The Hindu Business Line : Cut transaction costs: PHD Chamber

THE Foreign Trade Policy, to be announced this week, should aim at removing procedural hurdles and reducing high transaction costs faced by Indian exporters to help enhance the competitiveness of Indian products in the world market, the PHD Chamber of Commerce and Industry (PHDCCI) has said.

In a memorandum submitted to the Minister for Commerce and Industry, Mr Kamal Nath, the PHDCCI also suggested that duty-free import of research and development equipment for some sectors, such as textile, should be allowed up to 25 per cent of the freight on board (f.o.b) value of exports, as provided for pharmaceuticals and biotechnology.

All announcements made in the policy last year, which had not taken effect due to the absence of enabling notifications from the Department of Revenue and the Reserve Bank of India, should be made operational, it said.

The chamber also suggested that the interest rate on the proportionate duty saved on the unfulfilled portion of the export obligation under the Export Promotion Capital Goods (EPCG) Scheme needs to be reduced to at least 10 per cent from 15 per cent. The need to obtain separate licence for machinery spares under the EPCG Scheme should also be done away with as this creates problems and time delays for exporters, it added.

According to the PHDCCI, there is a need to take a balanced approach between Export-Oriented Units and units in the domestic tariff area as EOUs had lost competitiveness in recent times.

Exemption from payment of all types of duties and statutory levies by EOUs should be introduced to make them internationally competitive. Introduction of Value Added Tax may take care of some of these problems, but the problem of central sales tax incidence remains.

The Duty Exemption Pass Book and duty drawback rates should be fixed to compensate the additional cost of power as this was reducing the cost competitiveness of Indian exporters.

Even though input costs could not be neutralised by the Government under the World Trade Organisation framework, neutralisation of all duties and levies should be looked into.

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