MUMBAI (ICIS)--India ‘rules of origin’ norms, which are expected to come into force on 21 September, will help reduce the dumping of goods and stop imports of low quality products, a government official said on Tuesday.
The Department of Revenue under the Ministry of Finance issued the notification on the new provisions on 21 August.
The new norms are expected to check low quality imports and to prevent the dumping of goods by a third country by routing them through one of India’s free trade agreement (FTA) partner countries.
These rules “will apply to imports of goods into India where the importer makes a claim of preferential rate of duty in terms of a trade agreement,” as per the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020.
Countries that have trade pacts with India get the benefit of lesser or zero trade barriers, as well as a concessional tariff regime. Some countries, which do not have trade pacts with India, try to take advantage of these benefits by routing their products through India’s partner countries.
The ‘rules of origin’ provisions prescribe the minimal processing that should happen in the partner country so that the final manufactured product may be termed as originating from that particular country.
As per the new provision, a country which has an FTA with India cannot dump goods from a third country into the Indian market. It has to provide credible proof that it has made a value add to the product that is being exported to India.
Indian importers will have to produce certificates of origin to claim preferential rates of duty for the imported goods.
Customs officers can now ask for further details and documents to determine the origin of imported goods and whether the imports are eligible to avail the concessional duty.
For import of goods produced in a partner country, officers may demand documents substantiating the manufacturing or production process.
Concerned officers can deny the claim to preferential rates in case the certificate of origin is incomplete or has any alterations that have not been officially authenticated.
Claims can also be denied if the validity of the certificate of origin has expired.
Indian customs authorities have been authorised to directly request data from their foreign counterparts in case their doubts are not cleared at the local level.
Benefits can also be denied if the customs officers feel that the documents produced by an importer do not satisfactorily meet the prescribed origin criteria.
“These rules will help businesses in India and abroad to know the exact procedures that will be used for evaluating the preferential rate of duty under trade agreements and the process for verification of certificate of origin,” the government official said.
Importers will now find it difficult to avail preferential rates if the goods are not imported from India’s partner countries, he added.
India has FTAs with more than 30 countries including Japan, South Korea and Singapore, and is in the process of negotiating trade agreements with the USA, Australia, Switzerland, Norway and Iceland among others.
Friday, September 11, 2020
India to implement ‘rules of origin’ norms for imports from 21 September
Food ministry seeks Rs 5,600 crore to pay export subsidy dues of sugar mills.
New Delhi: The food ministry has sought Rs 5,600 crore to clear export subsidy dues of sugar mills. The government gives a subsidy of Rs 10,448 for the export of every tonne of sugar.
Exports in the current season are estimated to be 5.7 million tonnes, but officials said very little subsidy has been paid out so far.
“So far subsidy of only Rs 600 crore has been disbursed. We need Rs 5,600 crore more to clear dues. The money will help millers clear can arrears to farmers which have been mounted to around Rs 16,000 crore,” said a senior food ministry official.
He said that the ministry would need additional Rs 2,500 crore to settle buffer stock subsidy and interest subvention on soft loans given to millers.
“The government reimburses sugar mills Rs 1,674 crore for carrying buffer stock of 4 million tonnes. The government also provides soft loans to the extent of Rs. 7,900-10,540 crore to the sugar industry where in it (government) bears the interest subvention cost at 7-10% to the extent of Rs. 553 crore to Rs 1,054 crore for one year,” the official said.
He said that the ministry is likely to propose for providing the export subsidy to millers in the next season also as the export has risen by over 50% from last year due to this financial support.
“It is still under deliberation. The policy and subsidy amount is yet to be finalised,” the official said.
The government expects the production of sugar to be around 32.5 million tonnes in the next season (October 2020-September 2021) as against the annual domestic demand of 26 million tonnes.
There will be surplus of 6-6.5 million tonnes and we expect a carryover stock of another 1 million tonnes. Even if we divert 2 million tonnes to ethanol production, there will be need for exports aggressively,” he said.
India rice prices hit 18-month peak as coronavirus strains export logistics
Rice export prices in top hub India rose to their highest in nearly 18 months this week as supplies remained constrained due to pandemic-induced disruptions, while Bangladesh may have to import the staple after natural calamities damaged crops.
India's 5 percent broken parboiled rice prices climbed to $387-$394 per tonne from last week's $384-$390.
With the top exporter now behind only the United States in the tally of COVID-19 cases, exporters have been grappling with limited availability of containers and mill workers at its biggest rice handling port of Kakinada on the east coast.
"Coronavirus outbreak has affected rice milling in Andhra Pradesh and loading operations at Kakinada. Limited supplies are available for exports though demand is robust," said a Kakinada-based exporter.
In neighboring Bangladesh, domestic prices have risen up to 20 percent over a month amid fears of a production shortfall.
Excessive rainfall in March-April, cyclone Amphan in May and three spells of floods in June-July damaged most crops, of which 70 percent was paddy, according to agricultural ministry officials.
Bangladesh needs to start importing rice without any delay, sources familiar with the matter said.
In Vietnam too, low domestic supplies pushed prices for 5 percent broken rice to $490-$495 a tonne on Thursday from $490 last week.
"Domestic supplies are very low at the moment, while some exporters continue to fulfill their contracts signed earlier with customers from Malaysia, Timor-Leste and Africa," a trader in the Mekong Delta province of Tien Giang said.
Traders expect prices to come down in the coming weeks ahead of the autumn-winter harvest. Adding to demand woes, another trader said the Philippines could suspend rice purchases at least until November to support domestic prices of an ongoing harvest there.
In Thailand, benchmark 5 percent broken rice prices eased to $487-510 per tonne on Thursday from $500-$513 last week amid muted demand.
India’s defence exports increase by 700% in two years, ranks 19th among world’s defence exporters
The central government under Prime Minister Narendra Modi has had the long-standing ambition of making India one of the leading exporter of defence equipment and as per latest information, the Centre has indeed lived up to its promise on that front.
Chief of Defence Staff General Bipin Rawat on Wednesday said that India is currently ranked 19th in the list of top defence exporters in the world, as of 2019 data.
“We witnessed a staggering 700% growth in defence exports from Rs 1521 crores in 2016-17 to Rs 10,745 crores in 2018-19…an all-time high ranking of 19th in the list of defence exporters in 2019,” CDS Rawat said during an e-symposium on 'Catalysing Defence Exports' via video conferencing.
In order to boost PM Modi’s clarion call for ‘Atmanirbhar Bharat’, the Union Ministry of Defence in August formulated a draft Defence Production and Export Promotion Policy 2020 as an overarching guiding document to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.
“The policy aims to achieve a turnover of Rs 1,75,000 crores, including export of Rs 35,000 crores, in aerospace and defence goods and services by 2025,” the Defence Ministry said in a statement on August 3.
Defence Minister Rajnath Singh had in August announced a major policy decision about the imposition of a phase-wise ban on the import of 101 military weapons systems and platforms in order to promote the domestic defence industry.
“We cannot depend on foreign governments, foreign suppliers and foreign defence products to meet our defence needs. It is not compatible with the objectives and feelings of a strong and ‘Atmanirbhar Bharat’,” he had said back then.
Wednesday, September 9, 2020
India’s global auto components trade likely to grow 5% by 2026: McKinsey
To grow trade, India could benefit from a targeted exports expansion and imports substitution programme, stated a news report by McKinsey on Indian auto component industry. For exports expansion, India has to learn from countries that are major exporters of auto components.
5% by 2026: McKinsey
To grow trade, India could benefit from a targeted exports expansion and imports substitution programme, stated a news report by McKinsey on Indian auto component industry. For exports expansion, India has to learn from countries that are major exporters of auto components.
India has the scope to expand its share in the global auto components trade to 4%-5% by 2026, riding on exports growth and the import substitution initiatives being taken by the industry in the wake of Covid-19-triggered supply chain disruptions as well as the Centre’s ‘Atmanirbar’ programme. As the supply chains shift, India will be in a position to increase its share in the global auto components trade. The country contributes only a small percentage of the total imports to its biggest buyers – 2.2% in the US, 1% in Europe and 0.6% in China. To grow trade, India could benefit from a targeted exports expansion and imports substitution programme, stated a news report by McKinsey on Indian auto component industry. For exports expansion, India has to learn from countries that are major exporters of auto components. Germany, for example, has a 15% share in the global exports market for auto components. China’s share is at 11% with Japan and Korea following at 7% and 6%, respectively, the report said.
While these countries also have a trade surplus in auto components, they achieved this market position due to advantages such as the presence of large original equipment manufacturers (OEMs) in the domestic market, greater ease of doing business, a significant spend on research and development – between 2% and 5% of GDP- and their top-25 rank in infrastructure. McKinsey said India could pursue higher exports in product categories where the country has a competitive edge, such as shafts, bearing and fasteners. At the same time, component manufacturers can continue to broaden their global export presence by building capabilities for high-value products such as gear-box parts, heating, ventilation and air-conditioning (HVAC) products.
The report said an analysis of the value that automotive parts add to India’s import bill while also featuring as major exports indicates scope to localise and substitute imports of up to $12 billion. One option is to be more focussed on manufacturing high-value parts such as engine and engine components, engine electricals, fuel systems and exhaust parts and gear box parts. India could also ramp up capabilities through recent innovations such as those made to match BS-VI standards that could help replace those imports with components made in the country. Possible collaborations with global suppliers, who are relocating manufacturing operations to India, could further reinforce these efforts and help build new capabilities, it said.
The after-market could be a growth engine during lockdown, with micro-market clusters driving the bulk of demand. India has 19,500 micro-markets, serving close to 30 million passenger cars and, of these, around 1,275 micro-markets (7%) contribute to half of all demand, the report said. Collaboration with non-automotive sectors is likely to unlock product opportunities for parts such as bearings, motors, engines and turbines, among others. In some cases the product or process capability overlap between auto and non-auto parts is more than 50%. A granular approach across 20 categories could help save 15% to 25% of hidden costs, it added.
Government asks auto industry to cut imports, raise exports
Citing examples of existing auto hubs, such as Sanand, Manesar, and Hosur, Piyush Goyal said India must look at boosting its domestic capabilities and expand its global economic engagement.
Senior ministers of the Union government took Prime Minister Narendra Modi’s clarion call of Atmanirbhar Bharat forward and urged automakers to reduce their dependence on imports, increase exports, and make India a global manufacturing hub for automobiles and auto components.
“I request the auto industry to not depend on imports, develop import substitutes, and expand its export business. The government will support you in increasing production and boosting employment potential,” said Nitin Gadkari, the Union minister for road transport and highways, and micro, small and medium enterprises.
Minister of railways, and commerce and industry Piyush Goyal and minister of environment, forest and climate change Prakash Javadekar also urged the auto sector to boost local manufacturing at the annual conventions organized by the Society of Indian Automobile Manufacturers (Siam) and the Automotive Component Manufacturers Association of India (ACMA), held on 4-5 September.
This is also likely to boost the economy by creating enormous job opportunities at a time that the country is struggling to shake off the adverse effect of the lockdown imposed to check the spread of coronavirus.
Gadkari urged the industry to develop import substitutes and increase investment in research and development (R and D) and export volumes and said that the government will set up industrial clusters along the 12-lane, 1,400km Mumbai-Delhi expressway. “The expressway passes through the backward tribal areas of Haryana, Rajasthan, Gujarat, Madhya Pradesh, and Maharashtra. Land acquisition cost in these areas is low. The land rate in Gurugram or any big city is ₹2-2.5 crore per acre. I am willing to give you land in these areas for ₹10-15 lakh per acre. I request the auto industry to develop industrial clusters on the land parcels,” the road transport and highways minister said. Gadkari said his ministry will take the responsibility for connectivity to ports, railway stations and airports.
Citing examples of existing auto hubs, such as Sanand, Manesar, and Hosur, Goyal said India must look at boosting its domestic capabilities and expand its global economic engagement.
“The auto industry should reduce dependence on imports, specifically in areas such as steel, tyres, and electronic parts,” Goyal said.
Goyal said he has requested the industry to come up with a viable model for setting up semiconductor fabrication units, which will help increase production of electronic components.
“India needs to focus immediately on setting up fabrication facilities because that is the root of the entire electronics chain. The government is willing to extend support to set these up,” Goyal said. One or more large automakers may look at setting up such units, and even consider moving existing fabrication units from other countries to India, he said. “I think it should be driven by the private sector and the government setting up a fabrication unit is not a good idea.” Goyal said. The industry must aim to become a global manufacturing hub for sunrise sectors, including electric and autonomous vehicles.
The government is working with other countries to sort out tariff and non-tariff barriers, including a free trade agreement with the European Union for India to become a preferred supplier. “We are also considering a credit guarantee model to help exporters. Under the model they may get insurance of up to 90% of their export value. The scheme should be finalized soon,” Goyal said.
Gadkari and Goyal also hinted that the government is considering an increase in duties on import of auto components. Javadekar said that the government was evaluating the possibility of reducing goods and services tax for two- and three-wheelers to revive local demand, while Gadkari said that the much awaited vehicle scrappage policy is in its final stages of approval and will be rolled out within a month.
Illegal cashew kernel imports a big worry
The Cashew Export Promotion Council of India (CEPCI) has raised serious concerns over rising illegal import of cashew kernels, saying this has hit the crisis-ridden domestic industry.
CEPCI pointed out that large scale imports of low-quality, plain cashew kernels from competing countries such as Vietnam, Mozambique and Ivory Coast have led to closure of several cashew factories that provides gainful employment to more than 10 lakh workers, majority of them are women.
According to R.K.Bhoodes, Chairman, CEPCI, plain cashew kernels that falls under chapter 8 of the customs tariff is levied a basic customs duty of 45 per cent. Also, the minimum import prices of ₹288/kg for broken grades and ₹400/kg for whole cashew are fixed and 45 per cent of the same is levied as the basic customs duty for imports .
However, roasted cashew kernels and further value-added cashew products which comes under chapter 20 of the customs tariff under various Free Trade Agreements have been fully exempted from payment of basic customs duty. Misusing these provisions, he pointed out, several importers ship large volumes of plain cashew kernels (mostly brokens), which are inferior in quality vis-a-vis Indian products. Since these countries do not have a domestic market, they sell it in the Indian market at throw-away prices.
As such low-quality and low-priced broken kernels are dumped in the domestic market evading customs duty, genuine processors are finding difficulties in selling their products. This has not only impacted prices in the domestic market but making domestic processing unviable as well.
Further, re-exporting of low-quality whole kernels of other countries with Indian label has tarnished the brand of Indian kernels. Exports of imported unpeeled cashew kernels can also avail of 5 per cent export incentive as applicable to fully processed cashew in India. “This is a big blow to the efforts of the CEPCI to promote Indian cashew as a brand,” Bhoodes said.
CEPCI also demanded that the import of cashew kernels (including the 12 categories of mis-declarations) should be subject to 100 per cent inspection by the Customs for sampling and testing. Fraudulent importers should be blacklisted and Cofeposa should be invoked against repeated importers.
India's sugar exports surge 50% to a record level of 5.7 million tonne this month.
New Delhi: India’s sugar exports will rise 50% to a record of over 5.7 million tonnes in the season ending this month, helped by the depreciated rupee, subsidy and lower output from rival suppliers.
The government expects the robust performance to continue in the next season also.
“We have contracted 5.7 million tonnes out of which 5.5 million tonnes have been already dispatched from mills. We expect contracts of further 5-6 lakh tonnes before the season ends,” said Subodh Kumar Singh, joint secretary, food ministry. India had a target to export 6 million tonnes.
He said that the record export has been possible due to better coordination between ministry, millers and transporters during Covid-19 pandemic.
“Export shot up due to sustained demand at global market,” Singh said.
The highest sugar export before this was in 2007-08 when India shipped 4.9 million tonnes.
Singh said sugar export was likely to be in the same range in the next season also.
“We expect production of 32.5 million tonnes of sugar next season (October 2020-September 2021) with surplus of 6-6.5 million tonnes. The carryover stock of 1 million tonnes will further raise need for exports,” he said.
The government’s decision to extend subsidy of Rs 6,268 crore for export of 6 million tonnes sugar also encouraged mills to ship excess sugar.
Exports have risen due to opening up of Indonesian market for the first time and Malaysian market after long time. The traditional markets like East Africa, Bangladesh and Middle East also reacted positively during Covid pandemic.
“Due to drastic drop of sugar output in Thailand owing to drought, Indonesia and Malaysia which are primarily served by Thailand, had to import sugar from India. Apart from that, Iran also imported sugar in large quantities. Iranian and Indonesian imports together comprise 1.2 million tonnes while Malaysia imported sweetener in small quantity,” said Abinash Verma, director general, ISMA, an industry body.
He said that the global price of imported sugar ranged between Rs 19-23 per kg ex mill making imports viable.
“Rupee deprecation also helped the cause. Now, India has been able to instil trust among global importers that the country can consistently import 5-6 million tonnes without putting pressure on prices,” Verma said.
Exports, imports are showing positive trends: Piyush Goyal
NEW DELHI: The country's exports as well as imports are showing positive trends as the outbound shipments are approaching the last year's levels, after making a sharp dip in April this year due to the COVID-19 pandemic, commerce and industry minister Piyush Goyal has said.
The minister said this during his meeting with various export promotion councils (EPCs) on September 3. The meeting was held to discuss the issues concerning the country's global trade, ground-level situation, and problems being faced by the exporters.
On imports, Goyal said that inbound shipments of capital goods have not declined, and the reduction has been seen mainly in crude, gold and fertilisers. He added that the trade deficit is reducing drastically and India's share in the global trade is improving due to resilient supply chains. He also said the ministry is trying to generate more reliable and better trade data so that the nation can do better planning and frame policies accordingly.
"The country's exports as well as imports are showing positive trends. The exports are approaching the last year's levels, after making a sharp dip in April this year due to the pandemic," an official statement said on Friday quoting the minister.
Further, Goyal said 24 focus manufacturing sectors have been identified that have the potential to expand, scale up operations, improve quality, and lead enhancement of Indian share in global trade and value chain. These sectors have capacity to do import substitution and push exports. On the issue of recent changes in the Merchandise Export from India Scheme (MEIS), the minister said that the capping of Rs 2 crore will not affect 98 per cent of the exporters who claim benefit under the scheme.
The government has already announced the Remission of Duties or Taxes on Export Products (RoDTEP) scheme for exporters to replace MEIS. This new scheme would reimburse the embedded taxes and duties already incurred by exporters. He said that special economic zone (SEZ) issues are being taken up with the finance ministry.
In a separate statement, export promotion council for SEZs and export-oriented units (EOU) said it raised matters such as resolution of incentives under the SEIS (Service Exports from India Scheme) for the exports made during 2019-20 and this financial year.
"In order to boost domestic manufacturing and check imports, there should be exemption from five per cent health cess on medical devices manufactured in SEZ/EOU units and supplied to the domestic market," it said.
Contracting for the fifth straight month, India's exports slipped 10.21 per cent to $23.64 billion in July, on account of decline in the shipments of petroleum, leather and gems and jewellery items.
Auto component firms eye higher exports, low imports to become self-reliant
Auto component makers are looking to shore up exports and cut down on imports as they seek to reduce vulnerability to currency swings and become self-reliant.
Top executives at various auto component firms said exports, which have been intrinsic to the overall strategy, will likely increase at a rapid pace over 2-5 years. These firms, however, will continue to import high volume, low-value parts, as making them in India is financially unviable given higher logistics and power costs.
F R Singhvi, joint managing director at Bengaluru-based Sansera Engineering, said his firm a manufacturer and supplier of critical engine parts, is looking to increase the share of exports in its revenue to a third by FY22, from the current 28 per cent.
“Being atmanirbhar means higher exports and less imports. You cannot make everything in India as it’s not viable,” said Singhvi. High volume, low-value parts — which can be sourced from countries like China at a cost which is significantly less than in India — will always be imported as India cannot match the scale and costs of that country, he pointed out, citing an example of alloy wheels, which are imported by automakers in large numbers.
“We would rather focus on developing know-how of local production of technology-intensive parts that are in high demand in both domestic and global markets,” said Singhvi.
The plans to accelerate local procurement and boost exports come amid Prime Minister Narendra Modi's clarion call for Atmanirbhar Bharat. It is also being fuelled by the geopolitical tensions with China, which has been one of the key sources for imports for manufacturers across several sectors.
India’s auto component industry imported parts worth Rs 1.09 trillion in FY20, against Rs 1.23 trillion a year ago. It constituted 31.2 per cent of the turnover, according to Auto Component Manufacturers Association (Acma). Exports for the same period stood at Rs 1.02 trillion, against Rs 1.06 trillion a year ago, accounting for 29.4 per cent of the turnover.
Ashok Taneja, president and MD at Shriram Pistons and Rings, says the company has been working towards becoming self-reliant for a while now.
At the crux of the strategy is to become a “globally competitive supplier and a supplier of choice for the OEMs (original equipment manufacturers) globally.” His firm that currently gets a fourth of its revenue from exports is looking at increasing it to 30 per cent in the next three years.
Shriram Pistons and Rings, he said, has been working towards achieving sustainable cost competitiveness. A sharper focus on R and D, design, development, and testing has helped the firm generate intellectual property rights (IPR).
India may expand its share in the global auto component trade to 4-5 per cent by 2026, emphasising a targeted export expansion and import substitution programme for key components, McKinsey said.
