In a major initiative to enable India to compete effectively in the increasingly competitive international market and to boost export-led growth, the new five-year Exim policy lifts all quantitative restrictions on exports, improves incentives for Special Economic incentives for Special Economic Zones (SEZs) and schemes like DEPB, advance license, and EPCG.

The 2002-07 Exim policy also provides an incentive package for the hardware sector, simplifies procedures to reduce transaction costs besides adopting new commodity classification for imports and exports.

Coterminous with the Tenth Five Year Plan, the policy comes a year after the quantitative restrictions were dismantled on import. With the lifting of quantitative restrictions on exports this year, the policy has made a paradigm shift on its focus from import liberalization to export orientation.

In a significant decision to make Special Economic Zones (SEZs) internationally competitive, Commerce and industry Minister Mr. Murasoli Maran announced that for the first time in India overseas banking units would be permitted to be set up in SEZs. These units would virtually be foreign branches of Indian banks located in India, and overseas banking units would be exempted from CR, SLR and would give access to SEZ units and SEZ developers to international finances at global rates. It has also been decided to permit external commercial borrowings ( ECBs) for a tenure of less than 3 years in SEZs. The detailed guidelines would be worked out by Reserve Bank.

The Exim policy takes “radical steps” in line with medium term export strategy to fulfill the mission to capture one per cent of the global share of trade by 2007 up from the present level of 0.67 per cent. Translated in value, the projected growth will mean doubling the present exports of 46 billion dollars to more than 80 billion dollars over the Tenth Plan, requiring a compound annual growth rate of 11.9 per cent in dollar terms.

Making it employment oriented, the policy removes several restrictions on agriculture exports including registration and packaging requirement for items like butter, wheat and wheat products, coarse grains, groundnut oil and cashew to Russia.

Restrictions on export of all cultivated varieties of seed, except jute and onions have also been removed besides providing transport subsidy to exports of fruits, vegetables, floriculture, poultry, and dairy products. The policy has also allowed 3 percent special Duty Entitlement Pass Book (DEPB) rate for primary and processed food exported in retail packaging of one kg or less.
To promote cottage sector and handicrafts, the Exim policy announced earmarking of Rs.5 crore under market access initiative for exports of Khadi. With a view to encouraging further development of centres of economic and export excellence such as Tirupur for hosiery, Panipat for woollen blanket, Ludhiana for woollen knitwear, several benefits have been announced for small-scale sector.

The policy has also included various duty-neutralization instruments for exports such as DEPB and Advance licenses. The changes in respect of advance license included abolition of duty exemption entitlement certificate, withdrawal of annual advance license scheme and permission to exporters to avail advance licenses for any value. Regarding DEPB, the value cap exemption would continue and there will be no midterm reduction of rates except exceptional circumstances.

EPCG licenses of Rs.100 crore or more will have 12 year export obligations period as against eight years earlier with a five year moratorium, while supplies under deemed exports will be eligible for export obligations fulfillment along with deemed export benefits.

Some of the sector specific packages in the policy include reduction of customs duty on import of rough diamonds to zero per cent, abolition of licensing regime for rough diamonds, reduction in value addition norms for export of plain jewellery at a value addition of three per cent and extension of duty free imports for trimmings and embellishments upto three per cent job value. In a major initiative to reduce transaction cost, Mr. Maran announced a series of procedural simplifications covering DGFT, customs and banks.

These include adoption of new commodity classification for imports and exports, which will be adopted, by Central Board of Excise and Customs and the Directorate General of Commercial Intelligence and Statistics with common classification to be adopted by DGFT and CBEC to eliminate disputes. It has also been decided to further simplify all schemes, reduce the maximum fee limit for application under various schemes, same day licencing and adoption and harmonization of the 8-digit code by customs.

The policy also allowed 100 percent retention in Export Earners’ Foreign Currency (EEFC) accounts and extension of repatriation period for realization of export proceeds from 180 days to 360 days.