ANNUAL SUPPLEMENT TO THE FOREIGN TRADE POLICY 2004-09 FOR FINANCIAL YEAR 2005-06

1. ANNUAL SUPPLEMENT TO THE FOREIGN TRADE POLICY 2004-09 FOR FINANCIAL YEAR 2005-06 ISSUED ON 8TH APRIL 2005

2. GENESIS OF ANNUAL FTP SUPPLEMENT Fast changing Global economic scenario necessitate evaluation of Foreign Trade Policy at regular intervals and to take initiatives for framing apposite transformational course of action considering required Strategic realignment basis assessment of the varying Global economic scenario. The annual supplement endeavors to incorporate additional policy initiatives and to simplify procedures of the existing schemes for greater efficiencies and efficacy thereby facilitating persistent enhancement of India’s share in International trade.

3. OUTLINE ON INDIA’s SHARE IN WORLD TRADE Worth of Exports 80 billion dollars against Target of 74 billion dollars in the FY 2004-05. Growth rate of nearly 24%. Export target revised to 92 billion dollars for the FY 2005-06. Target Export by 2008-09 150 billion dollars. Worth of Imports 105 billion dollars in the FY 2004-05. Fuel oil import accounted for 29 billion dollars. Growth rate of nearly 34% Total Trade deficit on merchandise goods 25 billion dollars for FY 2004-05. Excluding Fuel oil Imports Trade Surplus of 5 billion dollars. Estimated Service Exports 30 billion dollars.

4. MAJOR INITIATIVES EXPORT CESS Proposal to abolish cess on export of all agricultural (wheat, soya meals etc.) and plantation commodities levied under these Acts. Consultations with other Ministries to abolish cess on other commodites (iron ore etc.) administered by them under the different Commodity Board Acts {Respective cess acts requires instant amendment for implementation}

5. MAJOR INITIATIVES EPCG SCHEME For Agro & SSI units, export obligations reduced to 6 times of duty saved fullfilment period to 12 year in place of normal export obligations of 8 times of duty saved and 8 years fullfilment period EPCG Scheme extended for import of capital goods required by retailers. Firms fulfilling 75% or more of their export obligation in half the original obligation period, shall be freed from the balance export obligation. Submission of Chartered Engineer Certificate permitted for all units Importing capital goods and spares in lieu of submission of installation certificates issued by Central Excise Authorities Facility of clubbing license further liberalized by permitting clubbing of licenses issued under same customs notification

6. MAJOR INITIATIVES SERVICE EXPORTS Goods Imported under “served from india” scheme allowed to be Transferred within Group companies with actual user condition Self declaration permitted in lieu of Chartered Accountants’ certificate to the effect that duty benefit availed under the “served from india” Scheme have been passed to consumer.

7. MAJOR INITIATIVES DUTY EXEMPTION - ADVANCE LICENSE Removal of requirement of Advance Release order for supplies to EOU/EHTP/STP/BTP units with permission of direct debit of the Advance license by the Bond officer of respective units Advance License for physical exports, intermediate supplies and deemed Exports merged into single category Annual Annual License extended to all categories of exporters instead of status holders. Limit of obtaining Annual Advance License enhanced to 300% of FOB value of export from earlier 200% Transfer of Duty free material imported under Advance License from one Unit to another unit of the same company allowed with intimation instead of obtaining permission from jurisdictional Central Excise Authority.

8. MAJOR INITIATIVES DUTY REMISSION - DFRC & DEPB DEPB Scheme continued with no changes in scheme except that DEPB benefits now also available for supply of goods to SEZs for the period 01-04-2003 to 11-05-2004. Provisions for 95% re-credit on account of rejected items imported under DFRC permitted in line with Advance License scheme

9. MAJOR INITIATIVES EOU De-bonding procedure for EOU simplified. Self assessment procedure to be in place for compliances Capital Goods will be allowed to be transferred to other units with Intimation to both Excise & development commissioner EOU permitted to claim IT exemption in respect of export proceeds realised within a period of 12 months from date of export

10. MAJOR INITIATIVES ASSORTED INITIATIVES & OTHER PROCEDURAL SIMPLIFICATION EDI Linkage of all community trade partners like DGFT, Customs, banks Export Promotion councils etc. to facilitate web based filing, retrieval and verification of documents. A fast rack mechanism for clearances, examination, testing, quarantine, packaging etc. to be set up to facilitate import/export of perishable cargo. Trade data to be made available enabling users to make commercial decisions DGFT offices to provide facilitation to exporters in regard to developments in WTO and International Trade Arena

11. MAJOR INITIATIVES ASSORTED INITIATIVES & OTHER PROCEDURAL SIMPLIFICATION Benefits of “Vishesh Krishi Upaj Yojana” extended to exports of poultry and dairy products Duty free credit certificates in split form permitted making utilization easier. Duty free import of specialized inputs/chemicals and flavoring oils as per a defined list shall be allowed to the extent of 1% of FOB value of exports of preceding financial year Duty free imports of Gems & Jewelry samples enhanced to 3 lac from 1 lakh in a F.Y. or 0.25% of average of last 3 year export turnover of Gems and Jewelry item whichever is lower. Exporters of plain/studded/precious metal jewelry will be allowed to import plain/studded/precious metal jewelry for the purpose of exports

12. SURVEILLANCE 1 This supplement is primarily directed towards relaxing conditions of earlier schemes and to iron out jagged procedures exporters and importers were encountering with bureaucracy. Abolishment of cess on export of commodities will be real booster for agri exporters in particular. Much awaited substitute to DEPB scheme has been kept in abeyance, possibly for another 6 to 12 months. This again will be a great soother to trade. Eventually, considering international trade commitments, direct subsidies at the least needs neutralization. Nevertheless, ministry has done a good job to grant further time to trade to gear up for exporting goods and services with their efficiencies rather than making subsidy as only pedestal.

13. SURVEILLANCE 2 Ministry’s commitment to resolving all outstanding problems and disputes pertaining to the past policy periods as regards condoning delays, regularizing breaches in bonafide cases, resolving entitlements disputes, granting extensions for utilization of licences etc. needs to be applauded. This move has been successful and trade has been benefited largely.

14. SURVEILLANCE 3 Initiatives to create structure in order to combat contradicting trade stand of developed economies are still not visible. Developed Economies are freely using Non Tariff barriers and taking shelter under Sanitary and Phytosanitary regulations to restrict free trade to their advantage. Tariffs and Quotas may be of little consequence in coming time. Resisting and structuring to fight against economic war guns viz., NTBs and SPS of developed economies is the greatest challenge which Indian traders are going to face in future. Partnering with trade associations, industry and specialized professionals to create skeleton for catering above in time will be decisive for positive balance of trade on revenue account.

15. SURVEILLANCE 4 Last but not the least issue of another prime importance is significance of PTAs and RTAs on Indian economy. Trade is baffled on agreement with Sri Lanka and Nepal in particular. In many sectors, these agreements instead of benefiting Indian economy is rather proving detrimental. Though RTAs and PTAs should benefit Indian foreign trade economy, however, considering negative in quite a few sectors, its time Ministry conduct appraisal on impact of these agreements at brisk pace before couple industries fall into sector of beyond recovery.

16. Thank You Deoki Nandan Muchhal