FTP 2015-2020 A welcome move

The Ministry of Commerce, Government of India has released the new Foreign Trade Policy for 2015-2020, to be amended from June 30, 2015. Industry stakeholders analyse its impact on the pharmaceutical sector By Usha Sharma

‘2015-2020 FTP demonstrates the wisdom dawning in India to handle global challenges with mature and erudite leadership’

Successive trade policies from 1960’s to 2015 had moved through import export policies based on negative lists, red books and green books mostly driven by procedural provisions managed through import and advance licences and a plethora of incentives, like duty drawbacks, cash compensatory supports etc. The Foreign Trade Policy (FTP) is a welcome floribunda with deep insight into global economy and domestic challenges along with region wise and country wise SWOT analysis. Market strategy for specific markets has been elaborately dealt with highlighting opportunities and challenges. Pharmaceuticals have been dealt with under ‘product strategy.’ While generic drug opportunities have been highlighted, the NTBs (Non Tariff Barriers) which block entry and trade opportunities in markets such as China and Japan have also been dealt with. The challenges facing pharma sector has been listed out. IPR status, PIC/PICS (Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme) non-membership status, alleged quality compliance issues, impact of stiff domestic pricing on overseas price realisations etc. have also been acknowledged. The FTP has analysed the current status of WTO (World Trade Organization), TRIPs (Agreement on Trade-Related Aspects of Intellectual Property Rights) and other WTO based agreements, more importantly, the potential impact of TPP (Trans-Pacific Partnership), TTIP (Transatlantic Trade and Investment Partnership) and RCEP (Regional Comprehensive Economic Partnership) along with RTAs (Regional Trade Agreements), FTAs (Free Trade Agreements), PTAs (Preferential Trade Agreements), CECAs (Comprehensive Economic Cooperation Agreements), CEPAs (Comprehensive Economic Partnership Agreements) have been discussed and elaborated with consequent impacts on India’s exports. Need for PIC/PICs membership or observer status by India has been emphasised. India is facing formidable challenges in these TBTs (Technical Barriers to Trade) and NTBs which need to be overcome by pragmatic review and action plan, according to the FTP.

In depth analysis of constraints incorporated into the FTP, is heartening to note. Major constraints being those of infrastructure, logistics, ease of doing business, digitalisation, e-governance and border management. In the light of extremely adverse remarks in the recent USTR 2015 Report on bulk imports of pharma APIs from China to India circumventing regulatory systems, by labelling APIs as chemicals, additional IPR burden need to be realised on border management by customs authorities but also the regulatory authorities. It is also heartening to note that FTP notes the need for reduction in transaction costs.

While consolidation and simplification of incentive schemes and extension to SEZs (Special Economic Zones) are welcome features, the highlights of the FTP is the economic analysis and SWOT analysis demonstrating high potential to address international trade issues facing India. Unlike earlier Trade Policies, the 2015-2020 Foreign Trade Policy demonstrates the wisdom dawning in India to handle global challenges with mature and erudite leadership. More deliberations for convincing the domestic audience on the need to target global benchmarks in regulatory framework, trade regulations and emerging bilateral, regional and multilateral trade partnerships and agreements need to be undertaken using the FTP as a reference standard.

– Dr Gopakumar G. Nair, Gopakumar Nair Associates

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‘This is a good policy and people will benefit the most, if it is implemented effectively’

The First Foreign Trade Policy (2015-20) of NDA Government was unveiled by Commerce Minister Nirmala Sitharaman on April 1, 2015. The policy lays down a road map for Indian global engagement in coming years, targets 15 per cent increase in exports on annual basis and has a thrust on ‘Make in India’, ‘Digitisation’ and ‘Ease to do Business’. The new Foreign Trade Policy (FTP) has been announced in the back drop of dip in exports because of moderation in demand globally. New FTP has merged all incentive schemes under Chapter 3 into Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS). The benefit under MIES will be determined based on exporting product and exporting country divided in various groups. The benefit will range between two to five per cent of FOB Value of Exports. Classification up to eight digit for the export product is very important for claiming the benefit under this scheme. Exporters need to understand the significant of the product classification.

Served From India Scheme (SFIS) is being replaced by a New Scheme – Services Export from India Scheme (SEIS). All service providers of notified services located in India will be eligible for the benefits regardless of their constitution or profile of service provider. The SEIS benefit of three per cent or five per cent will be based on Net Foreign Exchange Earned. This scheme aims to explore the huge opportunities of rendering our services to the rest of the world. Skill India is also on the agenda of the present government.

The duty credit scrip issued under both MEIS and SEIS will without any actual user condition, freely transferable. They will be no longer restricted for any specified types of goods. They can be used for payment of customs duty /excise duty/service tax. These scrip can also be utilised to make the payment against excess import under advance authorisation. The multiple usage of the scrip will increase the demand and supply of the scrip in the market. Since, the percentage of benefit is reduced, the value available in the market may not substantially enhance. However, the volume of trading in the scrip will increase.

The units in SEZ will also be allowed to claim incentive under MIES and SIES Schemes.

The nomenclature of status holder scheme has been changed to one, two, three, four and five star export house. The criteria for export performance for the recognition of status holder have been changed from Rupees to US dollar. The minimum export performance in FOB Value during current and previous two years is now $3 million. All the existing status holders are instructed to make a fresh application as per this revised norms on or before June 30, 2015.

Manufacturer Status Holders will now enabled to self certify country of origin from India to qualify under various PTA, FTA, CECAs and CEPAs. To boost ‘Make in India’ specific export obligation under EPCG will be reduced to 75 per cent, if goods are procured from domestic capital goods manufacturer.

Hard copies of CA /CE /CS certificates will not be required for various applications. Online upload facility of its soft copy will be made available in the new online application process for Chapter 3 and Chapter 4 Schemes.

Document records of EPCG authorisation will now be required to be maintained only for two years after redemption. A facility has been created to upload documents in exporter importer profile, which will hold copies of IEC, PAN, RCMC, industrial License etc. Once uploaded, no separate submission of these copies will be required with each application.

Communication with exporter/importer will be done through SMS/email and thus mandatory fields like mobile number and email address will be added in the IEC data base. Application of refund of terminal excise duty will now be made online.

EOUs, EHTPs, STPs have now been allowed to share infrastructural facilities among themselves, inter unit transfer of goods and services and to set up facility of warehouses near the port of export. Goods falling in the category of handloom products, books/ periodicals, leather footwear, toys and customised fashion garments, having FOB Value upto `25,000 per Consignment (finalised using e-commerce platform) shall be eligible for benefits under FTP. E-commerce exports will allowed to be done under manual mode through foreign post offices at New Delhi, Mumbai and Chennai and under courier regulations through Airports at Delhi, Mumbai and Chennai Only.

Chapter number 8 is incorporated in the policy, to resolve quality complaints and trade disputes. A Committee on Quality Complaints and Trade Disputes (CQCTD) is being constituted. Vishakhapatnam and Bhimavaram in Andhra Pradesh are to be recognised as towns of export excellence for product category – Seafood.

It can be noted that specific application, procedures and documentation will have to be prepared, applied and submitted as defined under the New FTP and handbook of procedures to avail of any of the said benefits under the new FTP.

In conclusion, we can say that this policy is prepared by considering several aspects of the trade. Several circulars and public notices are now forming a part of the policy/ handbook. This is a good policy and people will benefit the most, if it is implemented effectively.

– Ajit J Shah, Faculty & Trainer in Export & Import

u.sharma@expressindia.com