Routine Tinkering

BARELY a day after the Congress pulled the plug on the United Front Government at the Centre, the Export-Import (Exim) Policy 1997-2002 was announced right on schedule on April 1. But it was an effort that added precious little to the beleaguered Government's slender list of achievements.

For one, the new five-year policy lacks any step to arrest the dismal export performance of the last couple of years. For another, it fails to give a long-term perspective to Indian trade, at a time when the Ninth Plan has set an export target of $100 billion by 2002. "It's more of a policy on imports rather than a balanced export-import policy," says Dr R.K. Dhawan, former additional director-general of foreign trade (DGFT) and till recently secretary-general of the Federation of Indian Export Organisations.

Commerce Minister B.B. Ramaiah is at pains to point out that the aim of the Government is to consolidate the gains, speed up liberalisation, increase transparency in trading and derive maximum benefits from expanding global markets. But, in effect, the policy has merely gone a step ahead in removing trade and quantitative restrictions according to the world trade agreement.

While imports of several consumer goods have been freed, leading to a hue and cry about clearing the field for inessential imports, it does not reallyamount to much freer trade. The routine tinkering with import lists neither marks a break from the past nor seems set to boost export growth in any way this year. According to Dhawan, the domestic industry would be worst hit by the decision to shift 542 items from the restricted lists to the open general list (OGL) and special import licence (SIL) routes. Many of these, like honey and chewing gum, are made by small-scale and cottage industries which would now face closure.

Clearly, exporters are upset. The tightening of the eligibility criteria for export houses, trading houses, star trading houses and super trading houses will leave only a few in these categories as also very little incentive for exporters. The Rs 1,500-crore export turnover criterion for super star trading houses, they say, would ensure that only public sector traders qualify.

Exporters also resent the cosmetic reduction in duty under the Export Promotion Capital Goods (EPCG) scheme from 15 to 10 per cent. But the most striking absence in the policy, exporters say, is that of an effective anti-dumping mechanism which the Government had promised before the announcement of the policy. This has become important with the progressive liberalisation of imports, especially following the shift of a large number of items into the OGL and SIL from the restricted list this time.

On the other hand, some popular measures announced in the policy have strong undertones of political and international pressures. The decision to reduce the threshold limit for zero duty imports for the agricultural sector under the EPCG scheme from Rs 20 crore to Rs 5 crore, for instance. The value of capital goods imports for this sector ranges only between Rs 30 lakh to Rs 1 crore and keeping it as high as Rs 5 crore makes little sense.

So does the decision to discontinue the controversial Value Based Advance Licence scheme (Vabal), feel exporters. While the Vabal scheme insisted on a value addition of 60 per cent, the retained Quantity Based Advance Licences (Qabal) insists on only 30 per cent. "Most of the hue and cry about Vabal misuse is created by the Government itself," says a former DGFT. The extent of Vabal misuse is estimated to be only about Rs 700 crore compared to several lakh crores worth of Vabals issued to the exporters. Instead of strengthening surveillance to arrest misuse, the Government has thrown away the baby along with the bathwater, he adds.

On the positive side, an effort has been made to streamline the DGFT offices through computerisation which is expected to be completed by September 1. From January 1, 1998, it would be possible to file licence application on either a floppy or through e-mail. The new Duty Entitlement Pass Book scheme too is expected to help in cutting delays and procedural hurdles as will the longer validity of export licences.

While the new policy seeks to introduce a new regime for exporters, it retains most of the anomalies in the old one. And with the trade deficit for the current year expected to be a whopping $5 billion, apart from the fact that export growth might hit a new low, India's trade ambitions may remain unrealised for a long time to come.