Key FTP changes that didn't find mention in the highlights

While unveiling the new Foreign Trade Policy 2023 (FTP), the Director General of Foreign Trade (DGFT) made a presentation on the highlights of the latest policy. Later, the highlights were put up on the DGFT website. However, the fine prints in the FTP reveal several changes that did not find a mention in the highlights. I deal with some of them here.
 
Under the self-ratification system that is now extended to exporters holding recognition of two-star export house and above, additional items that are not mentioned in the standard input-out norms (SION) will be available but additional quantities of the items already mentioned in the SION will not be available. This provision is more restrictive than earlier but does make sense.

 
 The decisions regarding audits of cases where the exporters have opted for the self-ratification scheme will be taken by the norms committee and not the DGFT.
 

The post-export export promotion capital goods (EPCG) scheme has been abolished but will be available for the authorisations already issued under the earlier policy.
 
 Under the EPCG scheme, the annual average exports will have to be maintained every year. This provision can be a nuisance as it is quite possible that in some years the exporter will not be able to maintain the annual average exports for any number of reasons.

 
Earlier, it was open to the exporter to make up any shortfall in achieving annual average exports in any year through higher than stipulated annual average exports in any other year. The DGFT should consider restoring that flexibility.
 
The units in the domestic tariff area (DTA) opting to convert into export oriented units (EOU) cannot now carry over the capital goods procured under the EPCG scheme, where the export obligation is still pending. The DTA unit has to fulfill the export obligations under the EPCG authorisations and obtain export obligation discharge certificate before converting to EOU.
 
The other option is for the DTA to pay the duty proportionate to the unfulfilled export obligation along with interest and get the EPCG authorisation redeemed before opting for conversion into EOU.

 
An EOU can import or procure from domestic sources captive power plants (diesel generating sets, wind power, solar power), including transformers and accessories. However, no tax/duty benefits stipulated under EOU scheme shall be available for setting up as well as operations and maintenance of such wind and solar power plants. This restriction is similar to the restrictions placed in the EPCG scheme.
 
On the procedures, the highlights miss out mentioning higher fees for regularisation of bona fide default under the duty exemption scheme.
 
Where there is a shortfall in achieving the export obligation quantity, besides payment of duty and interest on the unutilised quantity of inputs, the exporters now have to pay 10 per cent of the value of any unutilized items restricted for import, instead of 3 per cent earlier. Where the prescribed value addition is not achieved, the exporters have to now pay 3 per cent of the shortfall amount, instead of 1 per cent earlier.

 
There are other small changes here and there in the FTP and the procedures that have not been covered in the highlights but their implications are not significant enough to warrant detailed treatment. Generally speaking, the new FTP continues with the same old provisions under the major export promotion schemes.

 
email: tncrajagopalan@gmail.com