Export Promotion

Definition

Export promotion refers to the set of government policies, schemes, and institutional support mechanisms designed to encourage and facilitate the export of goods and services from India, thereby earning foreign exchange and promoting economic growth. India's export promotion framework is anchored in the Foreign Trade Policy (FTP) issued by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry. The FTP provides the overarching policy framework, while individual schemes provide specific fiscal incentives, duty exemptions, and infrastructure support to exporters. Key schemes include the Remission of Duties and Taxes on Exported Products (RoDTEP), Export Promotion Capital Goods (EPCG) scheme, Advance Authorization scheme, Status Holder benefits, and the Special Economic Zones (SEZ) framework.

The RoDTEP scheme, introduced in 2021 as a WTO-compliant replacement for the Merchandise Exports from India Scheme (MEIS), provides exporters with transferable duty credit scrips representing a percentage of the FOB value of their exports. These scrips can be used to pay Basic Customs Duty on imports, making them an effective cash subsidy equivalent. The EPCG scheme allows importation of capital goods at concessional or nil customs duty for use in export production, subject to an export obligation of six times the duty saved, to be fulfilled within six years. The Advance Authorization scheme permits duty-free import of inputs (including fuel and packing materials) required for export production, based on Standard Input Output Norms (SIONs) or ad hoc norms for new products.

India's Special Economic Zones (SEZs), governed by the SEZ Act, 2005, offer a comprehensive export promotion infrastructure with duty-free imports of goods for production, an income tax holiday for units in the SEZ, and simplified customs procedures. The One District One Product (ODOP) initiative and the Export Credit Guarantee Corporation (ECGC) scheme provide targeted support to geographical clusters and protect exporters against the risk of buyer default on international receivables respectively. For service exporters, the Services Exports from India Scheme (SEIS), though being restructured, provides duty credit scrips based on net foreign exchange earnings. Exporters must maintain detailed records of export transactions, comply with RBI reporting requirements under FEMA for realization of export proceeds within prescribed timeframes, and file returns with DGFT for scheme compliance.

Key Points

• RoDTEP provides WTO-compliant transferable duty credit scrips as a percentage of FOB export value, usable for payment of Basic Customs Duty on imports.
• EPCG allows duty-free import of capital goods for export production against an export obligation of six times the duty saved, fulfilled within six years.
• Advance Authorization permits duty-free import of inputs based on SION norms, with a positive export obligation to be fulfilled within 18 months.
• SEZ units enjoy duty-free imports, income tax benefits, and simplified customs procedures under the SEZ Act, 2005, for production of goods and services for export.
• ECGC provides credit guarantee and insurance protection to exporters and banks financing exports, covering risk of buyer default and political risks.
• Exporters must realize export proceeds within nine months (for goods) and report to their AD bank under FEMA; failure attracts FEMA penalties.