New incentives for electronics industry under FTP

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By Nitasha Chawla

The Centre recently announced a Rs 9000 million package in its annual supplement to the Foreign Trade Policy (FTP) 2009-14, to save the Indian export market from the effects of slowdown in the US and European markets. With these new measures, the government is confident about exports achieving the US$ 300 billion target for 2011-12. Companies that are exporting to Latin America, Africa and the Commonwealth of Independent States (CIS) will benefit the most.

According to Sanjay Budhia, chairman, National Committee on Exports and Imports, CII, the announcement of the expansion of the list of items under the Focus Product Scheme (FPS), which will now include 130 additional items mainly in the sectors of chemicals/pharmaceuticals, textiles, handicrafts, engineering and electronics, is a step in the right direction. Electronic items like parts of mobile handsets, telecom transmission equipment, optical fire cables, etc, have been added under this scheme.

Coverage of more items expected

“Although the measures announced by the government are good for the Indian export industry, we feel that the ministry could have done better by adding more items under various schemes,” opines K Srinivasan, secretary, ELCINA (Electronic Industries Association of India).

Mukund Shah, president, Indian Printed Circuit Association (IPCA), shares a similar concern regarding the items that have been added to the FPS. In his view, the recent announcement regarding the FTP covers only a few electronic components, which is not sufficient.

1% duty credit for exporters

Another prominent announcement has been made with respect to the Special Focus Market Scheme (SFMS), which is aimed at boosting the competitiveness of Indian exports to 41 countries in Latin America and CIS. Indian exporters will now be able to avail 1 per cent duty credit while exporting to these countries. Cuba and Mexico, too, have been added to this list. “The addition of countries like Cuba and Mexico in the SFMS is welcomed. Right now, there are only a few products that are exported to these countries; focusing on them will be a good encouragement to boosting exports to countries that have been less popular export destinations so far,” Srinivasan adds.

The government’s main aim in putting these measures in place is market diversification, increasing exports and simplifying procedures, as India is witnessing lower export demand due to the recession in its traditional export destinations—the US and European Union (EU)— along with its own fiscal constraints.

Vinod Sharma, chairman of Electronics and Computer Software Export Promotion Council (ESC) hardware committee, says that the council’s recommendations, which have been incorporated in the new announcements made, are expected to bring about a rise in foreign investment and encourage global MNCs to set up their manufacturing bases in India, spurring employment and revenue generation for the country. “The measures will help the electronics hardware industry to overcome its current problems. However, the council feels that a lot more needs to be done to support the electronics hardware manufacturing industry in India,” he adds.

The list of electronic items that were added under FPS after the last review in April 2011 includes static converters; populated, loaded or stuffed PCBs; parts of mobile handsets and telecom transmission equipment; telephone answering machines and optical fibre cables.

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Highlights of the Annual Supplement 2010-11 to the Foreign Trade Policy 2009-14

  • An additional 2 per cent bonus benefits over and above the existing benefits under FPS.
  • Telecom equipment, colour TVs, audio systems, optical media, semiconductors, capacitors, resistors, PCBs, LEDs, conductors, desktops and notebooks will now be entitled for benefits at 2 per cent of the FOB value of exports to all markets under the FPS, instead of their exports to limited markets under the MLFPS earlier.
  • 256 new products added under FPS (at the 8 digit level), which will be entitled for benefits at 2 per cent of the FOB value of exports to all markets.
  • Support for technological upgradation: zero duty EPCG scheme extended till 31.3.2012
  • The 1 per cent Status Holder Incentive Scheme (SHIS) has been extended for 2011-12 exports.
  • Exporters will now have the flexibility to get a high value EPCG authorisation by filing their EPCG application on an annual basis, without the need to file the application for individual capital goods from time to time. It will reduce transaction time and costs.
  • In order to provide a wider choice to the users and increase access for online filing, there will be additional licensed certifying authorities for digital signatures and banks for electronic fund transfers (EFT)

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