Year End Review 2015: Department of Commerce

Vision and Mission

The long-term vision of the Department is to make India a major player in the world trade by 2020 and assume a role of leadership in the international trade organizations commensurate with India’s growing importance.

DOC’s goal is to increase India’s exports of merchandise and services from the present level of 465.9 billion USD (2013-14) to approximately 900 billion USD by 2019-20 and raise India’s share in world exports from present 2% to 3.5%.

 Strategic Initiatives and Priorities

• Diversification of export product basket
• Diversification into non-traditional markets and conclusion of ongoing FTA negotiations and initiating new FTAs
• Strengthening export related infrastructure
• Enhancing credit flows for exports at lower cost
• Reducing Transaction Costs
• Diversification of Services exports
• Building up a Brand Image of India
• Support to Plantation Sector
• Protection to sensitive domestic industries 

Export Performance

During the period April-November 2015 total exports in dollar terms were US $ 174.3 billion which shows a decline of 18.5% over corresponding period figure of US $ 213.8 billion in 2014. Decline in non-oil & non-gems and jewellery export for the reporting period is 9.7% in dollar terms and only 3.7% in rupee terms. Thus the basic picture emerging is that excluding petroleum and gems & jewellery, India’s exports have marginally in response to contraction of global demand and fall in commodity prices. While several sectors have shown declines, some have shown increases e.g. ready-made garments of all textiles, carpets, handicrafts, jute manufacturing, drugs and pharmaceuticals, ceramic products & glassware, tea, cereal preparations & miscellaneous processed items.

Recent initiatives in Foreign Trade Policy and Ease of Doing Business

Release of New Foreign Trade Policy

The Foreign Trade Policy (FTP) 2015-20 was released on 1^st April, 2015.  FTP statement, Handbook of procedures, Appendix and Aayat-Niryat forms were also released. The main focus of new FTP was on improving ‘Ease of Doing Business’ and Trade Facilitation. FTP statement, released for the first time, explains the vision, goals and objectives underpinning the FTP.  It describes the market and product strategy envisaged and the measures required not just for  export  promotion  but  also  for  the  enhancement  of  the  entire  trade ecosystem.

New FTP Schemes

    (i)        Export from India Schemes: The new FTP has also simplified the various incentive schemes by merging them into one scheme each for merchandise and service exports, namely MEIS and SEIS.

  (ii)        Merchandise Exports from India Scheme (MEIS): Earlier there were 5 different schemes with different kinds of duty scrips with varying conditions (sector specific or actual user only) attached to their use. Now all these schemes have been merged into a single scheme named MEIS.MEIS offers higher incentives for the following category of products:

• Agricultural and Village industry products
• Value added and packaged products
• Eco-friendly and green products that create wealth out of waste from agricultural and other waste products that generate additional income for the farmers, while improving the environment.
• Labour intensive Products with large employment potential
• Industrial Products from potential winning sectors
• Hi-tech products with high export earning potential

 (iii)        Expansion of Merchandise Exports from India Scheme (MEIS) in Oct 2015: In light of the major challenges being faced by Indian exporters in the backdrop of the global economic slowdown, Department of Commerce on Oct 29,2015 increased support for export of various products and included some additional items under the Merchandise Exports from India Scheme (MEIS).

MEIS, introduced through the Foreign Trade Policy (FTP) 2015-20 on April 1, 2015, with product and market focussed incentives for 4914 tariff lines, is a major export promotion scheme implemented by the Ministry of Commerce and Industry. Rewards under MEIS are payable as a percentage of realized FOB value of covered exports, by way of the MEIS duty credit scrip, which can be transferred or used for payment of a number of duties including the basic customs duty.

The current revision introduces 110 new tariff lines and increases rates or country coverage or both for 2228 existing tariff lines.

 (iv)        Service Exports from India Scheme (SEIS): The new scheme has been made applicable to ‘Service Providers located in India’ instead of ‘Indian Service Providers’ in the earlier scheme. Thus, SEIS provides for rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider. The rate of reward under SEIS is based on net foreign exchange earned.

  (v)        E-commerce exports: The new FTP has also introduced a scheme to incentivise exports of goods through courier or foreign post office using e-commerce under MEIS. As the regulatory structure of ecommerce export is still evolving, scope of the scheme was kept limited.

Other important FTP initiatives

    (i)        Interest Equalisation Scheme: The Cabinet Committee on Economic Affairs approved Interest Equalisation Scheme (earlier called Interest Subvention Scheme) on Pre & Post Shipment Rupee Export Credit with effect from 1st April, 2015 for five years.  The rate of interest equalisation would be 3 percent. The scheme would be available to all exports of MSME and 416 tariff lines. Scheme would not be available to merchant exporters. The scheme would be funded from the funds available with Department of Commerce under non-plan during 2015-16 and the restructured scheme would be funded from plan side from 2016-17 onwards.  Ministry of Commerce & Industry may place funds in advance with RBI for requirement of one month and reimbursement can be made on a monthly basis through a revolving fund system. On completion of three years of operation of the scheme, Department of Commerce may initiate a study on impact of the scheme on export promotion and its further continuation. The study may be done through one of the IIMs.The operational instructions of the scheme would be issued by RBI.

  (ii)        New initiatives for EOUs, EHTPs and STPs: EOUs, EHTPs, STPs have been allowed to share infrastructural facilities among themselves to avoid duplication of efforts and cost to create separate infrastructural facilities in different units. Inter unit transfer of goods and services has been allowed to facilitate group of those units which source inputs centrally to obtain bulk discounts. This will reduce cost of transportation, other logistic costs and result in maintaining effective supply chain. EOUs have been allowed facility to set up Warehouses near the port of export to reduce lead time for delivery of goods, STP units, EHTP units, software EOUs have been allowed the facility to use all duty free equipment/goods for training purposes. This will help these units in developing skills of their employees.

Time period for validity of Letter of Permission (LOP) for EOUs/EHTP/ STPI/BTP Units has been increased to 2 years to enable the unit to construct the plant and install the machinery with provisions for further extensions. A simplified procedure is being provided to fast track the de-bonding / exit of the STP/ EHTP units. EOUs having physical export turnover of Rs.10 crore and above, have been allowed the facility of fast track clearances of import and domestic procurement and will not have to seek procurement permission for every import consignment.

 (iii)        Facilitating & Encouraging Export of dual use items (SCOMET) and Encouraging Export of Defence Exports: Validity of SCOMET export authorisation has been extended from the present 12 months to 24 months to obviate the need to seek revalidation or relaxation from DGFT. Authorisation for repeat orders will be considered on automatic basis subject to certain conditions. Verification of End User Certificate (EUC) is being simplified if SCOMET item is being exported under Defence Export Offset Policy.

 (iv)        A longer export obligation (EO) period of 24 months has been provided for export items falling in the category of defence, military store, aerospace and nuclear energy instead of the normal 18 months under the advance authorization scheme. A list of military stores requiring NOC of Department of Defence Production has been separately notified.

  (v)        Privileges and preferential treatment for Status Holders: The New Foreign Trade Policy 2015-20 provides for certain privileges and preferential treatment and priority in handling of consignments of Status holders by the concerned agencies. Accordingly, a shortened time line of one day for 4 and 5 star status holders and 2 days for 1, 2 and 3 star status holders has been stipulated for regional authorities to issue advance authorisations to status holders and for its subsequent amendments, if any.

 (vi)        Manufacturers who are also Status Holders have been enabled to self-certify their manufactured goods as originating from India with a view to qualify for preferential treatment under different Preferential Trading Agreements [PTAs], Free Trade Agreements [FTAs], Comprehensive Economic Cooperation Agreements [CECAs] and Comprehensive Economic Partnerships Agreements [CEPAs], which are in operation

Steps to improve Ease of Doing Business

(A)       Reduction in the number of documents

New FTP has brought about reduction in the number of documents required for export and import from 7 & 10 respectively to 3 each now. Documents required for export of goods from India are Bill of Lading/Airway Bill, Commercial Invoice cum Packing List and Shipping Bill/Bill of Export. The mandatory documents required for import of goods into India are Bill of Lading/Airway Bill, Commercial Invoice cum Packing List and Bill of Entry. The saving in terms of cost and time associated with the dispensed documents would improve Ease of Doing Business in India.

(B)       IT initiatives

• A simplified system for issuance of Importer Exporter Code (IEC) online has been made operational w.e.f. Feb 2015.
• Online filing of documents/ applications and Paperless trade in 24×7 environment
• Complaint Resolution System for resolution of EDI related issues has been set up. It is being actively used by exporters.
• Online system for expediting issuance of authorisations for dual use items (Special Chemicals, Organisms, Materials, Equipments and Technologies [SCOMET]) has been developed. It will be made operational soon.
• DGFT is currently working on the following EDI initiatives

ü  Message exchange for transmission of Bills of Entry (import details) from Customs to DGFT.

ü  Online issuance of Export Obligation Discharge Certificate (EODC).

ü  Message exchange with Ministry of Corporate Affairs for CIN & DIN.

ü  Message exchange with CBDT for PAN.

• A new look website has been launched making it more user-friendly and easy to navigate. DGFT website has a large dynamic component whereby the trade community can file applications online for IEC and various other schemes of DGFT. The exporters can also see the status of their electronic Bank realization certificates in almost real-time. The website is rich in content with all documents related to Foreign Trade Policy along with a responsive online grievance redressal system.
• Launch of Mobile Application for Android users for DGFT related services

(C)       Training of entrepreneurs in the field of exports

More than 20000 entrepreneurs have been trained by DGFT Regional Offices under Niryat Bandhu Scheme. 108 MSME clusters were identified and 150 outreach programmes were conducted all over the country in MSME clusters, Towns of Excellence and Universities/ Management Schools.

 

The Tenth Ministerial Conference of the World Trade Organization (WTO) was held in Nairobi, Kenya from 15 to 19 December 2015. This also happened to be the 20^th anniversary of the WTO and during the conference its achievements were recalled by all members.

The outcomes of the Conference, referred to as the ‘Nairobi Package’ contains Ministerial Decisions on agriculture, cotton and issues related to least developed countries (LDCs). These cover public stockholding for food security purposes, a Special Safeguard Mechanism (SSM) for developing countries, a commitment to abolish export subsidies for farm exports particularly from the developed countries and measures related to cotton. Decisions were also made regarding preferential treatment to LDCs in the area of services and the criteria for determining whether exports from LDCs may benefit from trade preferences.

An important issue that was discussed at the Conference was the future of the Doha Round of trade negotiations which began in 2001 and remains unfinished. India took the stand that the Doha Development Agenda (DDA) must continue after the Nairobi Conference and no new issues must be introduced into the WTO agenda until the DDA has been completed. The DDA was launched as a development Round to benefit a large number of developing countries and LDCs. A few developed countries, including the United States, however, are opposed to the continuation of the Doha Round.

As the future of the Doha Round appeared in doubt, India sought and succeeded in obtaining a re-affirmative Ministerial Decision on Public Stockholding for Food Security Purposes honouring both the Bali Ministerial and General Council Decisions. The decision commits members to engage constructively in finding a permanent solution to this issue.

Similarly, a large group of developing countries has long been seeking a Special Safeguard Mechanism (SSM) for agricultural products. In order to ensure that this issue remains on the agenda of future discussion in the WTO, India negotiated a Ministerial Decision which recognizes thatdeveloping countries will have the right to have recourse to an SSM as envisaged in the mandate.Members will continue to negotiate the mechanism in dedicated sessions of the Committee on Agriculture in Special Session.

All countries agreed to the elimination of agricultural export subsidies subject to the preservation of special and differential treatment for developing countries such as a longer phase-out period for transportation and marketing export subsidies for exporting agricultural products. Developed countries have committed to removing export subsidies immediately, except for a few agricultural products, and developing countries will do so by 2018. Developing countries will keep the flexibility to cover marketing and transport subsidies for agriculture exports until the end of 2023, and the LDCs and net food-importing developing countries would have additional time to cut such export subsidies.

The 4^th India Africa-Trade Ministers’ Meeting was held on 23.10.2015 at, New Delhi. 34 African countries attended the Trade Minister’ Meeting, of which 23 countries were represented by their respective Ministers.  During the Meeting, the Trade Ministers of India and Africa agreed to diversify Africa’s export to India, continue joint efforts for improved and equitable growth in trade and investment and enhance cooperation in Africa’s SME development.  Africa welcomed India’s expended and simplified DFTP Scheme for LDCs and commended India’s services offer to LDCs.  India and Africa committed to continuing the tradition of mutual support in the WTO negotiations to ensure that the Doha Development Agenda is concluded as per its mandate and also underscore the importance of the 10^th Ministerial Conference of the WTO to be held in Nairobi, Kenya.  A commitment was made to establish a joint monitoring mechanism to report on the implementation of the outcomes of Ministers of Trade Meeting.

Recent Developments in Regional Trade Agreements (RTAs) and its implications on India

India has always stood for an open, equitable, predictable, non-discriminatory and rule based international trading system. India views regional trade agreements as ‘building blocks’ towards the overall objective of trade liberalization as well as complementing the multilateral trading system under the World Trade Organisation (WTO).India has concluded 11 Free Trade Agreements and 5 Limited scope Preferential Trade Agreements.

The implications of the RTAs on India can be gauged from the regular impact analysis conducted by the Department of Commerce to make an assessment of the Free Trade Agreements (FTAs) signed by India.  One of the methods of gauging this impact of FTAs on overall trade is through preferential trade data. In this context, the Department of Commerce has analysed the broad trend of our preferential imports under the India-Thailand Early Harvest Scheme (EHS), India-Singapore Comprehensive Economic Cooperation Agreement (CECA), India- South Korea Comprehensive Economic Co-operation Agreement (CECA), India-Japan Comprehensive Economic Partnership Agreement (CEPA), India – ASEAN Trade in Goods (TIG) Agreement and India-Malaysia Comprehensive Economic Cooperation Agreement (CECA).  Though the preferential imports have been increasing from the period 2009-10 to 2014-15, they are still not significant, ranging from 5.9% of total imports under the India-Malaysia CECA to 29.9% of total imports under the India-Korea CEPA during 2014-15. This clearly indicates that the preferential imports under FTAs have not contributed to the increase in trade deficits with some countries.

A separate set of analysis on trade in products where preferences have been exchanged under the India-ASEAN, India-Japan and India-Korea FTAs was carried out by external agencies such as the Centre for WTO Studies and the National Centre for Trade Information (NCTI). This looked at the composition of exports and imports under these FTAs using the COMESA classification. The analysis notes the increase in imports of intermediates and capital goods on lines where preferences have been granted. Similarly, there has been no significant increase in imports of consumer goods. This could thus be attributable to use of cost effective inputs for domestic manufacturing. On exports, one could infer that India has not become a supplier of raw material as well as the fact that increase in the share of intermediate and capital goods exports could be linked to rise in the value addition of our exports.

Special Economic Zones

Special Economic Zone (SEZ) Scheme meant for generation of additional economic activity, promotion of exports of goods and services, promotion of investment from domestic and foreign sources, creation of employment opportunities along with the infrastructure facilities. Good Governance Initiatives under implementation in SEZs are:-

• Dual use of Infrastructure: To facilitate creation of social & commercial infrastructure and other facilities in Non-Processing Area (NPA) of Special Economic Zone, Government vide notification G.S.R. 5(E) dated 02.01.2015 has allowed dual use of facilities in NPA both by SEZ and non-SEZ entities. This will help in optimum utilization of infrastructure set-up in SEZs.

 

• Extension of ICEGATE to SEZ Online System: To facilitate paperless transaction for movement of goods for imports and exports from SEZs to Ports, integration of Customs ICEGATE system to SEZ Online system have been launched on pilot basis from Madras SEZ on 19.01.2015. The programme is running successfully.  Further, training/user awareness programme amongst SEZ importers/exporters are being conducted at all SEZ Zones in coordination with NSDL, before the national roll out of the programme likely to be held in the month of May-June, 2015.
• Standardization of practices, procedures and forms: For ensuring standardization of practices, procedures and forms in all Zones across the country, mapping of activities related to Developers and Units in SEZs was done and timelines for these activities has been prescribed and launched on 14.08.2014 in all SEZ Zones.
• Digitization and on-line processing of works related to SEZs: A pilot module on digitization and online processing of works related to SEZ Developers and units was prepared. In the first phase five activities of the Developers and twelve activities of the Units have been digitized and implemented in all SEZs w.e.f 01.11.2014. In the second phase seven activities of Developers and eight activities of Units have been digitized and implemented in all SEZ Zones w.e.f 13.2.2015.
• Setting up of IFSCs in SEZs: The Central Government vide S.O 968(E) dated 08.04.4015 have notified for setting up of Units in an International Financial Services Centre (IFSC) in SEZs. This will result in opening of new avenues in SEZs, particularly in bringing the international financial services like off-shore banking units, insurance/re-insurance business/international stock trading etc. in India.

Plantation Sector

Major initiatives in Plantation Sector are as under:-

 Digitisation: 100% digitisation has been achieved in all major Spices Board offices including its Head office in Kochi and offices in NER. The Coffee Board has already digitised the licensing of importers and exporters.  National Institute of Smart Government has started work on digitising the licensing and subsidy disbursement functions of the Tea Board.

 

Tea

‘Trust Tea’: A sustainability code – named as ‘ Trustea’,  has been launched by the Tea Board in collaboration with the industry and other stakeholders to certify the sustainability of Indian tea. . The code which is now under pilot phase encompasses all aspects of tea production and seeks to embrace sustainability principles to boost productivity, maintain safety standards to improve quality compliance, and include all stakeholders in the mainstream.

Tea Export Strategy: An export strategy to increase India’s share in traditional and non-traditional markets through volume to 300 mn Kgs and unit value to US$6 per kg by 2025 is being discussed with the industry. The strategy will involve higher exports of orthodox, Darjeeling green tea, branded, packaged and value added tea.

 Enforcing PPC and developing standards for tea: A Plant protection Code (PPC) for cultivation and manufacture of quality tea is introduced in all tea gardens from 1.1.2015. This will mandate the producers/manufacturers to provide undertaking about the quality of tea manufactured and supplied by them. The Ministry is also working with the FSSAI to notify standards for several other chemicals approved for cultivation in tea.

Rubber

Expanding rubber cultivation: A Plan for expansion of Rubber cultivation in the North east Region and LWE affected districts has been drawn which will be implemented with cooperation of various Ministries and Agencies including the M/DONER, MoEF, and M/RD.

Expert Committee on Policy for Natural Rubber:  A Policy for development of Natural Rubber sector is being formulated to address demands of the rubber industry and growers.

Spices

Codex Committee: The Codex Alimentarius Commission (CAC) has agreed to set up, on India’s request, to set up a Committee on Spices and Culinary Herbs (CCSCH) with India as the host of the committee. The first Session of the Codex Committee on Spices and Culinary Herbs (CCSCH) was held in February 2014 in Cochin..

Setting up ‘Saffron Production & Export Development Agency’: A ‘Saffron Production & Export Development Agency (SPEDA)’ with headquarters in Jammu & Kashmir for the J&K region is being set up for production and development of Saffron cultivation & exports. Notification has been issued.

 Spice Development Agencies: With a view to promote farmer-oriented and export-friendly development practices, the government has reorganised the institutional structure of the Spices Board and has set up Regional Advisory Committees designated as Spice development Agencies ín 11 specific spice growing regions of the country. These Agencies will plan and support the development of spices in the notified regions in collaboration with the Central and state agencies.

Coffee

Addressing White Stem Borer problem: A National level steering committee of departments, and research institutions in the public and private sector including IARI, CCRI etc. has been formed to coordinate and fast-track the research initiatives in the area of white stem borer and to address the problem of fall in productivity of Arabica coffee.

Mainstreaming of States for Boosting Exports

• As a result of the ASIDE Scheme, in the last 5 years, a total of Rs. 3415 crores has been spent to boost exports and nearly 445 projects by State Committees and 109 new projects by the Empowered Committee have been created by way of export infrastructure.
• The Department of Commerce has initiated efforts to mainstream the States for boosting exports.

1. a) Export Strategy: 15 States have prepared their export strategy.
2. b) Export Commissioners: 28States have intimated appointment of Export Commissioners.
3. c) Export Awards: 6States have intimated institution of export awards.

 

• 3 new Inland Container Depots (ICDs) and 5 new Container Freight Stations (CFSs) were approved in 2014-15 as a measure to expand exports through container traffic. In the last 5 years (from 1.4.2010 to 31.3.2015), 65 Inland Container Depots/Container Freight Stations have been approved by the Department of Commerce.
• A major exercise was undertaken to update the status of all permission granted by the Inter Ministerial Committee. 29 LOIs were cancelled. A total of 218 ICD/ CFS are functional. Projects under implementation reduced to only 39 as on 31.1.2015.
• A major development of the year was establishment of procedure for setting up of Air Freight Stations. The initiative will promote international Air Cargo operations by reaching out to hinterland regions of the country besides decongesting the congested Air Cargo Terminals in some gateway international airports that face high dwell time.
• The Council for Trade Development and Promotion has been constituted vide notification dated 03.07.2015 to develop partnership with States in India’s export efforts. The 1^st meeting of the Council is scheduled on 8^th January, 2016. The Union Commerce & Industry Minister is the Chairperson of the Council and Ministers of Commerce and Industry in States are members along with Secretaries of concerned central Departments/Ministries and heads of other concerned organization.

 

Hannover Messe April 2015:

The Hannover Messe is one of the most important annual global exhibitions which provided an ideal platform for India to gain entry to international markets with focus on global technological and industrial innovation.  India was the ‘Partner Country’ at Hannover Messe held during April 12-17, 2015 in Germany.   Hon’ble Prime Minister along with German Chancellor, H.E. Angela Merkel inaugurated the fair. The Department of Commerce coordinated the entire exercise relating to mobilising pavilion of State Governments seminars by various Central Government Ministries presence of Indian Industry at the fair.  Letter of Intents, Joint Declaration of Intent, Memorandum of Understand and Project Cooperation were entered into various sectors of Engineering, New & Renewable Energy, Sustainable Urban Development, Skill Development, Electrical & Electronics, Water & Waste Water management and Green Energy.

The Department of Commerce in association with Services Export Promotion Council (SEPC), India Trade Promotion Organization (ITPO) and Confederation of Indian Industry (CII) organized the second edition of the Global Exhibition on Services from 21 to 23 April 2016 at India Expo Centre and Mart, Greater Noida. The objective of the Exhibition was to provide a platform to all the participants, delegates, business visitors and other key decision maker from the services industry and other related industry to interact with, and explore new business avenues.