M A I N   N E W S

Special economic zones proposed
Major initiative to boost exports
From T.V.Lakshminarayan
Tribune News Service

NEW DELHI, March 31 — Drawing inspiration from China, the Union Minister for Commerce and Industry, Mr Murasoli Maran, today unveiled the first Exim policy of the new millennium that provides for the setting up of special economic zones in different parts of the country.

He announced that the Positra zone near the Pipalav port in Gujarat and the Nangunery zone near the Tuticorin port in Tamil Nadu would be the country’s first special economic zones and these would come into operation very soon.

The units operating in these zones would have full flexibility of operations and would be free from the plethora of rules and regulations governing import and export.

Though the implementation of industry-friendly labour laws, like a liberal hire and fire policy, has not been possible in these zones as it is a state subject and the Labour Commission is looking into the issue minister has written to Chief Ministers to issue a notification under the Industrial Disputes Act to declare units exporting more than 50 per cent of their turnover as public utility services to enable these to keep international commitment regarding delivery schedules.

This would ensure that employees working in these units did not resort to strikes, Mr Maran said.

Another initiative in the Exim policy is the decision to fully involve state governments as in China in export efforts. Mr Maran pointed out that though the exports benefit the states from where these originate, especially by way of employment generation, for the state governments it was a drain on their revenue because exports were by law exempt from all local levies.

“There is no reason that the highly developed State of Punjab and the industrialised State of Gujarat should not be able to match Pakistan in exports”, Mr Maran said adding a way had to be found for motivating and involving state governments in this effort for realising the full export potential of the country.

The minister announced that the Finance Ministry had agreed to provide Rs 250 crore at the time of the supplementary budget this year to provide some kind of incentive to states for promoting exports.

Under the scheme, details of which are to be announced shortly, the states would be empowered with necessary resources and requisite flexibility and initiative in decision-making to make significant contribution to the export effort by way of creation of necessary export infrastructure.

The minister also spoke about the need for initiating policy changes to exploit the vast opportunities in the global market. He said there was a need to unshackle irksome procedures and do away with needless restrictions as mere tinkering with procedures would serve little purpose.

Mr Maran announced that for the purpose of stepping up the growth of hardware electronics, he was setting up a small group (not a committee in the conventional sense) to quickly look into the various policy and procedural changes required to be introduced in various departments of the government.

Indicating that the government was expecting a export growth of around 20 per cent in this current fiscal year, the minister said to achieve a sustained high growth of over 20-25 per cent every year, there was a need to diversify the export basket and its direction.

“We need to radically rethink our policies and bring about a paradigm shift in our export policy and procedures and also in related fields”, he said.

Coming back to the special economic zones, Mr Maran said it had been decided to treat Positra in Gujarat and Nangunery in Tamil Nadu as the country’s first two SEZs as the two state governments had already furnished proposals to this effect.

He said the minimum size of an SEZ should be 400-500 hectares or more. In the meanwhile, it was proposed to convert the existing export processing zones into SEZs though the area of such zones were limited due to historical reasons.

Immediately, SEEPZ in Mumbai, Kandla EPZ, Vizag EPZ and Cochin EPZ were proposed to be converted into SEZs, he said.

Referring to the specific features of the Exim policy, the minister touched upon some of the major changes which had been effected this year.

The first decision related to removal of quantitative restrictions (QRs). It had been proposed to withdraw QRs in respect of 714 items with effect from April 1, 2000. The decision to remove QRs followed the US appeal to the Dispute Settlement Panel of the World Trade Organisation that the balance of payment position of India did not require it to have QRs anymore.

With the Dispute Settlement Panel and the appellate body of the WTO upholding the appeal of the USA, India had now been obliged to withdraw the restrictions. An agreement had been signed between India and the USA for determining the reasonable period of time under which the QRs on the remaining 1429 tariff lines would be removed by April 1, 2001, 714 before April 1, this year.

Mr Maran asserted that the removal of QRs would in no way have any impact on the domestic industry and even if it did, India could have protection by increasing the tariff on these. Further, in the event of unfair trade practices like dumping or subsidisation of exports by other countries causing injury to the Indian industry, adequate protection under anti-dumping or anti-subsidy mechanisms or if there was a sudden surge in imports causing serious injury to the industry, protection under safeguard provisions would always be available.

The industry could always approach either the Anti-Dumping Directorate or the Safeguard Directorate for appropriate relief, the minister said.

In a major effort to rationalise the existing export promotion schemes and improve availability of inputs or raw material for exports, the government had decided to introduce a post-export duty-free replenishment scheme for over 5000 export products. Under this scheme, after the completion of exports exporters would be able to obtain transferable duty-free replenishment certificates for importing inputs used in export products as per the standard input-output norms.

The Export Promotion Capital Goods (EPCG) scheme would be extended uniformly to all sectors and to all capital goods without any threshold limit on payment of 5 per cent customs duty, while the 10 per cent countervailing duty on imports under the EPCG stood withdrawn. The changes in the EPCG scheme would particularly benefit small-scale units because earlier these could import capital goods under the scheme only on payment of 10 per cent duty, the minister said.

The actual user, non-transferable Advance licence for physical exports and for intermediate supply for exports, would be exempted payment from all kinds of duty like basic customs duty, countervailing duty, anti-dumping and safeguard duty.

The post-export Duty Entitlement Pass Book (DEPB) would continue till March 31, 2002, which in other words would mean that by 2002 it would be subsumed into the Drawback Scheme.

The threshold limit of Rs 20 crore for fixing new DEPB rates stood removed, thereby making DEPB more accessible. For all products, DEPB rates of 15 per cent or more value caps would be prescribed, but value caps would not apply to products being exported under brand names approved by an inter-ministerial committee.

However, the pre-export DEPB scheme would be abolished as very few exporters were using it.

The minister announced a series of sector-specific initiatives to boost exports of gems and jewellery; drugs and pharmaceuticals; agro-chemicals and bio-technology exports; leather; handicrafts; garments; silk; granites and minerals.

These included the introduction of a Diamond Dollar Account (DDA) scheme which would go a long way in developing India as a major trading centre for diamonds. Under this scheme, export proceeds would be retained in dollar account, allowing such DDA-holders to utilise such funds for import of rough diamonds and for purchase of rough diamonds or cut and polished diamonds from another DDA-holder.

Other initiatives included facility of exporting jewellery by speed post;

— for encouraging exports in knowledge-intensive sectors like pharmaceuticals, agro-chemicals and bio-technology, these sectors would be allowed to import laboratory equipment and chemicals for research and development purposes upto 1 per cent of the FoB value of exports duty-free;

— Duty-free import of trimmings, embellishments and other items increased from 2 per cent to 3 per cent of the FoB value of exports for leather, handicrafts and garments;

— Pre-export inspection of silk products by the Central Silk Board discontinued;

— Export-oriented units engaged in export of granites, marble and other mineral products permitted to move capital goods outside the manufacturing premises for the purposes of excavation;

— All EOU/EPZ units would be allowed to carry job works in domestic tariff area units in all sectors — a facility available earlier only for agriculture, marine and garment sectors; and

— Project exporters/construction companies/ service providers with a domestic turnover of more than Rs 100 crore allowed to apply for international service house status on signing of MoU with the Directorate-General of Foreign Trade (DGFT), undertaking to achieve exports of Rs 15 crore annually for the next three years-with a view to enabling such companies to participate effectively in overseas construction projects.

The minister said deemed export benefits had been made uniform for all sectors under the new policy. Deemed export benefits had been extended to supplies made to projects funded by UN agencies and also extended to the power sector, even for modernisation and renovation of power plants.

Responding to representations from the information technology and other sectors to do away with customs bonding, Mr Maran informed that necessary amendments in this regard would be issued shortly.

It was also decided to give double weightage to exports from Jammu and Kashmir for determining entitlement for status certificates, a facility already available for exports from the North-East.

Further, in keeping with the importance attached by the government to the development of border areas, it had been decided that apart from barter trade at the land customs check-post at Moreh on the Indo-Burmese border, normal imports and exports on payment of applicable duties would also be permitted.