Export Assistance And Incentives

Introduction
Export incentives are incentives provided by governments to increase the amount of exports that
take place in a country. These incentives could come in the form of direct payments or they could
come in the form of reduced taxes. Regardless of the type of incentive, the purpose of
these export incentives is to make domestic products more affordable and competitive in the
international market. In some cases, this type of incentive has led to disputes between countries
because of differing opinions as to how much a country should help its products in the
marketplace.

Investopedia explains 'Export Incentives'

Export incentives make domestic exports competitive by providing a sort of kickback to the
exporter. The government collects less tax in order to deflate the exported good's price, so
the increased competitiveness of the product in the global market ensures that domestic
goods have a wider reach. This level of government involvement can also lead to
international disputes that may be settled by the World Trade Organization (WTO).

Many governments have offered export incentives over the years. A level of these incentives has
varied from one situation to the next. In some cases, the incentives have amounted to huge
subsidies by a federal government.
The most common form of export incentives is a lowering of taxes. In this situation, the
government will lower the amount of taxes due from the exporter. This allows the exporter of a
product to lower the price of these goods and still make the same amount of profit. When this
happens, the goods from that country sell quicker and, in turn, it increases the overall sales of the
goods. By doing this, the government is hoping to make the product more competitive on the
world marketplace.
Some countries are set up better than others to produce certain goods. When a government is at a
disadvantage in producing a product, it may try to make up for it in other ways. Export
incentives is one way the country can make up for being at a natural disadvantage to another
country.
When a government decides to issue export incentives, it can often lead to controversy between
countries. One country might feel that another country helped out a little too much with its
exports. In many cases, a smaller, developing country may not be able to compete with the
subsidies provided by a larger nation. This puts the smaller country at a disadvantage and makes
it more difficult for it to make its products competitive in the marketplace.

When a dispute like this arises, it is often taken to the The World Trade organization.The World
Trade Organization will step in and hear the arguments from both countries. If it is determined
that one of the countries is in the wrong, the World Trade Organization can issue suggestions or
orders to that country.

Promotion of export has been a major thrust area of the Ministry of Commerce and Industry for
the last three decades. Apart from this. many other Central / State Ministries have also been
involved in the promotion of Indias exports. Many Export
Promotion
Councils,
Public
Sector
Undertakings,
Chambers
of
Commerce,
IndustriesAssociations and Services Organisations are also contributing towards the promotion
of Indian exports.
The facilities and incentives presently available to the Indian exporters include the
Export Incentives
The Government of India provides various incentives & facilities to the exporter. These export
incentives and facilities are as follow.
* Duty Drawback (DBK)
* Duty Entitlement Passbook Scheme (DEPB)
* Focus Market Scheme (FMS)
* Focus Product Scheme (FPS).
* Duty Exemption Scheme
* Vishesh Krishi and Gram Udyog Yojna (VKGUY)
* Marketing Development Assistance (MDA)
* Export Promotion Capital Goods Scheme
* Served from India Scheme* Exchange earner Foreign Currency Account (EEFC A/C)
Duty Drawback
The duty drawback refers to the refund in respect of central Excise & Custom duties paid by
manufacturer and/or exporter in relation to the inputs used for manufacturing of the products.
Duty ABDUL GHORI drawback is not applicable in the respect of a product if (a)- No
excise/custom duties were paid for its manufacturer and/or exporter.(b)- Amount of the drawback
is less then 1 % of FOB value.(except where the amount of drawback is more than Rs 500 per
shipment)(c) - manufacturer and/or exporter is by 100% EOU/EPZ/SEZ Units.(d)- If
manufacturer and/or exporter apply for duty entitlement pass book scheme.
Duty Drawback Rates
The government of India announces every year on 31 may, the rates of Duty drawback in respect
of scheduled items. All such rates are called all industry rates. The rates indicated custom &
excise duty allocation. These rates are generally made effective for one year from 1 June. In case
duty draw back rates are not announced for a product, then you can submit an application in the
prescribed form ford e termination of specific rate of duty drawback for the particles product.
Such a rate is known as Brand rate. If the rate of duty drawback is less then 80 % of the duties
paid then the exporter can apply for its upwards revision in prescribes form.
Duty Drawback Under EDI System

In all custom station where EDI system has been introduced for processing of shipping
documents, the exporter are not required to file duty drawback claims, such claims are processed
simultaneously with shipping documents. For receiving this amount you have to be maintain a
bank account with a bank, which is link with customhouse.
Duty Entitlement Pass Book (DEPB)
Under the Duty Entitlement Pass Book (DEPB) scheme, exporter is eligible to claim credit as
specified percentage of FOB value if exports made in freely convertible currency. The rate of
Duty Entitlement Pass Book (DEPB) is announced by DGFT. The rates of Duty Entitlement Pass
Book (DEPB) are decided by DGFT after every 5 years but they have right to change the rates at
nay time.
Vishesh krishi And Gram Udyog Yojna
The objective of this scheme is to prompt the export of fruits, vegetables, flower, minor forest
product and their value added product. Export of agricultural product shall be entitled for duty
credit scrip equivalent to 5 % of FOB value of exports for each licensing year.

Advantages Of Export Assistance And Incentives1.Export assistance and incentives makes the business financially attractive.
2.It helps to increase the profit in business.
3.It enables exporters to expand and diversify the business.
4.It makes avaliable expertise in field of export marketing.
5.It improves competitive ability of exporters.
6.It facilitates repayment of loans including debt-servicing.
7.It removes the deficit in balance of payments.
8.It makes optimum use of avaliable resources between domestic and overseas markets.
9.It compensates for higher domestic cost of production.
10.It helps to earn goodwill for the country.

Case study1
Indias tea exports rose to 46.74 million kg. during the first quarter of the current financial year
from 35.47 million kg. in the previous comparable period. Export earnings from this iten
aggregated Rs.81.61 cr during April-June,1981 against Rs.68.03 cr in corresponding period last
year. Thus although in terms of quantity our tea exports have looped up this year, the unit value
realisation dropped from Rs. 19.8 per kg to Rs. 17.46 per kg.
The drop in the unit value realisation is attributed to the slackness in the international tea
market due to the global over-supply in this commodity . Since 1975,world tea production has
gone up by 41% while increase in tea consumers was not more than 9%. Naturally, the prospects
of a revival in international tea prices are dim, at least in the immediate future.
The National meet on tea, organised by Union Commerce Ministry, as held in 1 st week og
august to take at various problems confronting the tea industry. The meeting which was attended
by the representatives of Central govt., tea producing states, has been recommended a package of
fiscal reliefsboth at central and state levels.
The package includes, among other things, a substantial reduction in excise duty of tea, refund
of indirect taxes paid on tea exports, simplification of drawback procedures, substantial reduction
or removal of excise duty on packet tea until further review, suspension of sales tax on auction
teas.According to avaliable information these recommendations are being considered by the
centre and states concerned for implementation.
The basic problem that confronts the tea industry in international sphere is one of depressed
prices. More and more black tea is coming into the international markets from several new
producing exporting countries leading to over-supply and low price.And so these tea producing

countries realised that without their mutual- co-operation theyll not get better price for their
produce.
Viewed against this backgroung, it is doubtful that the massive reliefs being sought on tea
exports will really be helpful. Excise duty drawbacks on export, if granted, may compound to
decline in unit values.This is a temporary solution for this problem but it lead to further
slackening of internal consumption.Which has already been affected by the high prices of sugar
and milk.
Yet another factor needs consideration before attempting to set up the quantum of exports by
making tea cheaper through concessions. This is the discouraging trend in production at 173.7
million kg is down by as much as 27.4 million kg over same period of last year. If this trend
countinous in the remaining months of the year, the resultant lower the output itself may push up
internal tea prices to some extent.
Moreover, the tea growers who do not export directly and who deserve govt. help the most, are
unlikely to benefit from excise rebate or fiscal concessions to tea exports. Instead these would
benefit the FERA companies who export their produce for sale in the London auction
beneficiares would be exporters of blended tea and foreign players purchasing tea from public
auctions in India.What is needed, therefore, is a selective and judicious approach towards the
whole issue of fiscal incentives for tea exports. Because of lower production cost some of our
competitors have an edge over us in export markets and incentives may be necessary to an extent
for offsetting this price disadvantage. Similarly assisstance of exportsof non-traditional items
such as tea and packet teas would be advantageous for establishing markets for these high value
added items whose share inan overall tea exports is small at exports.

Case study 2
Export Fraud:
One of the export incentives provided by govt. of India relates to allowing companies to import
raw materials duty-free provided they export finished goods. Brilliant Rexine is a Mumbai based
business doing exports. It also runs a sister organisation called Radical Imports. Brilliant Rexine
imported raw materials by availing exemption from duty and exported cheaper quality of PVC
leather cloth. This was re imported by Radical Imports and again exported to show artificial
discharge of export obligation.
The customs officials examined Brilliant Rexines exports cosignments and found difference in
weight of PVC leather cloth. Additional Commissioner of Customs punished Brilliant Rexine
with heavy fines. It is also reprimanded the chartered account for issuing certificates confirming
export figures which were not genuine.

Questions:
1.Export incentives are boon to Indian exporters. Explain?
Ans. Ofcourse its a boon to Indian exporters. Its an open ticket to enter Global market with
rebates.It can be helpful to exporters in :1.Export assistance and incentives makes the business financially attractive.
2.It helps to increase the profit in business.
3.It enables exporters to expand and diversify the business.
4.It makes avaliable expertise in field of export marketing.

5.It improves competitive ability of exporters.

6.It facilitates repayment of loans including debt-servicing.
7.It removes the deficit in balance of payments.
8.It makes optimum use of avaliable resources between domestic and overseas markets.
9.It compensates for higher domestic cost of production.
10.It helps to earn goodwill for the country.
2.Do you feel more stringent laws are required to deal with export fraud??
Ans. Yes, more strict and stringent laws are required to deal with export fraud :Presently Indian Government has made a number of such acts and policies available for the
growth of the economy. These are :
1.

Imports and Exports (Control) Act, 1947 which has been taken over by the Foreign Trade
(Development and Regulation) Act, 1992

2.

Foreign Trade (Development and Regulation) Act, 1992

3.

Import-Export (EXIM) Policy 1997-2002

These acts and policies have empowered the Indian Government for :
1.

Enactment of the provisions pertaining to regulation and the development of trades in the
national and the international markets

2.

Limitation and regulation of all types of exports and imports and declaration of tariff
exemption by reaching to special needs.

3.

Announcement of EXIM policy and the amendment of the same in intervals in

notification.

4.

Authorization of the concerned officials for issuing 'IEC Number to both the exporters
and importers.
But still there is failure in application of these laws due to which scams like Vadra-DLF, Coal
scam , Satyam Scam are occurred. Lokpal Bill, Jan Lokpal are solutions for this but not big
enough to stop them. So theres a need for more such sort of bills and laws against such frauds in
India.

Recent Case:

India has offered incentives for exports to Iran, the trade ministry announced, a step industry
officials said on Tuesday could double the country's sales to sanctions-hit Tehran to $6 billion in
the current fiscal year that began in April.
Indian traders will now be allowed to turn around imports and sell them to Iran, as long as they
have added at least 15 percent in value to the goods, the Directorate General of Foreign Trade, an
arm of India's trade ministry, said on its Website.
"Accordingly, exports of such goods to Iran which have been imported against payment in freely
convertible currency would be permitted against payment in Indian Rupees also, subject to at
least 15 percent value addition," the notification said.
India is a major importer of Iranian oil but United States and European Union sanctions, meant
to discourage Tehran from pursuing its nuclear programme, aim to curb Iran's oil revenues and
have made payments for the oil difficult.
Tehran now has to keep New Delhi's payments in tightly-restricted rupees in an India-based
account which can only be used to buy certain goods from India.
New Delhi primarily exports rice, cereals, pharmaceutical products, machine tools, automobile
parts and steel to Tehran, all of which are permitted under sanctions. The latest order widens the
scope of potential exports.
The increase in exports could make India a net exporter to Iran, which used to be its secondlargest supplier of crude at a cost of over $12 billion a year before sanctions came in place.
"The move will benefit Indian exports and we can look forward for sizeable growth in India's
exports to Iran in the current fiscal," M Rafeeque Ahmed, president of the Federation of Indian
Export Organisations (FIEO), said in a statement.
Ajai Sahai, FIEO's chief executive, said the incentives could double exports to Iran to $6 billion
in 2013/14 from a year earlier.
India's move comes within a week of the United States renewing six-month waivers on sanctions
for India, China and seven other economies in exchange for their agreement to reduce purchases
of oil from Iran.
India shipped in about 266,000 barrels per day (bpd) of oil from Iran in the contract year ending
March 31, 2013, down 26.5 percent from a year ago.