India's Exporters Braving Global Trade Storm

www.thedollarbusiness.com Vol.4 Issue 08 August 2017 100 $2
With global trade in a state of concern,
India’s exporters are braving the storm. With
the recent change in tax regime doubling
headaches, India’s exports brand ambassadors
are waiting for something, anything, from the
revised Foreign Trade Policy. They do realise
however that revisions don’t always imply
better outcomes.
FTP MID-TERM REVIEW
A RELIEF PILL
FOR INDIA’S
EXPORTERS?
MANSUKH LAL MANDAVIYA
Minister of State for Road
Transport and Highways, Shipping,
Chemicals and Fertilisers, GoI
H.E. TOVAR DA SILVA NUNES
Ambassador of Brazil to India
NEERAJ KANWAR
Vice Chairman & Managing Director,
Apollo Tyres Ltd.
SUDHIR HASIJA
Chairman, Karbonn Mobiles
DEVENDRA KUMAR SINGH
Chairman, APEDA
...AND MANY MORE!
EXCLUSIVE INTERVIEWS
Cotton
It is a volume game
An opportune time to start imports
Pomegranate
The new king of fruits
Health benefits are driving exports
Eximpedia
Trust & Foreign Trade
High credibility = More business

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AUGUST 2017 II THE DOLLAR BUSINESS 3
LETTER FROM THE EDITOR–IN–CHIEF
C
risis in world trade seems to be evolving into big opportunities. And since March
this year, the air seems far pleasant than it did during a punishing 2016. The situa-
tion is akin to construction cranes once again stippling the skyline over buildings
left unfinished. The excitement is obvious.
But the momentary relief does not indicate that our brush with uncertainty is over. And
that’s the bitter truth about foreign trade. There are far too many countries, product and ser-
vice categories, sanctions, sovereign rules and mindsets to consider. In this territory, ‘being
at peace only symbolises living in denial’. No pre-tested fact, formula or notion is permanent.
Here, old ways don’t survive.
Consider this observation – why exports grew at a furious pace until 2008, then got silent
for two years before it picked up again and then, since mid-2014 has been relatively sluggish
is an occurrence not many have well-based theories to explain. And those who do will ei-
ther link it to financial market sentiments or China! But where’s the time-tested truth that
explains this gyration? There is none. In foreign trade, no fact or theory validated in the past
remains constant. There is always change in the making. One such theory is on technology.
Traditionally, it was believed that technology cannot disrupt global trade and exports.
(Affect it will. Not disrupt.) Today, it has and how! Gone are the days when Indian farmers
would sow seeds depending on whether the skies look blacker than grey. From supplies to
logistics to generation and processing of shipping bills – technology is fast emerging the
cruel-but-honest decider in the war between labour and capital. Even in the manufacturing
value chain, the tale is no different. 50 years ago, about 70% of global productivity could be
attributed to labour. Today, its share is down to 58%. With a 42% share, capital-aided tech-
nology is gradually eating into the human share across manufacturing and services sectors.
There was a time when China, as a relatively labour-abundant economy, opened up to
trade. It did well for three decades. Today, even within its borders, machines have replaced
humans, and robotics and technology are at the forefront of decision-making and imple-
mentation. Today, China’s strength clearly isn’t humans. Globally, automation will possibly
account for more than half of the manufacturing and services output by 2025, and this will
have a bearing on global trade, and especially on how a developing market like India deals
with this issue of technology taking charge of the production cycle. In the long run, you
could find the low cost-advantage of a manufacturing hotspot like India fading due to greater
automation of manufacturing processes in the First World markets. As costs of automation
fall relative to manufacturing wages and global industrial production becomes more tech-
nology-dependent, a hub like India will have to write-off advantages that it currently counts
on. So EU and USA could well become the ‘new low-cost centres’ in manufacturing in the
next decade. For exporters in India, China and Vietnam, this could mean 'new competition'.
While India’s policymakers are working to include revisions in its Foreign Trade Policy,
they will have to consider the ongoing battle against stagnation that India’s exporters are
engaged in. Thought needs to be spared for the fact that there is nothing more elastic than a
nation’s exports during a time when Trump and China are sending mixed signals on a daily
basis, and when technology may enable a return of Europe and America’s factories which
will help them relive the erstwhile glory days of the Industrial Revolution. (Imagine technol-
ogy rewinding the prowess of exporting nations to the early 19th
century days!)
India’s revised FTP will have to be made liberal enough to enable that big leap for its
exports in case ‘trade protectionism’ and ‘technology ghosts’ get harsh-
er. Pre-2008, trade was easier perhaps. No real reason why, but it was.
Today is a different ballgame.
www.thedollarbusiness/blogs/steven
EU and US could well
become the ‘new low-cost
centres’ in manufacturing
in the next decade. For
exporters in India, China
Vietnam and other devel-
oping nations, this could
mean 'new competition'.
LIVING IN DENIAL
Steven Philip Warner
President (VMPL) & Editor-in-Chief,
The Dollar Business
steven@thedollarbusiness.com
@SPWarner www.tumblr.com/blog/steven-p-warner

4 THE DOLLAR BUSINESS II AUGUST 2017
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COVER STORY16
Since the Union Budget 2017-18 had hardly anything for them,
exporters had build their hopes around the mid-term review of
the FTP 2015-2020 to address their issues. But soon after the
DGFT began deliberations with stakeholders, exporters were
hit with an even larger challenge – the implementation of the
blockbuster GST. The fineprint in the GST threw a spanner in
the works for exporters through the implementation of a pay-
now-get-refund-later mechanism as well as a high tax rate on
scrips. While exporters wait for the unveiling of the new policy,
we spoke to them about their expectations from the review.
FTP MID-TERM REVIEW
WILL
EXPORTERS’
WOES
CONTINUE?

INBOX
LETTERS TO THE EDITOR
Readers’ feedback, criticism and
appreciation that hit our mailbox
in July 2017.
MONOLOGUE
PEOPLE SPEAK
Nirmala Sitharaman on industry
status for agriculture; Xi Jinping on
China-Germany relations & more
GLOBAL TRADE
The G-20 Summit, US energy
policy, EU-Japan FTA, China’s beef
imports & much more.
INDIA TRADE
GST implementation, two-wheeler
exports to Sri Lanka, India-Israel
bilateral ties & more.
SPOTLIGHT
BRAZIL
The country is trying to get over the
commodity crisis by expanding its
export basket.
RENDEZVOUS
MANSUKH LAL MANDAVIYA,
MoS, ROAD TRANSPORT,
SHIPPING & CHEMICALS, GoI
On initiatives taken by him to
overcome global challenges.
IMPORT’ONOMICS
COTTON
While margins are narrow, the
volumes make it worthwhile.
SECRET INGREDIENT
POMEGRANATE
With consumption growing world-
wide exporters look to make hay.
POLICY MONITOR
APEDA
D. K. Singh, Chairman, on APEDA’s
initiatives to boost agro exports.
TDB FORUM
Questions about foreign trade that
hit our mail box in July 2017.
DATEBOOK
Some must-visit trade shows.
BORDERLINE
Editor’s Column
EXIMPEDIA
TRUST AND FOREIGN TRADE
Trust has been a key factor in foreign
trade ever since ships started sailing and
its importance has only gone up in the era
of Internet where buyers and sellers rare-
ly meet. But building trust does not come
easy. We giveaway the secrets of trust.
H.E. TOVAR DA SILVA NUNES
AMBASSADOR OF BRAZIL TO INDIA
Talks about the past and present state of Brazil-India
relationship and explains the roadmap for the future
to fortify the bilateral ties.
SUDHIR HASIJA
CHAIRMAN, KARBONN MOBILES
Talks about growth potential of Indian handset
market and explains how he plans to expand
the company’s footprint in Europe and Africa.
NEERAJ KANWAR
VICE CHAIRMAN & MANAGING
DIRECTOR, APOLLO TYRES LTD.
Discusses the Indian market for tyres and
company’s international gameplan.
06
12
38
40
48
54
14
32
10
34
60
62
66
46
44

WE VALUE YOUR FEEDBACK, WHETHER CRITICISM OR APPRECIATION.
AND HERE ARE A FEW THAT HIT OUR MAILBOXES IN JULY 2017
The July 2017 cover story, Export
Factoring – Visible yet locked away
from Indian exporters, was an excellent
read. In fact, we have been waiting
for someone to cover the topic in de-
tail; and it happens to be The Dollar
Business that published it. Factoring,
as we understand, is a mechanism
that wholly solves all working capital
woes, backed by timely realisation of
export proceeds and credit protec-
tion. It is an excellent working cap-
ital financing solution for MSMEs
and small-scale merchant-export-
ers like us. This is the need of the
hour, and we would like to thank
the entire editorial team for bring-
ing out such a well-researched
story. Do keep up the good
work and continue to educate
the trade community with your
trademark stories.
S. SARAVANAN
Proprietor, Magee Exports
Dindigul, Tamil Nadu
+91-9487178XXX
mageeexports.india@gmail.com
Iam a subscriber of The Dollar Business. The magazine
has been a great resource and has helped us under-
stand the market better. Going forward, I would like to
request you to initiate an exclusive new page in the maga-
zine that is dedicated to beginners in the business. Also, I
would like you to publish more stories that cater to coastal
states like Gujarat.
PREET KAKKAD
+91-9327467XXX
preet.kakkad@gmail.com
The Dollar Business is a fabulous magazine. I really
enjoy reading its content, and I must admit that the
July edition was very educational – I am sure other read-
ers felt the same. I also enjoyed reading the story on ‘fro-
zen cuttlefish’. If you could publish some more articles on
www.thedollarbusiness.comVol.4Issue07July2017100$2RNI:APENG/2014/54643
www.thedollarbusiness.com Vol.4 Issue 07 July 2017 100 $2
MANOHAR AZGAONKARMinister for Tourism, Goa
A. M. NAIKGroup Executive Chairman,Larsen & Toubro Ltd.H.E. MOHAMED MALIKIAmbassador of Morocco to India
LEE KHENG LEONGDirector - Asia Chapter,Factors Chain International (FCI)
V. DHARMARAJANExecutive Director, ECGC Ltd.
TUSHAR BUCH
MD & CEO, SBI Global Factors Ltd.
...AND MANY MORE!
EXCLUSIVE INTERVIEWS
Despite its advantages that are visible to the naked eye, for the common Indian exporter,
factoring has for long remained a concept too complex to digest. Lack of awareness and accessibility
to this tool are to blame. Will anything change and anytime soon?
EXPORT FACTORINGVISIBLE YET LOCKED AWAY
FROM INDIAN EXPORTERS
inbox editorial@thedollarbusiness.com
SMS your views to +91-7680-80-7111
exports of salt and fish from
India, and explain how our
competitors are perform-
ing, the current trend, etc.,
it would be very helpful for
many businesses across the
country.
D. JEYASON
+91-9443657XXX
jeyason_ca@yahoo.co.in
Iwould like to congratulate The
Dollar Business team for pub-
lishing some well-articulated and
enriching cover stories over the
last few months. I really enjoyed
reading the story on anti-dump-
ing, and your last month’s cover
story on export factoring was an
eye opener. Continue encouraging
us to scale new heights.
GAURAV VARSHNEY
+91-9540056XXX
gaurav@rkagroexport.com
The June issue of the magazine was a great read. The
cover story, ‘GST – A catalyst or deterrent for India’s
exports?’, was very insightful. We all know that the impact
of GST on the EXIM community is enormous and it will
continue to linger on for a long time. Thus, we want The
Dollar Business magazine to continue supporting the com-
munity by publishing more GST-related stories and help
India’s exporters sail through the maze of GST regime.
ATEE SHUKLA
+91-9810503XXX
ateeshukla@yahoo.com
The information provided on your website is very useful.
It has plenty of data for exporters and importers.
A. SINGHAL
Suman Exports
+91-9831474XXX
auggustussinghal@gmail.com

Agriculture is going to be
the biggest component
of our exports and therefore,
yes, I would be in favour of
agriculture being accorded
industry status.
NIRMALA SITHARAMAN
INDIAN COMMERCE AND INDUSTRY
MINISTER
On industry status for agriculture
Chinese-German relations
are now about to have a
new start where we need new
breakthroughs.
XI JINPING
CHINESE PRESIDENT
On international cooperation between
China and Germany
Source: Reuters
THE RISE IN PROTECTIONISM THREATENS
THE GAINS FROM GLOBALISATION.
NARENDRA MODI
INDIAN PRIME MINISTER
while talking about protectionism during his speech at the G20 Summit
Source:ReutersUKSource:PTI
We’re working on a trade
deal which will be a
very, very big deal, a very
powerful deal, great for both
countries.
DONALD TRUMP
PRESIDENT OF THE UNITED
STATES OF AMERICA
On US-UK trade relations
Our relationship needs to
be based on searching
for ways to generate mutual
respect, build confidence
and work with a positive
attitude. I can say that I saw
that willingness in President
Trump.
ENRIQUE PEÑA NIETO
MEXICAN PRESIDENT
On US-Mexico relations
While we are looking at the possibilities
of cooperation to benefit everyone,
globalisation is seen by the American
administration more as a process that is not
about a win-win situation but about winners
and losers.
ANGELA MERKEL
GERMAN CHANCELLOR
On the US approach to globalisation
Source:www.ft.comSource:PTI
Source:CNNSource:IMF
Just as the global crisis generated the
momentum for effective multilateral action,
we too must use the global economic recovery
to continue our collaboration to address risks
and ensure strong, sustainable, balanced and
inclusive growth.
CHRISTINE LAGARDE
MANAGING DIRECTOR, IMF
On strengthening the global economy
monologue

SMS TDB MONEY TO 56161
SAY GOODBYE TO ALL YOUR WORKING
CAPITAL WOES WITH
DON’T MISS OUT ON AN
EXPORT OPPORTUNITY
JUST BECAUSE YOU ARE
RUNNING SHORT OF CASH
SHIP.
RECEIVE.
CELEBRATE.

GLOBAL
TRADE
LAST MONTH
GLOBAL
TRADE
LAST MONTH
I
t was a case of ‘US’ against ‘them’ at the 12th
annual G20 Summit, held in July in Hamburg, Germany. Amidst anti-capitalist
protests, leaders from 20 nations met to discuss politics, economics and the future of trade relations across the world. The top
issues were the Paris Climate Accord (and the US’s withdrawal from it) and growing protectionism across the world. Demand to
ensure the unaffected implementation of the Paris Climate Accord was led by the BRIC nations – Brazil, Russia, India and China.
The quartet also stressed on the other G20 members the importance of maintaining a free, fair and open trading system across the
world. The final statement from the summit reaffirmed commitment to the climate deal, despite the US dropping out. The summit
also reinforced the need for more open, free reciprocal trade relations between nations.
This G20 Summit was also an important one for British Prime Minister Theresa May who, after her rather disappointing perfor-
mance during the recently concluded snap elections, has been working on shifting attentions towards developing a strong BREXIT
strategy and forging stronger relationships with key trading partners. May has expressed hope that many trade deals will emanate
from discussions she had with world leaders at the summit. Though the summit lacked the hype and grandeur of the previous edi-
tions, it was a relief to see that most world leaders are moving in the direction of free and responsible trade policies.
US
ENERGY POLICY
In reverse gear
As the world moves away from carbon fuels, US President
Donald Trump in a ‘not so surprising’ move announced a
new pro-coal export policy. The announcement comes on the
heels of the US pulling out from the Paris Climate Accord, ear-
lier this year. Aiming to develop “coal dominance”, President
Trump announced that US will be increasing its exports of coal
and LNG in the year ahead.
While Mexico has been an important export destination for
coal, the Trump administration hopes that in the coming days,
US will expand exports to countries like Ukraine that have a
growing demand for coal. The Trump administration further
hopes to expand the market for coal by rolling back restrictions
on financing of coal projects overseas.
LNG is another product category where Trump is looking to
increase exports. While US oil and gas production has doubled
over the last few years, at one point in time, the US was one
of the world’s largest importers of LNG, a tag that the Trump
administration hopes to shrug off completely in the coming
US export of crude oil and petroleum
Exports have been steadily growing over the last few years
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Apr-13 Apr-14 Apr-15 Apr-16 Apr-17
Source: TDB Intelligence Unit and USEIA;
figures in 1,000 barrels per day; April 2013- April 2017 period
days. Currently, US has one LNG-producing export facility in
Louisiana and is constructing four other export facilities (to be
operational by 2018). The administration is expected to make
more changes in its energy policy as it reviews the struggling
domestic nuclear industry. It also announced plans to increase
areas under drilling in the Arctic and Atlantic Ocean.
While the policy has been hailed as not as radical as expect-
ed, pundits are still refraining from placing bets on the effec-
tiveness of this move to boost energy exports from US.
TRADE SUMMIT
G20 TALKS
United we stand?
TRADE SUMMIT
G20 TALKS
United we stand?

News & Analysis
News & Analysis
US
TRADE DEFICIT
On the path to glory
While it’s still a long way before US can
celebrate complete autonomy from im-
ports, if that is even possible, this latest
piece of news will, without doubt, be a
statistic that followers of the “tweet-hap-
py” President are expected to hear quite
frequently in the coming days.
According to latest statistics, US trade
deficit has narrowed, courtesy of an in-
crease in exports and decline in imports
across a number of sectors.
US Commerce Department data sug-
gests that trade deficit in May 2017 saw
a month-on-month (m-o-m) decline of
EU-JAPAN
FTA
East-west bonhomie
With EU and Britain moving towards a
complete separation, the failure of TPP
and the rise of the Trump brand of pro-
tectionism, EU leaders, especially Ger-
many’s Chancellor Angela Merkel, have
been stressing on the need for the Euro-
pean Union to strengthen its trade ties
with other nations.
Among the many deals that are being
negotiated the first deal to see the light
of day was the EU-Japan FTA. The first
signs that the deal was near finalisation
came during a meeting between senior
officials that included Japanese Foreign
Total trade between EU and Japan
Bilateral trade touched €124.6 bn in CY16
130
125
120
115
110
105
100
CY12 CY13 CY14 CY15 CY16
Source: TDB Intelligence Unit and EU Trade Commission; figures in € billion
Minister Fumio Kishida and European
Trade Commissioner Cecilia Malm-
strom. The final decision was taken in
Brussels by leaders of both countries,
Prime Minister Shinzo Abe of Japan and
EU joint chiefs Donald Tusk and Jean-
Claude Juncker.
Through the FTA, Japan has agreed to
“open some economic areas” in the Japa-
nese market. Tariffs on bilateral trade are
to be phased out over a period of time.
Trade between Japan and EU account
for a significant part of the world’s to-
tal trade, but trade barriers have been
a major obstacle for expansion of trade
between these two entities. With an FTA
in place, EU exporters are hoping to see
an increase in demand for their products
in the Japanese market. The free trade
accord is expected to come into force in
the first half of 2019.
This deal is a breath of fresh air in a
global atmosphere where protectionism
is once again raising its ugly head.
US trade deficit in CY2017
Trade deficit shrank 2.3% m-o-m in May
50
49
48
47
46
45
44
43
42
January February March April May
Source: TDB Intelligence Unit and US Census Bureau;
figures in $ billion; break-up for CY2017
2.3%. The increase in exports of petro-
leum goods, motor vehicle parts, etc., has
been a major contributor to this decline.
In terms of destinations, Canada, Mexi-
co, Germany and China were important
contributors to the growth in exports,
with US exports to these countries wit-
nessing a m-o-m increase of 5.4%, 7.4%,
3.6%, and 9.6%, respectively, in May
2017. And there seems to be more good
news in the offing. According to Atlan-
ta Federal Reserve, US GDP is expected
to expand at an annualised pace of 3%
y-o-y in the second quarter of the year.
An improved world economy and
a weak dollar are also expected to help
boost these figures in the months ahead.
For now, things seem on an upswing. But
the long-term impact of these changes
on US economy will become clear only
once the numbers for the second half of
the year are out.
CHINA-US
BEEF TRADE
No “beef” about beef
Looks like there is at least one thing US
and China can agree on, and not surpris-
ingly, it’s food. After a 14-year ban on
imports of beef from US, China is set to
open its doors to American beef.
Recently concluded talks between
China and US saw several specifications
being finalised for restarting the trade of
beef. New specifications will now make
all details on the sources of US beef avail-
able to the Chinese importers.
China is one of the largest importers
of beef in the world with a steady growth
in demand. The ban was placed after
the break out of bovine spongiform en-
cephalopathy (BSE), commonly known
as Mad Cow Disease in Washington in
2003. The outbreak in 2003 had cost US
$11 billion in exports in the first three
years of the ban itself.
With China settling this dispute with
US, can these two economies now re-
solve other ongoing issues that have been
impacting their trade relations?

INDIA
TRADE
LAST MONTH
A
fter months of agonising debates and discussions, India
finally stepped into the GST-era, amidst much pomp and
grandeur! While India is not the first country to introduce
such a tax structure, the tax reform is the biggest since indepen-
dence. It wasn’t surprising though to see that from the get-go GST
wasatthereceivingendofitsownshareof bouquetsandbrickbats.
The new unified, four-tier tax system, according to its makers,
is expected to help increase the competitiveness of Indian prod-
ucts and services in the global market. While there has been some
cheer regarding the replacement of numerous taxes and exclusion
of products from sectors such as agriculture from GST, many sec-
tors which have products in the 18% and 28% slab have expressed
concerns on its impact and its complicated compliance require-
ments. For the foreign trade community, while Indian exports are
zero-rated, the inclusion of imports under IGST and the issue of
restricting the use of duty scrips to certain duties have been sore
points. Scrips from various export incentives and duty remission
schemes can now be applied for only at a later date and can be
used only for paying customs duty. While the Commerce Ministry
has promised a quick 7-day processing of these requests, it’s safe to
say that the trade community is not so certain. Exporters also fear
that MEIS and SEIS rates may undergo a downward revision, but it
seems they will have to wait till September for more clarity, as that
is when the mid-term review of the FTP is expected to be released.
Talks on GST in India have crossed borders too and now neigh-
bouring countries such as Nepal are also feeling the impact. In-
dian ports like Kolkata are import ports for many goods coming
into Nepal. Under GST, as imports will be taxed, Nepali traders are
concerned about the increase in prices for goods brought into the
land-locked nation through India.
ports of vehicles to Sri Lanka from var-
ious destinations had seen a decline over
the last year due to an increase in import
duty. The move was made to promote
manufacturing in the country.
Despite the hike in import duties, Sri
Lanka remains an attractive market for
Indian two-wheeler manufacturers. In-
dia’s leading two-wheeler makers Honda
Motorcycle and Scooters India and Bajaj
Auto consider the island nation to be
one of their key export markets. Yamaha
India has also announced that they have
started exporting their mid-range Yama-
ha FZ 25 to Sri Lanka this financial year.
Now, if Piaggio manages to strike gold
in exports to Sri Lanka, will this move
open doors for more exports of mid to
higher-end two wheelers from India?
Well, if Piaggio’s success in India is any-
India’s exports of vehicles
Two-wheelers account for a 67% share
Passenger vehicle Commercial vehicle
Three wheeler Two wheeler
Source: TDB Intelligence Unit & SIAM; break-up for FY2017
67%
22%
3%
8%
thing to go by it is more than likely that
they will succeed in Sri Lanka unless
they fall prey to protectionist policies.
GST
TAX POLICY
A long road ahead…
INDIA-SRI LANKA
TWO-WHEELER EXPORTS
A smart leap?
Conceptualised in Italy, ‘Made in India’,
driven in Sri Lanka seems to be the latest
mantra for Piaggio, makers of popular
two-wheeler brands such as the classic
Vespa and modern-day Aprilia. Piaggio
which has a manufacturing unit in In-
dia has begun exporting its India-made
two-wheelers to Sri Lanka.
Through this move, the Italian
two-wheeler maker is hoping to expand
its reach within the region by using India
and its existing manufacturing facility as
a springboard. The Indian manufactur-
ing unit, which is located in Baramati,
Maharashtra, was inaugurated in 2012.
However, it’s worth noting that ex-

News & Analyses
In what was the first visit by an Indian
Head of State to Israel, Indian Prime Min-
ister Narendra Modi embraced his Israeli
counterpart Benjamin Netanyahu and ex-
pressed joy on meeting his “brother”.
As a part of Modi’s visit, the two nations
signed seven memorandum of under-
standings (MoUs) pertaining to exchange
of information and development of infra-
structure. This includes the setting up of
a $40-million India-Israel Industrial R&D
and Technological Innovation Fund, a stra-
tegic partnership in water and agriculture,
as well as scientific cooperation in areas
such as satellites, atomic clocks, etc. The
two nations also emphasised on the need to
begin negotiations for an “Protection of In-
vestment” agreement to strengthen the bi-
lateral ties. Israel has also eased visa norms
for Indians and will be issuing five-year
multiple entry visas to Indian businessmen
to further boost trade and promote peo-
ple-to-people exchange
While India and Israel have had political
differences in the past, this visit is expected
to give the economic relationship between
both nations a fillip. It’s worth noting that
Indo-Israel trade has seen a steady growth
over the years despite some fluctuation in
trade numbers. Bilateral trade, which be-
gan in 1992, has increased from $0.2 billion
in FY1992 to $5.02 billion in FY2017.
INDIA-ISRAEL
BILATERAL TRADE
Brothers in arms
MOBILE PHONE
IMPORT POLICY
The cheer is back
Does Prime Minister Modi’s ambitious
‘Make in India’ plan gel with his other
grand economic reform, the GST? Well,
it seems so! Domestic handset manu-
facturers had been reaping the benefits
of a differential tax structure that made
smartphone imports 11.5% costlier than
India-made handsets. So when a 12%
GSTratewasdecidedonmobilephones,
it raised significant concerns amongst
India’s handset manufacturers who had
a sit down with the concerned authori-
ties earlier in the year. For, such a policy
change would have benefitted importers
by leveling the playing field for both im-
porters and local manufacturers. Come
today, and the concerns of manufactur-
ers seem addressed – the government
INDIA-EU
RICE EXPORTS
Hitting a bump
EU regulations on health and safety
have been a constant concern for Indian
exporters over the years. The latest In-
dian export to be hit by stringent rules
is basmati rice. The regulation is with
regards to the maximum residue limit
(MRL) of the chemical fungicide tricy-
clazole. The limit has now been reduced
from 1 parts per million (ppm) to 0.01
ppm. This new directive will be in effect
from January 2018.
This has raised flags with exporters
who say that a drastic reduction of tri-
cyclazole concentration in basmati rice
would be difficult to implement imme-
diately and could impact India’s exports
News & Analyses
India’s exports of basmati rice
Exports declined 7.35% y-o-y in FY2017
6
5
4
3
2
1
0
FY13 FY14 FY15 FY16 FY17
Source: TDB Intelligence Unit and Ministry of Commerce,GoI;
HS Code: 10063020; figures in $ billion
has levied a basic customs duty of 10%
on imports of mobile phones and some
accessories like charger, headset, etc.,
w.e.f. July 1, 2017. The move has brought
back the cheer to the domestic handset
manufacturing industry. Now the ques-
tion is: will foreign brands ‘Make in In-
dia’ and play by Modi’s rules or will In-
dian consumers be willing to pay higher
prices for their preferred brands? Your
guess is as good as ours.
to EU. Concerns have also been raised at
the possibility that, in the wake of these
regulations, India would end up losing
its export market to neighbouring coun-
tries like Pakistan.
According to APEDA, India is one
of the world’s largest exporters of bas-
mati rice. Apart from Europe, other im-
portant markets are Saudi Arabia, Iran,
United Arab Emirates, Iraq and Kuwait.
In FY2017, India exported a total of
4 million metric tonnes of basmati rice.
The industry insiders state that the regu-
lation would take at least two crop cycles
to implement and as such the industry
could lose a lot of business to neigh-
bouring countries like Pakistan. India
exports the PB1 and 1401 varieties to
Europe, which usually have the permis-
sible 0.03% tricyclazole content.
India is not the only country to be im-
pacted by this. Countries like Spain and
Italy are facing a similar predicament.
Indian exporters are now in a fix and
have appealed Prime Minister Modi to
intervene and are keeping their fingers
crossed that the government will act as
an effective mediator.

COVER STORY FTP 2015-2020 MID-TERM REVIEW
FTP 2015-2020
MID-TERM
REVIEW
WILL IT
BE A 'POLICY
REVISION'
WORTH THE
WAIT AND
EXPECTATIONS?

TDB INTELLIGENCE UNIT
India's exporters got little from this year's
Union Budget. The recently implemented
Goods and Services Tax (GST) further left
them confused. They now can't wait to learn
what 'happy surprises' the mid-term review
of the Foreign Trade Policy has in store for
them. And not to say, their expectations
from the mid-term review have changed
in the past weeks. [It's just getting bigger!]
The Dollar Business reaches out to India's
EXIM community to learn what it desires
from the FTP revision and how GST has
impacted its wishlist.
T
he good news is that over
the last few months, ex-
ports from India are on
the rise. The not so good
news is that while exports
moved up y-o-y by 5.33% to $276.28 bil-
lion in FY2017, it is still way below the
$314 billion mark touched in FY2014
and a far cry from the $900 billion target
that FTP 2015-2020 had set for FY2020.
While there is no doubt that the For-
eign Trade Policy (FTP) 2015-2020 went
a long way in simplifying procedures
and improving ease of doing business, its
impact on the growth of India's exports
has been at best limited. And the govern-
ment, not blind to this fact, is presently
undertaking a midterm review of FTP,
which, following deliberations with all
stakeholders, is expected to be unveiled
in September this year. And high time
too! Between the beginning of the delib-
erations on the review and now, the 'big-
gest tax reform' in India – the Goods and
Services Tax (GST) – was implemented
on July 1, 2017. And it brought forth
many new challenges for the exporters.
So much so that when The Dollar Busi-
ness questioned exporters on issues
even unrelated to the new tax regime,
they replied saying most of their pres-
ent challenges emanate from the GST
and more than anything else, that is
what they want addressed in the review.
Sure there are other long pending de-
mands related to Advanced Authorisa-
tion Scheme, changes to SION and the
usual suspects like increasing the rates of
incentives and remissions, but challenges
that have arisen due to the GST seem to
be bothering exporters the most.
THE GST CONUNDRUM
Back in May 2015, after FTP 2015-2020
was released with much fanfare, the-then
Director General of Foreign Trade, Pra-
vir Kumar, had told The Dollar Business,
“We have removed all the confusion and
overlapping that existed in FTP 2009-
2014. We have clubbed together various
schemes; and most importantly, the new
policy has liberalised the utilisation of
duty credit scrips.” Well, implementation
of the GST seems to have brought back
the confusion and managed to deliber-
alise the utilisation of duty scrips at one
fell swoop.
Let us first talk about the limitations
that the implementation of GST has im-
posed on the usage of duty scrips, be-
cause that seems to be a pain point that
all Export Promotion Council (EPC)
heads that The Dollar Business spoke to
share. For the uninitiated, duty scrips
are incentives offered to exporters by
The Directorate General of Foreign
Trade (DGFT) under export promotion
schemes – Merchandise Exports from In-
dia Scheme (MEIS) and Services Exports
from India Scheme (SEIS) – which can be
used to offset various taxes that exporters

need to pay. Earlier the scrips could have
been utilised to pay customs duties, ex-
cise duties and service tax. Now, with the
implementation of GST the only avenue
for utilisation of the scrips is to offset ba-
sic customs duty (BCD) as the other du-
ties have been subsumed under GST.
The scrips cannot be used for pay-
ment of Integrated GST (IGST) and GST
Compensation Cess which is levied on
imports, and Central GST (CGST), State
GST (SGST), IGST and GST Compen-
sation Cess on domestic procurements.
The concern therefore is that exporters
may not be able to completely use the
scrips within the validity period of 24
months. Agreeing to the fact, Satish W.
Wagh, Chairman, Basic Chemicals, Cos-
metics & Dyes Export Promotion Coun-
cil (CHEMEXCIL) says, “We would like
the government to lift the limitation on
TDB: What suggestions has AEPC given to the government
with respect to the FTP mid-term review?
Ashok G. Rajani (AGR): AEPC have requested the govern-
ment to revise the MEIS rates and increase the incentives to
5%. This can help exporters offset the compliance burden aris-
ing out of GST. We have also asked the government to increase
the Rebate of State Levies (RoSL) rate to 5% as GST will lead
to an increase in transaction cost. As RoSL is not a part of the
FTP, we are taking the matter of continuation of RoSL with the
relevant authorities as its continuation is critical for the growth
of the industry. Post GST, MEIS srips can be used only for pay-
ment of Basic Customs Duty. We hope the FTP mid-term re-
view will help change the policy so that the scrip can be used to
off-set other export-related expenditure that are not presently
under the refund-route in the GST scheme – like import duty
on capital goods, construction of new units in apparel parks,
etc. The sectors biggest concerns are presently related to GST.
TDB: Would you want any change in SION?
AGR: Standard Input Output Norms (SION) is an area of con-
cern. We want SION to be updated to include new products
and categories which have come up since they were formulated.
TDB: Does the export target of $900 billion by FY2020 seem
feasible at all at this time?
AGR: After two years of stagnation, India’s exports in FY2017
clocked a positive growth of 2.9%. Schemes like RoSL, interest
subvention, duty drawback and extension of EPCG scheme,
have helped our sector. Speaking about the export target for
the apparel industry, the target is $35 billion by 2018, which
is steep. But, the industry has reacted very positively to the
special package, and has grown at a rate of over 30% last year.
Though the industry will need a lot of support to tide over the
impact of GST, nothing is unachievable.
TDB: What would be the impact of GST on the sector?
AGR: Calculations based on pre- and post-GST rates suggest
that t-shirts, shirts, trousers, dresses and blouses would be
cheaper under GST – provided they are branded and are priced
above Rs.1,000. But, in case of unbranded garments there will
be no change because the GST rate is 5%, the same as the erst-
while VAT. Raw cotton will be a little cheaper, but cotton yarn
will be more expensive since it falls under 5% GST. Similarly,
exports of cotton yarn will be a little expensive. Since the input
tax credit is available, composite mills will benefit.
ASHOK G. RAJANI, CHAIRMAN, APPAREL EXPORT PROMOTION COUNCIL (AEPC)
“WE NEED GOVERNMENT SUPPORT
TO TIDE OVER THE GST IMPACT”
Although India's exports has been rising over the last few months, the target of $900 billion in
exports by FY2020 still seems like a pipe dream.

TDB: What are your expectations from the FTP 2015-2020
mid-term review?
Ajay Sahai (AS): The mid-term review is being done at a
time when the global situation looks very uncertain. Emerg-
ing economies are facing a downturn, advanced economies
are embracing protectionism and there is extreme volatility in
currencies. On the domestic front, while GST has come as a
harbinger of new India, the new regime has posed many chal-
lenges for exporters. Export growth has been good in last nine
months or so, but we are still far from the $300 billion that we
achieved in FY2012. Also, recently, there has been an upsurge
in imports increasing our trade deficit by over 100% in the first
quarter of this fiscal year. India has ratified the Trade Facilita-
tion Agreement which has come into operation this year. So,
with these in the background, exporters are expecting a lot
from the mid-term review. I think the government must adjust
the exports target based on the state of the global economy and
India’s manufacturing growth rate. Also, many of the schemes
introduced in the FTP 2015-2020, with the solitary exception
of SEZ, have lost their charm with the imposition of IGST on
imports. The mid-term review of the policy must address the
concerns of exporters emanating from the GST regime.
TDB: Exporters are concerned about how GST has limited
the avenues for utilisation of duty credit scrips. How do you
see this impacting the exporting fraternity?
AS: The premium on the scrips has already declined and there
are question marks over the utilisation of the scrips. On a BCD
of 5% and additional duties of 18%, the exporters could utilise
the scrip within a period of one year. Now, the same exporters
would require four years time to utilise the same. The validity
being two years, the exporter has no other option but to sell/
transfer the scrip. The rate of GST on such transfer is expected
to be 18%. But, we have argued for a zero GST rate on trans-
fer/sale of scrip or at best at 5%. If the premium on the scrip
comes down, it will be a loss to the exporter. Assuming that the
premium comes down to 80%, the exporter will get 80% of the
due while the final importer will get 100%. This is not a fair sit-
uation for exporters. We, therefore, urge that the government
to allow utilisation of the scrip for payment of CGST, if states
are not agreeing for payment of IGST. Moreover, DGFT should
look for new avenues for utilisation of the scrip while simulta-
neously extending its validity to a period of at least three years.
If exporters are forced to go for distress sale of scrips it may
bring down the premium further.
AJAY SAHAI, DIRECTOR GENERAL & CEO, FEDERATION OF INDIAN EXPORT ORGANISATIONS (FIEO)
"WE'VE ARGUED FOR A ZERO GST RATE
ON TRANSFER AND SALE OF SCRIPS"
TDB: What are the key expectations of plastics exporters
from the mid-term review of FTP 2015-2020?
Pradip Thakkar (PT): Implementation of Goods and Services
Tax (GST), with applicable tax rates of 18% and 28% on plastic
products, will create unnecessary fund blockage. Although the
government has promised to refund 90% of the IGST within
a week, it will add to the cost in terms of the interest on the
working capital loans. Further, we also want the government
to relax the limitations it has imposed on the utilisation of duty
credit scrips granted as rewards under MEIS.
TDB: Would you also want any change in the value addition
norms under Advance Authorisation and DFIA schemes?
PT:Manyatimethereisahighturnoverofproductswhichhave
lower value-addition, but these products can’t be ignored
as the volumes are phenomenal. As long as the export-
ers are adding value on a regular basis, they should be al-
lowed to avail the Advance Authorisation scheme. In sec-
tors like chemicals and fabrics, there are many products
with minimal value addition. For example, in our sector,
the process of converting the plastic granules into film or sheets
is not very capital intensive and the value addition achieved is
also low. But these products are important to our export basket.
Hence, the value addition clause needs to be relaxed.
PRADIP THAKKAR, CHAIRMAN, THE PLASTICS EXPORT PROMOTION COUNCIL (PLEXCONCIL)
“THERE IS AN URGENT NEED TO
RELAX VALUE ADDITION NORMS”

utilisation of duty credit scrips in the up-
coming Midterm Review.”
Giving an example of how the lim-
itation on the utilisation of scrips will
impact exporters, Ajay Sahai, CEO &
Director General of Federation of In-
dian Export Organisations (FIEO) tells
The Dollar Business, "With a BCD of 5%
and other duties like CVD and ACD of
18%, the exporters could utilise the scrip
within a period of one year. Now, the
same exporters would require four years
time to utilise the scrips." In a situation
like this, exporters will be compelled to
sell or transfer their scrips in the open
market, and herein lies another major
obstacle since the GST on sale of scrips
will now attract a duty of 18%, as they fall
under the residual category [the DGFT
in a tweet though has said that scrips un-
der Chapter 3 of the FTP will attract 12%
duty under HSN classification 4907, sub-
ject to clarification by the Tax Research
Unit (TRU). The question is who will get
the clarification issued – the DGFT or
individual exporters?] against the earlier
VAT incidence of 4%.
Scrips are typically traded at a dis-
count. So if we take the discounted mar-
ket value of a Rs.100 scrip to be Rs.92,
in the VAT regime the buyer would
have paid a total of Rs.95.68 (Rs 92 plus
Rs.3.68 as VAT), while in the GST re-
gime, the buyer of the scrip will end up
paying Rs.108.56 (Rs.92 plus Rs.16.56 as
GST). The second situation is clearly less
attractive. Also, purchase of duty scrips
will become a viable option for the buy-
ers only if they can claim the Input Tax
Credit (equivalent to GST paid while
procuring the scrip). All such complica-
tions with tradability of scrips could fur-
ther pull down the premium (read price)
of the scrips.
FIEO's Sahai estimates that under this
situation a Rs.100 scrip is likely to sell for
Rs.80 in open market. O. P. Prahladka,
Chairman, Export Promotion Council
for Handicrafts (EPCH), agreeing with
the estimates says, “GST will compro-
mise at least 20% of the premium on
MEIS scrips." Clearly, this will put ex-
porters at a disadvantage as without more
avenues for offsetting the scrips, export-
ers will have to sell their scrips at a deep
discount. This in turn, will significantly
eat into the charm of MEIS and SEIS, the
flagship schemes promulgated in the FTP
2015-2020. Exporters in such a situation
will also be forced to pass on the costs
to buyers, which is then likely to hurt
the competitiveness of their products in
global markets, and ultimately result in a
decline in exports from India.
Several EPCs have requested the gov-
ernment to increase the avenues for util-
isation of the scrips and increase their
validity period. In fact, FIEO has also
requested that trading of scrips be ex-
empt from GST or at the most attract 5%
GST. The other suggestion that has been
offered to the government is that trading
of scrips be treated in the same way that
trading of securities are treated. Export-
ers hope that the review will consider
these suggestions and give exporters a
solution that will not suck the lives out
of flagship schemes of the current FTP.
The other major issue that has ema-
nated from the implementation of GST is
the withdrawal of exemptions under Ad-
vance Authorisation (AA) and Duty Free
Import Authorisation (DFIA) schemes.
Under the GST regime, while exemption
from payment of import duties, includ-
ing BCD, anti-dumping duty, safeguard
duties and customs cesses continue, there
is no exemption from payment of IGST
and GST Compensation Cess for im-
ports under AA and DFIA. Previously,
an exporter need not have funded the tax
portion of imports for production of the
goods. That will be necessary under GST.
While the government has said that 90%
of refund/ credit on these taxes paid will
be issued within seven days of filing all
necessary documents, exporters fear that
this is impractical. "Under GST regime,
only BCD will be exempted and IGST
will have to be paid. This would make
Advance Authorisation completely unvi-
able as duties will be paid upfront at the
time of import. We have suggested the
new norm be waived off. Otherwise ex-
ports will drop," says T. S. Bhasin, Chair-
man, Engineering Exports Promotion
Council (EEPC).
What's more? The Advance Release
Order (ARO) facility available for do-
mestic procurement of inputs under AA
has been restricted only to certain inputs
[listed in the Fourth Schedule of CentralSource: TDB Intelligence Unit and Ministry of Commerce,GoI; figures in $ billion
India’s merchandise exports since April 2014
Between FY2015 and FY2017 India's exports has gone down by about 11%
30
25
20
15
10
05
00
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
FY2015 FY2016 FY2017
LIMITATIONS ON
SCRIP UTILISATION
WILL RESULT IN A
DECLINE IN SCRIP
PREMIUMS
Most exporters are not happy with the Ad-
vance Authorisation Scheme as they believe
that the Standard Input Output Norms are
completely flawed.

Excise Act, 1944 (CE Act)] such as tobac-
co and petroleum products. Therefore,
AA cannot be used for domestic procure-
ment of other inputs. What will therefore
happen is that a significant portion of an
exporter's working capital will remain
blocked with the government, thus rais-
ing his cost of capital. With cost of capital
already high in India, when compared to
other exporting nations, this could have a
negative effect on the competitiveness of
Indian goods and services in the interna-
tional marketplace.
The treatment for EPCG is simi-
lar. EPCG scheme was formulated to
encourage manufacturer exporters to
import capital goods including spares
for pre-production, production and
post-production activities at zero duty
subject to an export obligation (EO) of
six times of duty saved on capital goods
imported under the EPCG scheme, to
be fulfilled in six years from the authori-
sation issue date. This was expected to
give a boost to exports of high-value
and value-added products from India,
something that the government has
been trying to promote. Under GST, the
exemption from import duties under
Manish Karajia
Chairman, Jute Products Development & Export Promotion
Council (JPDEPC)
As scrip utilisation will go down, we believe most exporters will have to
invest 15-20% extra working capital in the business. And, there is a lot of
uncertainty in the refund process as of now. I think the reverse charge mech-
anism under GST is unnecessary. Add to that the fact that an exporter is now
liable to pay taxes on the supply of goods and services from unregistered suppliers. Since job
work is quite extensive in our sector, a 5% GST on job work that has been imposed on items
from yarn to fabric has put us at a disadvantage. One must keep in mind that almost 60%
of the job work in our sector is done by the unorganised cottage industry players and hence
exporters would now end up paying the taxes for the job work. We believe, 4% of the capital
will have to be spent on paying taxes on job work. Another issue we are currently facing is
that the jute shopping bag has been clubbed in the 18% GST slab with luxury handbag. We
want the FTP to revisit these issues.
Puran Dawar
President, Agra Footwear Manufacturers & Exporters
Chamber (AFMEC)
Exports from the footwear sector is already under pressure, and as such
it has huge expectations from the FTP review. We hope the review re-
lieves the sector from some of the GST related compliance and teething
issues. As for drawbacks, I believe, we were already under incentivised. Be-
fore GST, utilising AIR norms, we used to get 9.5% duty drawback – of which about 50% could
be said to be our actual costs and 50% would be incentives. But now, we are paid only for the
actual. To cover GST-related compliance costs, we need at least 2% increment in benefits
under MEIS. Also under the FTP review, deemed duties should be generously taken care of
because in many of our products the share of deemed duties is quite significant.
TDB: What are the key issues that the FTP 2015-2020 mid-
term review must revisit?
Mukesh Bhatnagar (MB): The dictum of exports is ‘export
goods and not taxes’. So, any tax incurred during the produc-
tion of goods or during exports must be rebated through a sim-
ple, transparent and acceptable procedure. Speaking of GST,
the pay-first-and-get-a-refund-later mechanism under GST is
creating a hassle because exporters don’t know if the refund
will happen as promised. I believe FEIO has been raising the
issue with the government for some time and there has been an
emphasis on developing a mechanism to give exporters some
form of a rebate. If we look at other countries and their expe-
riences, we will find that they have a system of refund of taxes
which go into the production of goods and there is a system
whereby, if they are under a VAT regime, the goods that are
taxed at the input stage are refunded. This is what we should do
in India too. But the bigger problem is the availability of export
credit at a competitive rate. Indian exporters have a disadvan-
tage in the international market because the cost of borrowing
is high. And, when the high borrowing cost is coupled with the
lack of infrastructure and the high turnaround time, exporters
lose competitiveness. The FTP needs to consider introducing
more competitive and more liberal borrowing schemes.
TDB: The export incentives will eventually be phased out.
What would you suggest?
MB: This is an obligation which is eventually going to come
to India. The government has been gradually sensitising the
exporters that export subsidies are not going to be there forev-
er. But, there can be other incentives, say production subsidy
with which the government can continue to subsidise
the exporters.
MUKESH BHATNAGAR, PROFESSOR, INDIAN INSTITUTE OF FOREIGN TRADE (IIFT)
“FTP MUST CONSIDER INTRODUCING
MORE LIBERAL BORROWING SCHEMES”

EPCG does not extend to IGST and is re-
stricted to only BCD. Further, the ARO
facility for domestic procurement of cap-
ital goods has been discontinued. EPCG
scheme now, sounds less sweeter than
EPCG scheme then!
Not only have these schemes been se-
verely restricted, there is immense dis-
parity between what the FTP allows and
what DGFT notifications mean. Under
the FTP 2015-2020 the facility of domes-
tic procurement continues to be available
under EPCG and AA via the invalidation
letter route. While GST is payable on
such deemed exports against invalidation
letters, according to DGFT the customs
portion of the duty drawback can be
claimed back. Interestingly, the FTP does
not allow this benefit for supplies against
invalidation letters, opening up the issue
to interpretations and litigation.
Export Oriented Units (EOUs) have
also been at the receiving end of the fall-
out from the implementation of GST. In
GST regime, though exemption has been
given to imports from customs duty,
IGST and compensation cess is payable
on these imports. GST is also payable on
domestic procurement (of goods covered
uder GST), which was earlier exempted
ab initio. Only procurement of goods
covered under Fourth Schedule of the
Central Excise Act will continue to en-
joy the ab initio exemption from central
excise duty. Further, the transfer/ supply
of goods from one unit of EOU/ EHTP/
STP/ BTP to another has been made li-Source: TDB Intelligence Unit & RBI; figures in $ billion
India’s service exports since April 2015
Although services exports have been growing, the pace has been slow
14
12
10
08
06
04
02
00
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
FY2016 FY2017
TDB: CAPEXIL had concerns over unavailability of duty
scrips under MEIS for some products like cement that are
widely exported to our neighbouring countries. Is the Coun-
cilexpectingthistoberevisitedduringthemid-termreview?
Ramesh Kumar Mittal (RKM): Yes, this is one of our key con-
cerns and we are hoping that the issue will be resolved during
the mid-term review. Exports of these products to countries
like Bangladesh, Pakistan, Sri Lanka, etc., have been growing
over the years – and at a much faster pace than to other coun-
tries. And, since these markets are evolving, we need the MEIS
incentives to remain competitive. Cement is exported in large
volumes to Sri Lanka, Nepal and Maldives, but exporters do
not enjoy any incentives on the product. In fact, total exports of
cement was close to $300 million in the last fiscal.
TBD:Therehavebeenconcernsraisedbythemembersabout
Advance Authorisation scheme. Can you please elaborate?
RKM: The plywood products segment has issues with regards
to value-addition. Exports of the product have to achieve 30%
value-addition to be eligible for the Advance Authorisation
scheme, whereas for most of the other products the eligibility
criteria is only 15%. So, we have been requesting the govern-
ment to align this segment with the rest.
TDB: What other issues do you think the government must
address in the mid-term review?
RKM: The FTP 2015-2020 mid-term review should address
the inverted duty structure prevalent across product categories.
For instance, imports of natural rubber that is used for manu-
facturing of auto tyres attracts 25% duty, whereas imports of
finished auto tyres is taxed at 7%. Alongside, the government
must think of ways to support value-added manufacturing –
say by incentivising or giving remissions for imports of capital
goods to manufacturers to set up production units. And that
way, we can truly introduce ease of doing business in the coun-
try and get an upper hand in the global market.
Also, in the revised FTP 2015-2020, we need provisions to
set off all duties and taxes incurred during the production pro-
cess. The government must also think of ways to subsidise the
interest rate for exporters because it is very high at the mo-
ment. The Market Development Assistance (MDA) scheme
should be standardised to help even the small exporters – in
order to comply with the rules and regulations, they sometimes
miss out on various global events and exhibitions.
RAMESH KUMAR MITTAL, CHAIRMAN, CHEMICAL AND ALLIED EXPORT PROMOTION COUNCIL OF INDIA
"THE GOVERNMENT MUST SUPPORT
VALUE-ADDED MANUFACTURING"

able to GST, as these constitute “supply”
under the GST law. Quite a body blow to
EOUs!
Deemed exports too have not been
able to escape the wrath of GST. Deemed
Export Drawback benefits have been re-
stricted to refund of BCD only under the
GSTregime.TerminalExciseDuty(TED)
refund has been made available only for
goods covered under Fourth Schedule
of the Central Excise Act, subject to eli-
gibility of the supply of such products as
deemed exports, thus significantly reduc-
ing the scope of the scheme.
The Duty Drawback Scheme has also
been dealt a body blow. While draw-
back was earlier calculated based on all
taxes suffered, since GST has subsumed
all taxes other than customs duty, draw-
backs will now be available on just BCD.
The government however has provided a
transition period of three months, start-
ing July 1, 2017, during which exporters
can claim higher rate of duty drawback
TDB: What are the expectations of the handicrafts sector
from the mid-term review of FTP2015-2020?
O. P. Prahladka (OP): One of the major issues in the FTP
2015-2020 is that the residual entry for export products has
been removed. The FTP 2015-2020 has various provisions for
handicraft exports which include the benefit of MEIS, EPCG
and DFIA, but they have reduced the percentage of credit
scrips. We want the FTP to revisit the incentive structure.
Under the Interest Equalisation Scheme, merchant exporters
have been ignored. The government is considerate towards the
artisans and manufacturers, but not towards traders. But since
it is the traders who buy from the artisans and manufacturers,
the government must give them equal importance.
TDB: Is there anything related to GST that the government
needs to address in the review?
OPP: The cost of production will increase because we went
from tax-free to tax-on-all-products regime. There is a huge
price difference between industrial and handmade products.
Now that artisans will add the GST to the production cost,
prices are bound to go up. We fear that customers will shift to
industrial products. The new tax could also result in a lowering
of premium on MEIS scrips by at least 20%. It would be nice if
the government can increase the MEIS incentive or expand the
avenues for its utilisation.
TDB: Have you requested for any change in DFIA?
OPP: Duty Free Import Authorisation (DFIA) helps us pro-
duce unique products because there are many raw materials
that are either unavailable or rarely available in India. Even if
they are available, the quality is not upto the mark and the pric-
es are uncompetitive. So, we have been requesting the govern-
ment to increase the number of products under the scheme.
For instance, wires that we use for making lamps or fashion
accessories are all imported from China because the prices of
the domestic product isn’t competitive.
TDB: What in your opinion can boost the sector’s exports?
OPP: An export-oriented country must increase its capaci-
ty building too. The government must provide assistance for
the development of skill, design, training, etc. Finally, the FTP
2015-2020 is only a generic document because each sector fac-
es a dissimilar problem. So, if the DGFT can look at each sector
carefully, only then will our exports grow.
O. P. PRAHLADKA, CHAIRMAN, EXPORT PROMOTION COUNCIL FOR HANDICRAFTS (EPCH)
"THE FTP NEEDS TO REVISIT
THE INCENTIVE STRUCTURE"
The pay-first-take-refund-later system under GST regime is bound to create a cash flow crisis for small and medium sized exporters.

(composite AIR) subject to conditions
that no input tax credit of CGST/ IGST
is claimed, no refund of IGST paid on ex-
port goods is claimed and no CENVAT
credit is carried forward.
This was initially subject to a no objec-
tion certificate issued by a jurisdictional
GST officer. This clause has however been
removed and now exporters can avail the
old rates of duty drawback through self
certification. But from October 1, 2017,
drawback will only be available on the
BCD component. Exporters naturally are
up in arms against this ruling. Their con-
tention is that they also consume goods
and services that are not within the ambit
of GST and hence drawbacks should be
calculated taking these inputs into con-
sideration. Exporters in fact, want the
ambit of drawback to be extended to in-
puts procured even domestically.
While EPCs and individual exporters
have welcomed GST with open arms and
agree that the GST regime will result in
more transparency and ease of doing
business, their concerns with respect to
issues arising out of the implementation
of GST are real and can have far reach-
ing implications on India's exports. If the
mid-term review of the FTP does not ad-
dress these issues, it is more than likely
that the momentum gained by exporters
in the last few months will be impacted
and India's exports growth will suffer a
reversal in the medium term.
THE USUAL SUSPECTS
Every time the Foreign Trade Policy is
revised or reviewed, the recurring de-
mand from exporters is to increase in-
centives. Exporters have extolled the
FTP 2015-2020 predominantly because
of two schemes that it had introduced;
Merchandise Exports from India Scheme
(MEIS) and Services Exports from India
Scheme(SEIS).Boththeschemeshaveei-
ther merged or replaced several schemes
that were earlier mentioned under FTP
2009-2014 with the intent to simplify the
process and give exports a boost. In fact,
for the first time, MEIS was extended to
special economic zones (SEZs) and SEIS
incentives were made available for both
domestic and international companies
operating and based out of India.
The benefits under MEIS were initially
divided into three brackets 2%, 3% and
5%, based on country group-wise desti-
nation. However, the country group-wise
division was withdrawn in May 2016,
making the incentives equal for every
country. Similarly, SEIS incentives are
divided into two brackets, 3% (offered
to services from hotels, restaurants, etc.)
and 5% (offered to R&D, hospital ser-
vices, professional services, etc.).
UNDER GST, THE
DUTY DRAWBACK
SCHEME HAS ALSO
BEEN DEALT A
BODY BLOW
TDB : What are the key issues that EEPC wants the govern-
ment to address during the mid-term review?
T. S. Bhasin (TSB): The MEIS and SEIS scrips should be utilis-
able for border taxes, customs duties as well as Goods and Ser-
vices Tax (GST) paid for domestic procurement of inputs and
goods, including capital goods. They should also cover pay-
ment of duties that are mentioned under Para 3.18 of the FTP
2015-2020. Also, MEIS and SEIS scrips, which used to attract
5% VAT now attract 18% GST because the scrips fall under the
residual category. This issue must be addressed, otherwise GST
will sharply reduce the incentive aspect of these scrips.
Further, European Union (EU) has struck down some prod-
ucts from the Generalised Scheme of Preferences (GSP) list.
Thus, the government must increase the MEIS rates for all en-
gineering products that are no longer a part of EU GSP.
TDB: How has GST impacted your sector's growth?
TSB: The sector’s growth in FY2017 was about 5-6%. But ever
since the implementation of GST, both merchant exporters and
service providers have been raising several concerns – and be-
cause of this, we are not forecasting any growth for the next
quarter. In fact, the industrial production growth decreased
3.1% y-o-y in April this year due to sluggish output from the
manufacturing, mining and power sectors.
TDB: What has been the sector’s reaction on impact of GST
on Advance Authorisation scheme?
TSB: It is not good! Till now, imports under Advance Authori-
sation scheme were exempted from all duties including BCD,
CVD, AED, AD and/ or Safeguard Duty as the advance au-
thorisation of import is subject to the actual user condition.
But under the GST regime, only BCD will be exempted and
IGST will have to be paid. This would make Advance Authori-
sation scheme completely unviable as duties will be paid up-
front at the time of import. We have suggested the new norm
be waived off – otherwise exports will drop.
T. S. BHASIN, CHAIRMAN, ENGINEERING EXPORT PROMOTION COUNCIL (EEPC)
"EXPORTERS HAVE RAISED SEVERAL
CONCERNS ON GST IMPLEMENTATION"

While exporters have requested the
DGFT to consider higher rates of incen-
tives, the terrifying truth about MEIS and
SEIS is that India must soon phase out
the export-related incentives that clash
with World Trade Organisation (WTO)
regime. Mukesh Bhatnagar, Professor,
Centre for WTO Studies, Indian Institute
of Foreign Trade (IIFT) explains, “Incen-
tives will eventually phase out in India
and the government has been gradually
sensitising the exporters about this re-
ality. But, there can be other incentives,
say production subsidy and continue to
subsidise the exporters.” We would agree.
This probably is then the hour to max-
imise and expand the incentive umbrella
– while we still can. During the last two
and a half years, MEIS has gone through
several changes which includes expan-
sion of tariff lines as well as equalisation
of incentives across countries. But with
the changes GST has introduced and the
not-so-pleasant global economy, EPCs
are almost duty-bound to demand higher
Sanjeev Agarwal,
CEO, Gitanjali Export Corporation Ltd.
Because of the GST, the working capital requirement of jewellery export-
ers has gone up by 3%. Earlier, the exporters used to get gold on con-
signment from the bank for a period of 180 days. The gold rate and the 1%
VAT used to be fixed. That way, the exporters were not shouldering any gold
price risk. However, after the introduction of GST, banks have to pay 3%
GST at the time of import and the bank straightaway charges that 3% GST to the exporter
at the time of lending the gold. This will adversely affect the sector which is extremely capital
intensive. Secondly, the interest rate on lending of gold in dollar terms in India is 6-7% and
in rupee term is 9-10%. Whereas Chinese exporters, our competitors, get gold loan at 2-3%
interest rate. We need lower interest rates if we want to remain competitive.
D. K. SAREEN
Executive Director, Electronics and Computer Software,
Export Promotion Council (ESC)
While we believe that the government is proactively trying to undo some
of the irritants like inverted duty structure etc., we wish that FTP re-
view encourages more investment into the sector to build capacities. There
are many global majors such as Apple, Foxconn and LeEco that are keenly
exploring the possibility of setting up manufacturing base in India. Thus, the FTP should lever-
age the FDI policy framework to capitalise on this renewed interest in the Indian electronics
sector. India enjoys a strategic advantage being equidistant from the West and the East, and
can supply products and services to both regions efficiently.
TDB: What schemes mentioned in FTP 2015-2020 should
the government necessarily revisit in the mid-term review?
Satish W. Wagh (SWW): In my opinion, the Advance Authori-
sation scheme needs to be streamlined. There is a need for fast-
er fixation of norms. At the moment, due to delays, exporters
are unable to get the Export Obligation Discharge Certificate
(EODC) and are therefore placed in the Denied Entities List
(DEL) even when they are not at fault. Moreover, the incentives
under Chapter 3 have come down from 3-5% to 2% on most
products. Unless the government addresses these issue, we will
continue to see a negative impact on the sector.
TDB: What other crucial issues does Chemexcil want the
government to address during the review?
SWW: We have requested the government to increase the ben-
efits under MEIS. It will help us in making our products more
competitive in the global market. And, this is one issue that
exporters in the sector are really hopeful that the government
will consider with generosity. In addition, we have requested
the government to allow us to import technical pesticides from
unregistered sources against Advance Authorisation. Faster
fixation of SION, smooth functioning of IceGate and DGFT
servers, expansion of Interest Equalisation Scheme, etc., will
also help the industry. We have also urged the government to
lift the limitation on utilisation of duty credit scrips in the up-
coming mid-term review.
TDB: How has implementation of Goods and Services Tax
(GST) impacted the sector?
SWW: The GST rate for most chemical products is 18%, with
the exception of select items falling under Chapter 15, 28, 33,
34, 38, etc. However, the main worry is that the exemptions
that were earlier available under excise are not available under
GST. Exporters believe that this will impact their liquidity and
add to their costs. In addition, the lack of clarity on export pro-
cedures has been a hassle and is impacting our exports.
SATISH W. WAGH, CHAIRMAN, CHEMEXCIL
"LIMITATIONS ON UTILISATION OF
DUTY CREDIT SCRIPS MUST BE LIFTED"

rates of incentives and further expansion
of tariff lines eligible for MEIS.
While Narain Agarwal, Chairman of
Synthetic and Rayon Export Promotion
Council (SRTEPC), says, “Man-made
fibre is a major contributor of revenue
to the national exchequer and we want
this to be included under MEIS. This will
not only help us increase employment
generation, but will add to our exports
revenue.” Ramesh Kumar Mittal, Chair-
man of Chemicals & Allied Products
Export Promotion Council (CAPEXIL),
wants the government to extend MEIS
benefits to cement exports. Mukhtarul
Amin, Chairman, Council for Leather
Exports (CLE), too argues in favour of
higher incentives for his sector. "We want
the MEIS benefits to be increased for
finished leather and leather products &
footwear to 3% and 5% – from 2% and
3% – respectively. The duty credit for
leather garments and safety footwear
must also be increased to 6% from 3%,"
says Amin.
However, the case of project exports
from India is peculiar as project exports
do not fall under any particular HS
Code classification. Sandip Baran Das,
Chairman, Project Exports Promotion
Council (PEPC), explains, "Since proj-
ect exports do not have a specific chap-
ter or HS Code; project exporters have
to file each product and service under
its respective chapter and HS code. A
project generally comprises of numerous
TDB: What key issues does GJEPC want the government to
address in the mid-term review of FTP 2015-2020?
Praveen Shankar Pandya (PSP): Well, there are many. To be-
gin with, as per the FTP 2015-2020 provisions, jewellery ex-
porters are entitled to procure duty-free precious metals for
jewellery exports. However, it is difficult to establish a one-to-
one correlation between the procured precious metals and the
exported jewellery made from those imported metals as re-
quired by CBEC as per Circular No.27/2016 issued on June 10,
2016. Hence, we have suggested some necessary amendments
in the Para 4.41 of the FTP 2015-2020.
Also, Para 4.45 of the FTP 2015-2020 and Para 4.77 of the
Handbook of Procedures (HBoP) 2015-2020 allow foreign
buyers to supply gold, silver, platinum, etc., in advance to man-
ufacture and export jewellery to nominated agencies, status
holders and exporters of three years standing with an annual
average turnover of Rs.5 crore in the last three financial years
without any duties. So, we have requested the government to
allow us to use raw materials from our stock without any duty,
manufacture and export, after which the buyer can send us the
raw material to replenish our stocks.
TDB: What other measures can be included in the FTP to
boost exports from the sector?
PSP: We want imports of gold, silver and platinum from an
Organisation for Economic Cooperation and Development
(OECD) compliant refinery or the London Bullion Market
(LBMA)-accredited refinery to be made mandatory. This is be-
causeallinternationaljewelleryplayersseektoensureresponsi-
ble global sourcing practices by setting due diligence principles
and processes for international bullion companies. Also, we
want the inclusion of Gemological Institute of America (GIA)
laboratories in Japan and Israel in the list of overseas accredited
laboratories to export cut and polished diamonds for certifica-
tion/ grading and duty-free re-import of the same – overseas
buyersinsistongradingofdiamondsfromspecificinternational
laboratories.
In addition, the facility to export for certification or grading
and re-import the same should be extended to precious and
semi-precious gemstones and pearls since India is regarded as
a prominent international market for these products.
Given the sluggish global economy, there is a strong need
to aggressively promote gems and jewellery exports. Howev-
er, the upper limit of the value of gems and jewellery allowed
to be carried for participating in overseas exhibitions has been
stipulated at $5 million. We would like the cap to be increased
to $15 million to aggressively promote exports from our sector.
TDB: Has the Council requested the government to extend
the replenishment scheme to consignment exports? Any
comments on the sector's omission from MEIS?
PSP: Para 4.80 of the HBoP 2015-2020 talks about replen-
ishment scheme for exports of gems and jewellery through
overseas exhibitions, export promotion tours and branded
jewellery. Meanwhile, in the case of consignment exports, ex-
porters usually use their own stock to manufacture and export
precious metals to be sold in foreign market on a consignment
basis. When you look at these two procedures, they are very
similar. So, the replenishment scheme as mentioned in Para
4.82 must be allowed for consignment exports. As of now, the
sector is omitted from MEIS. We need interest subvention and
MEIS on value-added products to remain competitive.
PRAVEEN SHANKAR PANDYA, CHAIRMAN, GEM JEWELLERY EXPORT PROMOTION COUNCIL (GJEPC)
"WE WANT FTP MID-TERM REVIEW TO
REVISIT THE REPLENISHMENT SCHEME"

products and services and therefore the
process of claiming incentives under it
is a tedious task which entails significant
cost and time. As a result, a lot of project
exporters forgo these incentives since the
cost outweighs the benefits." He suggests
that the government should decide on a
fixed rate of incentives for projects based
on net foreign exchange earned. With
project exports facing a difficult global
economy, this suggestion can possibly
give the much-needed boost to exports
from this sector.
With the impact of GST already be-
coming a burden for exporters, the mid-
term review probably should consider
these suggestions with generosity.
THE SION STORY
Another issue that exporters want the
government to revisit during this mid-
term review is the way Standard Input
Output Norms (SION) are formulated
and updated. For instance, Ashok G. Ra-
jani, Chairman, Apparel Export Promo-
tion Council (AEPC), says that SION is
an area of concern because it’s outdated.
“We want SION to be updated and in-
clude new products and categories which
have come up since the norms were for-
mulated,” adds Rajani. And he is right
in saying that. There are many products
for which no such norms have been de-
signed – a case in point could be cars.
Then, in many cases, several key elements
are missing from the very list of ingredi-
TDB: Can you share the Council’s expectation from the FTP
2015-2020 mid-term review?
Mukhtarul Amin (MA): We want the MEIS benefits to be in-
creased for finished leather and leather products & footwear to
3% and 5%, from 2% and 3%, respectively. The duty credit for
leather garments and safety footwear must also be increased
to 6% from 3%. We also want the government to increase the
interest subvention to 5%, as against the current 3%, for at least
six months – from July to December 2017. Most importantly,
since the industry depends a lot on Duty Free Import Scheme
(DFIS) to import products that are crucial for the industry, the
duty-free limit under DFIS for leather garments must be in-
creased to 5% from 3%.
TDB: What are the implications of GST on the sector and
how will it impact exports?
MA: CLE wholeheartedly welcomes GST, but there are issues
that we want the government to resolve during the FTP 2015-
2020 mid-term review. For instance, prior to GST, finished
leather was exempted from both excise duty and import duty.
But now it attracts 12% GST, which is a burden. We have re-
quested the government to reduce the tax to 5% to help the
industry and also to avoid product classification problem –
because crust leather (semi-finished leather) falls under 5%
whereas finished leather is taxed 12% GST.
Adding to these concerns is the existing All Industry Rates of
duty drawback, which is available only for three months – from
July to September. Going forward from October, the drawback
will be restricted only to Basic Customs Duty portion.
The industry is also not happy because all duty credit scrips
issued under the FTP 2015-2020, including MEIS, EPCG and
Advance Authorisation scheme, will be taxable.
The higher rate of GST and upfront payment of tax will block
money for exporters for at least 2-3 months. This will cause im-
mense financial strain on the exporters and will lead to loss of
price competitiveness, and an eventual decline in exports.
TDB: Many EPCs have spoken against the limitations im-
posed on utilisation of duty credit scrips and the pay-first-
and-get-refund-later mechanism under GST. Do you expect
the review to address these issues?
MA: MEIS, EPCG and DFIS under FTP 2015-2020 have cer-
tainly increased price competitiveness of the leather industry.
At present, most of the leather products receive 3% scrip under
MEIS, while most categories under finished leather receive 2%
scrip. But, the fact that GST exempts only the Basic Customs
Duty, exporters will be unable to utilise the scrips within the
stipulated time and will face a lower sale value on transferabil-
ity. The FTP hence, must reconsider enhancing the scrip value
and grant IGST exemption. And alternately, the scrips can be
divided into Customs Portion and Virtual Credit Ledger for
payment of GST.
As for the EPCG scheme, procurement of machinery used
in leather and footwear sector under this scheme now attracts
18% GST. Earlier under the scheme, both Basic Customs Duty
plus CVD and SAD were exempted on imports and Central
Excise duty was exempted on domestic purchase. The value of
machinery used in the sector is usually high, so upfront pay-
ment of such a huge GST incidence on machinery will signifi-
cantly affect the industry. Instead of paying tax and then apply-
ing for a refund, upfront exemption on GST may be considered
for the schemes under FTP.
MUKHTARUL AMIN, CHAIRMAN, COUNCIL FOR LEATHER EXPORTS (CLE)
“LIMIT UNDER DFIS FOR LEATHER
GARMENTS MUST BE RAISED TO 5%”

ents mentioned in SION – for instance,
as per current SION, sugar is not a part of
ingredients that goes into the making of
fruit juice and instant coffee, and PVC/
PU leather cloth is the only input that
goes into the making of soccer balls.
Duty Drawback and Advance Authori-
sation schemes are entirely dependent on
All India Rates (AIR), which are nothing
but HS Code-wise drawback percent-
ages with caps based on SION. Hence,
the authorities need to update SION, if
they really want the EXIM community
to believe in the 'Make in India' concept.
Pradip Thakkar, Chairman, Plastics Ex-
ports Promotion Council (PLEXCON-
CIL), further explains, “Manufacturer
exporters in our sector use additional
materials to improve the quality of the
products or add value to them. But these
materials are not covered under SION.
Hence, every time the exporters have to
use the tedious Brand Rate mechanism to
claim back the refund of the duty suffered
while importing the materials.”
Sanjiv Sawla, Chairman, Indian Oil-
seeds and Produce Export Promotion
Council (IOPEPC), echoes a similar
opinion and says, "We aren’t happy with
the Advance Authorisation Scheme be-
cause the SION is completely flawed. We
have been asking the government for the
last two years to change the norms, but
there has been no progress."
Hence, it goes without saying that the
mid-term review of the FTP while add-
ing new materials to SION should also
come up with a simplified procedure for
regular updation of SION.
INVERTED STRUCTURE
While the government has left no stone
unturned to promote the 'Make in In-
dia' initiative, the ground reality remains
that our duty structure is not supportive
of the initiative. Across sectors, be it au-
tomobiles or electronics, chemicals or
tyres, the present duty structure in India
promotes the imports of finished prod-
ucts rather than that of raw materials or
intermediate goods, essentially putting to
ground any chances of making in India
a reality. Mittal of CAPEXIL elaborates,
"The FTP 2015-2020 mid-term review
should address the inverted duty struc-
ture prevalent in the auto tyres and tubes
product panel. Imports of natural rubber
that is used for manufacturing of auto
tyres attracts 25% duty, whereas imports
of finished auto tyres is taxed at 7%."
That's not the only case. This anomaly
is prevalent across sectors and product
categories. In fact, this seems like a case
TDB: Currently, the sector is not in sync with ‘Make in India’
because of various restrictions. What are your thoughts?
Sanjiv Sawla (SS): In that sense, we are at the bottom of the
pyramid. We have been requesting the government to liberalise
the imports of oil seeds because, at this point of time, the duty
structure is inverted – in the sense, the duty on oils is lower
than on oilseeds, which does not make sense. So, if we real-
ly have to ‘Make in India’, the import duty on oil seeds has to
be reconsidered. We should import the seeds and make the oil
and other finished product locally. This is a logical request and
will give a big boost to ‘Make in India’.
TDB: We are now more than two years into the FTP 2015-
2020. Has it helped the sector?
SS: Yes, it has. It has brought in considerable ease in doing busi-
ness and processes are being now streamlined to a certain ex-
tent. But then, the request to further liberalise the infrastructure
schemes hasn’t been realised and the incentives remain restrict-
ed only for manufacturers – whereas most people in the agri
sector are small merchant-exporters and not manufacturers.
TDB: What are your thoughts on the current exports target
of $900 billion by 2020?
SS: It would be practical and realistic to lower the target during
the mid-term review of the Foreign Trade Policy. There are a
lot of anomalies and distortions in India, and we need to put
our house in order first. Issues with regards to infrastructure,
ease of doing business, red tapism, etc., must be addressed first.
A 10-15% year-on-year growth is healthy and realistic for any
industry, anything above that would be an anomaly.
TDB: What issues would the Council want to be addressed
in the mid-term review of the FTP?
SS: Issues such as liberalising of oilseeds imports and SION
must be given a second thought. We are in talks with the gov-
ernment with regards to imports from some least developed
countries (LDCs) and have requested them to include oilseeds
to the list of products which can come in duty-free. As far as our
industry is concerned, if that happens, it will be very helpful for
us and do away with advanced licensing and SION norms, etc.
We aren’t happy with the Advance Authorisation Scheme be-
cause the norms are completely flawed. Also, we have been ask-
ing the government for the last two years to change the norms,
but there has been no progress.
SANJIV SAWLA, CHAIRMAN, INDIAN OILSEEDS & PRODUCE EXPORT PROMOTION COUNCIL (IOPEPC)
"STANDARD INPUT OUTPUT
NORMS ARE FLAWED"

TDB: What are your expectations from the FTP 2015-2020
mid-term review?
Rahul Gupta (RG): We have a few pending demands. For
instance, there is confusion amongst stakeholders on exports
from DTA units to SEZ units, particularly in the case of ser-
vices. We want the procedures to be simplified in the mid-
term review. Also, measures such as withdrawal or reduction
of minimum alternate tax (MAT) and dividend distribution
tax (DDT) rates for SEZs will bolster the units. Alternatively,
surplus lying unutilised in MAT account should be refunded,
concessional rate of duty equivalent to the lowest rate of FTA
on DTA sales by SEZs charged, and contract manufacturing
in SEZs for DTA market allowed to strengthen the concept of
‘Make in India’. These should be the focal points of any future
government policy. And, in order to ensure optimum utilisa-
tion of installed capacity in SEZs, I further request the govern-
ment to allow SEZ units to perform job work for DTA units.
TDB: Both Customs Act and SEZ Act are being made
GST-compliant. What are your expectations?
RG: The announcement of zero-rating of supplies to SEZ has
been a great help – though the implementation on the ground
would be very critical. In my opinion, the overall implementa-
tion of the refund procedure to suppliers to SEZ would now be
the deciding factor on whether or not GST gets a thumbs up
from the exporting fraternity.
TDB: You have recently expressed displeasure with regards
to limitations on utilisation of duty scrips under GST. Can
you share your concerns with us?
RG: GST has narrowed the ambit of duty credit scrip only to
payment of Basic Customs Duty, whilst earlier manufacturing
exporters who imported raw material for the purpose of ex-
ports were allowed to utilise the scrip for payment of customs,
excise duty and service tax. This is one of the issues that will
have wide ramifications on exporters. In my view, the market
prices of duty scrip will be reduced drastically if the scrip utili-
sation does not get integrated with GST.
TDB: So far, EoUs remain quite neglected. Do you think this
will be revisited during the mid-term review?
RG: Sadly, compared to SEZs, EOUs have always remained
under-supported. We would like to request the DGFT to help
EOUs under Chapter 6, through simplified procedures.
RAHUL GUPTA, CHAIRMAN, EXPORT PROMOTION COUNCIL FOR EOUS AND SEZS (EPCES)
"GOVERNMENT MUST ALLOW SEZ UNITS
TO PERFORM JOB WORK FOR DTA UNITS"
TDB: What’s your take on FTP 2015-2020?
Pulak Sen (PS): The current foreign trade policy allows 100%
foreign direct investment (FDI) in maintenance, repair and
overhaul (MRO) industry through the direct route. And, this
is a welcome move for the industry. However, the tax structure
in the country is not conducive to attract foreign MRO players
to set up base in India. While in the past some foreign MROs
have entered into joint ventures with their Indian counterparts,
there was no progress at the ground level.
TDB: Are you implying that GST will harm your sector?
PS: Yes. And frankly speaking, Goods and Services Tax has put
the MRO industry into a big problem. Earlier, the industry had
to pay a 15% Service Tax and Octroi (wherever applicable). But,
the sector now has to pay 18% GST on labour and 18% GST on
spare parts. In addition, the higher imports duty coupled with
IGST is adding to the cost of inputs – almost all the inputs in
the sector have to be imported. For example, if aircraft spares
are imported under HSN 8803, the Dustoms Duty is zero. But,
5% GST is being additionally levied. On the import of paints,
varnish and thinners, the import duty is 28% and IGST is 5%.
On the import of other consumables like adhesives etc, 18%
duty is levied along with 5% GST. Surely, this will impact our
competitiveness.
PULAK SEN, FOUNDER SECRETARY GENERAL, MRO ASSOCIATION OF INDIA
"WE NEED A LOWER GST RATE"

of the left hand not knowing what the
right hand is up to! The mid-term review
needs to urgently address this issue or
India can kiss its dream of being the next
manufacturing hub goodbye.
WORK CUT OUT
Of course, this is not the complete wish-
list of the exporting community. There is
the long-pending demand of rescinding
of DGFT Public Notice 35. According
to exporters, the notice directly contra-
dicts the provisions of FTP. The notice
also seeks to implement its effect with
retrospect by enforcing the conditions of
DGFT Notification No. 31, dated August
1, 2013, which said “the name/ descrip-
tion of the input used (or to be used) in
the Authorisation must match exactly the
name/ description endorsed in the ship-
ping bill,” and “at the time of redemption,
Regional Authorities (RA) shall allow
only those inputs which have been spe-
cifically indicated in the shipping bill.”
(by itself a rather impractical require-
ment) even on DFIA licences issued pri-
or to the issuance of Notification No. 31/
(RE-2013). The issuance of guidance with
retrospective effect goes against the char-
acter of natural justice, and in this case
it is a case of justice delayed and denied.
Some exporters have been so frustrated
about the lack of progress on this issue
that they have given up hope of any reso-
lution. This is not the only case, there are
multiple ongoing litigations between ex-
TDB: What sectoral concerns does TEXPROCIL want being
addressed in the FTP 2015-2020 mid-term review?
Ujwal R. Lahoti (URL): The Council is responsible for exports
of cotton textile, which covers yarn, cotton fabrics and made-
ups. India’s current annual exports of cotton textiles is about
$30-40 billion, but it has been declining year-on-year because
of the gloomy global economy. When the policy was intro-
duced the global economy was in a much better shape.
Recently, the government had asked for our suggestions
for the new policy and we communicated the same to them.
Further, there are issues such as anti-dumping duties that have
been instated by some countries against Indian exports and
also certain tariff-related concerns. We have already flagged
these issues and presented them to the government.
Moreover, Indian exporters do not get a level-playing field in
the global market due to the high-interest rates in India. Hence,
we have requested the government to give exporters some in-
terest subvention. China is a potential destination for India, but
Indian cotton fabrics attract around 8-10% tariff in China –
whereas exports from some of our neighbouring countries at-
tract zero tariff. We have raised the issue with the government
to perhaps discuss a bilateral trade agreement – or at least a
lower tariff rate. And, I think the government will take this up
through the Regional Comprehensive Economic Partnership
(RCEP) that is being discussed.
TDB: How has the Star Export House classification helped
the sector. Would you want any change in that?
URL: The Star Export House classification has definitely had a
positive impact. Exporters under the classification get benefits
such as self-certification. While being classified as Star Export
Houses has benefitted our sector to a great extent, we would
like the government to liberalise the classifications. This will
allow smaller and newer exporters, who previously did not fall
within the limits to be classified as Star Export Houses.
TDB: Do you want any change in SION?
URL: We have suggested that there is a need to fix SION for
technical textiles so that exporters can avail the benefits of the
Advance Authorization scheme. There are also no separate HS
codes for some products and that needs to be addressed.
TDB: The RoSL scheme was introduced post the FTP 2015-
2020. Do you hope to see any changes in this scheme?
URL: Rebate of State Levies (RoSL) need an urgent revisit. Ear-
lier, the refund was around 3.9%, which is now cut to a mere
0.39%. This drastic cut is because many items now fall under
GST. But the textile industry still uses many items that do not
fall under GST – such as petroleum products, electricity, etc.
We have urged the government to refund such taxes paid for
these items through RoSL as exports are zero rated and the tax-
es must be refunded.
TDB: Apart from the mid-term review, do you feel the FTP
needs to be reviewed more often?
URL: TEXPROCIL is constantly in touch with the Ministry
of Commerce through the Ministry of Textiles and communi-
cates its suggestions and grievances – from time to time. The
Ministry has been quite proactive when it comes to responding
to our suggestions. We are hopeful that in the upcoming review
they will implement most of our suggestions. And, of course,
frequent reviews can be helpful.
UJWAL R. LAHOTI, CHAIRMAN, THE COTTON TEXTILES EXPORT PROMOTION COUNCIL (TEXPROCIL)
"REBATE OF STATE LEVIES (RoSL)
NEED AN URGENT REVISIT"

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