New FTP sets $ 200 billion export target

NEW DELHI: Exporters, especially those from labour-intensive sectors such as textiles, gems & jewellery, marine, handloom and leather, have

been handed yet another basket of incentives to increase their competitiveness in the shrinking world market.

The foreign trade policy (FTP), announced by commerce and industry minister Anand Sharma on Thursday, seeks to help exporters establish a stronger foothold in existing markets, make inroads into new markets, upgrade technology through cheaper imports of capital goods, and reduce transaction costs and time through e-filing and lowering of application fees.

The policy—which has set a export target of $200 billion for 2010-11 and talks about doubling exports by 2014—also attempted to build a more stable policy environment by extending a number of existing schemes, including the popular import duty reimbursement (DEPB) scheme and enhanced export credit guarantee cover (ECGC), till the end of the fiscal and beyond.

The incentive package, which follows a number of sops already given in the Union Budget announced earlier this year, however, did not manage to please all. While some exporters contacted by ET welcomed the sops, others felt that the incentives were too little and limited to help make much of a difference on the global front.

“Given the limited incentives provided in the package, it will be very difficult to meet the existing export target of $168 billion. The government should have given more support,” said Rakesh Shah from the engineering export promotion council (EEPC).

Delhi Exporters Association president SP Agarwal said the policy does not live up to exporters’ expectations and will not contribute to stemming the fall in exports. “We have been told time and again that exporters will not have to export taxes. However, nothing was announced in this policy to address issues such as reimbursement of input taxes charged by states and also refund of VAT,” Mr Agarwal said.

Fieo, the umbrella body representing a number of export organisations was, however, more appreciative. “The new policy rightly puts emphasis on market diversification as our traditional exports have been hit badly due to concentration in the US and EU regions. The introduction of zero-duty capital goods scheme will add to expansion and modernisation of the production base,“ Fieo president A Sakthivel said.

Falling in step with competing countries like China, Bangladesh and Pakistan that have recently increased export incentives, the FTP provides higher support for market and product diversification by increasing incentives under focus market and focus product schemes—two independent schemes giving direct incentives to export of select products and to select countries.

The focus market scheme has been extended to 26 new markets, which includes 16 in Latin America and 10 in Asia-Oceania. The government also introduced a new market-linked focus product scheme where incentives will be given to export of select items to 13 identified markets like Egypt, Kenya, Nigeria, South Africa, Tanzania, Australia and New Zealand.

The policy also sought to ensure that dollar credit needs of exporters are met in a timely manner by setting up a committee, including finance secretary, commerce secretary and the Indian Banks Association (IBA) to monitor credit flow.

To help the industry upgrade technology, the policy introduced a scheme for importing capital goods at zero duty for identified sectors like engineering, chemicals, electronic products, pharmaceuticals, textiles, handicrafts, plastics and leather and leather products, subject to an obligation to carry out specified amount of exports. The existing export promotion capital goods (EPCG) scheme allows import of machinery at 3% duty against an export obligation.

Status holding exporters—whose exports are over and above specified levels—will be allowed additional duty credit scrips for import of capital goods for personal use at lower import duties. The discount will be equivalent to 1% of the exports made in the previous year.

The government has also announced continuation of the DEPB scheme beyond December 31, 2009, to December 31, 2010, and the enhanced ECGC cover till March 2010. The extension will help exporters in taking pricing decisions over an extended period of time.

A number of specific sops have been extended to labour-intensive industries such as gems & jewellery, marine, leather and the handloom sectors, which have received the most severe battering due to the global economic crisis.

The FTP has also sought to reduce transaction costs (which account for 5%-7% of total value of exports) and time by introducing a time frame for complete electronic networking of various export related agencies and reducing fees for authorisations and licence applications.

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Drugmakers criticise Mashelkar committee's report

NEW DELHI: The commerce ministry’s decision to accept the Mashelkar committee’s revised report that recommends not to restrict patenting to new

drugs has come in for strong criticism from health activists and some generic drugmakers even as patent experts supported the move that’s in line with international norms.

Earlier this month, the ministry accepted the controversial report, first released in 2007 but withdrawn over allegations of plagiarism and technical flaws.

The conclusion of the study however remains the same, recommended that granting patents only to new drugs will be a violation of the TRIPS, or Agreement on Trade Related Aspects of Intellectual Property Rights, that sets minimum standards for intellectual property regulations under the World Trade Organisation (WTO).

The adoption of the Mashelkar committee report means that India will continue to allow patent on incremental innovation under Section 3(d) of the Indian Patent Act, if it provides enhanced therapeutic efficacy.

Health activists have been seeking a ban on this provision, saying multinational drugmakers use it to extend patents for drugs by making minor innovations and, thus, blocking competition from low-cost drugmakers. This process is known as evergreening of patents.

“The government’s move may restrict global supply of cheaper medi-cine,” said Leena Menghaney, India project manager of Medicine sans Frontiers, a global social organization lobbying for easier access to es-sential medicine, as multinationals will use evergreening to extend their market exclusivity by decades. “India should progressively move towards stricter patent law to ensure that only a completely new drug is granted patent, which is possible under TRIPS,” she added.

“The commerce ministry has accepted the recommendations of the Mashelkar Committee without any debate or discussion with the domestic industry,” said B K Keayla of National Working Group on Patent Laws.

The Mashelkar committee was set up mainly to examine whether it would violate provisions of TRIPS if India restricted the grant of patents to only new chemical entities (NCEs).

But, Shamnad Basher, professor of intellectual property law at the National University of Juridical Sciences (Kolkata), supported the committee’s view. “Limiting patents only to new drugs would violate Article 27 of TRIPS, which mandates that patents shall be granted without discrimination to all inventions in all fields of technology,” he said.

It’s a major setback for the industry, said Amar Lulla, joint managing director of generic drugmaker Cipla, which is challenging the most number of patents in India.

If patents were to be granted only for new drugs, it would have fur-ther squeezed the scope of getting patents under the country’s laws, which is already one of the strictest in the world.

Another Delhi-based patent lawyer Pratibha Singh says the actual impact will be clearer if the government brings any amendment in the existing laws.

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Asean FTA can be reviewed to protect farm interest: Antony

NEW DELHI: With Congress’ rivals stepping up attack on the government for signing free trade agreement (FTA) with Association of South East Asian

Nations (Asean), defence minister AK Antony on Tuesday promised to take corrective measures to insulate the agricultural sector.

“If there are shortcomings in the agreement, the group of ministers will recommend corrective measures,” reports from Kochi quoting the minister said.

The Cabinet sub-group, set up to study the impact of the FTA on the agricultural sector, is headed by finance minister Pranab Mukherjee and includes overseas Indian affairs minister Vayalar Ravi and Mr Antony. “This committee will hold talks with the state government and all other parties concerned,” Mr Antony said. “By 2020, we would be able to overcome all shortcomings with the proposed government help,” he added.

There was stiff resistance in the Cabinet over signing the treaty and Mr Antony himself had advocated caution. This opposition had prompted the prime minister to constitute a GoM.

Congress’ opponents have been using the issue to question the government’s commitment to farmers. “The Congress-led UPA has let down the people of this country and, more importantly, the farmers, who are the backbone of our economy, by signing the FTA. It will allow zero duty imports of items from January 1 next year into the country. Within the next four years 70% of imports from Asean will be without import duties and they will account for over 50% of India’s annual import bill. The farmers will be the key sufferers since the Asean countries have a comparative advantage in producing farm crops such as rice, palm oil and other plantation products,” Samajwadi Party general secretary Amar Singh said in a letter to the prime minister.

The SP leader also said the FTA would only make matters worse for the Indian farmer. “Indian exports are contracting (growing by minus 50%) at the moment. Global markets are disappearing. At the same time, India’s domestic demand is doing very well and is therefore bound to be a target of cheap imports. A commerce ministry note has warned that the increased market access for India will be 20% while it will be 75% for Asean. Clearly, the deal is loaded against India,” Mr Singh said. The SP leader said the prime minister or the government have not bothered to take Parliament into confidence.

“This is despite the fact that several Congress ministers raised objections in the Cabinet meeting called to approve the deal. The prime minister has failed the nation yet again by showing that the rest of the world is more important than India, and this deal was signed just 8 days before India’s 63rd Independence Day,” Mr Singh wrote in his letter to the prime minister.

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Foreign Trade Policy will be announced on August 27

The five-year Foreign Trade Policy (FTP), to be unveiled on August 27, is expected to give incentives to Indian exporters to widen their global markets beyond the US, EU and Japan in the face of the economic crisis in these key destinations.

Commerce and Industry Minister Anand Sharma, who apprised Finance Minister Pranab Mukherjee today about the difficulties being faced by exporters, said: “We will surely look at market expansion because if the diversion and expansion of market is not there, we will not be able to respond to this challenge.”

Talking to reporters after his meeting with Mukherjee, Sharma said the government could extend support but would not be in a position to generate demand in the western economies, which are contracting.

India’s exports are on a downslide since October 2008 and the average contraction has been around 30 per cent over the past nine months. The country’s exports were about $169 billion in fiscal 2008-09.

Sharma indicated that the policy, which outlines the priority sectors as also the sops, would be focused on employment-generating areas like textiles, leather, gems and jewellery, and handicrafts.

These sectors are having a torrid time over the past nine months, as their demand dried significantly in the US and the EU.

Sharma said the policy would ensure that the exporting sectors not only sustain themselves in these difficult times, but also expand into new geographies. It will also ensure that “labour-intensive (sectors) are given special consideration”, he said.

This will be the UPA government’s first FTP in its second term. Earlier, there was uncertainty whether the policy should be long-term or for a single year. However, it will set a five-year road map for exporters.

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Russia lifts ban on Indian seafood imports

The Russian government has allowed 46 Indian seafood companies to re-start their exports to the country in lieu with the signing of a protocol between India and Russia. Chairperson of Marine Products Export Development Authority (MPEDA) had recently visited Russia and sorted out the various issues pertaining to exports to that country.

Russia had banned import from India during June this year, and later lifted the ban due to the initiatives made by the chairperson of MPEDA.

In order to enhance import from India a delegation from Russia had visited India in December last year. Russia had insisted to sign a protocol for doing business with India, which did not happen and hence the ban was imposed.

Exports to Russia had grown by 110 per cent in 2008-09. Total exports were 4,500 tonnes valued at Rs 35 crore in 2007-08 and this went up to 9,400 tonnes valued at Rs 115 crore in 2008-09. All the 46 companies had been exporting to Russia for the last two years.

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India refuses re-export provision Nepal may not sign treaty

KATHMANDU, Aug 17: Nepal could defer signing of the Treaty to Control Unauthorized Trade, which was scheduled during the Nepal's Prime Minister´s upcoming visit to India, after New Delhi declined Nepal´s request to recognize re-export of third country goods through the authorized agents in Nepal.

A high-level government source said if the two countries fail to iron out the differences over the treaty, it would adversely affect the renewal of the Nepal-India Trade Treaty.

Nepal has already agreed with India to allow the entry of third country goods imported from international agents based in India. "We want the provision in the renewed treaty to be reciprocal. We are still busy in negotiations through diplomatic channels," said the source in Nepal, but added that there was stiff resistance from India in this regard.

Previously, the two sides had agreed that the provision would be reciprocal. However, the problem surfaced after New Delhi pointed out the possibility of trans-shipment of goods to its territory from Nepal even if there were no official agents in Nepal.

Despite the latest problem, India has agreed to Nepal´s request to allow temporary re-export of machinery tools to India for repair and maintenance. This facility was absent in the previous bilateral treaties.

Bilateral trade treaty, which the two governments will update during the prime minister´s upcoming visit, is widely expected to boost Nepal´s export to India as it categorically binds India not to impose state duty and non-tariff barriers on Nepali goods. The proposed revised treaty will remain valid for the next seven years.

Imposition of non-tariff and extra-customs duties, which debilitated Nepal´s competitiveness, has badly been affecting Nepal on the exports front. Sharp rise in consumption, on the other hand, has caused its trade deficit to widen to more than Rs 108 billion.

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India gives away more market access to Asean

NEW DELHI: Indian negotiators who had tried to bargain a good deal with 10-member regional grouping Asean for the last six years finally gave away much more additional market access than their counterparts from the Asian regional trading bloc.

Though India’s and Asean’s offer to each other’s imports is similar at around 96% under the recently signed free trade agreement (FTA), India has actually given much more additional market access than what it got in return.

As about 75% of the Indian goods entering the Asean countries currently attract zero duties, the effective additional market access that India has secured out of the FTA with Asean is mere 21% of its export. In return, India has agreed to provide additional market access of about 75% imports from Asean bloc.

Though, no official in the ministry of commerce and industry, which spearheaded the talks has come on record to admit poor negotiation skills by the Indian team, officials in the ministry agreed in private that it could have been a far better deal.

Whereas both parties agreed to keep 489 items each out of the scope of tariff cuts, Indian negotiators agreed for one consolidated negative list of 489 items for all Asean countries put together, which means India has about 50 items in its negative list for each Asean country. In return, India conceded each individual Asean country to prepare a separate negative list of 489 items each according to each country’s sensitivity to Indian imports, the analysis has found.

According to the agreement, which will be implemented from January 1, 2010, duties will be eliminated on about 3,200 products by December 2013. For the rest 800 products, duty will be zero or near zero by December 2016.

As India has already signed the agreement for goods, without taking into account the services sector, its future power of negotiation on services sector is substantially reduced, an analyst working in a quasi-government organisation said.

“As Indian negotiators have agreed to allow zero duty imports on 80% of items from a large trading bloc like Asean, it will adversely impact India’s long stand on WTO against major duty reduction in agriculture and non-agricultural market access, or Nama sectors,” the analyst said in the condition of anonymity.

Whereas Kerala politicians including heavyweights from the ruling Congress initially opposed to the India-Asean trade pact as it would impact agriculture products from the state, the Left parties have now demanded a white paper on the impact of the pact, saying that it will adversely affect farmers and small industries.

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India, ASEAN sign free trade agreement

India and the Association of South East Asian Nations on Thursday signed a Free Trade Agreement, which took nearly six years to negotiate. The FTA, relating only to goods, was signed by Union Commerce and Industry Minister Anand Sharma and his ASEAN counterparts at a ceremony in Bangkok after the two sides held annual consultations.

The accord, India’s first with a trade bloc, will cover 11 countries with a combined Gross Domestic Product of over $2 trillion. The combined population is of the order of 1.6 billion.

Co-Chairperson of the ASEAN-India Trade Negotiating Committee, Rebecca, later told that nine members of the 10-nation regional trade bloc signed the pact. Vietnam would do so after its formal recognition by India as a “market economy.”

India and Vietnam, according to Dr. Rebecca, had already agreed to sign a memorandum of understanding on this issue.

The implementation of the FTA would, therefore, take off from January 1 next year, as now agreed upon, she emphasised.

The press statement said the mutually agreed tariff liberalisation would “gradually” cover 75 per cent of the two-way trade, beginning from January 2010. India-ASEAN trade was of the order of $40 billion in the 2007-08 accounting year. The regional bloc was now India’s fourth largest trading partner.

Dr. Rebecca said the ASEAN would now seek a “fast-track” approach for talks with India for a “single” follow-up accord on liberalising the two-way flow of services and investments. The “hope” was to finalise the deal in about a year’s time. The ASEAN’s expectation was that the agreed tariff cuts under the FTA, as now signed, would be fully implemented by the end of 2013 and 2016 in respect of two “normal tracks.” A timeline had also been agreed upon for the “sensitive list” of items, she said.

Under the trade pact, India has included 489 items from agriculture, textiles and chemicals in the negative list, meaning these products will be kept out of the duty reduction.

Addressing concerns of domestic planters, black tea, coffee, pepper and rubber have been included in the sensitive list, which could mean duties will be cut by 2019 only. However, duty on these items at no time will be eliminated. Farmers in South India, especially Kerala, fear lower duty on plantation crops like coffee and pepper would lead to a deluge of imports from ASEAN members like Indonesia, Malaysia, which could leave domestic farmers vulnerable to competition.

Mr. Sharma had said on Wednesday that the agreement was well balanced and was in harmony with India’s Look East Policy. “I can say negotiations have been painstaking. The negotiators have ensured that our sensitive areas where we had concerns are fully addressed,” Mr. Sharma had said.

He had also said the whole debate of the CECA adversely impacting domestic planters was based on “uninformed” speculations.

The bulk of trade between the two regions include textiles, steel, processed food, plantation crops, iron and steel, ready-made garments and chemicals.

The Federation of Indian Chambers of Commerce and Industry (FICCI), which has accompanied Sharma, leading a business delegation, said that the agreement would provide access to the large ASEAN market to India.

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