DGFT to ring in changes in FTP's deemed export benefits

THE deemed export benefit scheme, under the Foreign Trade Policy (2009-14), is set to undergo a change in the wake of its extensive misuse down the years, especially by power companies.

In this regard, the Directorate-General of Foreign Trade (DGFT) will soon bring out the draft policy to solicit the feedback of all the stakeholders, and subsequently ring in the significant changes in the scheme.

It may be recalled that the Ministry of Commerce and Industry had set up a committee in this regard, headed by the Director-General of Foreign Trade, Mr Anup K. Pujari, in May 2011, which also included representatives from the Department of Industrial Policy and Promotion, Department of Economic Affairs, Reserve Bank of India and the Department of Revenue.

The term 'deemed exports' denotes those transactions where goods supplied to users do not leave the country and the payment for these supplies are received either in Indian or foreign currency, subject to several conditions. Such export benefits also include a rebate on duty chargeable on imports or excisable material used in the manufacture of goods supplied to projects.

Emphasising that the DGFT was interested in creating a level playing field between domestic manufacturers and exporters as the benefits were being misused since several years, Mr Pujari intimated that it had now decided to make a clean break from last year's decision to issue clarifications on the scheme, and instead relook the policy. He also confirmed that the draft report was in place, adding that the DGFT would be bringing it out soon.

The new policy may not only seek to curtail benefits and provide them only to deserving suppliers, it could also withdraw the benefits altogether. In 2010-11, the DGFT had intimated the Finance Ministry about fake claims by certain suppliers, especially those firms supplying boilers, turbines and generators.

While apprising that the DGFT had uncovered that deemed export dues amounting to about Rs 5,000 crore were pending in 2010-11, coupled with misuse of the benefits by a large number of companies making fake claims, he said the government could have saved a substantial amount by rectifying the discrepancy. He added that the DGFT had issued guidelines clarifying the policy as companies had complained of ambiguity in the policy.

Stating that the revised scheme was expected to focus on the relevance of import substitution in the present scenario and equitable treatment between domestic and global suppliers, he added that the move was aimed at saving a huge amount annually.

Source : Exim News Service - NEW DELHI, June 21