Submission on Trade Policy
Posted On : 13th July 2009

Submission on Foreign Trade Policy to Director General of Foreign Trade (DGFT)

Founded in 1938 (formerly known as Indian Chemical Manufacturers Association) Indian Chemical Council (ICC) is the umbrella organization of chemical industry in India. ICC provides its members a forum to address their common issues.

Many of our members have significant presence in export market. In the prevailing global economic scenario they are facing major challenges in overseas markets. In this context, ICC would like to submit the following covering policy and procedural issues for the consideration of the Government:

  1. Extending DEPB Scheme till 2012
    Justification:
    Many small & medium scale manufacturers and merchant exporters often do not have capacity to imports all their inputs required for export. These exporters are absorbing local taxes and levies which are often very high and needs to be compensated. Introduction of GST would provide partial relief, but may still not be adequate. The scheme may, therefore, be extended at-least till 2012.

  2. Incresing DEPB/Duty Drawback Rate by 5%
    Justification:
    Global economic melt-down has severely affected Indian exports. Chinese Government has increased export incentive for most of the chemicals from 5% to 9%. Similarly the incentive for polymers has been increased to 13%. It is imperative that Indian exporters receive similar supports to stay competitive in the international market.

  3. Extending DEPB benefit to Deemed Export:
    Justification:
    Deemed export supplies are made under the same spirit as physical exports. The suppliers of deemed export, however, need to absorb local taxes and duties on local procurements. It would, therefore, be logical to extend DEPB scheme on deemed export suppliers as well.

  4. Permitting manual registration of DEPB lineces issued manually for EDI shipping bills:
    Justification:
    Registration of DEPB issued for EDI shipping bills filed manually can be done only after shipping bills are online between customs and DGFT. Some shipping bills are not synchronized between customs & DGFT resulting in delay in imports. Manual registration would help reduce the delay.

  5. Simplifying process - DEPB on submission of proof of export.
    Justification:
    The current system of availing DEPB benefit is time consuming and causes losses in trading the licenses in case of non-utilization. The existing procedure should be amended to make it more exporter friendly by granting immediate credit in the company account on submission of proof of exports. This would help in fund availability to the exporters.

  6. Permission for validation of DEPB Licences beyond expiry period:
    Justification:
    DEPB Licences are required to be utilized within 2 years of the date of issue and the period granted for applying for the same is one year from the date of export.

    Original DEPB licences get held up at different Ports (as they get circulated within Customs' offices) and at times at office of DGFT (when given for amendment) and they expire without being utilized.

    In case of non-utilization of licenses, we request that permission be automatically granted for the Revalidation of DEPB Licenses by at least 6 months beyond expiry date.

  7. Extending tax benefit period u/s 10B of IT for EOU Units:
    Justification:
    While the tax exemption to EOU has been extended till assessment year 2010/11, this is not adequate under prevailing global economic conditions where the financial viability of many of these units is under threat. Considering this the benefit period may be extended till 2014.

  8. Exemption from MAT for EOU Units:
    Justification:
    Since EOU also operate in a similar manner as units located in SEZ, exemption from MAT should therefore be extended to EOUs.

  9. Growth Linked Incentive Scheme:
    Justification:
    While global economy and trade are under severe strain, Indian chemical industry can siege the opportunity and convert present adversity into opportunity with appropriate support from Government. Under the prevailing scenario, it could be to the long term advantage of Indian exporters if an incentive scheme linked to growth in export can be devised. Government may consider offering 10% of incremental fob value as duty free credit for import of inputs related to production of goods exported with actual user condition. This would promote export growth and avoid misuse of such incentives.

  10. Lower interest rates on Export Packing Credit (EPC):
    Justification:
    Interest rates in India are higher compared to most of the advanced economies. The Export Packing Credit Scheme enables exporters to get financed at interest rates closer to the international rates of interest, which are still substantially higher than LIBOR or the Prime Lending Rates in these countries.

    We request the government to fix the EPC rates at not more than 1-1.5% above the LIBOR rates.

  11. Extending Post / Pre-shipment Credit Period:
    Justification:
    ICC requests the government to increase the period for pre-shipment credit to 270 days from 180 days and post-shipment credit period (currently 90 days) needs to be extended to min of 270 days. This would help exporters tie-over the liquidity which is currently under severe pressure for small and medium scale exporters.

  12. Extending Interest Free Warehousing Period:
    Justification:
    The present facility of allowing interest free warehousing period of 3 months is inadequate under prevailing export market condition. This could be increased to six months to custom clearance of small lots without interest payment and provide temporary relief to the exporters.

  13. Extending FMS for export to Europe for 5 years:
    Justification:
    FMS was formulated to compensate for the additional costs incurred for export to few identified markets where the logistic and other costs are higher arising out of externalities. With implementation of REACH by EU, Indian exporters are faced with huge registration and compliance costs which may be partially compensated.

  14. Extending FMS for export to Africa & Latin American Countries:
    Justification:
    Indian exports to many African and Latin American countries faces very high logistic costs as compared to alternative sources like US, EU countries who are traditional competitors to Indian exporters in chemical sector. FMS may hence be extended for export to Brazil, Algeria, Kenya, South Africa, Ivory Coast, Nigeria, Tanzania and Cuba.

  15. Wiaver / reduction of penalties for loss of BRCs and Shipping Bills if duplicate copies are submitted.
    Justification:
    All shipping bills are processed through EDI only. ICC requests that very nominal penalty be charged (instead of 1% as notified vide notification 79/2002) on submission of duplicate shipping bills or BRCs in lieu of original (as export proof) for the closure of Advance Licenses. This could be 0.25% of FOB value subject to a maximum of Rs.25,000/-

  16. Clubbing of Duty Free Import Authorization (DFIA) Licenses:
    Justification:
    There is a provision for clubbing of Advance Licenses where there is an export beyond / above the Export Obligation with those licenses for which the Export Obligation has not been fully met. Two or more Advance Licences can be clubbed (Section 4.20 HBP VOL 1). ICC requests the government to extend the scheme of provision for clubbing in case of DFIA Licenses as well.

  17. Clubbing of Advance Licenses issued against Physical and Deemed Exports:
    Justification:
    As a further relaxation and widening of the applicability of provision of clubbing, we request that clubbing of Advance Licenses issued for Physical Exports should be applicable for Deemed Exports as well.

  18. Duty-free Import of Raw Material against Advance License at any port:
    Justification:
    Imports may be allowed at any Port even if the Licenses are registered at  "say Port X" i.e. doing away with the system of tele-releasing advice for at least Star Trading Houses. This will save on delays and demurrages for the exporters.

  19. Single Window Clearance for Bond Closures:
    Justification:
    In case of Advance Licensing Scheme, after the importation has been completed and Export Obligation has been completely fulfilled, the Licenses are 'closed' by the DGFT authorities after a detailed scrutiny.

    However, for Bond (executed by exporter for the duty amount on imported raw material with Customs Department), closure by DGFT is not sufficient. One needs to go through fresh scrutiny procedure again at Customs. This procedure is repetitive and time consuming and delays export bond closures. There is a need for Single Window Closure.

  20. Simplified procedure for refund of unutilized CENVAT Credit:
    Justification:
    Companies who are large exporters and consume domestic raw material accumulate huge Excise balances as CENVAT, which they are unable to utilize as no Excise Duty is required to be paid on goods exported out of India.

    The procedures for availing refunds of these balances is highly cumbersome and time consuming and exporters do not get refund within a reasonable period and refunds are without any interest despite undue delays.

  21. Amendment of Adhoc Norms:
    Justification:
    Actual wastage, reaction out-put, time, R&D process etc. are governed during chemical manufacturing processes. It is therefore submitted that Norms Committee may entertain at-least two requests for amendments within the validity of the Advance Authorization.

In the prevailing global economic scenario, it is imperative for the industry to seek support from Government to continue local manufacturing activities at a healthy pace. Chemical industry with significant presence in the export markets would need a well considered stimulus package that helps the industry negotiate the present global demand slow down, particularly emanating from the developed world.

In this context ICC believes that Government would sympathetically evaluate all the submissions made by the ICC and consider them for the long term sustainability of Indian producers in this industry. We would also be happy to have an audience with you and senior officials in your Directorate to personally brief you on our submissions.

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