Monitoring these schemes, given the long gestation period, is always a challenge. With rates of duty having come down and the multiplicity of FTAs, it is debatable if these schemes are still required. These schemes were introduced in an era when imports were expensive. The duty benefits are linked to the fulfilment of export obligations spread over six years in the case of EPCG. Basically, these schemes permit the import of duty-free inputs/capital goods, and a host of other related items to be used in the manufacture of goods that have to be exported. Surprisingly, the DFIS and EPCG schemes continue to be promoted in the FTP. These and the very popular and time-tested drawback schemes, which are all WTO compliant, are the way to go forward. Thus the Remission of Duties and Taxes on Export Products Scheme (RoDTEP) and the various Production Linked Incentive (PLI) schemes were introduced. This in effect meant that the government would refund back taxes paid on inputs that are used in the manufacture and export of goods. The pure reward schemes were scrapped, and the move towards remission began. India has appealed the decision but, corrective steps have been initiated. The WTO ruled against India and held that (i) Export-Oriented Units Schemes and Sector-Specific Schemes (ii) Merchandise Exports from India Scheme (MEIS) (iii) Export Promotion Capital Goods (EPCG) Scheme (iv) Special Economic Zones (SEZ) Scheme and (v) Duty-Free Imports for Exporters Scheme (DFIS) are indeed violative of ASCM. This agreement, to which India is a party, in effect does not permit member countries to grant any export subsidies except in certain situations. In 2019, the United States challenged in the World Trade Organisation (WTO) the exemptions or reductions in customs duties and the grant of freely transferable scrips as being violative of the provisions of the Agreement on Subsidies and Countervailing Measures (ASCM). There was an endless debate about whether this was the right way to promote exports. Basically, these permitted duty-free imports of goods if they were used in the manufacture of goods that were exported. There were also a plethora of exemption schemes. These could be used for the payment of customs duty. The reward was in the form of transferable scrips.
The emphasis in previous FTPs was on rewarding exporters based on their export performance. The FTP 2023 is predicated on four pillars: incentives for remission, export promotion through collaboration, ease of doing business, and emerging areas. Unlike the previous FTPs, which had a 5-year time frame with periodic revisions, the present FTP is open-ended, with the assertion that subsequent revisions ‘shall be done as and when required and shall not be linked to any date.’ What this will mean will have to be seen. The Foreign Trade Policy (FTP) 2023, effective April 1, 2023, has been announced.
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