Unit – 4: Infrastructure Support for Export Promotion
Institutional Support for Export
Promotion
Government of India has also set up
from time-to-time various institutions
in order to facilitate the process of
foreign trade in our country. Some of
the important institutions are as follows:
1. Department of Commerce: Department
of Commerce in the Ministry of Commerce,
Government of India is the apex
body responsible for the country’s external
trade and all matters connected
with it. This may be in the form
of increasing commercial relations with
other countries, state trading, export
promotional measures and the development,
and regulation of certain export
oriented industries and commodities.
The Department of Commerce
formulates policies in the sphere
of foreign trade. It also frames the
import and export policy of the country
in general.
2. Export Promotion Councils
(EPCs): Export Promotion Councils are non
profit organisations registered under
the Companies Act or the Societies
Registration Act, as the case may be.
The basic objective of the export promotion
councils is to promote and develop
the country’s exports of particular
products falling under their jurisdiction.
At present there are 21
EPC’s dealing with different commodities.
3. Commodity Boards: Commodity
Boards are the boards which have been
specially established by the Government
of India for the development of production of
traditional commodities an their exports. These boards are
supplementary to the EPCs. The functions
of commodity boards are similar
to those of EPCs. At present there
are seven commodity boards in
India: Coffee Board, Rubber Board, Tobacco
Board, Spice Board, Central Silk
Board, Tea Board, and Coir Board.
4. Export Inspection Council
(EIC): Export Inspection Council of India
was setup by the Government of India
under Section 3 of the Export Quality
Control and Inspection Act 1963. The
council aims at sound development of
export trade through quality control
and pre-shipment inspection. The council
is an apex body for controlling the
activities related to quality control and
pre-shipment inspection of commodities
meant for export. Barring a
few exceptions, all the commodities destined
for exports must be passed by
EIC.
5. Indian Trade Promotion
Organisation (ITPO): Indian
Trade Promotion Organisation was setup
on 1st January 1992 under the Companies
Act 1956 by the Ministry of
Commerce, Government of India. Its headquarter
is at New Delhi. ITPO was formed
by merging the two erstwhile agencies
viz., Trade Development Authority
and Trade Fair Authority of India.
ITPO is a service organisation and
maintains regular and close interaction
with trade, industry and Government.
It serves the industry by organising
trade fairs and exhibitions— both
within the country and outside, It helps
export firms participate in international
trade fairs and exhibitions, developing exports of
new items, providing support and
updated commercial business information.
ITPO has five regional offices at Mumbai,
Bangalore, Kolkata, Kanpur and Chennai
and four international offices at
Germany, Japan, UAE and USA.
6. Indian Institute of
Foreign Trade (IIFT):
Indian Institute of Foreign Trade
is an institution that was setup in
1963 by the Government of India as an
autonomous body registered under the
Societies Registration Act with the prime
objective of professionalising the country’s
foreign trade management. It has
recently been recognised as Deemed
University. It provides training in
international trade, conduct researches
in areas of international business,
and analysing and disseminating
data relating to international trade and
investments.
7. Indian Institute of
Packaging (IIP): The
Indian Institute of Packaging was set
up as a national institute jointly by the
Ministry of Commerce, Government of
India, and the Indian Packaging industry
and allied interests in 1966. Its
headquarters and principal laboratory
is situated at Mumbai and three
regional laboratories are located at
Kolkata, Delhi and Chennai. It is a training-cum-research
institute pertaining to packaging and
testing. It has excellent infrastructural facilities
that cater to the various needs of the
package manufacturing and package user
industries. It caters to the packaging
needs with regard to both the
domestic and export markets. It also
undertakes technical consultancy, testing
services on packaging developments,
training and educational programmes,
promotional award contests, information
services and other allied activities.
8. State Trading
Organisations: A large number
of domestic firms in India found
it very difficult to compete in the world
market. At the same time, the existing
trade channels were unsuitable
for promotion of exports and
bringing about diversification of trade
with countries other than European
countries. It was under these circumstances
that the State Trading Organisation
(STC) was setup in May 1956.
The main objective of the STC is to
stimulate trade, primarily export trade
among different trading partners of
the world. Later the government set up
many more organisations such as Metals
and Minerals Trading Corporation
(MMTC), Handloom and Handicrafts
Export Corporation (HHEC).
EXPORT PROMOTION COUNCILS
The Export Promotion Councils are established under the Companies
Act 1956 to provide direct institutional support to the Indian exporters. The
Government of India has created a separate export promotion council for every
industry. Export Promotion Councils are the representative bodies of the
various exporting industries. They serve as a bridge between the Government and
exporters for export promotion and development. The exporters should register
themselves with the respective export promotion councils and become the member
of the councils. A nominal fee is charged by the export promotion | council to
issue membership certificate. This certificate is called
Registration-cum-Membership Certificate (RCMC). This certificate is issued in
terms of the EXIM policy. Export Promotion council helps the member-exporters
on technical matters, export marketing strategies and export promotion. Experts
are appointed in various working committees of the export promotion councils in
order to help the exporters to solve various issues relating to international
trade. The offices of the Indian Export Promotion Councils are established in
foreign countries for the benefit of the Indian exporters. The export promotion
council perform both advisory and executive functions.
Functions of the Export Promotion Councils: The
important functions of the Export Promotion Councils are given below:
a) Providing
a forum between the Government and the members of the export promotion councils
for consideration and early implementation of the export promotion schemes
Sponsoring and inviting trade delegations and study teams for exploring export
markets for the Indian industries
b) Making
arrangements for the distribution of scarce materials for export production
c) Allocation
of export quota for the export products like textiles
d) Arranging
Buyer-Seller Meets and trade fairs/exhibitions in India and abroad
e) Foreign
publicity for Indian products in overseas markets through the scheme like Joint
Foreign Publicity
f) Recommending
the Government regarding the formulation and implementation of export incentive
schemes like fixation of drawback rates, market development assistance etc.
g) Creating
export consciousness among the exporters
h) Collecting
and disseminating statistical information and market intelligence about the
export opportunities through various media including newsletters, bulletins and
other periodicals
i)
Coordinating with the export inspection
council on quality control and preshipment inspection.
j)
Speedy disposal of export assistance
applications and assisting small scale units to export their products
k) Helping
the member exporters in claiming various types of incentives from the
Government and
l)
Keeping the member exporters informed with
regard to trade enquiries and opportunities
Commodity Boards
Commodity Boards are established by the Government of India in
order to help the organisation of industry and trade. The Boards take care of
the entire range of problems of production, marketing, promotion, competition,
etc in respect of the commodities concerned. The Commodity Boards 'are
statutory bodies taking steps for the development of cultivation, increased
productivity, processing, marketing and research and development. Offices of
the Commodity Boards are established in foreign countries for increasing the exports
of the commodities concerned. The Boards for the respective commodities arrange
trade fairs and exhibitions, sponsor trade delegations and conduct market
surveys for the purpose of promoting exports. All the Commodity Boards except
Central Silk Board are the registering authority and pro vide
Registration-cum-Membership Certificate (RCMC) to the member exporters in terms
of the Export-Import Policy. Commodity Boards are established in India for the
commodities such as silk, coffee, coir, rubber, spices, tea and tobacco.
Trade Development Authority (TDA)
The Trade Development Authority was established in the year 1970
under the Societies Registration Act 1860. It is a non-profit service
organisation functioning under the Ministry of Commerce, Government of India. The
Director is the executive head of the organization and he is guided and
assisted by a high powered committee consists of officials of the Government and
experts in the field of foreign trade. The Secretary of the Foreign Trade
department is the Chairman of the Organisation. The Trade Development Authority
has created three important divisions to execute its functions effectively. The
three divisions are, (i) Merchandising (ii) Research and Analysis and (iii)
Information.
The Merchandising division concentrates on ways and means to
increase Indian exports in the overseas market. This division identifies the
emerging market to penetrate Indian exports in the foreign countries in the
year to come. This division attempts to promote India's foreign trade by
assisting the exporters to plan marketing strategy, product development and
capacity expansion.
The Research and Analysis division attempts to conduct marketing
research to assess the market potentials for the Indian products in the
domestic as well as overseas market. This division helps the exporters to raise
their export capabilities.
The Information division collects the relevant data regarding the
global exports countrywise and commoditywise, trend in Indian exports and
opportunities for the Indian products in the overseas market. The collected
data are processed and supplied to the exporters to plan their export
strategies and to maximise their exports.
State Trading Corporation (STC)
The State Trading Corporation of India Ltd. (STC) is a premier
international trading house owned by the Government of India. Having been set
up in 1956, the Corporation has developed vast expertise in handling bulk international
trade. Though, dealing largely with the East European countries during the
early years of its formation, today it trades with almost all the countries of
the world.
By virtue of infrastructure and experience possessed by the
Corporation, it plays an important role in arranging import of essential items
into India and developing exports of a large number of items from India. It
exports a large number of items ranging from agricultural commodities to
manufactured products from India to all parts of the world. Because of
Corporation's in depth knowledge about the Indian market, STC is able to supply
quality products at most competitive prices and ensure that the goods reach the
foreign buyer within the prescribed delivery schedule. It also imports bulk
commodities for Indian consumer as per demand in the domestic market.
The eventful track record of more than 50 years has helped STC to
gear itself to face the fierce competitive challenges, seize business
initiatives and build on its core competencies.
Services provide by STC: While undertaking import and export
operations, the Corporation renders following services:
1. To the Overseas buyer: STC acts as an expert guide for
buyers interested in Indian goods. For them, STC finds the best Indian manufacturers,
undertakes negotiations, fixes delivery schedules, oversees quality control -
all the way to the final shipment to the entire satisfaction of the buyer.
2. To the Indian Industry: The Indian manufacturers, whose
products sail the seas via STC, benefit a lot from its expertise. STC helps
thousands of Indian manufacturers to find markets abroad for their products.
STC assists the manufacturers to use the best raw materials, guides and helps
them manufacture products that will attract buyers abroad. Some of the other
services offered by STC to the Indian manufacturers include:
a)
Financial assistance to exporters on easy terms.
b)
Taking products of small scale manufacturers to
international trade fairs and exhibitions.
c)
Import of machinery and raw material for export
production.
d)
Assistance in the areas of marketing, technical
know-how, quality control, packaging, documentation, etc.
e)
Supply of imported goods in small quantities as
per convenience of buyers.
f)
Market intervention on behalf of the Government.
3. To the Indian Consumer: The Indian consumers also benefit from
STC's expertise and infrastructure. STC imports essential commodities for them
to cover shortfalls arising in the domestic market. During the last one decade,
STC imported sugar, wheat and pulses to meet domestic requirements at a very
short notice.
Special Economic Zone- Introduction
Special Economic Zone (SEZ) is a geographical
region that has economic laws that are more liberal than a country's typical
economic laws. The category 'SEZ' covers a broad range of more specific zone
types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free
Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and
others. Usually the goal of an SEZ structure is to increase foreign investment.
One of the earliest and the most famous Special
Economic Zones were founded by the government of the People's Republic of China
under Deng Xiaoping in the early 1980s. The most successful Special Economic
Zone in China, Shenzhen, has developed from a small village into a city with a
population over 10 million within 20 years. Following the Chinese examples,
Special Economic Zones have been established in several countries, including
Brazil, India, Iran, Jordan, Kazakhstan, Pakistan, the Philippines, Poland,
Russia, and Ukraine.
SEZ AT INDIA
India was one of the first in Asia to recognize
the effectiveness of the Export Processing Zone (EPZ) model in promoting
exports, with Asia's first EPZ set up in Kandla in 1965. With a view to
overcome the shortcomings experienced on account of the multiplicity of
controls and clearances; absence of world-class infrastructure, and an unstable
fiscal regime and with a view to attract larger foreign investments in India,
the Special Economic Zones (SEZs) Policy was announced in April 2000.
This policy intended to make SEZs an engine for
economic growth supported by quality infrastructure complemented by an
attractive fiscal package, both at the Centre and the State level, with the
minimum possible regulations.
To instill confidence in investors and signal the
Government's commitment to a stable SEZ policy regime and with a view to impart
stability to the SEZ regime thereby generating greater economic activity and
employment through the establishment of SEZs, a comprehensive draft SEZ Bill
prepared after extensive discussions. The Special
Economic Zones Act, 2005, was passed by Parliament in May, 2005.
The main objectives of the SEZ Act are:
(a) Generation of additional economic activity
(b) Promotion of exports of goods and services;
(c) Promotion of investment from domestic and
foreign sources;
(d) Creation of employment opportunities;
(e) Development of infrastructure facilities;
It is expected that this will trigger a
large flow of foreign and domestic investment in SEZs, in infrastructure and
productive capacity, leading to generation of additional economic activity and
creation of employment opportunities.
OBJECTIVES OF SEZ AT INDIA
a)
Generation of
additional economic activity across all the states
b)
Promotion of
exports of goods and services across all Indian sates according to their
indigenous capabilities
c)
Promotion of
investment from domestic and foreign sources
d)
Creation of
employment opportunities across India
e)
Development
of world class infrastructural facilities in these units
f)
Simplified
procedures for development, operation, and maintenance of the Special Economic
Zones and for setting up units and conducting such business activities
g)
Single window
clearance cell for the establishment of Special Economic Zone
h)
Single window
clearance cell within each and every Special Economic Zones
i)
Single window
clearance cell relating to formal requirements of Central as well as all State
Governments.
j)
Easy and
simplified compliance procedures and documentations with stress on self
certification.
THE SALIENT FEATURES OF THE FIRST SEZ POLICY OF
INDIA
a)
Exemption
from duties on all imports for project development
b)
Exemption
from excise / VAT on domestic sourcing of capital goods for project development
c)
Freedom to
develop township in to the SEZ with residential areas, markets, play grounds,
clubs and recreation centers without any restrictions
on foreign ownership
d)
Income tax
holidays on business income
e)
Exemption
from import duty, VAT and other Taxes
f)
10% FDI
allowed through the automatic route for all manufacturing activities
g)
Procedural
ease and efficiency for speedy approvals, clearances and customs procedures and
dispute resolution
h)
Simplification
of procedures and self-certification in the labor acts
i)
Artificial
harbor and handling bulk containers made operational throughout the year
j)
Houses both
domestic and international air terminals to facilitate transit, to and fro from
major domestic and international destinations
k)
Well
connected with network of public transport, local railways and cabs
l)
Pollution
free environment with proper drainage and sewage system
m)
In-house
Customs clearance facilities
n)
Abundant
supply of technically skilled manpower
o)
Abundant
supply of semi-skilled labor across all industry vertical
p)
Easy access
to airport and local Railway Station
q)
10-year tax
holiday in a block of the first 20 years
r)
Full
authority to provide services such as water, electricity, security, restaurants
and recreational facilities within the zone on purely commercial basis
Key Advantages
of SEZ Units in India
Ø 10-year tax holiday in
a block of the first 20 years
Ø Exemption from duties
on all imports for project development
Ø Exemption from excise /
VAT on domestic sourcing of capital goods for project development
Ø No foreign ownership
restrictions in developing zone infrastructure and no restrictions on
repatriation
Ø Freedom to develop
township in to the SEZ with residential areas, markets, play grounds, clubs and
recreation centers without any restrictions on foreign ownership
Ø Income tax holidays on
business income
Ø Exemption from import
duty, VAT and other Taxes
Ø 10% FDI allowed through
the automatic route for all manufacturing activities
Ø Procedural ease and
efficiency for speedy approvals, clearances and customs procedures and dispute
resolution
Ø Simplification of
procedures and self-certification in the labor acts
Ø Artificial harbor and
handling bulk containers made operational through out the year
Ø Houses both domestic
and international air terminals to facilitate transit, to and fro from major
domestic and international destinations
Ø Has host of Public and
Private Bank chains to offer financial assistance for business houses
Ø A vibrant industrial
city with abundant supply of skilled manpower, covering the entire spectrum of
industrial and business expertise
Ø Well connected with
network of public transport, local railways and cabs
Ø Pollution free
environment with proper drainage and sewage system
Ø In-house Customs
clearance facilities
Disadvantages of SEZ
Ø Revenue losses because of the various tax
exemptions and incentives.
Ø Many traders are interested in SEZ, so that
they can acquire at cheap rates and create a land bank for themselves.
Ø The number of units applying for setting up
EOU's is not commensurate to the number of applications for setting up SEZ's
leading to a belief that this project may not match up to expectations.
Export Oriented Units (EOU)
The EOU scheme
was introduced in the year 1980 vide Ministry of Commerce resolution dated 31st
December 1980. The purpose of the scheme was basically to boost exports by
creating additional production capacity. The EOU scheme is, at present,
governed by the provisions of Export and Import (EXIM) Policy, 1997-2002. Under
this scheme, the units undertaking to export their entire production of goods
are allowed to be set up. The EOUs can export all products except prohibited
items of exports in ITC (HS).
Under the EOU
scheme, the units are allowed to import or procure locally without payment of
duty all types of goods including capital goods, raw materials, components,
packing materials, consumables, spares and various other specified categories
of equipments including material handling equipments, required for export
production or in connection therewith. However, the goods prohibited for import
are not permitted. In the case of EOUs engaged in agriculture, animal
husbandry, floriculture, horticulture, pisciculture, viticulture, poultry,
sericulture and granite quarrying, only specified categories of goods mentioned
in the relevant notification have been permitted to be imported duty-free.
Benefits under
EOU Scheme
Ø Units are exempted from payment of Income Tax
Ø All the imports to units are customs duty
free.
Ø Exemption from Central Excise Duty for the
procurement of Capital Goods and Raw Materials from domestic market.
Ø Units are entitled to sell the product in
local market upto 50% of the products exported in value terms.
Ø 100% of foreign equity is permissible.
Ø Reimbursement of Central Sales Tax pad on
domestic purchases.
Ø Full Freedom for sub-contracting.
Ø Exemption from the payment of Electricity
duty.
Ø EOU unit can be set up at any of over 300
places all over India
Ø The unit can import capital goods, raw
materials, consumables, packing material, spares etc. without payment of
customs duty. Similarly, these can be procured indigenously without payment of
excise duty. Second hand capital goods can also be imported.
Ø They have to achieve positive NFE (Net Foreign
Exchange Earnings).
Ø Minimum investment in plant and machinery and
building is Rs 100 lakhs for EOU. This should be before commencement of
commercial production.
Ø Fast Track Clearance Scheme (FTCS) for
clearances of imported consignments for EOU.
Ø Generally, all final production should be
exported, except rejects upto prescribed limit.
Ø Sale within India should be on payment of
excise duty. The duty which will be equal to normal customs duty which would be
payable on such goods, if imported. However, in certain cases, excise duty
payable will be only 50%/30% of normal customs duty payable on such goods if
imported into India.
Ø Sub-contracting of production outside on job
work basis is permissible after obtaining necessary permission on annual basis.
Ø Job work for exports is permitted.
Ø Samples can be sold / given free within
prescribed limit.
Ø Unutilized raw material can be disposed of on
payment of applicable duties.
Ø The unit can exit (de-bond) with permission of
Development Commissioner, on payment of applicable duties.
Ø Central Sales Tax (CST) paid on purchases is
refundable (but not local tax).
Ø Prescribed percentage of foreign exchange
earnings can be retained in EEFC account in foreign exchange.
Ø 100% foreign equity is permissible, except in
a few cases.
Ø Supplies made to EOU by Indian supplier are
‘deemed exports’ and supplier is entitled to benefits of ‘deemed export’.
Ø Restrictions under Companies Act on managerial
remuneration are not applicable.
Ø No restrictions on External Commercial
Borrowings.
Export Processing Zones (EPZ)
Export Processing Zones in India was
set up by the government of India with the aim to initiate infrastructural
development and tax holidays in various industrial sectors in the country. EPZ
has incessantly accelerated the economic growth of the country by ensuring a
flourishing export production. The export processing zones in India came into
existence soon after the political independence, when India proclaimed the
first Industrial Policy Revolution in the year 1948. It was from then that the
actual industrial growth begun in India, which resulted in the constitution of
the export processing zones later. Export promotion has always been the chief
concern of the government of India and it strictly follows the ISI policy while
carrying out all its activities.
The main reasons
behind setting up the EPZ in India have been listed as under:
Ø Ensuring better infrastructural facilities in
the industrial units that were set up in the export processing zones in India
Ø Introducing the privilege of tax holidays
Ø Establishing 100 percent export-oriented
system in the EPZ in India
Ø EPZ in India are entirely devoid of all kinds
of duties, levies, and taxes
Ø Implementing tax holidays in the importing of
goods like capital goods, raw materials, and consumer goods as well.
Ø The units in export processing zones follow
the automatic route set by the government of India which offers 100 percent
foreign direct investment in the zone
Ø The rules set by the government of India are
executed and implemented by the development commissioner of the respective
export processing zones in India
Ø Some of the significant features of the Export
Processing Zones in India have been enumerated as under:
Ø The activities that are carried out in the EPZ
in India are not liable to be licensed apart from the IT enabled sectors
Ø The units set up in the export processing
zones in India can select their desired locations by following certain
parameters as prescribed by the state governments
Ø The export processing zones in India
religiously follows the active export-import policy
Ø The units in EPZ in India are totally custom
bonded
Ø The proposals for the units in Export
processing zones in India are entitled to follow the automatic route for
approval as enforced by the state governments
Ø The proposals which do not fall under the
procedure of automatic route system are governed or approved by the FIPB
Ø The activities in EPZ in India belonging to
the Domestic Tariff Area sector are converted into Export oriented units to
meet the parameters set for the export production by the government
Ø 100 percent FDI is granted to these zones.
Difference Between EOU and SEZ
|
SL
|
EOU
|
SEZ
|
|
1
|
Supplies from EOU to Domestic Tariff Area
are termed as Deemed Exports.
|
Supplies to SEZ from Domestic Tariff Area is
termed as Export
|
|
2
|
EOU unit can be located within the 300
places all over India.
|
SEZ unit has to be located within the
specified zones developed
|
|
3
|
No Physical Control over movement of goods
to Individual EOU.
|
Physical Control exist on movement of goods.
|
|
4
|
Minimum Investment is 1 Crore before
commencement of production.
|
No Such Limit prescribed.
|
|
5
|
Fast Track Clearance Scheme for clearance of
import Consignment.
|
Custom’s Clearance for export and import is
obtained in the SEZ itself.
|
|
6
|
When Sold in DTA or in India, Concessional
rate is applicable.
|
Sale within India would be treated as
Import, Hence Import duties are levied.
|
|
7
|
The Existing EOU can de-bond with permission
of Development Commissioner
|
In case of SEZ, the Unit has to mandatorily
move out of SEZ zone.
|
|
8
|
CST is refundable and not Local tax.
|
Supplier need not have to pay CST.
|
|
9
|
Service Tax can be refunded.
|
Service Tax is exempted.
|
|
10
|
100% FDI has some restriction
|
100% FDI is allowed.
|
|
11
|
Refund of Excise and Duty drawback
available.
|
DEPB and duty drawback are available.
|
|
12
|
Restriction External Commercial Borrowing is
more.
|
Restriction External Commercial Borrowing is
comparatively less.
|
|
13
|
Scope to improve Infrastructure exists.
|
Infrastructure are better
|
|
14
|
No Labor law exemption allowed
|
Labor law can be exempted by State
Government.
|
|
15
|
Freedom of operation is restricted
|
Freedom of operation is available.
|