India’s present share in Global Trade is 0.6%, i.e., US$ 45 Billion & it has been envisaged by our planners to increase the same to 1% i.e US$ 80 Billion.World is becoming increasingly competitive & only the best & the most competitive will survive. Incentives should be made available to the industry where larger MNCs have made inroads.Chemical & Pharmaceutical Industry is the most important Foreign Exchange earner with major value additions through out the value chain. The value is added using knowledge,energy and Capital.
Chemical Industry is an important constituent of the Indian economy having approx. US $ 28 billion turnover which is approx. 7% of India’s GDP.In terms of volume, it is 12th largest in the world, and 3rd largest in Asia. Within India, it constitutes about 15% of manufacturing capacity and20% of the Excise revenue to the Government of India.Chemical industry has weightage of about 13% in the index of industrial production. The global chemical industry is valued at about US $ 1.7 trillion, of which, India’s chemical sector accounts for just 2%.
Market Development Assistance
The current financial assistance to exporters for participation in International Trade Fair is upto Rs.1.10 lacs annually.
Suggestion:In view of the dynamic global scenario, the cost of participation in International Trade Fairs is considerably high. Therefore, the financial assistance to exporters should be increased to Rs.5.00 lacs or USD 10000, for status holders This assistance would encourage manufacturer exporters to participate & enhance country’s image and manufacturing capabilities in the international arena
Reimbursement of Registration Charges
Under Market Access Initiative, Financial assistance shall be available under the scheme to the Export promotional Councils etc, for reimbursement of Registration charges for product registration abroad for Pharmaceuticals, biotechnology and agro chemicals and testing charges for engineering products.
Suggestion:The Organic and Inorganic sector which is the backbone for Pharmaceuticals, biotechnology sector is deprived from above assistance.
Therefore it is suggested to include Organic and Inorganic sector also under the preview of above said initiative.
EU REACH Proposal
EU REACH (Registration, Evaluation and Authorization of Chemicals) is a non Tariff barrier imposed by the European Union. This shall increase burden on the industry and reduce the competitiveness.
Suggestions:Govt. should create an infrastructure & a cell for assistance (Technical & financial) so that country’s export and competitiveness of the industry is not hit.Govt. should establish centers for toxicology and statistical modeling (QSAR) expertise.Testing laboratories approved by EU should be set up within India.These laboratories should adhere to various International standards. As there are going to be myriad of chemicals needing testing, this would result in saving testing cost and most importantly valuable time.
Duty Free Import of Fuel
Organic and Inorganic chemical sectors are allowed only 4% FOB value of export to import duty free fuel for captive power plants only. In the Chemical Sector, Energy is required in two forms i.e. Electrical & Thermal. Substantial energy is utilised in the form of thermal energy i.e.steam, which is very critical utility in various reaction process as well as distillation.This utilisation of steam cannot be substituted by power, as technology would not permit for the same. The fuels used for steam generation are Coal, R.F.O, Furnace Oil, L.D.O. and HSD etc. After considering steam i.e. thermal energy also in the utility, the cost of utility of chemical industry varies between 10% and 15% of the FOB value of the product exported. Therefore, it is suggested for upward revision for the duty free import of fuel for atleast 10% after considering the fuel required via steam for chemical industry.Duty free Entitlement for Status Holders for incremental growth more than 25% in FOB value.
Suggestion:The condition of incremental growth for big exporters is very high.For company’s having high turnover, incremental growth percentage wise may be less but value wise is high. Therefore, it is suggested that incremental growth limit should be brought down to 10% for Trading house & above.
Transferability of Advance Licence
Currently advance licence is issued on Actual user condition. It can be converted into Transferable, once the export obligations are fulfilled with no import of any item allowed taken place. However, if some of the inputs included in the licence have been imported, the licence can’t be converted into transferable for balance of the inputs even after the export obligations are fulfilled.
Suggestion:There are few imports which are hazardous, difficult to handle & store and the quantities are uneconomical to import by the licence holder. They can be imported by only those who can combine such licences and have the requisite infrastructure. Therefore, in such cases Advance Licence should be made transferable after fulfillment of export obligations
Revalidation of DFRC / DEPB Licences
Suggestion :Facility of revalidation should be extended subject to actual user condition as available to Advance licence holder.
Continuation of DEPB Scheme
Indian exports suffer from various handicaps namely higher transactioncost, infrastructure weaknesses with substantial delays at ports affecting imports and exports, outdated labour laws, high fuel and port cost as compared to international players. This reduces their margin of profit
Suggestion :It is suggested that we continue with DEPB scheme till we remove infrastructure impediments that reduces competitiveness.
Clubbing of EPCG Licences exist in the same licencing year
Suggestion :Facility of clubbing of EPCG shall be given to licences issued during the same policy period.
Conversion of Free Shipping bill into Advance
Licence/DFRC / DEPB/ Drawback shipping bills.
With the withdrawal on conversion facility by CBEC vide Circular no. 04/2004 dated 16.01.2004, exporters are in great disadvantageous position and are suffering looses.
Exporters at time have to make shipments under free shipping bills due to the reason beyond their control.
Denial of the conversion facility to claim the legitimate benefit has caused loss to the exporters.
Therefore, it is suggested that conversion of Free shipping bills into any Export Promotion Scheme as per exporter’s choice may be allowed.
Suggestion:Refund of terminal excise duty should be replaced by exemption from terminal excise duty.
Rational:Since 100% of excise duty is refundable to deemed exporters, a suitable bond should be devised based on excise notification No. 43/2001-CF NT dated 26/06/2001 so that no duty is collected at initial stage. Collection and delayed refund adds too the transaction costs, which is a big deterrent for deemed exporters.
Supplies made under Back to Back Letter of Credit
Suggestion : Benefit should be extended to cover advance licence for intermediate supplies/ deemed export / DFRC also as available to deemed exports supplies instead of Deemed export drawback & refund of terminal excise duty as it is a time consuming procedure.
Penalty for second extension of Export obligation period - Reduction from 5% to 1.5%.
Suggestion: The penalty for second extension is prescribed @ 5% of unfulfilled export obligation. This is too harsh and should be reduced to 1.5%, as it is improper to presume that all exporters delay the exports and therefore need to be penalised. This will consequently reduce the transaction cost and reduce burden on exporter.