Exporters may get incentives based on R&D, specific clusters under new FTP

New Delhi: Exporters are likely to get incentives based on parameters like research and development, product-specific clusters and production pattern under a five-year foreign trade policy (FTP) to be released later this year, an official said.

The commerce ministry is working on recasting the existing export incentive schemes in line with the global trade norms of the World Trade Organisation (WTO).

"We are recasting our export incentive schemes. In the new FTP, they would be in compliance with the global trade rules. The new incentives could focus on R&D activities, production parameters, product-specific clusters. Rebate can also be given on state levies," the official added.

The last FTP was released in 2015 for five years. It provided guidelines for enhancing exports with an overall objective of pushing economic growth and job creation.

Under an FTP, the government announces incentives for exporters. Currently, duty benefits are provided under merchandise export from India scheme (MEIS) and services export from India scheme (SEIS).

Recasting of the existing support measures assumes significance as the US has challenged these schemes under the dispute settlement mechanism of the WTO. America has alleged that these incentives are harming American companies.

The official said there are several product-specific clusters in sectors such as automobile, textiles and leather and providing direct incentives to them would help boost manufacturing and exports.

Currently, maximum incentives are cornered by big automobile and pharmaceutical companies under MEIS. In this scheme, the government provides duty benefits depending on product and country.

"Ideally, the scheme should target MSMEs," the official added.

For the new FTP, the commerce ministry is engaged with all commodity boards and ministries concerned for identifying the support measures compliant with global trade rules.

According to Federation of Indian Export Organisations (FIEO), the new scheme should include refund of indirect taxes like on oil and power; state levies such as mandi tax.

"The new scheme should help boost the country's exports," FIEO President Ganesh Gupta said.

Since 2011-12, India's exports have been hovering at around USD 300 billion. During 2017-18, the shipments grew about 10 per cent to USD 303 billion.

Promoting exports helps a country create jobs, boost manufacturing and earn more foreign exchange.

During April-December 2018-19, the country's total merchandise exports grew 10.18 per cent to USD 245.44 billion.