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EPCG, DFRC schemes -- Govt to relax norms for exporters

Hema Ramakrishnan

NEW DELHI, March 25

THE Government is set to relax crucial norms stipulated for exporters availing of benefits under the Export Promotion Capital Goods (EPCG) and Duty Free Replenishment Certificate (DFRC) schemes in the forthcoming Exim Policy.

According to official sources, the Finance Ministry is likely to give its nod to the Commerce Ministry's proposal to extend the time period for fulfilment of export obligation under the EPCG scheme by one more year.

As per the existing norms, an EPCG licence holder has to fulfil the export obligation over a period of eight years from the date of issuance of the licence. A one-year extension — beyond the eighth year — is also possible.

With economic slowdown hampering export growth, the Commerce Ministry has made out a case for granting an extension of one more year. This, in effect, means giving a time period of ten years (including a one-year grace period) for fulfilling export obligations under the EPCG scheme.

The EPCG licence holders are required to export five times the cost-and-freight (CIF) value of capital goods on free-on-board (f.o.b.) basis or four times the CIF value of capital goods on a net foreign exchange basis within the stipulated time period.

The Government is, however, set to reject the demand made by exporters to review the five per cent customs duty levied on capital goods imported under the EPCG scheme.

This impost, clamped under two windows of the EPCG scheme — zero duty and 10 per cent duty — were brought under a single window in March 2000.

The revenue foregone on account of the merger was estimated at around Rs 72 crore.

This was, however, offset by the revenue gain of Rs 196 crore estimated from the five per cent duty clamped on goods imported under the zero duty window.

The revenue department is against a review of this decision due to revenue implications.

Officials said the Finance Ministry had also decided to relax some of the norms under the DFRC scheme. A manufacturer exporter holding a DFRC is entitled to import inputs duty-free.

The imported inputs should, however, have the same quality, technical characteristics and specifications as those used in the end product.

Although an announcement was made in last year's Exim Policy that the technical characteristics would be dispensed with (except in the case of items included in a small negative list), it was not operationalised.

However, the Finance Ministry had agreed to implement this proposal in the ensuing fiscal and was in the process of shortlisting items which were to be included in the negative list, said a senior official.

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