Highlights of Foreign Trade Policy (2009-2014)

FOREWORD
The UPA Government has assumed office at a challenging time
when the entire world is facing an unprecedented economic
slow-down. The year 2009 is witnessing one of the most severe
global recessions in the post-war period. Countries across the
world have been affected in varying degrees and all major
economic indicators of industrial production, trade, capital
flows, unemployment, per capita investment and consumption
have taken a hit. The WTO estimates project a grim forecast that
global trade is likely to decline by 9% in volume terms and the
IMF estimates project a decline of over 11%. The recessionary
trend has huge social implications. The World Bank estimate
suggests that 53 million more people would fall into the poverty
net this year and over a billion people would go chronically
hungry.
Though India has not been affected to the same extent as other
economies of the world, yet our exports have suffered a decline
in the last 10 months due to a contraction in demand in the
traditional markets of our exports. The protectionist measures
being adopted by some of these countries have aggravated the
problem. After four clear quarters of recession there is some
sign of a turnaround and the emergence of ‘green shoots’,
though I would be hesitant to hazard a guess on the nature and
extent of this recovery and the time the major economies will
take to return to their pre-recession growth levels. Announcing a
Foreign Trade Policy in this economic climate is indeed a
daunting task. We cannot remain oblivious to declining demand
in the developed world and we need to set in motion strategies
and policy measures which will catalyse the growth of exports.
Before defining the objectives of the new policy it would be
useful to take stock of our achievements in the foreign trade
over the last 5 years. The foreign trade policy announced by the
UPA Government in 2004 had set two objectives, namely, (i) to
double our percentage share of global merchandize trade within
5 years and (ii) use trade expansion as an effective instrument of
economic growth and employment generation. Looking back,
we can say with satisfaction that the UPA Government has
delivered on its promise. Agriculture and industry has shown
remarkable resilience and dynamism in contributing to a healthy
growth in exports. In the last five years our exports witnessed
robust growth to reach a level of US$ 168 billion in 2008-09
from US$ 63 billion in 2003-04. Our share of global
merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008
as per WTO estimates. Our share of global commercial services
export was 1.4% in 2003; it rose to 2.8% in 2008. India’s total
share in goods and services trade was 0.92% in 2003; it
increased to 1.64% in 2008. On the employment front, studies
have suggested that nearly 14 million jobs were created directly
or indirectly as a result of augmented exports in the last five
years.
The short term objective of our policy is to arrest and reverse the
declining trend of exports and to provide additional support
especially to those sectors which have been hit badly by
recession in the developed world. We would like to set a policy
objective of achieving an annual export growth of 15% with an
annual export target of US$ 200 billion by March 2011. In the
remaining three years of this Foreign Trade Policy i.e. upto
2014, the country should be able to come back on the high
export growth path of around 25% per annum. By 2014, we
expect to double India’s exports of goods and services. The long
term policy objective for the Government is to double India’s
share in global trade by 2020.
In order to meet these objectives, the Government would follow
a mix of policy measures including fiscal incentives,
institutional changes, procedural rationalization, enhanced
market access across the world and diversification of export
markets. Improvement in infrastructure related to exports;
bringing down transaction costs, and providing full refund of all
indirect taxes and levies, would be the three pillars, which will
support us to achieve this target. Endeavour will be made to see
that the Goods and Services Tax rebates all indirect taxes and
levies on exports.
At this juncture, it is our endeavour to provide adequate
confidence to our exporters to maintain their market presence
even in a period of stress. A Special thrust needs to be provided
to employment intensive sectors which have witnessed job
losses in the wake of this recession, especially in the fields of
textile, leather, handicrafts, etc.
We want to provide a stable policy environment conducive for
foreign trade and we have decided to continue with the DEPB
Scheme upto December 2010 and income tax benefits under
Section 10(A) for IT industry and under Section 10(B) for 100%
export oriented units for one additional year till 31st March
2011. Enhanced insurance coverage and exposure for exports
through ECGC Schemes has been ensured till 31st March 2010.
We have also taken a view to continue with the interest
subvention scheme for this purpose.
We need to encourage value addition in our manufactured
exports and towards this end, have stipulated a minimum 15%
value addition on imported inputs under advance authorization
scheme.
It is important to take an initiative to diversify our export
markets and offset the inherent disadvantage for our exporters in
emerging markets of Africa, Latin America, Oceania and CIS
countries such as credit risks, higher trade costs etc., through
appropriate policy instruments. We have endeavored to diversify
products and markets through rationalization of incentive
schemes including the enhancement of incentive rates which
have been based on the perceived long term competitive
advantage of India in a particular product group and market.
New emerging markets have been given a special focus to
enable competitive exports. This would of course be contingent
upon availability of adequate exportable surplus for a particular
product. Additional resources have been made available under
the Market Development Assistance Scheme and Market Access
Initiative Scheme. Incentive schemes are being rationalized to
identify leading products which would catalyze the next phase
of export growth.
As part of our policy of market expansion, we have signed a
Comprehensive Economic Partnership Agreement with South
Korea which will give enhanced market access to Indian
exports. We have also signed a Trade in Goods Agreement with
ASEAN which will come in force from January 01, 2010, and
will give enhanced market access to several items of Indian
exports. These trade agreements are in line with India’s Look
East Policy. We have also concluded the Mercosur Preferential
Trade Agreement. It shall be our endeavour to deepen our trade
engagement with other major economic groupings in the world.
The Government seeks to promote Brand India through six or
more ‘Made in India’ shows to be organized across the world
every year.
In the era of global competitiveness, there is an imperative need
for Indian exporters to upgrade their technology and reduce their
costs. Accordingly, an important element of the Foreign Trade
Policy is to help exporters for technological upgradation.
Technological upgradation of exports is sought to be achieved
by promoting imports of capital goods for certain sectors under
EPCG at zero percent duty.
Under the present Foreign Trade Policy, Government recognizes
exporters based on their export performance and they are called
‘status holders’. For technological upgradation of the export
sector, these status holders will be permitted to import capital
goods duty free (through Duty Credit Scrips equivalent to 1% of
their FOB value of exports in the previous year), of specified
product groups. This will help them to upgrade their technology
and reduce cost of production. For upgradation of export sector
infrastructure, ‘Towns of Export Excellence’ and units located
therein would be granted additional focused support and
incentives.
The policy is committed to support the growth of project
exports. A high level coordination committee is being
established in the Department of Commerce to facilitate the
export of manufactured goods / project exports creating
synergies in the line of credit extended through EXIM Bank for
new and emerging markets. This committee would have
representation from the Ministry of External Affairs,
Department of Economic Affairs, EXIM Bank and the Reserve
Bank of India. We would like to encourage production and
export of ‘green products’ through measures such as phased
manufacturing programme for green vehicles, zero duty EPCG
scheme and incentives for exports.
To enable support to Indian industry and exporters, especially
the MSMEs, in availing their rights through trade remedy
instruments under the WTO framework, we propose to set up a
Directorate of Trade Remedy Measures. In order to reduce the
transaction cost and institutional bottlenecks, the e-trade project
would be implemented in a time bound manner to bring all stake
holders on a common platform. Additional ports/locations would
be enabled on the Electronic Data Interchange over the next few
years. An Inter- Ministerial Committee has been established to
serve as a single window mechanism for resolution of trade
related grievances. These are difficult times and we have set an
ambitious goal for ourselves. I am sure that the industry and the
Government, working in tandem, will be able to ensure that the
Indian exports become globally competitive and that we are able
to achieve the target, which we have set for ourselves.

(Anand Sharma)
Minister of Commerce & Industry
Government of India
 New Delhi
August 27, 2009
HIGHLIGHTS OF FOREIGN TRADE POLICY 2009-2014
Higher Support for Market and Product Diversification

1. Incentive schemes under Chapter 3 have been expanded by

way of addition of new products and markets.
2. 26 new markets have been added under Focus Market
Scheme. These include 16 new markets in Latin America and 10
in Asia-Oceania.
3. The incentive available under Focus Market Scheme (FMS)
has been raised from 2.5% to 3%.
4. The incentive available under Focus Product Scheme (FPS)
has been raised from 1.25% to 2%.
5. A large number of products from various sectors have been
included for benefits under FPS. These include, Engineering
products (agricultural machinery, parts of trailers, sewing
machines, hand tools, garden tools, musical instruments, clocks
and watches, railway locomotives etc.), Plastic (value added
products), Jute and Sisal products, Technical Textiles, Green
Technology products (wind mills, wind turbines, electric
operated vehicles etc.), Project goods, vegetable textiles and
certain Electronic items.
6. Market Linked Focus Product Scheme (MLFPS) has been
greatly expanded by inclusion of products classified under as
many as 153 ITC(HS) Codes at 4 digit level. Some major
products include; Pharmaceuticals, Synthetic textile fabrics,
value added rubber products, value added plastic goods, textile
madeups, knitted and crocheted fabrics, glass products, certain
iron and steel products and certain articles of aluminium among
others. Benefits to these products will be provided, if exports are
made to 13 identified markets (Algeria, Egypt, Kenya, Nigeria,
South Africa, Tanzania, Brazil, Mexico, Ukraine, Vietnam,
Cambodia, Australia and New Zealand).
7. MLFPS benefits also extended for export to additional new
markets for certain products. These products include auto
components, motor cars, bicycle and its parts, and apparels
among others.
8. A common simplified application form has been introduced
for taking benefits under FPS, FMS, MLFPS and VKGUY.
9. Higher allocation for Market Development Assistance (MDA)
and Market Access Initiative (MAI) schemes is being provided.
Technological Upgradation
10. To aid technological upgradation of our export sector, EPCG
Scheme at Zero Duty has been introduced. This Scheme will be
available for engineering & electronic products, basic chemicals
& pharmaceuticals, apparels & textiles, plastics, handicrafts,
chemicals & allied products and leather & leather products
(subject to exclusions of current beneficiaries under
Technological Upgradation  Fund Schemes (TUFS),
administered by Ministry of Textiles and beneficiaries of Status
Holder Incentive Scheme in that particular year). The scheme
shall be in operation till 31.3.2011.
11. Jaipur, Srinagar and Anantnag have been recognised as
‘Towns of Export Excellence’ for handicrafts; Kanpur, Dewas
and Ambur have been recognised as ‘Towns of Export
Excellence’ for leather products; and Malihabad for horticultural
products.
EPCG Scheme Relaxations
12. To increase the life of existing plant and machinery, export
obligation on import of spares, moulds etc. under EPCG Scheme
has been reduced to 50% of the normal specific export
obligation.
13. Taking into account the decline in exports, the facility of Re-
fixation of Annual Average Export Obligation for a particular
financial year in which there is decline in exports from the
country, has been extended for the 5 year Policy period 2009-14.
Support for Green products and products from North East
14. Focus Product Scheme benefit extended for export of ‘green
products’; and for exports of some products originating from the
North East.
Status Holders
15. To accelerate exports and encourage technological 
upgradation, additional Duty Credit Scrips shall be given to
Status Holders @ 1% of the FOB value of past exports. The
duty credit scrips can be used for procurement of capital goods
with Actual User condition. This facility shall be available for
sectors of lether (excluding finished leather), textiles and jute,
handicrafts, engineering (excluding Iron & steel & non-ferrous
metals in primary and intermediate form, automobiles & two
wheelers, nuclear reactors & parts, and ships, boats and floating
structures), plastics and basic chemicals (excluding pharma
products) [subject to exclusions of current beneficiaries under
Technological Upgradation Fund Schemes (TUFS)]. This
facility shall be available upto 31.3.2011.
16. Transferability for the Duty Credit scrips being issued to
Status Holders under paragraph 3.8.6 of FTP under VKGUY
Scheme has been permitted. This is subject to the condition that
transfer would be only to Status Holders and Scrips would be
utilized for the procurement of Cold Chain equipment(s) only.
Stability/ continuity of the Foreign Trade Policy
17. To impart stability to the Policy regime, Duty Entitlement
Passbook (DEPB) Scheme is extended beyond 31-12-2009 till
31.12.2010.
18. Interest subvention of 2% for pre-shipment credit for 7
specified sectors has been extended till 31.3.2010 in the Budget
2009-10.
19. Income Tax exemption to 100% EOUs and to STPI units
under Section 10B and 10A of Income Tax Act, has been
extended for the financial year 2010-11 in the Budget 2009-10.
20 The adjustment assistance scheme initiated in December,
2008 to provide enhanced ECGC cover at 95%, to the adversely
affected sectors, is continued till March, 2010. Marine sector
21. Fisheries have been included in the sectors which are
exempted from maintenance of average EO under EPCG
Scheme, subject to the condition that Fishing Trawlers, boats,
ships and other similar items shall not be allowed to be imported
under this provision. This would provide a fillip to the marine
sector which has been affected by the present downturn in
exports.
22. Additional flexibility under Target Plus Scheme (TPS) /
Duty Free Certificate of Entitlement (DFCE) Scheme for Status
Holders has been given to Marine sector. Gems & Jewellery
Sector 23. To neutralize duty incidence on gold Jewellery
exports, it has now been decided to allow Duty Drawback on
such  exports.
24. In an endeavour to make India a diamond international
trading hub, it is planned to establish “Diamond Bourse(s)”.
25. A new facility to allow import on consignment basis of cut
& polished diamonds for the purpose of grading/ certification
purposes has been introduced.
26. To promote export of Gems & Jewellery products, the value
limits of personal carriage have been increased from US$ 2
million to US$ 5 million in case of participation in overseas
exhibitions. The limit in case of personal carriage, as samples,
for export promotion tours, has also been increased from US$
0.1 million to US$ 1 million. Agriculture Sector
27. To reduce transaction and handling costs, a single window
system to facilitate export of perishable agricultural produce has
been introduced. The system will involve creation of multi-
functional nodal agencies to be accredited by APEDA.
Leather Sector
28. Leather sector shall be allowed re-export of unsold imported
raw hides and skins and semi finished leather from public
bonded ware houses, subject to payment of 50% of the
applicable export duty.
29. Enhancement of FPS rate to 2%, would also significantly
benefit the leather sector.
Tea
30. Minimum value addition under advance authorisation
scheme for export of tea has been reduced from the existing
100% to 50%.
31. DTA sale limit of instant tea by EOU units has been
increased from the existing 30% to 50%.
32. Export of tea has been covered under VKGUY Scheme
benefits.
Pharmaceutical Sector
33. Export Obligation Period for advance authorizations issued
with 6-APA as input has been increased from the existing 6
months to 36 months, as is available for other products.
34. Pharma sector extensively covered under MLFPS for
countries in Africa and Latin America; some countries in
Oceania and Far East.
Handloom Sector
35. To simplify claims under FPS, requirement of ‘Handloom
Mark’ for availing benefits under FPS has been removed.
EOUs
36. EOUs have been allowed to sell products manufactured by
them in DTA upto a limit of 90% instead of existing 75%,
without changing the criteria of ‘similar goods’, within the
overall entitlement of 50% for DTA sale.
37. To provide clarity to the customs field formations, DOR
shall issue a clarification to enable procurement of spares
beyond 5% by granite sector EOUs.
38. EOUs will now be allowed to procure finished goods for
consolidation along with their manufactured goods, subject to
certain safeguards.
39. During this period of downturn, Board of Approvals (BOA)
to consider, extension of block period by one year for
calculation of Net Foreign Exchange earning of EOUs.
40. EOUs will now be allowed CENVAT Credit facility for the
component of SAD and Education Cess on DTA sale.
Thrust to Value Added Manufacturing
41. To encourage Value Added Manufactured export, a
minimum 15% value addition on imported inputs under
Advance Authorization Scheme has now been prescribed.
42. Coverage of Project Exports and a large number of
manufactured goods under FPS and MLFPS.
DEPB
43. DEPB rate shall also include factoring of custom duty
component on fuel where fuel is allowed as a consumable in
Standard Input-Output Norms.
Flexibility provided to exporters
44. Payment of customs duty for Export Obligation (EO)
shortfall under Advance Authorisation / DFIA / EPCG
Authorisation has been allowed by way of debit of Duty Credit
scrips. Earlier the payment was allowed in cash only.
45. Import of restricted items, as replenishment, shall now be
allowed against transferred DFIAs, in line with the erstwhile
DFRC scheme.
46. Time limit of 60 days for re-import of exported gems and
jewellery items, for participation in exhibitions has been
extended to 90 days in case of USA.
47. Transit loss claims received from private approved insurance
companies in India will now be allowed for the purpose of EO
fulfillment under Export Promotion schemes. At present, the
facility has been limited to public sector general insurance
companies only.
Waiver of Incentives Recovery, On RBI Specific Write off
48. In cases, where RBI specifically writes off the export
proceeds realization, the incentives under the FTP shall now not
be recovered from the exporters subject to certain conditions.
Simplification of Procedures
49. To facilitate duty free import of samples by exporters,
number of samples/pieces has been increased from the existing
15 to 50. Customs clearance of such samples shall be based on
declarations given by the importers with regard to the limit of
value and quantity of samples.
50. To allow exemption for up to two stages from payment of
excise duty in lieu of refund, in case of supply to an advance
authorisation holder (against invalidation letter) by the domestic
intermediate manufacturer. It would allow exemption for
supplies made to a manufacturer, if such manufacturer in turn
supplies the products to an ultimate exporter. At present,
exemption is allowed upto one stage only.
51. Greater flexibility has been permitted to allow conversion of
Shipping Bills from one Export Promotion scheme to other
scheme. Customs shall now permit this conversion within three
months, instead of the present limited period of only one month.
52. To reduce transaction costs, dispatch of imported goods
directly from the Port to the site has been allowed under
Advance Authorisation scheme for deemed supplies. At present,
the duty free imported goods could be taken only to the
manufacturing unit of the authorisation holder or its supporting
manufacturer.
53. Disposal of manufacturing wastes / scrap will now be
allowed after payment of applicable excise duty, even before
fulfillment of export obligation under Advance Authorisation
and EPCG Scheme.
54. Regional Authorities have now been authorised to issue
licences for import of sports weapons by ‘renowned shooters’,
on the basis of NOC from the Ministry of Sports & Youth
Affairs. Now there will be no need to approach DGFT(Hqrs.) in
such cases.
55. The procedure for issue of Free Sale Certificate has been
simplified and the validity of the Certificate has been increased
from 1 year to 2 years. This will solve the problems faced by the
medical devices industry.
56. Automobile industry, having their own R&D establishment,
would be allowed free import of reference fuels (petrol and
diesel), upto a maximum of 5 KL per annum, which are not
manufactured in India.
57. Acceding to the demand of trade & industry, the application
and redemption forms under EPCG scheme have been
simplified.
Reduction of Transaction Costs
58. No fee shall now be charged for grant of incentives under
the Schemes in Chapter 3 of FTP. Further, for all other
Authorisations/ licence applications, maximum applicable fee is
being reduced to Rs. 100,000 from the existing Rs 1,50,000 (for
manual applications) and Rs. 50,000 from the existing Rs.75,000
(for EDI applications).
59. To further EDI initiatives, Export Promotion Councils/
Commodity Boards have been advised to issue RCMC through a
web based online system. It is expected that issuance of RCMC
would become EDI enabled before the end of 2009.
60. Electronic Message Exchange between Customs and DGFT
in respect of incentive schemes under Chapter 3 will become
operational by 31.12.2009. This will obviate the need for
verification of scrips by Customs facilitating faster clearances.
61. For EDI ports, with effect from December ’09, double
verification of shipping bills by customs for any of the DGFT
schemes shall be dispensed with.
62. In cases, where the earlier authorization has been cancelled
and a new authorization has been issued in lieu of the earlier
authorization, application fee paid already for the cancelled
authorisation will now be adjusted against the application fee for
the new authorisation subject to payment of minimum fee of Rs.
200.
63. An Inter Ministerial Committee will be formed to redress/
resolve problems/issues of exporters.
64. An updated compilation of Standard Input Output Norms
(SION) and ITC (HS) Classification of Export and Import Items
has been published.
Directorate of Trade Remedy Measures
65. To enable support to Indian industry and exporters,
especially the MSMEs, in availing their rights through trade
remedy instruments, a Directorate of Trade Remedy Measures
shall be set up.