Foreign Trade Policy 2023: A step forward towards ease of doing business in India

Foreign Trade Policy (FTP) 2015-2020 was set to end on 31 March 2020 but was extended from time to time due to compelling circumstances. After the introduction of GST, the new FTP clearly another positive step towards a flexible and digitised policy framework for trade facilitation and augmentation. The New FTP was anticipated for a long time as several export promotion schemes in India under the FTP framework had faced challenges before the Dispute Settlement Body (DSB) of the World Trade Organisation (WTO), wherein DSB had ruled that certain schemes are inconsistent with the WTO guidelines. The wait for the new and revised WTO-compliant FTP ended when the Hon’ble Ministry of Commerce and Industry announced the FTP 2023 on 31 March 2023, which takes effect from 1 April 2023.

FTP 2015-20 contributed significantly to the growth of India’s export in merchandise and services, which went from $435 billion in the FY16 to $676 billion in the FY22, and is expected to increase to $760 billion in FY23 as reported in the FTP highlights. Since FTP 2023 will have perpetual validity with flexibility to amend as per the needs of the hour and industry requirements, this will provide policy continuity and a responsive framework to the trade community. This will help businesses both in India and those who propose to invest in India and instill confidence to formulate strategies from a long term perspective. Additionally, the FTP 2023 has created ample room for policy advocacy.

The approach, to the new FTP 2023 policy is said to be based on four pillars, namely (a) Shift from incentives to remission (b) Export promotion through collaboration – Exporters, States, Districts, Indian Missions (c) Ease of doing business, reduction in transaction cost and digitisation and (d) Support to emerging areas such as E-Commerce, developing Districts as Export Hubs and streamlining SCOMET policy. 

Some of the key highlights include: 

• Continuation of Advance Authorisations/EPCG/EOU/DFIA schemes
• Reduction on application fees for MSMEs under for Advance Authorisation /EPCG scheme
• Online approval without physical interference for the issue of Advance Authorisation, EPCG, revalidation of authorisations and extension of export obligation period, which will reduce processing time to one day, from earlier three to seven days
• Revamp of the ‘e-Certificate of Origin’ platform to provide for self-certification
• Paperless filing of export obligation discharge applications
• Extending the benefit of the self-ratification scheme for fixation of norms to Two-star and above status holders
• Rationalisation of Status Holder Thresholds to enable more exporters to achieve such status

The FTP 2023 has also taken an effective step towards internationalising the Indian Rupee (INR) by facilitating International Trade settlement in INR and extending FTP benefits for payments realised in INR through special Vostro accounts, set-up as per the RBI. Further, the FTP 2023 seeks to create a suitable policy framework to transform the country into  a merchanting trade hub and accordingly, provides that the merchanting trade of shipment of goods from one foreign country to another without touching Indian ports, involving Indian intermediary, is allowed for all goods even if the same are restricted otherwise except for goods/items in the CITES and SCOMET list, but subject to compliance with the RBI guidelines. This will enable certain places in India, like GIFT city, etc., to be significant hubs for merchanting trade, like Dubai, Singapore, and Hong Kong. This will also, in turn, boost the manufacturing sector in India.

The FTP 2023 envisions to boost manufacturing in India and also focuses on the prevailing requirements of the Indian market by providing: 

• Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme to claim benefits under the Common Service Provider Scheme of EPCG
• Exemption to the dairy sector from maintaining Average Export Obligation under EPCG 
• Reduced export obligation requirement under EPCG  to Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to Green Technology products

Most importantly, the introduction of “One-Time Amnesty Scheme” is a huge relief to exporters who are unable to fulfil their export obligations against the EPCG and Advance Authorizations. It is expected that all pending cases of default in the export obligation under authorisations can be regularised by the authorisation holder on the payment of all customs duties exempted in proportion to unfulfilled export obligation with ceiling on interest up to 100% of duties exempted. However, no interest would be payable on the portion of Additional Customs Duty and Special Additional Customs Duty.

The Amnesty scheme shall be available for a limited period up to 30 September 2023. The finer details of the Amnesty Scheme is expected to be notified separately by the DGFT. An amnesty scheme was a long pending demand of trade and this announcement is expected to reduce pending litigation under such schemes. A thorough evaluation of the policy and procedure should be undertaken in order to assess the impact on account of benefits and concessions on businesses.

Source : Financial Express