Since 1992, the Ministry of Commerce, Government of India, has been announcing medium-term

Export - Import (EXIM) Policy valid for a duration of five years. In the light of the developments in India’s exports and imports as well as other external developments, modifications, if any, are announced at the end of March every year. Accordingly, modifications of the EXIM Policy 1997-2002 were announced on March 31, 1999.

The changes effected through the recent modifications in EXIM Policy can be classified into three

broad groups which, however, are not necessarily mutually exclusive:

(a)

Procedural Changes

The recent modifications have signalled significant advances towards improving procedures

associated with India’s foreign trade. The emphasis has been to move towards a trust-based regime as opposed to a highly administered regime for compliance of EXIM norms. Major areas where such measures have been initiated include the following :

1.

On a pilot basis, filling up of electronic form for issuing advance licence is being started in Delhi.

2.

All administered controls on export samples marked "not for sale" have been removed. Ceilings on export of samples in other cases as well as import of samples has been substantially relaxed.

3.

Import of new capital goods under lease finance would no longer need permission from licensing authorities.

4.

Manufacturer exporters with export performance of Rs.1 crore and above in the preceding year have been made eligible for duty-free Annual Advance Licence for import of inputs. This can be done without approaching the Director General of Foreign Trade (DGFT) and without any stipulation on value addition. The entitlement under this scheme shall be up to 125 per cent of the average FOB value of export in the preceding licensing year. Licensing procedure has been decentralised in respect of items for which there is no input-output norm.

5.

All manufacturers exporting more than 50 per cent of their production, subject to a minimum export of Rs. 1 crore, in the preceding year, have been made eligible for special facilities through the issue of a "green card".

6.

Units that receive recognition for three or more successive terms under Export House (EH), Trading House (TH), Star Trading House (STH) and Super Star Trading House (SSTH) Schemes would be eligible for golden status certificate. It would enable them to enjoy the benefits of EH/TH/STH/SSTH irrespective of their actual performance thereafter as per the guidelines issued in this regard from time to time.

(b)

Liberalisation Measures

In order to promote further liberalisation of India's exports and imports as well as to fulfill

the commitments to the WTO, the recent modifications of EXIM Policy have initiated the following important steps:

1.

Hitherto, EXIM Policy contained Negative Lists of exports and imports comprising of canalised (imported only by canalised agencies specially notified by the Government), restricted (exportable/importable under specific licences) and prohibited items. This system has been revamped. Following the Indian Trade Classification (based on Harmonised Commodity Description and Coding System) [in short, ITC (HS)] export and import items have been put under the Lists of (a) Free exportable or importable, (b) Canalised imports, (c) items importable under Special Import Licence (SIL) and (d) Restricted List. Further, 894 new items have been made freely importable while 414 new items have been shifted to the SIL list, leaving only 667 items under the restricted list.

2.

The direct concessions (for example, in the form of concessional rents) made available till 1998-99, to the units under Exports Oriented Unit (EOU) Scheme, Export Processing Zone (EPZ) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme have been suitably reoriented to reflect liberalisation.

3.

The nomenclatures used by the EXIM Policy have been revised to make them more WTO-consistent. For example, the term negative list of exports/imports has been dropped. Likewise, "export obligation" has been replaced by "export performance/commitment", "benefits to exporters" has been replaced by "entitlement of the exporters", 'concession' to exporters has been replaced by 'exemption', etc.

(c)

Modifications in the Incentive Structure

The modified Policy initiated steps to discourage certain kinds of imports/ exports. Simultaneously,

measures have been taken to encourage certain types of exports/imports as well as exporters/ importers. Major features of such changes include the following :

1.

Import of second hand capital goods without licence under actual user condition has been done away with and these products have been placed under the restricted list. Second hand capital goods can no longer be imported under the Export Promotion Capital Goods (EPCG) Scheme. Certain relaxation of norms for import of second hand jigs, fixtures, dies, machinery, etc. on export basis have also been withdrawn.

2.

Under the EPCG Scheme, the threshold limit of the CIF value for eligibility under the zero-duty scheme has been reduced from Rs. 20 crore to Rs. 1 crore. Sectoral coverage and export obligation under the 10 per cent duty scheme have been modified. Under the changed policy, textiles, biotechnology, engineering and chemical sector would get better coverage. Through the modification, the eligibility for import of machinery under EPCG Scheme has been broadened to cover agricultural exports.

3.

The yearly limit of licence-free exports of samples has been increased from Rs. 25,000 to Rs. 1,00,000. The minimum value addition condition on export of imported products against rupee payment has been reduced from 100 per cent to 33 per cent. Various conditions on import for the purpose of export against freely convertible currencies and export of replacement goods have also been relaxed.

4.

The coverage on internationally recognised quality certificates has been enlarged and the facilities under the scheme have been revised. Special schemes have been devised to promote branded product exports from India.

5.

The rate at which credit of Duty Exemption Pass Book Scheme (DEPB) on pre export basis is to be granted has been increased from 5 per cent to 10 per cent of the average export performance of the applicant during the preceding three licensing years.

6.

Units involved in services, agroprocessing and biotechnology have been made eligible to avail facilities under EOU/EPZ/EHTP/STP Schemes.

7.

The upper limit for Domestic Tariff Area (DTA) sales by the EOU/EPZ/ EHTP/STP units has been increased from 25 per cent of the value of production to 50 per cent of the FOB value of exports. Corporate tax holiday for these units has been increased from five to ten years. Supplies to bonded warehouses and against SIL have been included within the scope of the discharge of export performance.

8.

Private bonded warehouses have been allowed to procure goods from DTA for the purpose of export without payment of any duty.

9.

Service providers have been included within the purview of EH/ TH/STH/SSTH. Equivalents of EH/ TH/STH/SSTH for services exports have been devised. Export performance criteria for recognition under EH/TH/STH/SSTH Schemes have been rationalised with increase in export performance requirement between 1999-2000 and 2000-2001. Weightage for the purpose of recognition under EH/TH/STH/ SSTH Schemes, direct manufacturing and export by Small Scale Industry (SSI)/Tiny sector/Cottage Sector, the handlooms and handicraft sector has been increased from 200 per cent to 300 per cent while that for project exports has been increased from 100 per cent to 200 per cent.

10.

A special chapter has been added in the EXIM Policy to set out various schemes for the services exporters.

11.

States have been provided with financial incentives for providing infrastructure for foreign trade.

Major features of the EXIM Policy before and after the modification are enumerated in the

following table.

Major Features on the Revised EXIM Policy

Scheme/ Procedure

Features Prior to the

Features Effected through the

(Relevant clause of the

Current Revision

Current Revision

EXIM Policy)

General Provisions Regarding Exports and Imports

Categorisation of Exports and

Apart from the freely exportable and

The convention of announcing

Imports

importable goods, the Central

Negative Lists of exports and

Government could announce

imports has been done away with.

(Chapter 4, Paragraphs 1, 2, 3, 4,

Negative Lists of items for exports

According to the Indian Trade

5 and 8)

and imports. The Negative Lists

Classification (based on Harmonised

consisted of articles for which

Commodity Description and Coding

import/export were prohibited,

System) [in short, ITC (HS)] export

restricted or canalised.

and import items have been put

under the Lists of Free exportable

or importable, List for Canalised

imports and Lists for Restricted

items.

Issue of Green Cards to Exporters

No such provision.

All manufacturers exporting more

than 50 per cent of their

(Chapter 4, paragraph 23)

production, subject to a minimum

export of Rs.1 crore, in the preceding

year, would be issued a green card by

the Director General of Foreign Trade

(DGFT). This card would entitle the

holder to such facilities as may be

specified from time to time.

Imports

Import of second hand capital

All second hand capital goods with

This scheme has been discontinued.

goods

a minimum residual life of five years

could be imported by actual users

(Chapter 5, paragraph 4)

without a licence subject to Actual

User condition and in accordance

with the relevant procedure.

Import of second hand machinery

Such imports were allowed even if

This scheme has been discontinued.

and accessories on export basis

residual life for the machinery or

accessories were less than five

(Chapter 5, Paragraph 7,

years.

Subparagraph b)

Import of new capital goods under

No specific provision in this regard.

Permission of licensing authority

lease financing

would not be required for this

purpose.

(Chapter 5, Paragraph 11)

Export Promotion Capital Goods (EPCG) Scheme

Import of second hand capital goods

Such imports were eligible to avail

Import of such goods would not be

facilities under the Scheme.

allowed under the Scheme.

(Chapter 6, Paragraph 1)

Threshold limit under zero duty

The minimum threshold limit in

The limit has been reduced to Rs.1

Scheme

terms of CIF value of imports was

crore.

Rs. 20 crore.

(Chapter 6, Paragraph 2)

Export obligation and sectoral

Export obligation on Net Foreign

This obligation has been increased

coverage under zero duty Scheme

Exchange Earning (NFE) basis was

to six times the CIF value of Capital

in case CIF value is Rs. 1 Crore or

five times the CIF value of Capital

goods imported under the Scheme.

more

goods imported under the Scheme.

Sectoral coverage of certain

industries including biotechnology,

(Chapter 6, Paragraph 2)

textiles, chemicals and engineering

sectors have been improved under

the Scheme.

Eligibility under the Scheme

No specific provision about

Agricultural exporters have been

(Chapter 6, Paragraph 3,

agricultural exporters.

made eligible to import equipment

Subparagraph a)

under the Scheme subject to

specific conditions.

Discharge of export obligations -

The export obligation had to be

In addition, exporters have been

items eligible for the purpose

fulfilled by the export of goods

allowed to fulfill their obligation by

manufactured or produced by the

the export of same goods, for which

(Chapter 6, Paragraph 5,

use of the capital goods imported

EPCG licence has been obtained,

Subparagraph i)

under the scheme.

manufactured or produced in

different manufacturing units of the

licence holder.

Discharge of export obligations -

The export obligation was over and

Exports made to former USSR

the process of calculation for the

above the average level of exports

during the preceding three licensing

purpose

(including those made to former

years would not be included to

USSR) achieved by him in the

calculate the export obligation.

(Chapter 6, Paragraph 5,

preceding three licensing years.

Subparagraph v)

Duty Exemption Scheme (DES)

Treatment of Advance Licences

These licences were not included

Advance Licences have been

within DES.

included within the purview of the

(Chapter 7, Paragraph 1)

Scheme.

Advance Licence

Exporters having past export

Manufacturer exporter with export

performance in preceding three

performance of Rs.1 crore in the

(Chapter 7, Paragraph 4,

licensing years were eligible to apply

preceding year and registered with

Subparagraph A and Paragraph 13)

for Advance Licence and Advance

excise authorities have been made

Intermediate Licence without an

entitled for a nontransferable and

export order. In addition, they are

duty-free import licence called

also eligible for Special Imprest

Annual Advance Licence. Export

licences. The entitlement under all

Houses and various trading Houses

these licences taken together was

can avail the facility under certain

up to 100 per cent of the average

conditions. Such annual advance

FOB value of their exports, in the

licence would be issued with

preceding three licensing years.

positive value addition without

stipulation of minimum value

addition. The entitlement under this

scheme shall be up to 125 per cent

of the average FOB value of export

in the preceeding licensing year. The

scheme would come into operation

from 1st July, 1999.

Credit of Duty Exemption Pass

DEPB credit on pre export basis

The rate of DEPB credit on pre

Book (DEPB) Scheme on pre

was granted at the rate of 5 per

export basis has been increased to

export basis

cent of the average export

10 per cent of the average export

performance of the applicant

performance of the applicant

(Chapter 7, Paragraph 35)

during the preceding three

during the preceding three

licensing years.

licensing years.

Diamond Gem and Jewellery Export Promotion Schemes

Diamond Imprest Licence

These licences were issued for

In addition, these licences can be

import of rough diamonds.

issued for the import of cut and

(Chapter 8, Paragraph 3)

polished diamonds.

Diamond Imprest Licence for

No specific provision.

An exporter of cut and polished

Export Houses and various Trading

diamonds having the status of

Houses

Export Houses or any type of

Trading Houses could be issued a

(Chapter 8, Paragraph 4,

licence for import of cut and

Subparagraph b)

polished diamonds up to 5 per cent

of the export performance of the

preceding year of cut and polished

diamonds.

Coverage of items allowed to be

Precious, semi-precious stones,

Personal carriage of precious,

transported as samples with

beads and articles were not

semi-precious stones, beads and

personal carriage by gems and

included within the list of samples

articles as samples has been

jewellery exporters

that could be transported as

allowed within overall limits for

personal carriage.

such samples.

(Chapter 8, Paragraph 20,

subparagraph b)

Facilities to Export Oriented Units

No specific provision.

EOU/EPZ units are allowed to

(EOUs)/Export Processing Zones

import plain gold, platinum and

(EPZs)

silver jewellery for repairs/re-make

and export subject to a minimum

(Chapter 8, Paragraph 28,

Net Foreign Exchange Earning as a

subparagraph A)

Percentage of Export Earning

(NFEP)of 7.5 per cent.

Export of Samples

Samples made in wax models,

Export of such samples can be

silver models and rubber moulds

done with intimation to the

(Chapter 8, Paragraph 35)

were allowed to be exported with

Development Commissioner. The

the permission of the Development

permissible value of the export of

Commissioner provided its value

samples has been increased

does not exceed Rs.10,000 in a

to Rs. 1,00,000.

year.

Export Oriented Units (EOUs) and Units in Export Processing Zones (EPZs), Electronic

Hardware Technology Park Units (EHTP) and Software Technology

Park Units (STP)

Permissible activities by EOU/

Such activities did not specifically

Services, agro-processing and

EPZ/ EHTP/STP units

include services, agro-processing

biotechnology have been specifically

(Chapter 9, Paragraph 1 and 2)

and biotechnology. These units were

included in the list of permissible

not specifically allowed to procure

activities. Further, they may export

goods duty-free from Bonded

all products except goods mentioned

warehouses within the Domestic

as prohibited items of exports in

Tariff Area (DTA).

ITC (HS) Classifications of Export

items. Apart from direct duty-free

imports, these units have been

allowed to procure goods duty-free

from bonded warehouses within the

DTA.

DTA sales

Up to 25 per cent of the production

Permissible DTA sale has been

in value terms were allowed to be

increased up to 50 per cent of the

(Chapter 9, Paragraph 9,

sold in the DTA.

FOB value of exports.

Subparagraph b)

DTA sale as part of discharge of

Sale to Bonded warehouses and

Supplies made to Bonded

export performance requirement

supply against special entitlement

warehouses set up under paragraph

of duty free import of goods were

11.14 of the EXIM Policy and supply

(Chapter 9, Paragraph 10,

not specifically treated as discharge

of goods against special entitlement

Subparagraph d and e)

of export obligation.

of duty free import of goods would

be treated as discharge of export

performance requirement.

Rents for EOU/EPZ units

Such units used get clear con-

Such rents would be fixed by the

cessions on rent for their premises

authorities from time to time.

(Chapter 9, Paragraph 15,

for a period of up to five years from

Subparagraph a)

the setting up of the unit.

Tax holiday for EOU/EPZ/ EHTP/

EOU/EPZ/EHTP/STP Units were

Such concessions have been

STP units

eligible for exemption from payment

increased for a period of ten years.

of corporate income tax for a block

(Chapter 9, Paragraph 15,

of five years in the first eight years

Subparagraph b)

of operation.

Subcontracting by EOU/EPZ/

Such subcontracting was allowed if

Stipulation on indigenous raw

EHTP/STP units to other EOU/

the EOU/EPZ/ EHTP/STP units

material use has been done away

EPZ/ EHTP/STP units or units in

used 90 per cent or more

with. These may be permitted to

DTA

indigenous raw material.

subcontract up to 50 per cent of

(Chapter 9, Paragraph 17,

their production.

Subparagraph a)

Private Bonded warehouses in EPZ

Such warehouse could re-export

These warehouses have been

imported goods with re-packing or

allowed to re-export imported goods

(Chapter 9, Paragraph 21,

labelling. There was no specific

with or without re-packing/

Subparagraph a)

provision for duty-free procurement

labelling/minor processing. These

of goods from DTA or duty-free

warehouses may procure goods from

import of packing, labelling and

DTA without payment of excise duty

such other material.

for exports. They may also import

packing, labelling and such other

material without payment of duty

concerning their operations.

Exports

Export of gifts

The annual limit for export of gifts

The limit has been increased to

was Rs. 25,000.

Rs. 1,00,000.

(Chapter 11, Paragraph 4)

Re-export of restricted import/

Restricted export/ import items

The minimum value addition

export item

could be re-exported with a

condition has been relaxed.

minimum value addition of 10 per

(Chapter 11, Paragraph 8)

cent.

Export Houses (EHs), Trading Houses (THs), Star Trading Houses (STHs) and Super Star

Trading Houses (SSTHs)

Eligibility of service providers

No specific provision.

Service providers have been made

eligible for recognition as EH/ TH/

(Chapter 12, Paragraph 2)

STH/SSTH.

Export performance level

The level of minimum export

The minimum export performance

performance for recognition as EH/

level requirements have been

(Chapter 12, Paragraph 5,

TH/STH/SSTH were not rounded

rationalised. Higher performance

Subparagraph c)

up figures and the performance level

requirement levels have been set for

requirements for consecutive years

2000-2001 as against 1999-2000.

were uniform within each specific

category.

Special weightage for recognition

Export of products reserved for

All these products produced and

as EH/TH/ STH/SSTH

Small Scale Industry (SSI) units and

directly exported by the respective

manufactured by units in the SSI,

units would be attributed triple

(Chapter 12, Paragraph 7,

tiny sector, cottage sector

weightage for the purpose of

Subparagraphs a and b)

handlooms and handicraft sector

recognition.

(including handloom made silk

products) were assigned double

weightage for the purpose of

recognition.

Facilities of various types of

No specific provision.

Service Export House, International

Service Export Houses

Service Export House, International

Star Service Export House,

(Chapter 12, Paragraphs 10 and

International Super Star Service

12, Subparagraph B)

Export House have been made

entitled to the facilities extended to

EH/TH /STH/SSTH.

Facilities for manufacturing

No specific provision.

Under certain conditions manufac-

companies and industrial houses

turing companies and industrial

houses have been made eligible to

(Chapter 12, Paragraph 12,

avail the facilities of STH and SSTH,

Subparagraph A)

respectively.

Golden status certificate

No specific provision.

Exporters who have attained or

would attain in future EH/TH/STH/

(Chapter 12, Paragraph 14)

SSTH status for three successive

terms or more would be eligible for

golden status certificate which

would enable them to enjoy the

benefits of EH/TH/ STH/SSTH

irrespective of their actual

performance thereafter as per the

guidelines issued in this regard from

time to time.

Brand Promotion and Quality

Increase in coverage for recognition

No specific provision for SEI CMM

Manufacturers/ processors who

of quality standards and the

accreditation/ certification and

have acquired SEI CMM level 2 and

facilities

quality trademark holders.

above accreditation/ certification

would be recognised. Exporter

(Chapter 14, Paragraph 4)

exporting products with quality

trademarks would be recognised for

extending special facilities. Such

facilities would also include issue of

Green Card to quality certificate

holders.

Brand promotion

No specific provision.

With the objective of promoting

exports of branded products, a

(Chapter 14, Paragraph 7)

Committee would be constituted for

identification of such products.

Exporters of such branded products

would receive special benefits.

Export of Services

Special provisions for services

No specific provision for service

Exporters of services and service

exporters and service providers to

exporters of service providers.

providers to exporters have been

exporters

made eligible for a host of facilities

that were earlier extended to

(Chapter 15, Paragraphs 1 to 9)

manufactured and merchant

exporters of goods. These facilities

include EPCG Scheme, EOU/EPZ/

EHTP/ STP Scheme, EH/ TH/STH/

SSTH Scheme, etc. Furthermore, in

many cases, services exporters and

service providers have been

extended these facilities on more

favourable terms than the exporters

of goods.

* Prepared in the Division of International Trade, Department of Economic Analysis & Policy.