively, the EPCG Licence may be issued for minimum of 2,500,000.
12) Time-bound disposal of application
As per para 9.11 of Handbook of Procedures 2009-14, Vol.1, the Regional Licensing Authorities are required to dispose of applications within the time limit mentioned in above para. These time limits are to be followed.
B. CUSTOMS & EXCISE, TAXES
1) There should be time limit of, say 30 days, for the sanction of Excise rebate and grant of refunds of unutilised cenvat credit on account of exports under bond/ G.T.I. Otherwise, the exporters should be entitled to get interest for delayed refund.
2) Service tax on exports and imports under Advance Authorisation should be abolished:
3) Proper refund mechanism is required for Octroi, duties and cess paid for electricity, water, fuel etc. by the exporters for execution of export orders.
4) CST should be refunded
5) Drawback rates should be revised upward to offset the high cost of fuel, electricity, Octroi and other taxes without value cap.
C. RUBBER BOARD
1) Reduction of import duty on NR latex.
It has been the avowed policy of the Government to maintain the lowest rate of duty for raw material inputs. However, it is not so far NR latex in practice. The duty structure for the next higher level for intermediate products and the highest slab for the finished goods is at present 10%. Thus, it is discouraging for the domestic manufacturers to produce the rubber products from imported raw materials.
Though the Government has recently reduced import duty on NR latex to Rs. 49 a kg, effective January 18,2012 from the earlier 70%, on by a reduction to the level of 5-7% can give elbowroom to the manufacturers, thereby generating employment with growth of exports of value-added products. The duty on the synthetic rubber should be maximum 5-7% only.
2) Removal of compulsory inspection
Under F.No.8/12/2011 – Plant – C, dated 3/1/2012, random inspection on imported natural rubber has been exempted for one year on experimental basis. Since the Rubber Board has appreciated the difficulty caused by inspection, it should withdraw from inspection for all imported NR.
3) Cess on NR to be abolished
Since Cess is discontinued for almost all the export commodities, Cess on natural rubber should be abolished.
4) Non-availability of NR
To bridge the gap between low international prices and high domestic prices and tide over the shortages, duty-free import of 200,000 tonnes of natural rubber may be permitted with actual user condition.
5) Futures trading in rubber may be banned as it leads to speculation
Of the total futures trading, not more than 2% results in physical deliveries. If futures trading continues, compulsory delivery of 50% of the traded stocks must be taken.
6) Abolish licensing controls by Rubber Board. It increases the transaction costs and huge amount of paperwork.
D. GENERAL – BANKS, LABOUR
1) Exporting community should be given PCFC by their respective banks in dollars at labour + 1.5% against all the confirmed exports.
2) Development Commissioner for rubber industry should be appointed to look after the needs of the rubber industry, largely consisting of MSNEs.
3) Labour laws to be made exporter-friendly to encourage exporters to take commitments without fear of facing labour disputes and costs.