Export Promotion

Export Promotion Schemes and Policies

Export promotion has received considerable attention in India only since the Third Five-Year Plan. The Indian export has suffered from various problems such as the non-availability of promotional facilities and financial assistance. The Indian export has faced many difficulties since independence. Export promotion schemes and policies provide promotional measures to boost India’s exports with the objective to minimise infrastructural inefficiencies and associated costs involved to provide exporters equal opportunities.

Table of Content

1 Export Promotion Schemes and Policies
2 Major Export Promotion Schemes and Policies

Some of the key schemes for export promotion are as follows:

Advanced Authorisation Scheme

It is a duty exemption scheme offered to exporters by the Government. It is provided through the Directorate General of Foreign Trade (DGFT). It is an incentive to facilitate duty free import of materials which are physically incorporated in an export product. Such goods imported are exempted from custom duty, anti-dumping duty, safeguard duty, etc.

Deemed Exports

Deemed exports pertain to the transactions in which goods manufactured in India are supplied of specified projects. In other words, goods supplied do not leave the country and the payments for such goods are made in India currency or convertible Forex, by the recipient of the goods. The objective of this scheme is to empower India’s domestic industry and to offer protection to indigenous suppliers.

Duty Free Import Authorisation

In this scheme duty is exempted for import of input materials such as fuel, oil, energy resources, catalyst which are essential for production of export products. Under Duty Free Import Authorisation, authorisation is given to allow duty free import of inputs.

EPCG (Export Promotion Capital Goods Scheme)

This scheme permits import of capital goods such as spares for pre-production, production and post production at zero duty. However, there is an export obligation equal to 6 times of duties, taxes and cess saved on capital goods. The export obligation to be fulfilled in 6 years from date of issue of authorisation.

Merchandise Export from India Scheme (MEIS)

It is a scheme developed with an aim to make India’s export products more competitive across the global markets such as Europe, America and Africa. Under this scheme, the government offers incentives to exporters to counterbalance infrastructural inefficacy and provide exporters with a level playing field. The incentives are provided in form of duty credit scrips to exporters. However, MEIS scheme is replaced by Remission of Duties and Taxes on Export Products (RoDTEP). It is a new scheme that is applicable with effect from January 1st, 2021. The aim of RoDTEP is to recoup the local duties/ taxes and duties paid by exporters such as coal cess, mandi tax, electricity duties and fuel used for transportation, etc., which are not yet rebated or refunded under any other prevailing scheme.

Service Exports from India Scheme (SEIS)

The aim of this scheme is to encourage and increase magnitude of export from India. Under SEIS, rewards are bestowed to the service exporters in the form of duty credit scrips used for making payment of duties. In order to be eligible for the scheme, service providers must have following minimum net free foreign exchange earnings in preceding fiscal year: of US $10,000 for individual service providers or sole proprietor, whereas US $15,000 for Company/limited Liability Partnership/Partnership Firm.

Export promotion schemes and policies are the set of programmes and practices aimed at directly or indirectly supporting export in a given country.

Export promotion benefits a nation in the following ways:

It offers the ability to achieve economies of scale when the domestic market is small.
It provides opportunities for growth and expansion. Export-oriented markets can counteract the effects of domestic recession.
It provides a nation the opportunity to earn foreign exchange. Export-based activities contribute to the economic development of a country.
It aids in the selling of surplus production. It helps to remedy the unfavourable balance of trade.

Export promotion policies focus on export assistance such as credit lines, licensing, free trade zones, quality control, and guidance to Indian entrepreneurs. In India, the government has established various organisations for servicing and promoting exports. These organisations focus on a group of products and work to promote the export of these products. There are various measures through which these organisations provide export assistance.

Some of these measures are as follows:

To offer incentives to motivate organisations to export
To arrange for participation in international exhibitions, hold Indian exhibitions overseas, establish overseas trade centres, and operate Indian stores abroad to create an international presence
To reduce bureaucratic hurdles in the import of raw materials and capital goods and the export of finished goods
To arrange for commercial publicity through various channels
To conduct market surveys, conduct research and publish reports on international trade
To oversee quality control of the products and services
To provide technical assistance and training in international trade
To assist in the development of new products for diversification and expansion of exports

Major Export Promotion Schemes and Policies

Export Oriented Units (EOUS)

Export oriented unit scheme was introduced vide Ministry of Commerce Resolution dated 31.12.1980 It was introduced as a complementary scheme to the Free Trade Zones/Export Processing Zone Scheme introduced in the sixties. The EOUs scheme aims to increase exports from India and, in doing so, enhances foreign exchange earnings and generates employment opportunities.

For example; TATA GLOBAL BEVERAGES LTD.(FORMERLY TATA TETLEY DIVISION) is one of the EOUs in Kerala. It belongs to the Agro and food sector.

An EOU has the following features:

No import licence is needed except for restricted items.
Duty-free procurement of capital goods, raw materials, consumables, etc. from the domestic market
CST refund on domestic purchases
Supplies from Domestic Tariff Area (DTA) to EOU are treated as deemed exports
100% FDI permitted
100% foreign exchange proceeds in the EEFC account permissible
Repatriation is possible for export proceeds within 12 months

The objectives of the EOU scheme are as follows:

It provides a conducive ecosystem for export units.
It offers several waivers and preferences in compliance and taxation matters to the units to provide smoother conditions for conducting business.
It promotes an inflow of foreign exchange to boost the economic position of the nation.
It strives to create employment opportunities in the export sector.
It helps to improve the flow of the supply chain from procurement of raw materials to the supply of finished products to the DTA.
It aims to encourage technological advancements and skill development.

The EOUs enjoy several incentives stated as follows:

They can procure raw materials and capital goods via domestic or foreign sources duty-free.
They can claim refunds on GST amounts paid.
They can claim refunds on duty paid on the purchase of fuel from domestic oil companies.
They can claim an input tax credit on goods and services.
They have the benefit of priority-basis clearance facilities.
They do not need the industrial licensing, which is required for manufacturing items reserved for the ssI sector.

EOUs do suffer from some limitations as:

Service tax exemption is not available, though CENVAT credit is allowed for service tax paid
The scheme has more documentation, lengthy procedures, inflexible rules and there is dearth of proper monitoring
The project must have a minimum investment of `Rs1 crore in plant and machinery, though there are certain exceptions to this criterion

Export Processing Zones (EPZS)

Export Processing Zones (EPZs) may be defined as ear marked geographical areas within a country’s national boundaries where the regulations and policies are differentiated from those outside the zone, with the aim of creating a policy environment and associated infrastructures that are exporter friendly, for both domestic and foreign producers.

Some of the Prominent Indian Export Processing Zones are:

Kandla Free Trade Zone (KAFTZ), Kandla, Gujarat
Santa Cruz Electronic Export Processing Zone (SEEPZ), S. Cruz, Maharashtra
Cochin Export Processing Zone (CEPZ), Cochin, Kerala

EPZs offer incentives and remove hindrances in the environment to encourage economic growth by attracting foreign investment for export-oriented production. This happens because the EPZ has some advantages, for example, natural resources, cheap-skilled labour, logistical advantages, etc. that can appeal to investors. EPZs are created to aid manufacturing companies that are exporting their entire production. Apart from the above, the government promotes investment in the EPZ by offering accelerated licenses or permits, minimal customs regulations, tax holidays, etc.

EPZs have the following objectives:

To nurture production and employment in export-oriented industries
To foreign exchange profitability of non-traditional exporting producer
To attract Foreign Direct Investment where exporting by local producers is inhibited
To expand the industrial base
To introduce new technology

The EPZ scheme has the following advantages:

EPZ scheme is instrumental in creating employment opportunities and offering better standard of living
EPZ units have the privilege to be waived off from duties on all goods that are imported for the purpose of project development and augmenting procedural efficiency
In India, EPZ units do not have any constraint on foreign ownership in developing the infrastructure

The following are certain limitations of implementing the EPZ in the host country:

There are significant initial development costs of creating the infrastructure for the EPZ
Tax incentives must be offered to attract foreign investment

Special Economic Zones (SEZS)

A Special Economic Zone (SEZ) is an earmarked area in a country that is subject to different economic regulations than other regions of that country. A SEZ is deemed to be outside the customs jurisdiction of the country and hence, a foreign territory for the purposes of trade operations and duties and tariffs.

The SEZ attracts much foreign investment and serve as a prime opportunity for the host nation to derive benefit from these zones. Most often, businesses operating in a SEZ have additional economic advantages such as tax incentives and the opportunity to pay lower tariffs.

Some examples of SEZs are:

BROOKE BOND REAL ESTATES PVT. LTD.
BIOCON SPECIAL ECONOMIC ZONE
COCHIN SPECIAL ECONOMIC ZONE

In other words, SEZ is a geographical region that has economic laws different from a country’s typical economic laws. Usually, the goal is to accelerate foreign investments. SEZs have been established in several countries such as China, India, Jordan, Poland, Kazakhstan, the Philippines, etc.

As far as India is concerned, currently there are eight functional SEZs located at Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida (Uttar Pradesh) in India. Further an SEZ in Indore (Madhya Pradesh) is now ready for operation.

In India, SEZs have the following objectives:

To boost exports of goods and services
To encourage investment from domestic and foreign sources To generate employment opportunities through industrial growth
To develop infrastructure facilities in the region
To ease and simplify compliance, development, operation, and maintenance procedures for setting up units and conducting business

There are several advantages of SEZ units in India as:

SEZ units bring in FDI and technology to the Indian economic system
SEZ unitsget100 % income tax exemption on export income for first five years and 50 %after 5 years
SEZ units are given exemption in electricity duty and tax on sale of electricity by certain states in India
SEZ units can claim exemption from GST on domestic sourcing of capital goods for project development
SEZ units are extended single window clearance for Central and State level approvals
SEZ units generate employment avenues for the citizens
SEZ units have no restrictions on foreign ownership in developing infrastructure

Despite the many advantages, SEZs do have the following disadvantages:

Tax holidays and exemptions cause loss of revenue for the government
In India, land grabbing can occur on the pretext of development
Apart from land grabbing, there is also a loss of agricultural and to make room for industries

Electronics Hardware Technology Parks (EHTPS)

The Electronic Hardware Technology Park Scheme (EHTPS) was introduced by the Ministry of Electronics and Information Technology, Government of India to motivate entrepreneurs to set up manufacturing units of electronic hardware equipment anywhere in India. The EHTPS aims to encourage entrepreneurs to export their entire production of electronics goods.

The EHTPS has the following objectives:

To encourage entrepreneurs to establish manufacturing units of the electronic hardware equipment in any part of India
To increase the production and export of electronics goods
To create more employment opportunities
To increase the nation’s revenue through capital investment from foreign investors
To provide approvals under the single window clearance system

Manufacturing units operating within the EHTPS can perform the following activities:

Produce any electronic hardware product for export
Produce both hardware and software in an integrated fashion for export
Perform R&D, maintenance, testing, and calibration services for products meant for export

The EHTPS has the following advantages:

The scheme supports foreign investment and provides a provision for 100% Foreign Equity investment to EHTP units
It also provides the benefit of duty-free procurement or import of capital goods, raw materials, and components from bonded warehouses in the Domestic Tariff Area (DTA)
Eligible entrepreneurs may claim the income tax exemption from the export profits
Entrepreneurs can claim the reimbursement of CST charges paid

Software Technology Park Scheme (STP)

The Software Technology Park Scheme (STP) is a 100% export-oriented scheme established by the Ministry of Electronics and Information Technology with the aim of encouraging software exports from India. The scheme integrates the concept of EOU and EPZ with the concept of Science or Technology Parks. It provides resources to the IT industry for carrying out the development and export of computer software and IT-enabled services in their entirety.

Some of the STPs in India are:

IoT OpenLab at Bengaluru
Electropreneur Park at Bhubaneswar
VARCoE at Bhubaneswar
FabLab at Bhubaneswar

Though, individual units are allowed to do business in the domestic market up to 50% of the exports. STPs can also give commercial training and also regulate the IT business through licensing. Under the scheme, IT industries are provided certain concession in duties, levies, and taxes. STPs offers consulting, training, and implementation services to the IT industry.

The following are some functions of the STPs:

To develop and manage the infrastructural resources such as integrated infrastructure including international communication, data center, incubation facilities, network operation centres, etc.
To perform various export promotional activities such as technology assessments, market analysis, market segmentation and also hold workshops, exhibitions, seminars, conferences, etc.
To foster quality and security standards across Information Technology centre
To work in collaboration with State authorities and act as an interface between Information Technology industry and Government
To promote secondary and tertiary locations by establishing STPI presence
To offer operational and maintenance assistance to various national and international organisations

The STP has the following objectives:

To encourage the development and export of software and IT-enabled services
To establish software technology parks at various locations
To provide data communication services including value-added services to the units
To establish and manage the infrastructural resources for export-oriented units
To perform export promotional activities such as technology assessments and market analysis as well as organise exhibitions and conferences
To work together with venture capitalists for providing financial assistance

The following are the advantages of STP:

STPs may be established anywhere in India
Any unit under the STP scheme can import the required infrastructure equipment duty-free
STP products have duty benefits under the Income Tax Act
100% foreign equity is permitted
Software technology parks boost regional and national economies
They facilitate business growth and expansion of IT companies due to their infrastructure and ample spaces
They provide access to various professional training resources
They have access to various modes of public transport
They are well-equipped with facilities such as broadband internet and the latest technology
Software parks are generally very secure against theft and vandalism

Free Trade Warehousing Zone

Free Trade Warehousing Zone is port/warehouse within the territory of India used for the purpose of tariff and trade. for storage and other value-added activities under the customs law. Free Trade Warehousing Zone is permitted to stock inventory on behalf of international suppliers or regional buyers. The objective of Free Trade Warehousing Zone is to facilitate the import and export of goods and services while streamlining trade transactions.

Some of the activities allowed under Free Trade Warehousing Zone are:

To store goods on behalf of foreign or domestic customers
To trade with or without labelling
To undertake task of packaging and replacing
To resale, re-invoice or reexport goods
To assemble entire or semi-knockdown goods