Foreign Trade Promotion Measures and Schemes

Foreign Trade leads to the global division of labour and specialisation. In India, there is no shortage of workforce which is one of the reasons why the Indian government promotes and supports policies and schemes to increase foreign trade. The Indian government has initiated several incentives and plans to assist businesses in increasing the competitiveness of their exports. The government has also established a variety of organisations for helping firms do international business with infrastructure and marketing.

Foreign Trade Promotion Measures and Schemes

1. Duty Drawback Scheme: 

As goods destined for export are not consumed in the country, they are exempted from numerous excise and customs duties. Any such tariffs paid on export items are refunded to exporters upon the provision of evidence of exports to the relevant authorities. Such a refund is known as Duty Drawback. Some notable duty drawbacks include a refund of excise duties paid on goods which are meant for export, and a refund of customs duties paid on raw materials and machinery imported for export manufacture (also known as a Customs Drawback).

2. Export Manufacturing under Bond Scheme: 

This facility allows firms to produce goods without paying excise and other charges. The firms who want to use such facilities have to give an undertaking or bond mentioning that they are manufacturing goods for export and will export such products after their manufacturing.

3. Exemption from Payment of Sales Taxes: 

Goods intended for export purposes are exempted from sales tax. For a long period, income received from export activities was excluded from paying income tax. However, this benefit of income tax exemption is now available only to 100 per cent Export Oriented Units and units established in Export Processing Zones (EPZs)/Special Economic Zones (SEZs). 

4. Advance Licencing Scheme: 

This is a scheme that allows an exporter to get duty-free domestic and imported inputs for the manufacturing of export goods. Because of this, the exporter is exempt from paying customs duty on commodities imported for use in the manufacture of export goods. Advance licences are accessible to both categories of exporters; viz., the exporters who export on a regular basis and exporters who export on an ad-hoc basis. Regular exporters can avail of such licences against their production plans. Firms that export on an ad-hoc basis can also obtain these licences against particular export orders.

5. Export Promotion Capital Goods Scheme (EPCG): 

The principal goal of EPCG is to stimulate the import of capital goods for export production. Under this scheme, the exporting firms can import capital goods at negligible or lower customs duty rates, subject to real user conditions and compliance with specified export obligations. If the manufacturers meet the aforementioned standards, they will be able to import capital goods at a zero or concessional rate of import duty. Under this scheme, supporting manufacturers and service providers can also bring in capital goods. Industrial units can be more benefitted from this scheme who are looking to modernise and upgrade their current plant and machinery. Besides, service export enterprises can also use this facility to import products such as computer software systems needed for developing software for export purposes.

6. Scheme for classifying Export Enterprises as Export Houses, Trading Houses, and Superstar Trading Houses: 

With the goal of promoting established exporters and assisting them in selling their products in foreign markets, the government grants certain export firms the designation of Export House, Trading House, and Superstar Trading House. This kind of recognition is granted to a company if it has achieved a certain average export performance in the previous selected years. Aside from meeting a minimum of past average export performance, such export enterprises must also meet other standards outlined in the import-export policy. Various types of export houses have been identified in order to establish the marketing infrastructure and skills necessary for export promotion. These houses have received national recognition for export promotion. They need to operate as highly professional and prominent institutions and act as a vital tools for export performance.

7. Export of Services: 

Various kinds of service houses have been recognised in order to enhance service exports. These houses are recognised based on the service providers’ export performance. Hence, on the basis of their export performance, they are referred to as Service Export House, International Service Export House, and International Star Service Export House.

8. Export Finance:

Funding is required by the exporters in order to manufacture goods for export purposes. Besides manufacturing, finance is also required after the shipment of goods because payment from importers may take some time. Therefore, authorised banks provide two types of export funding to the exporters; viz., Pre-shipment Financing (or Packaging Credit) and Post-shipment Finance. The former includes granting finance to an exporter for the purchase, processing, manufacturing, or packing of products for export purposes. However, the latter includes providing finance to the exporter from the date of credit extension to the date of shipping goods to the export country. Exporters can obtain credit at a low-interest rate.

9. Export Processing Zones (EPZs): 

Export Processing Zones are industrial estates which act as enclaves from Domestic Tariff Areas (DTA). These are often located near seaports or airports and are meant to provide an internationally competitive duty-free environment for low-cost export production. This enables EPZ’s products to compete in worldwide markets, both in terms of quality and price. These zones have been established at several locations around India, including Kandla (Gujarat), Noida (Uttar Pradesh), Santa Cruz (Mumbai), Falta (West Bengal), Cochin (Kerala), Chennai (Tamil Nadu), and Visakhapatnam (Andhra Pradesh).

The Santa Cruz Zone is exclusively for electronic products as well as gem and jewellery items. All other EPZs deal with a variety of goods. EPZs have recently been changed to Special Economic Zones (SEZs), which are a more advanced kind of export processing zones. Except for labour and banking government, these SEZs are exempt from all rules and regulations governing imports and export units. The government has also approved the development of EPZs by the private, public, or joint sectors. The inter-ministerial committee on private EPZs has already authorized plans for the establishment of private EPZs in Mumbai, Surat, and Kanchipuram.

10. 100  per cent  Export  OrientedUnits  (100  per cent  EOUs): 

The EPZ scheme has been complemented with the 100 per cent Export Oriented Units scheme which was introduced in early 1981.  It uses the same production regime but provides a broader range of location options based on factors such as raw material source, ports, hinterland facilities, availability of technological skills, existence of an industrial base, and the need for a larger area of land for the project. EOUs were formed with the goal of increasing export capacity by providing a suitable policy framework, operational flexibility, and incentives.